UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 (Fee required) For the fiscal year ended December 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No fee required) For the transition period from to
Commission File Number 1-3492
HALLIBURTON COMPANY
(Exact name of registrant as specified in its charter)
Delaware 75-2677995
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
3600 Lincoln Plaza, 500 N. Akard St., Dallas, Texas 75201
(Address of principal executive offices)
Telephone Number - Area code (214) 978-2600
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange on
Title of each class which registered
Common Stock par value $2.50 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of Common Stock held by nonaffiliates on March 5,
1997, determined using the per share closing price on the New York Stock
Exchange Composite tape of $66.88 on that date was approximately $8,429,100,000.
As of March 5, 1997, there were 126,359,189 shares of Halliburton Company Common
Stock $2.50 par value per share outstanding.
Portions of the Halliburton Company Proxy Statement dated March 25, 1997, are
incorporated by reference into Part III of this report.
PART I
Item 1. Business.
General Development of Business. Halliburton Company's predecessor was
established in 1919, incorporated under the laws of the state of Delaware in
1924 and reorganized under the laws of the State of Delaware in 1996.
Halliburton Company (the Company) provides energy services and engineering and
construction services. Information related to acquisitions and dispositions is
set forth in Note 15 to the financial statements of this Annual Report.
Financial Information About Business Segments. The Company is comprised of
two business segments. See Note 9 to the financial statements of this Annual
Report for financial information about these two business segments.
Description of Services and Products. The following is a summary which
briefly describes the Company's services and products for each business segment.
The Energy Group business segment provides a wide range of services and
products to provide integrated solutions to customers in the exploration,
development and production of oil and natural gas. The Energy Group operates
worldwide, serving major oil companies, independent operators and national oil
companies. The segment includes Halliburton Energy Services, which offers
drilling systems and services, pressure pumping equipment and services, logging
and perforating products and services, specialized completion and production
equipment and services and well control products and services; Brown & Root
Energy Services, which provides upstream oil and gas engineering, construction,
project management and maintenance activities, subsea construction, fabrication
and installation of subsea pipelines, offshore platforms, and production
platforms, marine engineering and other marine related projects; Landmark
Graphics Corporation, which provides integrated exploration and production
information systems and professional services; and Halliburton Energy
Development, which has been formed to create business opportunities for the
development, production and operation of customers' oil and gas fields.
The Engineering and Construction Group provides conceptual design, process
design, detailed engineering, procurement, project and construction management,
construction of chemical and petrochemical plants, refineries, pulp and paper
mills, metal processing plants, highways and bridges, technical and economic
feasibility studies, site evaluation, contract maintenance and operations and
maintenance services for both industry and government, engineering and
environmental consulting and waste management services for industry, utilities
and government, and remedial engineering and construction services for hazardous
waste sites.
Markets and Competition. The Company is one of the world's largest
diversified energy services and engineering and construction services companies.
The Company's services and products are sold in highly competitive markets
throughout the world. Competition in both services and products is based upon a
combination of price, service (including the ability to deliver services and
products on an "as needed, where needed" basis), product quality, warranty and
technical proficiency. Some customers have indicated a preference for integrated
services and solutions. These integrated solutions, in the case of the Energy
Group, relate to all phases of exploration and production of oil and gas, and,
in the case of the Engineering and Construction group, relate to all phases of
design, procurement, construction, project management and maintenance of a
facility. Demand for these types of integrated solutions is based primarily upon
quality of service, technical proficiency and overall price.
The Company conducts business worldwide in over 100 countries. Since the
market for the Company's services and products is so large and crosses many
geographic lines, a meaningful estimate of the number of competitors cannot be
made. The markets are, however, highly competitive with many substantial
companies operating in each market. Generally, the Company's services and
products are marketed through its own servicing and sales organizations. A small
percentage of sales of the Energy Group's products is made by supply stores and
third-party representatives.
Operations in some countries may be affected by unsettled political
conditions, expropriation or other governmental actions, and exchange control
and currency problems. The Company believes the geographic diversification of
its business activities reduces the risk that loss of its operations in any one
country would be material to the conduct of its operations taken as a whole.
Information regarding the Company's exposures to foreign currency fluctuations,
risk concentration and financial instruments used to minimize risk is included
in Note 11 to the financial statements of this Annual Report.
2
Customers and Backlog. In 1996, 1995 and 1994, respectively, 73%, 78% and
78% of the Company's revenues were derived from the sale of products and
services to, including construction for, the energy industry. The following
schedule summarizes the backlog of projects at December 31, 1996 and 1995:
1996 1995
-------------- -------------
(In millions)
Firm orders $ 4,555 $ 3,961
Government orders firm but not yet funded 262 634
Letters of intent and contracts
awarded but not signed 23 6
-------------- -------------
Total $ 4,840 $ 4,601
- --------------------------------------------------------------------------------
It is estimated that nearly 65% of the backlog existing at December 31,
1996 will be completed during 1997. The Company's backlog excludes contracts for
recurring hardware and software maintenance and support services. The Company
does not believe that backlog should necessarily be relied on as an indication
of future operating results since such backlog figures are subject to
substantial fluctuations. Arrangements included in backlog are in many instances
extremely complex, nonrepetitive in nature and may fluctuate in contract value.
Many contracts do not provide for a fixed amount and are subject to modification
or termination by the customer. Due to the size of certain contracts, the
termination or modification of any one or more contracts or the addition of
other contracts may have a substantial and immediate effect on backlog.
Raw Materials. Raw materials essential to the Company's business are
normally readily available. Where the Company is dependent on a single supplier
for any materials essential to its business, the Company is confident that it
could make satisfactory alternative arrangements in the event of interruption in
the supply of such materials.
Research, Development and Patents. The Company maintains an active research
and development program to assist in the improvement of existing products and
processes, the development of new products and processes and the improvement of
engineering standards and practices that serve the changing needs of its
customers. Information relating to expenditures for research and development is
included in Note 1 to the financial statements of this Annual Report.
The Company owns a large number of patents and has pending a substantial
number of patent applications covering various products and processes. The
Company is also licensed under patents owned by others. The Company does not
consider a particular patent or group of patents to be material to the Company's
business.
Seasonality. Weather and natural phenomena can temporarily affect the
performance of the Company's services. Winter months in the Northern Hemisphere
tend to affect operations negatively, but the widespread geographical locations
of the Company's services serve to mitigate the seasonal nature of the Company's
business.
Employees. At December 31, 1996 the Company employed approximately 60,000
people of which 23,500 were located outside the United States.
Regulation. The Company is subject to various environmental laws and
regulations. Compliance with such requirements has neither substantially
increased capital expenditures or adversely affected the Company's competitive
position, nor materially affected the Company's earnings. The Company does not
anticipate any such material adverse effects in the foreseeable future as a
result of such existing laws and regulations. Note 10 to the financial
statements of this Annual Report discusses the Company's involvement as a
potentially responsible party in remedial activities to clean up various
"Superfund" sites.
Item 2. Properties.
Information relating to lease payments is included in Note 10 to the
financial statements of this Annual Report. The Company's owned and leased
facilities, as described below, are suitable and adequate for their intended
use.
The Energy Group owns manufacturing facilities covering approximately
3,300,000 square feet. Principal locations of these manufacturing facilities are
Davis and Duncan, Oklahoma; Alvarado, Amarillo, Carrollton, Fort Worth, Garland
and Houston, Texas; Arbroath, Scotland; and Reynosa, Mexico. The manufacturing
facilities at Davis, Amarillo, and one of four locations in Houston were idle at
the end of 1996. The manufacturing facility in Mansfield, Texas was sold in 1996
and the manufacturing facility in Garland, Texas will be leased to another
company in 1997. The Energy Group also leases manufacturing facilities covering
approximately 118,000 square feet. Principal locations of these facilities are
Houston, Texas; Jurong, Singapore; Basingstoke, England; and Kilwinning,
Scotland. The facility in Basingstoke, England was idle at the end of 1996.
Research, development and engineering activities are carried out in owned
facilities covering approximately 469,000 square feet in Duncan, Oklahoma; and
Houston, Austin and Carrollton, Texas; and in leased facilities covering
approximately 84,000 square feet in Englewood and Denver, Colorado; and
3
Leiderdorp, Holland. One of two facilities in Houston was idle at the end of
1996. The Energy Group also owns marine fabrication facilities covering
approximately 523 acres in Belle Chasse, Louisiana; Greens Bayou, Texas; and
Nigg and Wick, Scotland. The Belle Chasse, Louisiana facility consisting of
approximately 165 acres is idle. The facility in Nigg, Scotland is leased to
another company. The Group sold its 35% owned marine fabrication facility in
Sundra Strait, Indonesia during 1996. In addition, service centers, sales
offices and field warehouses are operated at approximately 200 locations in the
United States, almost all of which are owned, and at approximately 270 locations
outside the United States in both the Eastern and Western Hemispheres.
The Engineering and Construction Group owns fabricating facilities covering
approximately 441,000 square feet in Houston, Texas, and Edmonton, Canada of
which 388,000 square feet in Houston is leased to another Company. Engineering
and design, project management and procurement services activities are carried
out in owned facilities covering approximately 3,600,000 square feet in Houston,
Texas; Edmonton, Canada; Leatherhead, England; and Aberdeen, Scotland. These
activities are also carried out at leased facilities covering approximately
1,100,000 square feet in Mobile, Alabama; Alhambra, California; Gaithersburg,
Maryland; Pittsburg, Pennsylvania; Aiken, South Carolina; Eastleigh and London,
England; Kuala Lumpur, Malaysia; Stavanger, Norway; Singapore; Aberdeen,
Scotland; Al Khobar, Saudi Arabia; and Bahrain. In addition, project offices,
field camps, laboratories, service centers, and sales offices are operated at
approximately 60 locations in the United States, almost all of which are leased
by the Company, and at approximately 30 foreign locations in both the Eastern
and Western Hemispheres.
General Corporate operates from leased facilities in Dallas, Texas covering
approximately 55,000 square feet. The Company also leases approximately 5,500
square feet of space in Washington, D.C. and owns an 85,000 square foot
mainframe data processing center in Arlington, Texas which is leased to another
company.
Item 3. Legal Proceedings.
Information relating to various commitments and contingencies is described
in Note 10 to the financial statements of this Annual Report.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders during the
fourth quarter of 1996.
4
Item 4(A). Executive Officers of the Registrant.
The following table indicates the names and ages of the executive officers
of the registrant along with a listing of all offices held by each during the
past five years:
Name and Age Offices Held and Term of Office
* Richard B. Cheney Director of Registrant, since October 1995.
(Age 56) Chairman of the Board, since January 1996
President and Chief Executive Officer,
since October 1995
Senior Fellow, American Enterprise Institute,
1993 to October 1995
Secretary, U.S. Department of Defense, 1989 to 1992
Jerry H. Blurton Vice President and Treasurer, since July 1996
(Age 52) Vice President-Finance & Administration of
Halliburton Energy Services, August 1995 to
July 1996
Vice President-Finance, 1991 to August 1995
Lester L. Coleman Executive Vice President and General Counsel, since
(Age 54) May 1993
President of Energy Services Group, September 1991
to May 1993
Executive Vice President of Finance and Corporate
Development, January 1988 to September 1991
* Dale P. Jones Director of Registrant, since December 1988
(Age 60) Vice Chairman, since October 1995
President, June 1989 to October 1995
* David J. Lesar Executive Vice President and Chief Financial
(Age 43) Officer, since August 1995
President and Chief Executive Officer of Brown &
Root, Inc., since September 1996
Executive Vice President of Finance and
Administration of Halliburton Energy Services,
November 1993 to August 1995
Partner, Arthur Andersen LLP, 1988 to November 1993
* Kenneth R. LeSuer President and Chief Executive Officer of the
(Age 61) Halliburton Energy Group, since September 1996
President and Chief Executive Officer of Halliburton
Energy Services, March 1994 to September 1996
President and Chief Operating Officer of Halliburton
Energy Services, May 1993 to March 1994
President and Chief Executive Officer of Halliburton
Services, December 1989 to May 1993
Gary V. Morris Senior Vice President - Finance, since February 1997
(Age 44) Senior Vice President, May 1996 to February 1997
Vice President - Finance of Brown & Root, Inc.,
June 1995 to May 1996
Vice President - Finance of Halliburton Energy
Services, December 1993 to June 1995
Controller, December 1991 to December 1993
R. Charles Muchmore Vice President and Controller, since August 1996
(Age 43) Finance & Administration Director - Europe/Africa of
Halliburton Energy Services, September 1995 to
August 1996
Regional Finance & Administration Manager - Europe/
Africa of Halliburton Energy Services, December
1989 to September 1995
Lewis W. Powers Senior Vice President, since May 1996
(Age 50) Vice President - Europe/Africa of Halliburton
Energy Services, April 1993 to May 1996
Senior Vice President of Operations of Otis
Engineering, June 1989 to April 1993
* Members of the Executive Committee of the registrant.
There are no family relationships between the executive officers of the
registrant.
5
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters.
The Company's common stock is traded on the New York Stock Exchange and the
Swiss Stock Exchanges at Zurich, Geneva, Basel and Lausanne. Information
relating to market prices of common stock and quarterly dividend payments is
included under the caption "Quarterly Data and Market Price Information" on page
36 of this Annual Report. At December 31, 1996, there were approximately 14,900
shareholders of record. In calculating the number of shareholders, the Company
considers clearing agencies and security position listings as one shareholder
for each agency or listing.
Item 6. Selected Financial Data.
Information relating to selected financial data is included on page 33 and
34 of this Annual Report.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Information relating to management's discussion and analysis of financial
condition and results of operations is included on pages 7 to 10 of this Annual
Report.
Item 8. Financial Statements and Supplementary Data.
Page No.
Responsibility for Financial Reporting............................... 11
Report of Arthur Andersen LLP, Independent Public Accountants........ 12
Consolidated Statements of Income for the Years Ended
December 31, 1996, 1995 and 1994................................ 13
Consolidated Balance Sheets at December 31, 1996 and 1995............ 14
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994................................ 15
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1996, 1995 and 1994.................... 16
Notes to Financial Statements........................................ 17 to 32
Quarterly Data and Market Price Information.......................... 36
The related financial statement schedules are included under Part IV, Item 14 of
this Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
BUSINESS ENVIRONMENT AND OUTLOOK
The Company operates in over 100 countries around the world to provide a
variety of energy services and engineering and construction services to energy,
industrial and governmental customers. Operations in some countries may be
affected by unsettled political conditions, expropriation or other governmental
actions, and exchange control and currency devaluations. The Company believes
the geographic diversification of its business activities reduces the risk that
loss of its operations in any one country would be material to its consolidated
results of operations. However, United States law imposes a variety of trade
sanctions restricting the ability of the Company, and in some cases its foreign
subsidiaries, to conduct business in some countries where there are markets for
the Company's goods and services. In the future, certain of these trade
sanctions may adversely affect the ability of the Company to conduct business
with foreign customers having activities in certain countries such as Cuba, Iran
or Libya which are targeted by the United States, including restrictions on the
Company's ability to do business with such customers in unrelated countries.
Currently, discussions are ongoing in the United States Congress and
Administration concerning imposition of further trade sanctions affecting
countries such as Algeria, Nigeria, Colombia and Myanmar. Many of these
countries are important markets for the Company and new trade restrictions which
impair the ability of the Company and/or its customers to conduct business in
these countries could adversely affect the results of the Company's operations
in some future period.
Energy Group. In 1996, the energy industry experienced a year of strong
growth, as customers worldwide expanded their petroleum exploration, development
and production activities. Customer activities increased in response to a
combination of factors including higher crude oil and natural gas prices,
improvement in the long-term demand growth outlook for the petroleum industry
and available investment opportunities with desirable economic potential.
Customer economics are also being enhanced by increased utilization of
integrated solutions, partnering and alliance arrangements designed to reduce
the per barrel cost of finding, developing and producing hydrocarbons. Although
customers have given early indications they plan to increase their spending in
1997, recent crude oil and natural gas price declines may constrain their
anticipated cash flow which may, in turn, reduce or defer some planned
activities.
Engineering and Construction Group. Opportunities are good; however, those
opportunities are increasingly complex and competition remains intense. The key
drivers of improved margins will be partnering on larger jobs, accepting more
risk through gain sharing or fixed price contract arrangements, broadening the
service base in core competencies, acquiring proprietary knowledge and managing
costs.
Landmark acquisition. On October 4, 1996, the Company completed its
acquisition of all of the outstanding common stock of Landmark Graphics
Corporation in exchange for approximately 10.2 million shares of Halliburton
Company Common Stock. See Note 13 to the financial statements.
Realignment of product and service lines. During 1996, prior to the fourth
quarter, the Company operated through two business segments, Energy Services and
Engineering and Construction Services. Beginning with the fourth quarter of
1996, the Company realigned the business units making up these two segments in
order to better meet the needs of its customers and capitalize on the synergy
between business units. The Company's two business segments are now called the
Energy Group and the Engineering and Construction Group. The Energy Group
business segment consists of Halliburton Energy Services, which offers drilling
systems and services, pressure pumping equipment and services, logging and
perforating products and services, specialized completion and production
equipment and services and well control products; Brown & Root Energy Services,
which includes upstream oil and gas engineering, construction, project
management and maintenance activities; Landmark Graphics Corporation, which
includes integrated exploration and production information systems and
professional services; and Halliburton Energy Development, which has been formed
to create business opportunities for the development, production and operation
of customers' oil and gas fields.
The Engineering and Construction Group consists of two business units
offering engineering, construction, project management, facilities operation and
maintenance and environmental services. To more closely align with its
customers, one business unit will focus on delivering engineering and
construction services to commercial customers and the other will focus on
servicing government customers at all levels. The cost of implementing this
program, along with the combination of various administrative support functions
into combined shared services for the Company, is reflected in the 1996 third
quarter $65.3 million pre-tax charge. See Note 16 to the financial statements.
7
RESULTS OF OPERATIONS
Revenues for 1996 were $7,385.1 million, an increase of 26% over 1995
revenues of $5,882.9 million and an increase of 30% over 1994 revenues of
$5,661.1 million. Approximately 55% of the Company's consolidated revenues were
derived from international activities in 1996 compared with 51% in 1995 and 45%
in 1994.
Energy Group 1996 revenues were $4,286.3 million, an increase of 19% over
1995 revenues of $3,604.0 and an increase of 27% over 1994 revenues of $3,364.0
million. The Energy Group's increase in revenues compares to an 8% increase in
the worldwide rotary rig count for 1996 compared to 1995 and a 3% increase in
the worldwide rotary rig count for 1996 compared to 1994. Approximately 67%, 67%
and 63% of the Energy Group's revenues were derived from international
activities for 1996, 1995 and 1994, respectively.
Engineering and Construction Group revenues were $3,098.8 million for 1996,
an increase of 36% over 1995 revenues of $2,278.9 million and an increase of 35%
over 1994 revenues of $2,297.1 million. The increase in revenues is due
primarily to higher levels of activity in the Group's pulp and paper and
chemical operations as well as a service contract with the U.S. Department of
Defense to provide technical and logistical support for military peacekeeping
operations in Bosnia.
Operating income was $417.9 million for 1996 compared to $400.9 million for
1995 and $239.8 million for 1994. Excluding special charges of $85.8 million,
$8.4 million and $16.6 million during 1996, 1995 and 1994, respectively,
operating income for 1996 increased by 23% over 1995 and by 96% over 1994 as
shown in the following table. See Note 16 to the financial statements.
Millions of dollars 1996 1995 1994
- ------------------------------------------------------------------ -- --------- -- -- ---------- -- -- ---------
Operating income before special charges $ 503.7 $ 409.3 $ 256.4
Landmark write off of acquired in process research
and development (11.3) (3.7) -
Merger costs associated with Landmark acquisition (12.4) - -
Realignment of products and service lines and support services (61.2) - -
Landmark restructuring and merger costs (0.9) (4.7) (16.6)
-- --------- -- -- ---------- -- -- ---------
Operating income $ 417.9 $ 400.9 $ 239.8
- ------------------------------------------------------------------ -- --------- -- -- ---------- -- -- ---------
Approximately 66% of the Company's consolidated operating income was
derived from international activities in 1996 compared to 65% for 1995 and 40%
for 1994. Consolidated international operating margins were 8%, 9% and 4% for
1996, 1995 and 1994, respectively.
Energy Group operating income in 1996 was $484.4 million in 1996, an
increase of 22% over 1995 operating income of $398.2 million and 83% over 1994
operating income of $264.1 million. Operating margins were 11% in 1996 compared
with 11% for 1995 and 8% for 1994. Approximately 62%, 66% and 41% of the Energy
Group's operating income was derived from international activities for 1996,
1995 and 1994, respectively. Operating income growth for Halliburton Energy
Services in 1996 is due primarily to substantially increased services provided
in North America and Europe and, to a lesser degree, increases in Latin America
and the Middle East. Margin increases were strongest in the pressure pumping
business. Lower operating margins in 1994 were due to decreased activity levels
in the North Sea, Middle East, and Asia, market disturbances in Nigeria and
Yemen, unsettled political and business conditions in the Commonwealth of
Independent States, and pricing pressures in the United States. Energy Group
results for 1996 include $35 million of gain sharing revenue on the Brown & Root
Energy Services' portion of the cost savings realized on the BP Andrew alliance.
The alliance completed the project seven months ahead of the scheduled
production of oil and achieved a $125 million savings compared with the targeted
cost. The effect of the gain sharing was offset by a $20.7 million reduction in
operating income due to lower activity levels by its 50% owned joint venture,
European Marine Contractors, Limited.
Engineering and Construction Group operating income for 1996 increased 20%
over 1995 and 253% over 1994 to $53.7 million. Operating margins were 2%, 2% and
1% for 1996, 1995 and 1994, respectively. During 1996, operating income
increases in petroleum and chemical services as well as income from technical
and logistical support services for military peacekeeping operations in Bosnia
were partially offset by a $17.1 million charge for the impairment of Brown &
Root's investment in the Dulles Greenway toll road extension project. The
Group's contract to provide services in Bosnia ends in 1997.
8
Consolidated general and administrative expenses for 1996 were $236.6
million compared to $221.7 million and $232.1 million for 1995 and 1994,
respectively.
The Company sold its natural gas compression business, geophysical products
and services business and workover platform business in 1994.
Interest expense decreased to $24.1 million for 1996 from $47.1 million in
1995 and $48.1 million in 1994 due to the redemption of the Company's zero
coupon convertible subordinated debentures in September 1995 and the redemption
of its $42.0 million term loan in December 1995.
Interest income decreased to $14.2 million for 1996 from $32.0 million in
1995 and $19.8 million in 1994 due to lower amounts of invested cash resulting
from the debt redeemed in 1995.
Foreign currency gains (losses) netted to a loss of $3.9 million in 1996
compared to a $1.4 million gain in 1995 and a $16.3 million loss in 1994.
Current year losses are due primarily to the devaluation of the Venezuelan
bolivar. The loss in 1994 related primarily to devaluations in Brazil and
Venezuela.
Provision for income taxes was lower in 1996 than in 1995 and 1994. The
effective income tax rate was 26% in 1996, compared with 36% in 1995 and 41% in
1994. The lower effective income tax rate and provision for 1996 are due to
credits of $43.7 million recorded during the third quarter to recognize certain
net operating loss carryforwards and the settlement of various issues with the
Internal Revenue Service. Excluding the tax benefits recorded in 1996, the
effective income tax rate was 36%. See Note 16 to the financial statements.
Income from continuing operations for 1996, 1995 and 1994 of $300.4
million, $249.2 million and $175.4 million, respectively, resulted in income per
share from continuing operations of $2.38, $2.00 and $1.41, respectively.
Discontinued operations in 1995 and 1994 consists of the Company's
Insurance Services Group. The Company declared a dividend on December 26, 1995
and subsequently distributed its property and casualty insurance subsidiary,
Highlands Insurance Group, Inc. (HIGI) to its shareholders in a tax-free
spin-off on January 23, 1996. The operations of the Insurance Services Group
have been classified as discontinued operations. During 1995, HIGI increased its
reserves for claim losses and related expenses and provisions for certain legal
matters which together with certain other provisions associated with the
Company's complete exit from the insurance industry resulted in a $67.2 million
charge against net earnings. See Note 14 to the financial statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company ended 1996 with cash and equivalents of $213.6 million compared
with $239.6 million in 1995 and $441.3 million in 1994. The decrease in cash and
equivalents from 1994 is due to the redemption of debt during 1995 of $432.7
million, partially offset by increased cash flows from operations.
Cash flows from operating activities were $452.0 million for 1996 compared
to $667.4 million and $439.0 million for 1995 and 1994, respectively. The
primary use of cash by operating activities was to fund increased working
capital requirements related to increased revenues.
Cash flows used in investing activities were $409.4 million for 1996
compared to $267.3 million used in 1995 and $183.4 million provided in 1994. The
increase in cash used for investing activities during 1996 is due primarily to
an increase in capital expenditures of 30% over 1995 and $41.3 million related
to the Company's share of the purchase price of a subsidiary acquired by the
Company's 36% owned affiliate, M-I Drilling Fluids Company, L.L.C. In 1994, the
Company sold substantially all of the assets of its geophysical services and
products business for $190.0 million and its natural gas compression business
for $205.0 million.
Cash flows used in financing activities were $65.8 million for 1996
compared to $599.0 million and $254.7 million for 1995 and 1994, respectively.
Cash used for financing activities during 1996 consisted primarily of dividend
payments of $117.5 million offset by net short term borrowings of $38.3 million
and proceeds from the exercise of stock options of $25.6 million. In 1995, the
increased amount of cash used by financing activities is due primarily to the
redemption of the Company's $390.7 million zero coupon convertible debentures
and $42.0 million term loan. In 1994, the Company redeemed the remaining $23.8
million of its 10.2% debentures and made $48.8 million in installments on the
$73.8 million note issued by the Company to the buyer of its geophysical
business. Total debt was 10%, 10% and 25% of total capitalization at the end of
1996, 1995 and 1994, respectively.
During January 1997, the Company announced that it had offered to purchase
all of the outstanding shares of OGC International plc for approximately $117.9
million. See Note 15 to the financial statements.
9
On February 6, 1997, the Company issued $125.0 million principal amount of
6.75% notes due February 1, 2027; however, each holder of the notes has the
right to require the Company to repay such holder's notes, in whole or in part,
on February 1, 2007. The additional funds will be used for general corporate
purposes which may include repayment of debt, acquisitions, and loans and
advances to and/or investments in subsidiaries of the Company for working
capital, repayment of debt and capital expenditures. The Company has the ability
to borrow additional short-term and long-term funds if necessary. See Note 6 to
the financial statements regarding the Company's various short-term lines of
credit, notes payable and long-term debt.
ENVIRONMENTAL MATTERS
The Company is involved as a potentially responsible party in remedial
activities to clean up various "Superfund" sites under applicable Federal law
which imposes joint and several liability, if the harm is indivisible, on
certain persons without regard to fault, the legality of the original disposal,
or ownership of the site. Although it is very difficult to quantify the
potential impact of compliance with environmental protection laws, management of
the Company believes that any liability of the Company with respect to all but
one of such sites will not have a material adverse effect on the results of
operations of the Company. See Note 10 to the financial statements.
FORWARD LOOKING INFORMATION
In accordance with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, the Company notes that the statements in this
annual report and elsewhere, which are forward looking and which provide other
than historical information, involve risks and uncertainties that may impact the
Company's actual results of operations. The Company continues to face many risks
and uncertainties including: unsettled political conditions, war, civil unrest,
currency controls and governmental actions in countries of operation; trade
restrictions and economic embargoes; environmental laws, including those that
require emission performance standards for new and existing facilities; the
magnitude of governmental spending for military and logistical support of the
type provided by the Company; operations in high risk countries; technological
and structural changes in the industries served by the Company; changes in the
price of oil and natural gas; changes in capital spending by customers in the
hydrocarbon industry for exploration, development, production, processing,
refining and pipeline delivery networks; changes in capital spending by
customers in the wood pulp and paper industries for plants and equipment; and
changes in capital spending by governments for infrastructure. In addition,
future trends for revenues and profitability remain difficult to predict in the
industries served by the Company.
10
RESPONSIBILITY FOR FINANCIAL REPORTING
Halliburton Company is responsible for the preparation and integrity of its
published financial statements. The financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
and, as such, include amounts based on judgments and estimates made by
management. The Company also prepared the other information included in the
annual report and is responsible for its accuracy and consistency with the
financial statements.
The financial statements have been audited by the independent accounting
firm, Arthur Andersen LLP, which was given unrestricted access to all financial
records and related data, including minutes of all meetings of stockholders, the
Board of Directors and committees of the Board.
The Company maintains a system of internal control over financial
reporting, which is intended to provide reasonable assurance to the Company's
management and Board of Directors regarding the preparation of financial
statements. The system includes a documented organizational structure and
division of responsibility, established policies and procedures including codes
of conduct to foster a strong ethical climate, which are communicated throughout
the Company, and the careful selection, training and development of our people.
Internal auditors monitor the operation of the internal control system and
report findings and recommendations to management and the Board of Directors,
and corrective actions are taken to address control deficiencies and other
opportunities for improving the system as they are identified. The Board,
operating through its audit committee, which is composed entirely of Directors
who are not current or former officers or employees of the Company, provides
oversight to the financial reporting process.
There are inherent limitations in the effectiveness of any system of
internal control, including the possibility of human error and the circumvention
or overriding of controls. Accordingly, even an effective internal control
system can provide only reasonable assurance with respect to financial statement
preparation. Furthermore, the effectiveness of an internal control system may
change over time.
The Company assessed its internal control system in relation to criteria
for effective internal control over financial reporting described in "Internal
Control-Integrated Framework" issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based upon that assessment, the
Company believes that, as of December 31, 1996, its system of internal control
over financial reporting met those criteria.
HALLIBURTON COMPANY
by /s/ Dick Cheney by /s/ David J. Lesar
------------------------ ------------------------
Dick Cheney David J. Lesar
Chairman of the Board, President Executive Vice President
and Chief Executive Officer and Chief Financial Officer
11
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders and Board of
Directors, Halliburton Company:
We have audited the accompanying consolidated balance sheets of Halliburton
Company (a Delaware corporation) and subsidiary companies as of December 31,
1996 and 1995, and the related consolidated statements of income, cash flows and
shareholders' equity for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of Halliburton
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 generally accepted auditing
standards. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Halliburton
Company and subsidiary companies as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas,
January 22, 1997
12
Consolidated Statements of Income
Years ended December 31
Millions of dollars and shares except per share data 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
Revenues
Energy Group $ 4,286.3 $ 3,604.0 $ 3,364.0
Engineering and Construction Group 3,098.8 2,278.9 2,297.1
--------------------------------------------
Total revenues 7,385.1 5,882.9 5,661.1
--------------------------------------------
Operating costs and expenses
Cost of revenues 6,644.8 5,251.9 5,172.6
General and administrative 236.6 221.7 232.1
Special charges 85.8 8.4 16.6
--------------------------------------------
Total operating costs and expenses 6,967.2 5,482.0 5,421.3
--------------------------------------------
Operating income 417.9 400.9 239.8
Interest expense (24.1) (47.1) (48.1)
Interest income 14.2 32.0 19.8
Foreign currency gains (losses) (3.9) 1.4 (16.3)
Gain on sale of compression services - - 102.0
Other nonoperating income, net 0.1 0.6 0.6
--------------------------------------------
Income from continuing operations before income taxes and
minority interests 404.2 387.8 297.8
Provision for income taxes (103.3) (137.7) (122.2)
Minority interest in net income of consolidated subsidiaries (0.5) (0.9) (0.2)
--------------------------------------------
Income from continuing operations 300.4 249.2 175.4
Income (loss) from discontinued operations - (65.5) 5.5
--------------------------------------------
Net income $ 300.4 $ 183.7 $ 180.9
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) per share
Continuing operations $ 2.38 $ 2.00 $ 1.41
Discontinued operations - (0.53) 0.04
--------------------------------------------
Net income 2.38 1.47 1.45
- ---------------------------------------------------------------------------------------------------------------------------
Average common shares outstanding 126.1 124.7 124.2
See notes to financial statements.
13
Consolidated Balance Sheets
December 31
Millions of dollars and shares except per share data 1996 1995
- --------------------------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and equivalents $ 213.6 $ 239.6
Receivables:
Notes and accounts receivable (less allowance for bad debts of $43.6 and $38.1) 1,413.4 1,215.4
Unbilled work on uncompleted contracts 288.9 233.7
------------------------------
Total receivables 1,702.3 1,449.1
Inventories 292.2 256.3
Deferred income taxes, current 108.7 141.4
Other current assets 81.2 99.6
------------------------------
Total current assets 2,398.0 2,186.0
Property, plant and equipment:
At cost 3,560.8 3,422.3
Less accumulated depreciation 2,269.2 2,264.4
------------------------------
Net property, plant and equipment 1,291.6 1,157.9
Equity in and advances to related companies 234.9 115.4
Excess of cost over net assets acquired (net of accumulated amortization
of $42.7 and $34.0) 233.9 225.6
Deferred income taxes, noncurrent 98.6 3.0
Other assets 179.6 174.1
------------------------------
Total assets $ 4,436.6 $ 3,862.0
- --------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Short-term notes payable $ 46.3 $ 4.8
Current maturities of long-term debt 0.1 5.2
Accounts payable 452.1 373.0
Accrued employee compensation and benefits 193.7 155.2
Advance billings on uncompleted contracts 336.3 301.8
Income taxes payable 135.8 97.3
Deferred maintenance fees 18.9 12.1
Other current liabilities 321.5 248.7
------------------------------
Total current liabilities 1,504.7 1,198.1
Long-term debt 200.0 200.0
Employee compensation and benefits 281.1 263.2
Other liabilities 291.6 280.5
------------------------------
Total liabilities 2,277.4 1,941.8
------------------------------
Shareholders' equity:
Common stock, par value $2.50 per share - authorized 200.0 shares,
issued 129.3 and 129.1 shares 323.3 322.7
Paid-in capital in excess of par value 322.2 302.9
Cumulative translation adjustment (12.4) (28.0)
Retained earnings 1,656.3 1,473.4
------------------------------
2,289.4 2,071.0
Less 4.0 and 4.6 shares treasury stock, at cost 130.2 150.8
------------------------------
Total shareholders' equity 2,159.2 1,920.2
------------------------------
Total liabilities and shareholders' equity $ 4,436.6 $ 3,862.0
- --------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
14
Consolidated Statements of Cash Flows
Years ended December 31
Millions of dollars 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 300.4 $ 183.7 $ 180.9
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization 267.9 259.8 271.3
Provision (benefit) for deferred income taxes (23.8) 46.0 86.0
Distributions from (advances to) related companies, net of equity in
(earnings) or losses (65.9) (20.5) (0.6)
Appreciation of zero coupon bonds - 15.0 21.6
Gain on sale of compression services - - (102.0)
Net (income) loss from discontinued operations - 65.5 (5.5)
Other non-cash items 8.9 (8.2) (8.5)
Other changes, net of non-cash items:
Receivables (218.2) (91.6) 100.4
Inventories (46.0) 17.6 90.0
Accounts payable 63.7 76.5 (54.3)
Other working capital, net 251.5 192.1 (78.6)
Other, net (86.5) (68.5) (61.7)
-----------------------------------------
Total cash flows from operating activities 452.0 667.4 439.0
-----------------------------------------
Cash flows from investing activities:
Capital expenditures (395.7) (303.3) (245.0)
Sales of property, plant and equipment 49.8 36.0 65.6
Acquisitions of businesses, net of cash acquired (31.6) (10.3) (23.5)
Dispositions of businesses, net of cash disposed 21.6 25.9 400.2
Other investing activities (53.5) (15.6) (13.9)
-----------------------------------------
Total cash flows from investing activities (409.4) (267.3) 183.4
-----------------------------------------
Cash flows from financing activities:
Net payments on long-term borrowings (5.1) (465.4) (74.4)
Net borrowings (payments) of short-term debt 38.3 (27.0) (65.3)
Payments of dividends to shareholders (117.5) (114.3) (117.8)
Proceeds from exercises of stock options 25.6 9.7 3.1
Payments to reacquire common stock (7.1) (2.2) (1.3)
Other financing activities - 0.2 1.0
-----------------------------------------
Total cash flows from financing activities (65.8) (599.0) (254.7)
-----------------------------------------
Effect of exchange rate changes on cash (2.8) (2.8) (5.8)
-----------------------------------------
Increase (decrease) in cash and equivalents (26.0) (201.7) 361.9
Cash and equivalents at beginning of year 239.6 441.3 79.4
-----------------------------------------
Cash and equivalents at end of year $ 213.6 $ 239.6 $ 441.3
- -----------------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information: Cash payments (refunds) during
the period for:
Interest $ 24.9 $ 26.2 $ 29.9
Income taxes 35.5 29.9 (15.4)
Non-cash investing and financing activities:
Liabilities assumed in acquisitions of businesses $ 24.8 $ 4.1 $ -
Liabilities disposed of in dispositions of businesses 9.8 14.6 69.9
See notes to financial statements.
15
Consolidated Statements of Shareholders' Equity
Years ended December 31
Millions of dollars except share data 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
Common stock (number of shares in thousands):
Balance at beginning of year 129,064 128,846 128,586
Shares issued (forfeited) under restricted stock plans, net 382 175 28
Cancellation of treasury stock (130) - -
Common stock issued in connection with acquisition - 43 -
Conversion of performance units - - 232
---------------------------------------------------
Balance at end of year 129,316 129,064 128,846
- -----------------------------------------------------------------------------------------------------------------------
Common stock (dollars):
Balance at beginning of year $ 322.7 $ 322.1 $ 321.5
Shares issued (forfeited) under restricted stock plans, net 0.9 0.5 0.1
Cancellation of treasury stock (0.3) - -
Common stock issued in connection with acquisition - 0.1 -
Conversion of performance units - - 0.5
---------------------------------------------------
Balance at end of year $ 323.3 $ 322.7 $ 322.1
- -----------------------------------------------------------------------------------------------------------------------
Paid-in capital in excess of par value:
Balance at beginning of year $ 302.9 $ 298.4 $ 283.6
Shares issued (forfeited) under restricted stock plans, net 22.9 4.5 5.9
Cancellation of treasury stock (3.6) - -
Conversion of performance units - - 8.0
Contribution of undistributed S Corporation earnings - - 0.9
---------------------------------------------------
Balance at end of year $ 322.2 $ 302.9 $ 298.4
- -----------------------------------------------------------------------------------------------------------------------
Cumulative translation adjustment:
Balance at beginning of year $ (28.0) $ (23.1) $ (24.8)
Other changes net of tax of $3.7 in 1996, $(0.5)
in 1995 and $1.1 in 1994 15.6 (4.9) 3.8
Sale of geophysical business - - (2.1)
---------------------------------------------------
Balance at end of year $ (12.4) $ (28.0) $ (23.1)
- -----------------------------------------------------------------------------------------------------------------------
Retained earnings:
Balance at beginning of year $ 1,473.4 $ 1,656.6 $ 1,611.3
Net income 300.4 183.7 180.9
Cash dividends paid ($1.00 per share) (includes S Corporation
distributions by pooled entity of $(3.8) in 1994) (117.5) (114.3) (117.8)
Spin-off of Highlands Insurance Group, Inc. - (268.6) -
Net change in unrealized gains (losses) on investments
held by discontinued operation - 16.3 (16.9)
Common stock issued in connection with acquisition - (0.3) -
Contribution of undistributed S Corporation earnings - - (0.9)
---------------------------------------------------
Balance at end of year $ 1,656.3 $ 1,473.4 $ 1,656.6
- -----------------------------------------------------------------------------------------------------------------------
Treasury stock (number of shares in thousands):
Balance at beginning of year 4,582 4,990 5,119
Shares issued under restricted stock plans, net (670) (469) (171)
Purchase of common stock 172 61 42
Cancellation of treasury stock (130) - -
---------------------------------------------------
Balance at end of year 3,954 4,582 4,990
- -----------------------------------------------------------------------------------------------------------------------
Treasury stock (dollars):
Balance at beginning of year $ 150.8 $ 163.8 $ 168.1
Shares issued under restricted stock plans, net (23.8) (15.2) (5.6)
Purchase of common stock 7.1 2.2 1.3
Cancellation of treasury stock (3.9) - -
---------------------------------------------------
Balance at end of year $ 130.2 $ 150.8 $ 163.8
- -----------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
16
NOTES TO FINANCIAL STATEMENTS
Note 1. Significant Accounting Policies
The Company employs accounting policies that are in accordance with
generally accepted accounting principles in the United States. The preparation
of financial statements in conformity with generally accepted accounting
principles requires Company management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Ultimate results could differ from those estimates.
Principles of Consolidation. The consolidated financial statements include
the accounts of the Company and all majority-owned subsidiaries. All material
intercompany accounts and transactions are eliminated. Investments in other
affiliated companies in which the Company has at least 20% ownership and does
not have management control are accounted for on the equity method. As discussed
in Note 13, the Company completed the acquisition of Landmark Graphics
Corporation (Landmark) on October 4, 1996. The Company's financial statements
for 1996 and prior periods have been restated to reflect the combined results of
the two companies under the pooling of interests method. Prior to the
acquisition, Landmark had a fiscal year end of June 30, which has subsequently
been changed to conform to the Company's fiscal year end. In addition, the
financial statements have been restated to reflect the realignment of Brown &
Root's energy services operations into the Energy Group (see Note 9). In
connection with the discontinuance of the Company's insurance segment, as
described in Note 14, the Company has adopted a classified balance sheet format.
Certain prior year amounts have been reclassified to conform with current year
presentation.
Revenues and Income Recognition. The Company recognizes revenues as
services are rendered or products are shipped. The distinction between services
and product sales is based upon the overall business intent of the particular
business operation. Revenues from construction contracts are reported on the
percentage of completion method of accounting using measurements of progress
toward completion appropriate for the work performed. All known or anticipated
losses on any contracts are provided for currently. Claims for additional
compensation are recognized during the period such claims are resolved.
Post-contract customer support agreements are recorded as deferred maintenance
fees and recognized as revenue ratably over the contract period. Training and
consulting service revenue is recognized as the services are performed.
Research and Development. Research and development expenses are charged to
income as incurred. Such charges were $133.3 million in 1996, $113.1 million in
1995, and $127.8 million in 1994.
Software Development Costs. Costs of developing software for sale are
charged to expense when incurred as research and development until technological
feasibility has been established for the product. Thereafter, software
development costs are capitalized until the software is ready for general
release to customers. The Company capitalized software development costs of
$12.9 million in 1996, $8.8 million in 1995, and $9.7 million in 1994.
Amortization expense related to these costs was $12.5 million, $10.3 million and
$10.5 million for 1996, 1995 and 1994, respectively. Once the software is ready
for release, amortization of the software development costs begins. Capitalized
software development costs are not amortized over periods which exceed three
years.
Income Per Share. Income per share is based on the weighted average number
of common shares and common share equivalents outstanding during each year.
Common share equivalents included in the computation represent shares issuable
upon assumed exercise of stock options which have a dilutive effect.
Cash Equivalents. The Company considers all highly liquid investments with
an original maturity of three months or less to be cash equivalents.
Receivables. The Company's receivables are generally not collateralized.
Notes and accounts receivable at December 31, 1996 include $24.9 million ($17.8
million at December 31, 1995) due from customers in accordance with applicable
retainage provisions of engineering and construction contracts, which will
become billable upon future deliveries or completion of such contracts. This
amount is expected to be collected during 1997. Additionally, other noncurrent
assets include $6.7 million ($4.5 million at December 31, 1995) of such
retainage which is expected to be collected in years subsequent to 1997.
Unbilled work on uncompleted contracts generally represents work currently
billable and such work is usually billed during normal billing processes in the
next month.
Inventories. Inventories are stated at cost which is not in excess of
market. Cost represents invoice or production cost for new items and original
cost less allowance for condition for used material returned to stock.
Production cost includes material, labor and manufacturing overhead. About forty
percent of all sales items are valued on a last-in, first-out (LIFO) basis.
17
Inventories of sales items owned by foreign subsidiaries and inventories of
operating supplies and parts are generally valued at average cost.
Depreciation, Amortization and Maintenance. Depreciation and amortization,
including amortization of the excess of cost over the fair value of net assets
acquired, for financial reporting purposes is calculated primarily on the
straight-line method over the estimated useful lives of the assets not exceeding
40 years. Expenditures for maintenance and repairs are expensed; expenditures
for renewals and improvements are generally capitalized. Upon sale or retirement
of an asset, the related cost and accumulated depreciation or amortization are
removed from the accounts and any gain or loss is recognized. In the event that
facts and circumstances indicate that assets may be impaired, an evaluation of
recoverability would be performed. If an evaluation is required, the estimated
future undiscounted cash flows associated with the asset would be compared to
the asset's carrying amount to determine if a write-down to market value or
discounted cash flow value is required.
Income Taxes. A valuation allowance is provided for deferred tax assets if
it is more likely than not these items will either expire before the Company is
able to realize their benefit, or that future deductibility is prohibited or
uncertain. Deferred tax assets and liabilities are recognized for the expected
future tax consequences of events that have been realized in the financial
statements or tax returns.
Derivative Instruments. The Company enters into derivative financial
transactions to hedge existing or projected exposures to changing foreign
exchange rates, interest rates, security prices, or commodity prices. The
Company does not enter into derivative transactions for speculative or trading
purposes. Derivative financial transactions are generally carried at fair value
with the resulting gains and losses reflected in the results of operations.
Foreign Currency Translation. Foreign entities whose functional currency is
the U.S. dollar translate monetary assets and liabilities at year-end exchange
rates and non-monetary items are translated at historical rates. Income and
expense accounts are translated at the average rates in effect during the year,
except for depreciation and cost of product sales which are translated at
historical rates. Gains or losses from changes in exchange rates are recognized
in consolidated income in the year of occurrence. Foreign entities whose
functional currency is the local currency translate net assets at year-end rates
and income and expense accounts at average exchange rates. Adjustments resulting
from these translations are reflected in the Shareholders' Equity section titled
"Cumulative translation adjustment".
Note 2. Inventories
Inventories at December 31, 1996 and 1995 are comprised of the following:
Millions of dollars 1996 1995
- -------------------------------------------------------------------------------------
Sales items $ 104.3 $ 90.1
Supplies and parts 136.3 121.5
Work in process 30.4 27.2
Raw materials 21.2 17.5
------------------------
Total $ 292.2 $ 256.3
- -------------------------------------------------------------------------------------
If the average cost method had been in use for inventories on the LIFO
basis, total inventories would have been about $13.0 million and $18.3 million
higher than reported at December 31, 1996 and 1995, respectively.
Note 3. Property, Plant and Equipment
Millions of dollars 1996 1995
- -------------------------------------------------------------------------------------
Land $ 63.9 $ 63.7
Buildings and property improvements 568.2 555.7
Machinery and equipment 2,653.8 2,560.3
Other 274.9 242.6
--------------------------
Total $ 3,560.8 $ 3,422.3
- -------------------------------------------------------------------------------------
18
Note 4. Related Companies
The Company conducts some of its operations through various joint ventures,
which are in partnership, corporate and other business forms, which are
principally accounted for using the equity method. Included in the Company's
revenues for 1996, 1995 and 1994 are equity in income of related companies of
$105.5 million, $88.4 million and $93.0 million, respectively. When the Company
sells or transfers assets to an affiliated company that is accounted for using
the equity method and the affiliated company records the assets at fair value,
the excess of the fair value of the assets over the Company's net book value is
deferred and amortized over the expected lives of the assets. Such deferred
gains included in the Company's other liabilities were $3.7 million and $10.1
million at December 31, 1996 and 1995, respectively. Summarized financial
statements for European Marine Contractors, Limited, a 50% owned company which
specializes in engineering, procurement and construction of marine pipelines,
and for the remaining combined jointly owned operations which are not
consolidated are as follows:
COMBINED OPERATING RESULTS
Millions of dollars 1996 1995 1994
- --------------------------------------------------------------------------------------
European Marine Contractors
Revenues $ 246.5 $ 361.8 $ 439.3
- --------------------------------------------------------------------------------------
Operating income $ 65.5 $ 106.9 $ 142.4
- --------------------------------------------------------------------------------------
Net income $ 43.7 $ 72.6 $ 94.4
- --------------------------------------------------------------------------------------
Other Affiliates
Revenues $ 2,276.4 $ 1,767.2 $ 1,542.2
- ---------------------------------------------------------------------------------------
Operating income $ 197.7 $ 92.9 $ 81.3
- ---------------------------------------------------------------------------------------
Net income $ 158.8 $ 63.0 $ 66.2
- ---------------------------------------------------------------------------------------
COMBINED FINANCIAL POSITION
Millions of dollars 1996 1995
- -----------------------------------------------------------------------------------------
European Marine
Contractors
Current assets $ 263.1 $ 238.4
Noncurrent assets 25.6 40.6
---------------------------
Total $ 288.7 $ 279.0
- -----------------------------------------------------------------------------------------
Current liabilities $ 226.4 $ 182.1
Noncurrent liabilities 3.8 18.1
Shareholders' equity 58.5 78.8
---------------------------
Total $ 288.7 $ 279.0
- -----------------------------------------------------------------------------------------
Other Affiliates
Current assets $ 871.3 $ 752.5
Noncurrent assets 615.2 476.1
---------------------------
Total $ 1,486.5 $ 1,228.6
- -----------------------------------------------------------------------------------------
Current liabilities $ 572.9 $ 418.4
Noncurrent liabilities 284.0 403.7
Shareholders' equity 629.6 406.5
---------------------------
Total $ 1,486.5 $ 1,228.6
- -----------------------------------------------------------------------------------------
19
Note 5. Income Taxes
The components of the (provision) benefit for income taxes are:
Millions of dollars 1996 1995 1994
- ------------------------------------------------------------------------------------------------
Current income taxes
Federal $ (21.5) $ (6.4) $ 9.2
Foreign (102.7) (79.9) (43.5)
State (2.9) (5.4) (1.9)
-------------------------------------
Total (127.1) (91.7) (36.2)
-------------------------------------
Deferred income taxes
Federal 58.2 (11.2) (55.3)
Foreign and state (34.4) (34.8) (30.7)
-------------------------------------
Total 23.8 (46.0) (86.0)
-------------------------------------
Total $ (103.3) $ (137.7) $ (122.2)
- ------------------------------------------------------------------------------------------------
Included in income taxes are foreign tax credits of $63.7 million in 1996
and $35.2 million in 1995. The U.S. and foreign components of income from
continuing operations before income taxes and minority interests are as follows:
Millions of dollars 1996 1995 1994
- ------------------------------------------------------------------------------------------------
U.S. $ 217.2 $ 234.6 $ 200.9
Foreign 187.0 153.2 96.9
-------------------------------------
Total $ 404.2 $ 387.8 $ 297.8
- ------------------------------------------------------------------------------------------------
The primary components of the Company's deferred tax assets and liabilities
and the related valuation allowances are as follows:
Millions of dollars 1996 1995
- ----------------------------------------------------------------------------------
Gross deferred tax assets
Employee benefit plans $ 95.2 $ 86.0
Accrued liabilities 71.9 55.3
Net operating loss carryforwards 62.8 89.2
Construction contract accounting methods 38.6 88.9
Intercompany profit 34.2 26.8
Insurance accruals 30.0 20.9
Foreign tax credits 29.8 13.1
Alternative minimum tax carryforward 19.3 15.0
All other 82.2 61.5
----------------------
Total 464.0 456.7
----------------------
Gross deferred tax liabilities
Depreciation and amortization 56.7 75.4
Unrepatriated foreign earnings 34.1 34.0
Safe harbor leases 12.0 13.0
All other 83.6 117.0
----------------------
Total 186.4 239.4
----------------------
Valuation allowances
Net operating loss carryforwards 36.3 53.2
All other 34.0 19.7
----------------------
Total 70.3 72.9
----------------------
Net deferred income tax asset $ 207.3 $ 144.4
- ----------------------------------------------------------------------------------
20
The Company has foreign tax credits which expire in 1999 of $1.0 million
and in 2000 of $28.8 million. The Company has net operating loss carryforwards
which expire as follows: 1997, $8.9 million; 1998, $18.0 million; 1999, $20.7
million; 2000 through 2010, $41.3 million; and indefinite, $87.4 million.
Reconciliations between the actual benefit (provision) for income taxes and that
computed by applying the U.S. statutory rate to income or loss from continuing
operations before income taxes and minority interests are as follows:
Millions of dollars 1996 1995 1994
- ------------------------------------------------------------------------------------------------
Benefit (provision) computed at
statutory rate $ (141.5) $ (135.7) $ (104.3)
Reductions (increases) in taxes resulting from:
Tax differentials on
foreign earnings 3.7 (35.4) (18.4)
State income taxes, net of
Federal income tax benefit (2.9) (5.1) (1.9)
Net operating losses 23.0 48.6 0.4
Federal income tax settlement 16.1 - -
Other items, net (1.7) (10.1) 2.0
-------------------------------------
Total $ (103.3) $ (137.7) $ (122.2)
- ------------------------------------------------------------------------------------------------
The Company has received statutory notices of deficiency for the 1990 and
1991 tax years from the Internal Revenue Service (IRS) of $92.9 million and
$16.8 million, respectively, excluding any penalties or interest. The Company
believes it has meritorious defenses and does not expect that any liability
resulting from the 1990 or 1991 tax years will result in a material adverse
effect on its results of operations or financial position. In 1996, the Company
reached settlements with the IRS for certain matters including the 1989 taxable
year. As a result of the settlement for the 1989 taxable year, the Company
recognized tax benefits and net income was increased by $16.1 million in 1996
(see Note 16).
Note 6. Lines of Credit, Notes Payable, and Long-Term Debt
At December 31, 1996, the Company had committed short-term lines of credit
totaling $185.0 million available and unused, and other short-term lines of
credit totaling $275.0 million, under which $25.0 million in borrowings were
outstanding with several U.S. banks. The interest rate on these borrowings was
5.65%. In addition, the Company had $21.3 million of other short-term debt
outstanding at December 31, 1996, primarily consisting of commercial paper with
an interest rate of 5.85%. The $100.0 million revolving credit agreement
maintained by Landmark prior to the merger (see Note 13) was terminated on
October 7, 1996.
Long-term debt at December 31, 1996 and 1995 consists of the following:
Millions of dollars 1996 1995
- ------------------------------------------------------------------------------------
8.75% debentures due February 15, 2021 $ 200.0 $ 200.0
Other notes with varying interest rates 0.1 5.2
------------------------
200.1 205.2
Less current portion (0.1) 5.2
------------------------
Total $ 200.0 $ 200.0
- ------------------------------------------------------------------------------------
The Company's 8.75% debentures due February 15, 2021 do not have sinking
fund requirements and are not redeemable prior to maturity. In September 1995,
the Company redeemed all of its zero coupon convertible subordinated debentures
due March 13, 2006 for $390.7 million in cash, which represented the original
issue price plus accrued original issue discount to the redemption date. In
addition, in December 1995, the Company redeemed all of its $42.0 million term
loan at LIBOR plus 0.45%. Long-term debt of $0.1 million matures during 1997 and
there are no other maturities due for the succeeding four years.
21
On February 6, 1997, the Company issued $125.0 million principal amount
6.75% notes due February 1, 2027 under the Company's medium-term note program.
The notes were priced at 99.78%, to yield 6.78% to maturity. The notes are not
redeemable prior to maturity and have no sinking fund requirements. Each holder
of the notes has the right to require the Company to repay such holder's notes,
in whole or in part, on February 1, 2007. The Company intends to use the net
proceeds from the sale of the notes for general corporate purposes which may
include repayment of debt, acquisitions, and loans and advances to and/or
investments in subsidiaries of the Company for working capital, repayment of
debt and capital expenditures.
Note 7. Common Stock
The Company's 1993 Stock and Long-Term Incentive Plan (1993 Plan) provides
for the grant of any or all of the following types of awards: (1) stock options,
including incentive stock options and non-qualified stock options; (2) stock
appreciation rights, in tandem with stock options or freestanding; (3)
restricted stock; (4) performance share awards; and (5) stock value equivalent
awards. Under the terms of the 1993 Plan, 5.5 million shares of the Company's
Common Stock were reserved for issuance to key employees. At December 31, 1996,
0.3 million shares were available for future grants under the 1993 Plan. In
connection with the acquisition of Landmark, the stock option plans maintained
by Landmark were assumed by the Company. Stock option transactions summarized
below include amounts for the 1993 Plan and the Landmark plans using the
acquisition exchange rate of .574 shares for each Landmark share.
Exercise Weighted Average
Number of Price per Exercise Price
Shares Share Per Share
- ---------------------------------------------------------------------------------------------------
Outstanding at December 31, 1993 2,016,941 1.05 - 44.86 29.27
Granted 1,373,358 29.62 - 59.45 33.42
Exercised (145,926) 1.05 - 41.38 23.37
Forfeited (129,552) 17.42 - 49.65 29.21
- ---------------------------------------------------------------------------------------------------
Outstanding at December 31, 1994 3,114,821 1.05 - 59.45 31.38
- ---------------------------------------------------------------------------------------------------
Granted 1,983,357 31.36 - 50.63 41.06
Exercised (350,774) 1.05 - 41.81 27.61
Forfeited (132,597) 17.42 - 57.53 34.54
- ---------------------------------------------------------------------------------------------------
Outstanding at December 31, 1995 4,614,807 5.80 - 59.45 35.74
- ---------------------------------------------------------------------------------------------------
Granted 1,799,670 28.96 - 59.13 55.40
Exercised (997,287) 5.80 - 47.04 31.15
Forfeited (222,830) 17.42 - 56.18 37.62
- ---------------------------------------------------------------------------------------------------
Outstanding at December 31, 1996 5,194,360 6.97 - 59.45 43.34
- ---------------------------------------------------------------------------------------------------
Options outstanding at December 31, 1996 is composed of the following:
Outstanding Exercisable
------------------------------------------------ --------------------------------
Weighted
Number of Average Weighted Number of Weighted
Shares at Remaining Average Shares at Average
Range of December 31, Contractual Exercise December 31, Exercise
Exercise Prices 1996 Life Price 1996 Price
- -----------------------------------------------------------------------------------------------------------
6.97 - 17.86 101,266 5.42 17.68 101,266 17.68
18.29 - 28.75 201,932 4.65 24.33 195,117 24.32
28.96 - 44.86 2,438,743 6.61 35.55 1,631,513 35.40
45.19 - 59.45 2,452,419 9.10 53.73 301,664 45.87
- -----------------------------------------------------------------------------------------------------------
6.97 - 59.45 5,194,360 7.69 43.34 2,229,560 35.04
- -----------------------------------------------------------------------------------------------------------
22
All stock options under the 1993 Plan are granted at the fair market value
of the Common Stock at the grant date. Landmark, prior to its acquisition by the
Company, had provisions in its plans that allowed Landmark to set option
exercise prices at a defined percentage below fair market value. The weighted
average fair value of the stock options granted during 1996 was $20.48. The fair
value of each stock option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1996: risk-free interest rate of 5.9%; expected
dividend yield of 1.6%; expected life of five years; and expected volatility of
39.72%. The weighted average fair value of the stock options granted during 1995
was $14.32. The following weighted average assumptions were used for grants in
1995: risk-free interest rate of 6.2%; expected dividend yield of 1.6%; expected
life of five years; and expected volatility of 38.36%. Stock options generally
expire ten years from the grant date. Stock options vest over a three-year
period, with one-third of the shares becoming exercisable on each of the first,
second and third anniversaries of the grant date.
The Company accounts for the 1993 Plan in accordance with Accounting
Principles Board Opinion No. 25, under which no compensation cost has been
recognized for stock option awards. Had compensation cost for the 1993 Plan been
determined consistent with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock - Based Compensation" (SFAS 123), the Company's pro forma
net income for 1996 and 1995 would have been $292.4 million and $181.6 million,
respectively, resulting in earnings per share of $2.32 and $1.45, respectively.
Because the SFAS 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
Restricted shares awarded under the 1993 Plan for 1996, 1995 and 1994 were
90,450, 206,350 and 80,600, respectively. The shares awarded are net of
forfeitures of 11,750, 4,900 and 5,000 shares in 1996, 1995 and 1994,
respectively. The weighted average fair market value per share at the date of
grant of shares granted in 1996 and 1995 was $54.73 and $40.88, respectively.
The Company's Restricted Stock Plan for Non-Employee Directors (Restricted
Stock Plan) allows for each non-employee director to receive an annual award of
200 restricted shares of Common Stock as a part of compensation. The Company
reserved 50,000 shares of Common Stock for issuance to non-employee directors.
The Company issued 1,800, 1,600 and 1,800 restricted shares in 1996, 1995 and
1994, respectively under this plan. The weighted average fair market value per
share at the date of grant of shares granted in 1996 and 1995 was $53.13 and
$40.75, respectively.
The Company's Employees' Restricted Stock Plan was established for
employees who are not officers, for which 100,000 shares of Common Stock have
been reserved. The Company awarded 1,750 and 96,750 restricted shares in 1995
and 1994, respectively, and 4,200 and 900 restricted shares were forfeited in
1996 and 1995, respectively. No awards were made in 1996 and no further grants
are being made under this plan. The weighted average fair market value per share
at the date of grant for shares granted in 1995 was $35.00.
Under the terms of the Company's Career Executive Incentive Stock Plan, 7.5
million shares of the Company's Common Stock were reserved for issuance to
officers and key employees at a purchase price not to exceed par value of $2.50
per share. At December 31, 1996, 5.9 million shares (net of 1.0 million shares
forfeited) have been issued under the plan. No further grants will be made under
the Career Executive Incentive Stock Plan.
Restricted shares issued under the 1993 Plan, Restricted Stock Plan,
Employees' Restricted Stock Plan and the Career Executive Incentive Stock Plan
are limited as to sale or disposition with such restrictions lapsing
periodically over an extended period of time. The fair market value of the
stock, on the date of issuance, is being amortized and charged to income (with
similar credits to paid-in capital in excess of par value) generally over the
average period during which the restrictions lapse. Compensation costs
recognized in income for 1996, 1995 and 1994 were $6.9 million, $7.0 million and
$7.1 million, respectively. At December 31, 1996, the unamortized amount is
$22.9 million.
Note 8. Series A Junior Participating Preferred Stock
The Company has previously declared a dividend of one preferred stock
purchase right (a Right) on each outstanding share of Common Stock. Each Right
entitles the holder thereof to buy one one-hundredth of a share of the Company's
Series A Junior Participating Preferred Stock, without par value, at an exercise
price of $150, subject to certain antidilution adjustments, upon the terms and
subject to the conditions set forth in the Rights Agreement entered into with
ChaseMellon Shareholder Services, L.L.C. as Rights Agent. The Rights do not have
any voting rights and are not entitled to dividends.
The Rights become exercisable in certain limited circumstances involving a
potential business combination. Following certain other events after the Rights
become exercisable, each Right will entitle its holder to an amount of Common
23
Stock of the Company, or, in certain circumstances, securities of the acquiror,
having a then-current market value of two times the exercise price of the Right.
The Rights are redeemable at the Company's option at any time before they become
exercisable. The Rights expire on December 15, 2005. No event during 1996 made
the Rights exercisable.
Note 9. Business Segment Information
In the fourth quarter of 1996, the Company realigned its two business
segments in order to better meet the growing customer needs for complete arrays
of integrated energy services. Under the new structure, the upstream oil and gas
services business unit of the former Engineering and Construction Services
segment and Landmark, a leading supplier of integrated exploration and
production information systems and professional services to the petroleum
industry, are included in the Energy Group. The Energy Group also includes the
product and service lines of the former Energy Services segment, including
drilling systems and services, pressure pumping equipment and services, logging
and perforating, specialized completion and production equipment and services,
and well control. The Engineering and Construction Group provides engineering,
construction, project management, facilities operation and maintenance, and
environmental services for industrial and governmental customers. Amounts for
prior years have been restated to conform to the new organization structure.
The Company's equity in income or losses of related companies is included
in revenues and operating income of each applicable segment. Intersegment
revenues included in the revenues of the other business segments are immaterial.
Sales between geographic areas and export sales are also immaterial. General
corporate assets are primarily comprised of cash and equivalents and certain
other investments.
OPERATIONS BY BUSINESS SEGMENT
Years ended December 31
Millions of dollars 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
Operating income:
Energy Group $ 484.4 $ 398.2 $ 264.1
Engineering and Construction Group 53.7 44.6 15.2
General corporate and special charges (120.2) (41.9) (39.5)
-----------------------------------------
Total $ 417.9 $ 400.9 $ 239.8
- -----------------------------------------------------------------------------------------------------
Capital expenditures:
Energy Group $ 313.8 $ 248.1 $ 207.1
Engineering and Construction Group 70.5 55.1 37.5
General corporate 11.4 0.1 0.4
-----------------------------------------
Total $ 395.7 $ 303.3 $ 245.0
- -----------------------------------------------------------------------------------------------------
Depreciation and amortization:
Energy Group $ 228.4 $ 220.2 $ 224.9
Engineering and Construction Group 38.2 38.3 43.8
General corporate 1.3 1.3 2.6
-----------------------------------------
Total $ 267.9 $ 259.8 $ 271.3
- -----------------------------------------------------------------------------------------------------
Identifiable assets:
Energy Group $ 2,899.8 $ 2,445.1 $ 2,524.8
Engineering and Construction Group 986.3 873.6 750.0
General corporate 550.5 543.3 636.0
Net assets of discontinued operations 286.6
- -
-----------------------------------------
Total $ 4,436.6 $ 3,862.0 $ 4,197.4
- -----------------------------------------------------------------------------------------------------
24
OPERATIONS BY GEOGRAPHIC AREA
Years ended December 31
Millions of dollars 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
Revenues:
United States $ 3,953.2 $ 3,255.6 $ 3,327.7
Europe 1,711.1 1,117.7 963.9
Latin America 557.4 529.9 405.1
Other areas 1,163.4 979.7 964.4
------------------------------------------
Total $ 7,385.1 $ 5,882.9 $ 5,661.1
- ------------------------------------------------------------------------------------------------------
Operating income (loss):
United States $ 397.5 $ 231.4 $ 166.3
Europe 62.3 3.3 (12.1)
Latin America 24.7 64.9 35.8
Other areas 53.6 134.8 72.7
General corporate and special charges (120.2) (33.5) (22.9)
------------------------------------------
Total $ 417.9 $ 400.9 $ 239.8
- ------------------------------------------------------------------------------------------------------
Identifiable assets:
United States $ 1,994.7 $ 1,872.0 $ 1,742.3
Europe 695.0 528.0 576.5
Latin America 347.3 279.7 272.3
Other areas 849.1 639.0 683.7
General corporate 550.5 543.3 636.0
Net assets of discontinued operations 286.6
- -
------------------------------------------
Total $ 4,436.6 $ 3,862.0 $ 4,197.4
- ------------------------------------------------------------------------------------------------------
Note 10. Commitments and Contingencies
Leases. At December 31, 1996, the Company was obligated under noncancelable
operating leases, expiring on various dates to 2020, principally for the use of
land, offices, equipment and field facilities. Aggregate rentals charged to
operations for such leases totaled $70.8 million in 1996, $73.7 million in 1995
and $108.2 million in 1994. Future aggregate rentals on noncancelable operating
leases are as follows: 1997, $55.7 million; 1998, $41.2 million; 1999, $30.0
million; 2000, $16.4 million; 2001, $11.3 million; and thereafter, $72.5
million.
Environmental. The Company is involved as a potentially responsible party
(PRP) in remedial activities to clean up various "Superfund" sites under
applica Federal law which imposes joint and several liability, if the harm is
indivisible, on certain persons without regard to fault, the legality of the
original disposal, or ownership of the site. Although it is very difficult to
quantify the potential impact of compliance with environmental protection laws,
management of the Company believes that any liability of the Company with
respect to all but one of such sites will not have a material adverse effect on
the results of operations of the Company. With respect to a site in Jasper
County, Missouri (Jasper County Superfund Site), sufficient information has not
been developed to permit management to make such a determination and management
believes the process of determining the nature and extent of remediation at this
site and the total costs thereof will be lengthy. Brown & Root, Inc. (Brown &
Root), a subsidiary of the Company, has been named as a PRP with respect to the
Jasper County Superfund Site by the Environmental Protection Agency (EPA). The
Jasper County Superfund Site includes areas of mining activity that occurred
from the 1800's through the mid 1950's in the southwestern portion of Missouri.
The site contains lead and zinc mine tailings produced from mining activity.
Brown & Root is one of nine participating PRPs which have agreed to perform a
Remedial Investigation/Feasibility Study (RI/FS), which, due to various delays,
is not expected to be completed until the fourth quarter of 1997. Although the
entire Jasper County Superfund Site comprises 237 square miles as listed on the
National Priorities List, in the RI/FS scope of work, the EPA has only
identified seven areas, or subsites, within this area that need to be studied
and then possibly remediated by the PRPs. Additionally, the Administrative Order
25
on Consent for the RI/FS only requires Brown & Root to perform RI/FS work at one
of the subsites within the site, the Neck/Alba subsite, which only comprises
3.95 square miles. Brown & Root's share of the cost of such a study is not
expected to be material. At the present time Brown & Root cannot determine the
extent of its liability, if any, for remediation costs on any reasonably
practica basis.
Other. The Company and its subsidiaries are parties to various other legal
proceedings. Although the ultimate dispositions of such proceedings are not
presently determinable, in the opinion of the Company any liability that may
ensue will not be material in relation to the consolidated financial position
and results of operations of the Company.
Note 11. Financial Instruments and Risk Management
Foreign Exchange Risk. Techniques in managing foreign exchange risk
include, but are not limited to, foreign currency borrowing and investing and
the use of currency derivative instruments. The Company hedges significant
exposures to potential foreign exchange losses considering current market
conditions, future operating activities and the cost of hedging the exposure in
relation to the perceived risk of loss. The purpose of the Company's foreign
currency hedging activities is to protect the Company from the risk that the
eventual dollar cash flows resulting from the sale and purchase of products in
foreign currencies will be adversely affected by changes in exchange rates. The
Company does not hold or issue derivative financial instruments for trading or
speculative purposes.
The Company hedges its currency exposure through the use of currency
derivative instruments. Such contracts generally have an expiration date of one
year or less. Forward exchange contracts (commitments to buy or sell a specified
amount of a foreign currency at a specified price and time) are generally used
to hedge identifia foreign currency commitments. Gains or losses on such
contracts are deferred and recognized when the offsetting gains and losses are
recognized on the related hedged items. Forward exchange contracts and foreign
exchange option contracts (which convey the right, but not the obligation, to
sell or buy a specified amount of foreign currency at a specified price) are
generally used to hedge foreign currency commitments with an indeterminable
maturity date. These contracts are marked to market monthly with the resulting
gains or losses included in current period foreign exchange gains (losses). None
of the forward or option contracts are exchange traded.
While hedging instruments are subject to fluctuations in value, such
fluctuations are generally offset by the value of the underlying exposures being
hedged. The use of some contracts may limit the Company's ability to benefit
from favora fluctuations in foreign exchange rates. The notional amounts of
open forward contracts and options were $161.1 million and $111.5 million at
December 31, 1996 and 1995, respectively. The notional amounts of the Company's
foreign exchange contracts do not generally represent amounts exchanged by the
parties, and thus, are not a measure of the exposure of the Company or of the
cash requirements relating to these contracts. The amounts exchanged are
calculated by reference to the notional amounts and by other terms of the
derivatives, such as exchange rates. The Company actively monitors its foreign
currency exposure (net position) and adjusts the amounts hedged as appropriate.
Exposures to certain currencies are generally not hedged due primarily to
the lack of availa markets or cost considerations (non-traded currencies).
The Company attempts to manage its working capital position to minimize foreign
currency commitments in non-traded currencies and recognizes that pricing for
the services and products offered in such countries should cover the cost of
exchange rate devaluations. The Company has historically incurred transaction
losses in non-traded currencies. The risk of loss is primarily due to the
magnitude of currency devaluations experienced in those currencies rather than
the size of the foreign currency exposures.
Credit Risk. Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily cash equivalents, investments and
trade receiva s. It is the Company's practice to place its cash equivalents
and investments in high quality securities with various investment institutions.
The Company derives the majority of its revenues from sales and services to,
including engineering and construction for, the energy industry. Within the
energy industry, trade receiva s are generated from a broad and diverse group
of customers. There are concentrations of receiva s in the United States and
the United Kingdom. The Company maintains an allowance for losses based upon the
expected collectibility of all trade accounts receiva . There are no
significant concentrations of credit risk with any individual counterparty or
groups of counterparties related to the Company's derivative contracts.
Counterparties are selected by the Company based on creditworthiness, which the
Company continually monitors, and on the counterparties' ability to perform
their obligations under the terms of the transactions. The Company does not
expect any counterparties to fail to meet their obligations under these
contracts given their high credit ratings and, as such, considers the credit
risk associated with its derivative contracts to be minimal.
26
Fair Value of Financial Instruments. The estimated fair value of long-term
debt at December 31, 1996 and 1995 was $229.6 and $247.9 million, respectively,
as compared to the carrying amount of $200.0 million at December 31, 1996 and
1995. The fair value of long-term debt is based on quoted market prices for
those or similar instruments. The carrying amount of short-term financial
instruments (cash and equivalents, receiva s and certain liabilities) as
reflected in the consolidated balance sheets approximates fair value due to the
short maturities of these instruments. The fair value of currency derivative
instruments, which generally approximates the carrying amount, was ss than
$2.5 million at December 31, 1996 and 1995, based upon third party quotes.
Note 12. Retirement Plans
Retirement Plans. The Company has various retirement plans which cover a
significant number of its employees. The major pension plans are defined
contribution plans, which provide pension benefits in return for services
rendered, provide an individual account for each participant, and have terms
that specify how contributions to the participant's account are to be determined
rather than the amount of pension benefits the participant is to receive.
Contributions to these plans are based on pre-tax income and/or discretionary
amounts determined on an annual basis. The Company's expense for the defined
contribution plans totaled $114.2 million, $95.1 million and $98.7 million in
1996, 1995 and 1994, respectively. Other pension plans include defined benefit
plans, which define an amount of pension benefit to be provided, usually as a
function of one or more factors such as age, years of service or compensation.
As a result of siza reductions in the number of employees, curtailment gains
of $1.3 million and $8.9 million are reflected in the net amortization and
deferral component of net periodic pension cost for 1995 and 1994, respectively.
These plans are funded to operate on an actuarially sound basis. Plan assets are
primarily invested in equity and fixed income securities of entities domiciled
in the country of the Plan's operation. Assumed long-term rates of return on
plan assets, discount rates for estimating benefit obligations and rates of
compensation increases vary for the different plans according to the local
economic conditions. The rates used are as follows:
Percentages 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
Return on plan assets:
United States plans 8% to 8.5% 8.5% 8.5%
International plans 9% 6.5% to 9% 7% to 9%
Discount rate:
United States plans 7% to 7.75% 7% to 7.25% 8.5%
International plans 7% to 8.5% 4% to 8.5% 4% to 8.5%
Compensation increase:
United States plans 4.5% 4% 5%
International plans 4.3% to 6% 1% to 6% 1% to 6%
- ----------------------------------------------------------------------------------------------------------------------
The net periodic pension cost for defined benefit plans is as follows:
Millions of dollars 1996 1995 1994
- ------------------------------------------------------------------------------------------------
Service cost - benefits earned during period $ 15.8 $ 9.6 $ 9.5
Interest cost on projected benefit obligation 29.9 27.5 26.6
Actual return on plan assets (61.0) (46.8) (8.5)
Net amortization and deferral 13.7 12.7 (26.7)
------------------------------------
Net periodic pension cost (benefit) $ (1.6) $ 3.0 $ 0.9
- ------------------------------------------------------------------------------------------------
27
The reconciliation of the funded status for defined benefit plans where
assets exceed accumulated benefits is as follows:
Millions of dollars 1996 1995
- ------------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested $ (351.9) $ (300.3)
- ------------------------------------------------------------------------------------
Accumulated benefit obligation $ (358.4) $ (309.0)
- ------------------------------------------------------------------------------------
Projected benefit obligation $ (388.6) $ (345.6)
Plan assets at fair value 522.0 423.7
-------------------------
Funded status 133.4 78.1
Unrecognized prior service cost 2.7 5.5
Unrecognized net gain (109.3) (81.3)
Unrecognized net transition asset (3.9) (4.5)
-------------------------
Net pension liability $ 22.9 $ (2.2)
- ------------------------------------------------------------------------------------
The reconciliation of the funded status for defined benefit plans where
accumulated benefits exceed assets is as follows:
Millions of dollars 1996 1995
- ------------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested $ (2.5) $ (3.4)
- ------------------------------------------------------------------------------------
Accumulated benefit obligation $ (6.3) $ (8.1)
- ------------------------------------------------------------------------------------
Projected benefit obligation $ (6.9) $ (9.1)
Plan assets at fair value - 2.2
-------------------------
Funded status (6.9) (6.9)
Unrecognized net gain (6.0) (1.8)
Unrecognized net transition asset - (1.0)
Adjustment required to recognize minimum liability - (3.4)
-------------------------
Net pension liability $ (12.9) $ (13.1)
- ------------------------------------------------------------------------------------
Postretirement Medical Plan. The Company offers a postretirement medical
plan to certain employees that qualify for retirement and, on the last day of
active employment, are enrolled as participants in the Company's active employee
medical plan. The Company's liability is limited to a fixed contribution amount
for each participant or dependent. The plan participants share the total cost
for all benefits provided above the fixed Company contribution and participants'
contributions are adjusted as required to cover benefit payments. The Company
has made no commitment to adjust the amount of its contributions; therefore, the
computed accumulated postretirement benefit obligation amount is not affected by
the expected future healthcare cost inflation rate. The weighted average
discount rate used in determining the accumulated postretirement benefit
obligation was 7.75% in 1996, 7% in 1995 and 8% in 1994.
Net periodic postretirement benefit cost included the following components:
Millions of dollars 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
Service cost - benefits attributed to service during the period $ 0.5 $ 0.5 $ 0.8
Interest cost on accumulated postretirement benefit obligation 1.6 2.1 2.3
Net amortization and deferral (1.2) (1.0) (0.9)
-------------------------------------
Net periodic postretirement cost $ 0.9 $ 1.6 $ 2.2
- ------------------------------------------------------------------------------------------------------
28
Postretirement medical benefits are funded by the Company when incurred.
The Company's postretirement medical plan's funded status reconciled with the
amounts included in the Company's Consolidated Balance Sheets at December 31,
1996 and 1995 is as follows:
Millions of dollars 1996 1995
- -----------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees and related beneficiaries $ 12.7 $ 15.6
Fully eligible active plan participants 2.4 2.4
Other active plan participants not fully eligible 6.4 6.7
------------------------
Accumulated postretirement benefit obligation 21.5 24.7
Unrecognized prior service cost 7.4 8.3
Unrecognized gain 9.1 7.0
------------------------
Net postretirement liability $ 38.0 $ 40.0
- -----------------------------------------------------------------------------------------
Note 13. Landmark Acquisition
On October 4, 1996, the Company completed the acquisition of Landmark
Graphics Corporation (Landmark) through the merger of Landmark with and into a
subsidiary of the Company, the conversion of the outstanding Landmark common
stock into an aggregate of approximately 10.2 million shares of Common Stock of
the Company and the assumption by the Company of the outstanding Landmark stock
options (for the exercise of which the Company has reserved an aggregate of
approximately 1.5 million shares of Common Stock of the Company). The merger
qualified as a tax free exchange and was accounted for using the "pooling of
interests" method of accounting for business combinations. Accordingly, the
Company's financial statements have been restated to include the results of
Landmark for all periods presented.
Prior to the merger, Landmark had a fiscal year-end of June 30. Landmark
results have been restated to conform with Halliburton's calendar year-end.
Combined and separate results of Halliburton and Landmark during periods
preceding the merger were as follows:
Nine Months
Ended
September 30 Years Ended December 31
------------------------------------
Millions of dollars 1996 1995 1994
- ---------------------------------------------------------------------------------------------
Revenues:
Halliburton $ 5,251.5 $ 5,698.7 $ 5,510.2
Landmark 143.9 184.2 150.9
---------------------------------------------------------
Combined $ 5,395.4 $ 5,882.9 $ 5,661.1
- ---------------------------------------------------------------------------------------------
Net Income:
Halliburton $ 201.2 $ 168.3 $ 177.8
Landmark (8.4) 15.4 3.1
---------------------------------------------------------
Combined $ 192.8 $ 183.7 $ 180.9
- ---------------------------------------------------------------------------------------------
Landmark, together with its subsidiaries, designs, markets and supports
sophisticated computer-aided exploration and computer-aided reservoir management
software and systems. Geologists, geophysicists, petrophysicists and engineers
in more than 70 countries use Landmark products in exploration for and
production of oil and gas.
Landmark offers an extensive line of integrated software applications for
seismic processing, three dimensional and two dimensional seismic
interpretation, geologic and petrophysical interpretation, mapping and modeling,
well log and production analysis, drilling and production engineering and data
management. Through its service consulting business, Landmark provides software
training, on-site support and assistance in designing computer networks and
integrating applications and data. In addition to providing software products,
Landmark is a value-added reseller of workstations and other hardware and
29
provides a range of services, including software and systems support and
training, systems configuration and network design and data loading and
management.
Note 14. Discontinued Operations
On January 23, 1996, the Company spun-off its property and casualty
insurance subsidiary, Highlands Insurance Group, Inc. (HIGI), in a tax-free
distribution to holders of Halliburton Company Common Stock. Each common
shareholder of the Company received one share of common stock of HIGI for every
ten shares of Halliburton Company Common Stock. Approximately 11.4 million
common shares of HIGI were issued in conjunction with the spin-off.
The following summarizes the results of operations of the discontinued
operations:
Millions of dollars 1995 1994
- -------------------------------------------------------------------------------------------
Revenues $ 252.6 $ 290.3
- -------------------------------------------------------------------------------------------
Loss before income taxes $ (126.3) $ (0.6)
Benefit for income taxes 67.5 6.1
Loss on disposition (7.6)
-
Benefit for income taxes 0.9
-
-------------------------------
Net income (loss) from discontinued operations $ (65.5) $ 5.5
- -------------------------------------------------------------------------------------------
In the third quarter of 1995, HIGI conducted an extensive review of its
loss and loss adjustment expense reserves to assess HIGI's reserve position. The
review process consisted of gathering new information and refining prior
estimates and primarily focused on assumed reinsurance and overall environmental
and asbestos exposure. As a result of such review, HIGI increased its reserves
for loss and loss adjustment expenses and certain legal matters and the Company
also recognized the estimated expenses related to the spin-off transaction and
additional compensation costs and other regulatory and legal provisions directly
associated with discontinuing the insurance services business segment as
follows:
Income (loss)
before income Net income
Millions of dollars taxes (loss)
- -------------------------------------------------------------------------------------------
Additional claim loss reserves for environmental
and asbestos exposure and other exposures $ (117.0) $ (76.4)
Realization of deferred income tax valuation allowance - 25.9
Provisions for legal matters (8.0) (5.2)
Expenses related to the spin-off transaction (7.6) (6.7)
Other insurance services expenses (7.4) (4.8)
--------------------------------
Total charges $ (140.0) $ (67.2)
- --------------------------------------------------------------------------------------------
The review of the insurance policies and reinsurance agreements was based
upon an actuarial study and HIGI management's best estimates using facts and
trends currently known, taking into consideration the current legislative and
legal environment. Developed case law and adequate claim history do not exist
for such claims. Estimates of the liability were reviewed and updated
continually. Due to the significant uncertainties related to these types of
claims, past claim experience may not be representative of future claim
experience.
The Company also realized a valuation allowance for deferred tax assets
primarily related to HIGI's insurance claim loss reserves. The Company had
provided a valuation allowance for all temporary differences related to HIGI
based upon its intent announced in 1992 that it was pursuing the sale of HIGI. A
taxable transaction would have made it more likely than not that the related
benefit or future deductibility would not be realized. The spin-off transaction
was tax-free and allows HIGI to retain its tax basis and the value of its
deferred tax asset.
Note 15. Acquisitions and Dispositions
See Note 13 regarding the acquisition of Landmark.
See Note 14 regarding the disposition of the Company's insurance segment.
30
In the second quarter of 1996, M-I Drilling Fluids Company, L.L.C., a 36%
owned joint venture, purchased Anchor Drilling Fluids. The Company's share of
the purchase price was $41.3 million and is included in cash flows from other
investing activities.
In 1995, Landmark acquired two software companies for a total of $5.8
million and 0.6 million shares of its common stock, equivalent to 0.3 million
shares of Halliburton Company Common Stock. In 1994, Landmark acquired two
software companies for a total of $13.3 million and 0.4 million shares of its
common stock, equivalent to 0.2 million shares of Halliburton Company Common
Stock.
The Company sold its natural gas compression business unit in November 1994
for $205.0 million in cash. The sale resulted in a pretax gain of $102.0
million, or 52 cents per share after tax. The business unit sold, owned and
operated a large natural gas compressor rental fleet in the United States and
Canada. The compressors were used to assist in the production, transportation
and storage of natural gas.
On March 25, 1994, Landmark issued 2.6 million shares of its common stock,
equivalent to 1.5 million shares of Halliburton Company Common Stock, in
exchange for all of the outstanding common shares of Advance Geophysical
Corporation (Advance). Advance provides software which allows seismic processors
and interpreters to manipulate raw seismic data and to condense it into a form
that is ready for interpretation. The acquisition of Advance was accounted for
as a pooling of interests, and the financial statements for periods prior to the
Advance merger have been restated to reflect the financial position and results
of operations of the combined companies.
In January 1994, the Company sold substantially all of the assets of its
geophysical services and products business to Western Atlas International, Inc.
(Western Atlas) for $190.0 million in cash and notes subject to certain
adjustments. The notes of $90.0 million were sold for cash in the first quarter
of 1994. In addition, the Company issued $73.8 million in notes to Western Atlas
to cover some of the costs of discontinuing certain geophysical operations,
including the cost of personnel reductions, leases of geophysical marine vessels
and the closing of duplicate facilities. The final payment on these notes was
made in February 1996.
In January 1997, the Company announced that it has offered to purchase all
of the outstanding shares of OGC International plc (OGC) for approximately
$117.9 million. OGC is engaged in providing a variety of engineering, operations
and maintenance services, primarily to the North Sea oil and gas production
industry. As of February 28, 1997, approximately 93% of such shares were
tendered to the Company and it is expected that the acquisition of all of such
shares will be completed in the second quarter of 1997.
In February 1997, the Company announced that Devonport Management Limited
(DML), which was 30% owned by the Company at December 31, 1996, has agreed to
purchase Devonport Royal Dockyard Limited, which owns and operates the Devonport
Royal Dockyard in Plymouth, England, from the government of the United Kingdom
for approximately $66.1 million. Concurrent with the purchase, the Company
increased its ownership of DML to 51%. The dockyard principally provides repair
and refitting services for the British Royal Navy's fleet of submarines and
surface ships.
Note 16. Special Charges
In September 1996, the Company recognized special charges to operating
income of $65.3 million ($42.7 million after tax) related to the reorganization
of the Engineering and Construction Group, severance costs for combining general
support functions throughout the Company, and certain other business structure
costs, including $4.1 million ($3.5 million after tax) for costs associated with
the acquisition of Landmark.
The Company recognized severance costs of $41.0 million to provide for the
termination of approximately one thousand employees related to reorganization
efforts at the Engineering and Construction Group and plans to combine various
administrative support functions into combined shared services for the Company.
The terminations impact mostly middle and senior management levels within
business unit operations, business unit support, and general and administrative
areas. Approximately $3.5 million was charged against the reorganization
liability for the termination of approximately 200 employees during the fourth
quarter of 1996. The remaining terminations are to occur primarily during 1997.
The Company also recognized $20.2 million of costs associated with restructuring
certain Engineering and Construction Group businesses, providing for excess
lease space and other items.
The above charges to net income were offset by tax credits during the third
quarter of $43.7 million due to the recognition of net operating loss
carryforwards and the settlement during the quarter of various issues with the
Internal Revenue Service (IRS). The Company reached agreement with the IRS and
recognized net operating loss carryforwards of $62.5 million ($22.5 million in
tax benefits) from the 1989 tax year. The net operating loss carryforwards are
31
expected to be utilized in the 1996 and 1997 tax years. In addition, the Company
also reached agreement with the IRS on issues related to intercompany pricing of
goods and services for the tax years 1989 through 1992 and entered into an
advanced pricing agreement for the tax years 1993 through 1998. As a result of
these agreements with the IRS, the Company recognized tax benefits of $16.1
million. The Company also recognized net operating loss carryforwards of $14.0
million ($5.1 million in tax benefits) in certain foreign areas due to improving
profitability and restructuring of foreign operations.
In September 1996, Landmark also recorded special charges related to the
merger with and into a subsidiary of the Company of $8.3 million ($7.6 million
after tax). In March 1996, Landmark recorded special charges of $12.2 million
($8.7 million after tax) for the write-off of in-process research and
development activities acquired in connection with the purchase by Landmark of
certain assets and the assumption of certain liabilities of Western Atlas
International, Inc. and the write-off of redundant assets and activities.
In 1995 and 1994, Landmark recorded special charges of $8.4 million and
$16.6 million, respectively. These amounts were primarily for the write-off of
research and development activities of acquired companies, merger costs and
restructuring charges.
32
Halliburton Company
Selected Financial Data (a)
Millions of dollars and shares except per share and employee data
Years ended December 31
--------------------------------------------------------------
1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------
Operating results
Net revenues
Energy Group $ 4,286.3 $ 3,604.0 $ 3,364.0 $ 3,765.1
Engineering and Construction Group 3,098.8 2,278.9 2,297.1 2,459.6
Total revenues $ 7,385.1 $ 5,882.9 $ 5,661.1 $ 6,224.7
- ----------------------------------------------------------------------------------------------------------------
Operating income (loss)
Energy Group $ 484.4 $ 398.2 $ 264.1 $ 253.1
Engineering and Construction Group 53.7 44.6 15.2 13.3
Special charges (b) (85.8) (8.4) (16.6) (321.8)
General corporate (34.4) (33.5) (22.9) (22.0)
- ----------------------------------------------------------------------------------------------------------------
Total operating income (loss) (b) 417.9 400.9 239.8 (77.4)
Nonoperating income (expense), net (13.7) (13.1) 58.0 (55.0)
- ----------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations
before income taxes and minority interest 404.2 387.8 297.8 (132.4)
Benefit (provision) for income taxes (c) (103.3) (137.7) (122.2) 3.0
Minority interest in net (income) loss of
consolidated subsidiaries (0.5) (0.9) (0.2) 1.5
Income (loss) from continuing operations $ 300.4 $ 249.2 $ 175.4 $ (127.9)
- ----------------------------------------------------------------------------------------------------------------
Income (loss) per share
Continuing operations $ 2.38 $ 2.00 $ 1.41 $ (1.06)
Net income (loss) 2.38 1.47 1.45 (1.23)
Cash dividends per share 1.00 1.00 1.00 1.00
Return on shareholders' equity 13.9 % 9.6 % 8.7 % (7.3) %
- ----------------------------------------------------------------------------------------------------------------
Financial position
Net working capital $ 893.3 $ 987.9 $ 1,366.5 $ 1,217.7
Total assets 4,436.6 3,862.0 4,197.4 4,318.6
Property, plant and equipment 1,291.6 1,157.9 1,117.4 1,189.3
Long-term debt 200.1 205.2 655.7 637.4
Shareholders' equity 2,159.2 1,920.2 2,090.2 2,023.5
Total capitalization 2,405.6 2,130.2 2,776.6 2,752.9
Shareholders' equity per share 17.23 15.42 16.87 16.38
Average common shares outstanding 126.1 124.7 124.2 121.0
- ----------------------------------------------------------------------------------------------------------------
Other financial data
Cash flow from operating activities $ 452.0 $ 667.4 $ 439.0 $ 293.0
Capital expenditures 395.7 303.3 245.0 270.5
Long-term borrowings (repayments) (5.1) (465.4) (74.4) (44.7)
Depreciation and amortization expense 267.9 259.8 271.3 459.8
Payroll and employee benefits 3,112.7 2,775.0 2,878.8 3,141.9
Number of employees (d) 60,000 58,400 57,300 64,600
33
Halliburton Company
Selected Financial Data (a)
Millions of dollars and shares except per share and employee data
Years ended December 31
-----------------------------------------------
1992 1991 1990
- -------------------------------------------------------------------------------------------------
Operating results
Net revenues
Energy Group $ 3,536.9 $ 3,652.4 $ 3,551.0
Engineering and Construction Group 2,848.1 3,124.6 3,105.4
Total revenues $ 6,385.0 $ 6,777.0 $ 6,656.4
- -------------------------------------------------------------------------------------------------
Operating income (loss)
Energy Group $ 205.1 $ 233.9 $ 327.6
Engineering and Construction Group (19.3) 9.7 33.8
Special charges (b) (272.9) (118.5) -
General corporate (21.0) (21.8) (19.9)
- -------------------------------------------------------------------------------------------------
Total operating income (loss) (b) (108.1) 103.3 341.5
Nonoperating income (expense), net (37.2) (0.7) 17.1
- -------------------------------------------------------------------------------------------------
Income (loss) from continuing operations
before income taxes and minority interest (145.3) 102.6 358.6
Benefit (provision) for income taxes 1.1 (76.5) (167.0)
Minority interest in net (income) loss of
consolidated subsidiaries 1.7 (2.6) (2.6)
Income (loss) from continuing operations $ (142.5) $ 23.5 $ 189.0
- -------------------------------------------------------------------------------------------------
Income (loss) per share
Continuing operations $ (1.24) $ 0.21 $ 1.66
Net income (loss) (1.27) 0.35 1.79
Cash dividends per share 1.00 1.00 1.00
Return on shareholders' equity (7.4) % 1.8 % 8.8 %
- -------------------------------------------------------------------------------------------------
Financial position
Net working capital $ 1,150.0 $ 1,304.6 $ 1,154.0
Total assets 126.1 4,185.3 4,480.6 3,971.7
Property, plant and equipment 126.1 1,214.6 1,204.6 1,028.2
Long-term debt 126.1 657.8 654.9 192.0
Shareholders' equity .1 1,982.8 2,248.6 2,316.7
Total capitalization 2,641.3 2,914.3 2,514.6
Shareholders' equity per share 17.24 19.6 20.25
Average common shares outstanding 115.0 114.6 114.3
- -------------------------------------------------------------------------------------------------
Other financial data
Cash flow from operating activities $ 449.9 $ 294.7 $ 127.0
Capital expenditures 322.8 430.1 342.9
Long-term borrowings (repayments) (16.3) 440.6 (9.0)
Depreciation and amortization expense 366.9 300.2 254.4
Payroll and employee benefits 3,373.3 3,286.8 3,043.4
Number of employees (d) 69,000 72,700 76,600
34
(a) Prior years' information has been restated to include the effect of the
acquisition of Landmark Graphics Corporation (Landmark) on October 4, 1996,
which was accounted for as a pooling of interests.
(b) Operating income (loss) includes the following special charges: in 1996 and
1995, $85.8 million and $8.4 million, respectively, related to merger and
restructuring costs, including severance costs, and the write-off of
acquired in-process research and development activities; in 1994, $16.6
million related to merger and restructuring costs; in 1993, $321.8 million
related to loss on sale of geophysical business and employee severance
costs; in 1992, $272.9 million related to restructuring/reorganization
costs and consolidation of certain support functions; in 1991, $118.5
million related to restructuring costs.
(c) Benefit (provision) for income taxes in 1996 includes tax benefits of $43.7
million due to the recognition of net operating loss carryforwards and the
settlement of various issues with the Internal Revenue Service.
(d) Does not include employees of 50% or less owned affiliated companies.
35
Quarterly Data and Market Price Information
Millions of dollars except per share data
(unaudited) First Second Third Fourth Year
((unaudited)
- -----------------------------------------------------------------------------------------------------------------------
1996 (1)
Revenues $ 1,704.7 $ 1,830.8 $ 1,859.9 $ 1,989.7 $ 7,385.1
Operating income 71.6 115.7 57.3 173.3 417.9
Net income
Continuing operations 45.5 71.8 75.5 107.6 300.4
Net income 45.5 71.8 75.5 107.6 300.4
Earnings per share
Continuing operations 0.36 0.57 0.60 0.85 2.38
Net income 0.36 0.57 0.60 0.85 2.38
Cash dividends paid per share 0.25 0.25 0.25 0.25 1.00
Quarterly common stock prices (2)
High 58.38 58.75 57.25 62.88 62.88
Low 45.75 50.00 50.75 51.88 45.75
1995 (1)
Revenues $ 1,318.9 $ 1,446.8 $ 1,529.6 $ 1,587.6 $ 5,882.9
Operating income 65.1 103.8 110.5 121.5 400.9
Net income (loss)
Continuing operations 41.5 60.3 69.1 78.3 249.2
Discontinued operations 0.8 1.4 (67.7) - (65.5)
Net income 42.3 61.7 1.4 78.3 183.7
Earnings (loss) per share
Continuing operations 0.34 0.48 0.55 0.63 2.00
Discontinued operations - 0.01 (0.54) - (0.53)
Net income 0.34 0.49 0.01 0.63 1.47
Cash dividends paid per share 0.25 0.25 0.25 0.25 1.00
Quarterly common stock prices (2)
High 38.88 39.50 45.25 50.63 50.63
Low 33.50 35.50 35.13 39.75 33.50
(1) The first three quarters of 1996 and the quarters of and total year 1995
have been restated to reflect the acquisition of Landmark Graphics
Corporation accounted for using the pooling of interests method of
accounting for combinations.
(2) New York Stock Exchange - composite transactions high and low closing stock prices.
36
PART III
Item 10. Directors and Executive Officers of Registrant.
The information required for the directors of the Registrant is
incorporated by reference to the Halliburton Company Proxy Statement dated March
25, 1997, under the caption "Election of Directors." The information required
for the executive officers of the Registrant is included under Part I, Item
4(A), page 5 of this Annual Report.
Item 11. Executive Compensation.
This information is incorporated by reference to the Halliburton Company
Proxy Statement dated March 25, 1997, under the captions "Compensation Committee
Report on Executive Compensation," "Comparison of Five-Year Cumulative Total
Return," "Summary Compensation Table," "Option Grants in Last Fiscal Year,"
"Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values," "Retirement Plan," "Employment Contracts and Termination of Employement
and Change-in-Control Arrangements" and "Directors' Compensation, Restricted
Stock Plan and Retirement Plan."
Item 12(a). Security Ownership of Certain Beneficial Owners.
This information is incorporated by reference to the Halliburton Company
Proxy Statement dated March 25, 1997, under the caption "Stock Ownership of
Certain Beneficial Owners and Management."
Item 12(b). Security Ownership of Management.
This information is incorporated by reference to the Halliburton Company
Proxy Statement dated March 25, 1997, under the caption "Stock Ownership of
Certain Beneficial Owners and Management."
Item 12(c). Changes in Control.
Not applicable.
Item 13. Certain Relationships and Related Transactions.
Not applicable.
37
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. Financial Statements:
The report of Arthur Andersen LLP, Independent Public Accountants, and
the financial statements of the Company as required by Part II, Item 8,
are included on pages 12 through 32 of this Annual Report. See index on
page 6.
2. Financial Statement Schedules:
Note: All schedules not filed herein for which provision is made under
rules of Regulation S-X have been omitted as not applicable or not
required or the information required therein has been included in the
notes to financial statements.
3. Exhibits:
Exhibit
Number Exhibits
2 Agreement and Plan of Reorganization dated as of December 11,
1996 among Halliburton Company, now known as Halliburton
Energy Services, Inc. (the "Predecessor"), Halliburton Hold
Co., now known as Halliburton Company (the "Company"), and
Halliburton Merge Co. (incorporated by reference to Exhibit
1.1 of the Company's Registration Statement on Form 8-B dated
December 12, 1996, File No.
1-03492).
3(a) Certificate of Incorporation of the Company, as amended
(incorporated by reference to Exhibit 3.1 of the Company's
Registration Statement on Form 8-B dated December 12, 1996,
File No. 1-03492).
3(b) By-laws of the Company, as amended (incorporated by reference
to Exhibit 3.2 of the Company's Registration Statement on Form
8-B dated December 12, 1996, File No. 1-03492).
4(a) Subordinated Indenture dated as of January 2, 1991 between the
Predecessor and Texas Commerce Bank National Association, as
Trustee (incorporated by reference to Exhibit 4(c) to the
Predecessor's Registration Statement on Form S-3 (File No.
33-38394) originally filed with the Securities and Exchange
Commission on December 21, 1990), as supplemented and amended
by the First Supplemental Indenture dated as of December 12,
1996 among the Predecessor, the Company and the Trustee
(incorporated by reference to Exhibit 4.3 of the Company's
Registration Statement on Form 8-B dated December 12, 1996,
File No. 1-03492).
4(b) Form of debt security of 8.75% Debentures due February 12,
2021 (incorporated by reference to Exhibit 4(a) to the
Predecessor's Form 8-K dated as of February 20, 1991).
4(c) Senior Indenture dated as of January 2, 1991 between the
Predecessor and Texas Commerce Bank National Association, as
Trustee (incorporated by reference to Exhibit 4(b) to the
Predecessor's Registration Statement on Form S-3 (File No.
33-38394) originally filed with the Securities and Exchange
Commission on December 21, 1990), as supplemented and amended
by the First Supplemental Indenture dated as of December 12,
1996 among the Predecessor, the Company and the Trustee
(incorporated by reference to Exhibit 4.1 of the Company's
Registration Statement on Form 8-B dated December 12, 1996,
File No. 1-03492).
4(d) Resolutions of the Predecessor's Board of Directors adopted at
a meeting held on February 11, 1991 and of the special pricing
committee of the Board of Directors of the Predecessor adopted
at a meeting held on February 11, 1991 and the special pricing
committee's consent in lieu of meeting dated February 12, 1991
(incorporated by reference to Exhibit 4(c) to the
Predecessor's Form 8-K dated as of February 20, 1991).
38
3. Exhibits:
Exhibit
Number Exhibits
4(e) Form of debt security of 6-3/4% Notes due February 1, 2027
(incorporated by reference to Exhibit 4.1 to the Company's
Form 8-K dated as of February 11, 1997).
4(f) Second Senior Indenture dated as of December 1, 1996 between
the Predecessor and Texas Commerce Bank National Association,
as Trustee (incorporated by reference to Exhibit 4.4 to the
Predecessor's Registration Statement on Form S-3 (File No.
33-65772) originally filed with the Securities and Exchange
Commission on July 9, 1993 and as post effectively amended on
December 5, 1996), as supplemented and amended by the First
Supplemental Indenture dated as of December 5, 1996 between
the Predecessor and the Trustee and the Second Supplemental
Indenture dated as of December 12, 1996 among the Predecessor,
the Company and the Trustee (incorporated by reference to
Exhibit 4.2 of the Company's Registration Statement on Form
8-B dated December 12, 1996, File No. 1-03492).
4(g)* Resolutions of the Company's Board of Directors adopted by
unanimous consent dated December 5, 1996.
4(h)* Certificate of Designation, Rights and Preferences related to
the authorization of the Company's Junior Participating
Preferred Stock, Series A, filed December 11, 1996 with the
Secretary of State of Delaware.
4(i) Rights Agreement dated as of December 1, 1996 between the
Company and ChaseMellon Shareholder Services, L.L.C.
(incorporated by reference to Exhibit 4.4 of the Company's
Registration Statement on Form 8-B dated December 12, 1996,
File No. 1-03492).
4(j) Copies of instruments which define the rights of holders of
miscellaneous long-term notes of the Registrant and its
subsidiaries, totaling $0.1 million in the aggregate at
December 31, 1996, have not been filed with the Commission.
The Registrant agrees herewith to furnish copies of such
instruments upon request.
10(a) Halliburton Company Career Executive Incentive Stock Plan as
amended November 15, 1990 (incorporated by reference to
Exhibit 10(a) to the Predecessor's Annual Report on Form 10-K
for the year ended December 31, 1992).
10(b) Retirement Plan for the Directors of Halliburton Company
adopted and effective January 1, 1990 (incorporated by
reference to Exhibit 10(c) to the Predecessor's Annual Report
on Form 10-K for the year ended December 31, 1992).
10(c)* Halliburton Company Directors' Deferred Compensation Plan as
amended and restated effective May 1, 1994.
10(d) Summary Plan Description of the Executive Split-Dollar Life
Insurance Plan (incorporated by reference to Exhibit 10(g) to
the Predecessor's Annual Report on Form 10-K for the year
ended December 31, 1992).
10(e)* Halliburton Company 1993 Stock and Long-Term Incentive Plan,
as amended and restated May 21, 1996.
39
3. Exhibits:
Exhibit
Number Exhibits
10(f) Agreement and Plan of Merger between the Predecessor,
Halliburton Acq. Company and Landmark Graphics Corporation,
dated as of June 30, 1996 (incorporated by reference to
Appendix A of the Predecessor's Registration Statement on Form
S-4, filed on August 30, 1996).
10(g) Halliburton Company Restricted Stock Plan for Non-Employee
Directors (incorporated by reference to Appendix B of the
Predecessor's proxy statement dated March 23, 1993).
10(h)* Halliburton Elective Deferral Plan, as amended and restated
effective January 1, 1997.
10(i) Employment agreement (incorporated by reference to Exhibit 10
to the Predecessor's Form 10-Q for the quarterly period ended
September 30, 1995).
10(j)* Halliburton Company Senior Executives' Deferred Compensation
Plan, as amended and restated effective January 1, 1996.
10(k)* Halliburton Company Annual Performance Plan, as amended and
restated effective January 1, 1997.
10(l) Employment agreement (incorporated by reference to Exhibit 10
(n) to the Predecessor's Form 10-K for the year ended December
31, 1995).
10(m)* Early retirement agreement.
10(n) The financial statements of European Marine Contractors
incorporated by reference from item 14 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
11* Computation of Earnings per share.
21* Subsidiaries of the Registrant.
23(a)* Consent of Arthur Andersen LLP.
23(b)* Consent of Ernst & Young chartered accountants.
24* Powers of attorney signed in February 1997, for the following
directors:
Anne L. Armstrong
Richard B. Cheney
Lord Clitheroe
Robert L. Crandall
W. R. Howell
Dale P. Jones
Delano E. Lewis
C. J. Silas
Roger T. Staubach
Richard J. Stegemeier
E. L. Williamson
27* Financial data schedules for the Registrant (filed
electronically).
* Filed with this Annual Report
40
(b) Reports on Form 8-K:
A Current Report was filed on Form 8-K dated October 8, 1996, reporting on
Item 5. Other Events, regarding a press release dated October 4, 1996
announcing the completion of the acquisition of Landmark Graphics
Corporation.
A Current Report was filed on Form 8-K dated October 24, 1996, reporting
on Item 5. Other Events, regarding a press release dated October 22, 1996
announcing third quarter results.
A Current Report was filed on Form 8-K dated November 18, 1996, reporting
on Item 5. Other Events, regarding a press release dated November 15, 1997
announcing the fourth quarter dividend.
A Current Report was filed on Form 8-K dated December 11, 1996, reporting
on Item 5. Other Events, regarding a press release dated December 9, 1997
announcing the Company's intent to reorganize its legal structure.
A Current Report was filed on Form 8-K dated December 12, 1996, reporting
on Item 5. Other Events, regarding a press release dated December 12, 1996
announcing the completion of the reorganization of the Company's legal
structure.
A Current Report was filed on Form 8-K dated December 20, 1996, reporting
on Item 5. Other Events, regarding a press release dated December 19, 1996
announcing the award of Terra Nova Contract to the Grand Banks Alliance.
A Current Report was filed on Form 8-K dated December 24, 1996, reporting
on Item 5. Other Events, regarding a press release dated December 24, 1996
reporting supplemental selected financial data restated for the
acquisition of Landmark Graphics Corporation.
A Current Report was filed on Form 8-K dated December 27, 1996, reporting
on Item 5. Other Events, regarding a press release dated December 23, 1996
announcing the potential acquisition of OGC International plc.
During the first quarter of 1997 to the date hereof:
A Current Report was filed on Form 8-K dated January 14, 1997, reporting
on Item 5. Other Events, regarding press releases dated January 11, 1997
announcing the Sangu agreement and plan approval.
A Current Report was filed on Form 8-K dated January 23, 1997, reporting
on Item 5. Other Events, regarding a press release dated January 22, 1997
announcing fourth quarter earnings.
A Current Report was filed on Form 8-K dated January 31, 1997, reporting
on Item 5. Other Events, regarding a press release dated January 29, 1997
announcing an offer to acquire OGC International plc.
A Current Report was filed on Form 8-K dated February 10, 1997, reporting
on Item 5. Other Events, regarding a press release dated February 6, 1997
announcing $125 million notes offering.
A Current Report was filed on Form 8-K dated February 12, 1997, reporting
on Item 5. Other Events, regarding a press release dated February 11, 1997
announcing purchase of Davenport Royal Dockyard.
A Current Report was filed on Form 8-K dated February 14, 1997, reporting
on Item 7. Financial Statements and Exhibits, regarding filing of
Distribution Agreement, Terms Agreement, and Form of Note.
A Current Report was filed on Form 8-K dated February 21, 1997, reporting
on Item 5. Other Events, regarding a press release dated February 20, 1997
announcing annual meeting and quarterly dividend.
A Current Report was filed on Form 8-K dated March 4, 1997, reporting on
Item 5. Other Events, regarding a press release dated March 3, 1997
announcing unconditional tender offer to purchase outstanding shares of
OGC International plc.
41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on this 11th day of March,
1997.
HALLIBURTON COMPANY
By /s/ *Richard B. Cheney
-----------------------------
Richard B. Cheney
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons in the capacities indicated on
this 11th day of March, 1997.
Signature Title
/s/ Richard B. Cheney
- -------------------------------- Chairman of the Board, President and
Richard B. Cheney Chief Executive Officer and Director
/s/ David J. Lesar
- -------------------------------- Executive Vice President and
David J. Lesar Chief Financial Officer
/s/ R. Charles Muchmore
- -------------------------------- Vice President and Controller and
R. Charles Muchmore Principal Accounting Officer
42
Signature Title
*ANNE L. ARMSTRONG Director
Anne L. Armstrong
*LORD CLITHEROE Director
Lord Clitheroe
*ROBERT L. CRANDALL Director
Robert L. Crandall
*W. R. HOWELL Director
W. R. Howell
*DALE P. JONES Vice Chairman and Director
Dale P. Jones
*C. J. SILAS Director
C. J. Silas
*ROGER T. STAUBACH Director
Roger T. Staubach
*RICHARD J. STEGEMEIER Director
Richard J. Stegemeier
*E. L. WILLIAMSON Director
E. L. Williamson
* SUSAN S. KEITH
Susan S. Keith, Attorney-in-fact
43
RESOLUTIONS OF THE BOARD OF DIRECTORS
OF HALLIBURTON COMPANY
EFFECTIVE DECEMBER 5, 1996
Issuance Of Medium-Term Notes, Series A
WHEREAS, on July 9, 1993 Halliburton Company ("Halliburton")
filed with the Securities and Exchange Commission ("Commission") a
Registration Statement on Form S-3 (Registration No. 33-65772, herein
the "Registration Statement") for the offering and sale from time to
time pursuant to Rule 415 under the Securities Act of 1933, as amended,
of unsecured debt securities of the Company ("Debt Securities") with an
aggregate initial offering price of not more than $500,000,000 and such
Registration Statement was declared effective at 10:00 a.m. August 3,
1993 by order of the Commission and such Registration Statement was
subsequently amended by Post Effective Amendment No. 1 dated December
4, 1996 (herein "Registration Statement").
WHEREAS, the Registration Statement relates to Debt Securities
issuable under the Second Senior Indenture dated December 1, 1996
between Halliburton and Texas Commerce Bank National Association, as
Trustee (the "Trustee"), as supplemented by that certain First
Supplemental Indenture dated December 5, 1996 between Halliburton and
the Trustee (such Indenture, as supplemented, being herein called the
"Second Indenture"), which Debt Securities include a series of Medium
Term Notes Due Nine Months or More From Date of Issue, Series A (the
"Notes");
WHEREAS, no Debt Securities or Notes have heretofore been
issued or sold by Halliburton;
WHEREAS, this Board of Directors has heretofore authorized the
proper officers of Hold Co. to execute and deliver, for, in the name
and on behalf of Hold Co., a Second Supplemental Indenture
supplementing and amending the Second Indenture and providing for the
assumption by Hold Co. of Halliburton's liabilities and obligations
under the Second Indenture;
WHEREAS, Hold Co., by virtue of certain interpretations of its
rules and regulations by the Commission, is deemed to be the successor
to Halliburton as the issuer of the Debt Securities, including the
Notes, under the Registration Statement;
WHEREAS, this Board of Directors has heretofore authorized the
proper officers of Hold Co. to prepare, to cause to be executed and to
file with the Commission for, in the name and on behalf of Hold Co. a
post-effective amendment to the Registration Statement (the "Hold Co.
Post Effective Amendment") in order to recognize Hold Co. as the
successor issuer thereunder, for the purpose of continuing the offering
of Debt Securities, including the Notes thereunder;
WHEREAS, this Board of Directors deems it advisable for Hold
Co., as the issuer thereof, to continue the offering of Debt
Securities, including the Notes, pursuant to the Registration Statement
and the Second Indenture, as supplemented by the Second Supplemental
Indenture (the "Second Senior Indenture");
WHEREAS, the Second Senior Indenture provides that, with
respect to each tranche or issue of Notes, certain terms and provisions
applicable only to that tranche or issue will be established by an
Officer's Certificate or Note Terms Certificate, as therein defined;
and
WHEREAS, capitalized terms used but not defined herein are
defined in the Second Senior Indenture and are used herein with the
same meanings as ascribed to them therein.
NOW, THEREFORE, BE IT:
RESOLVED, that this Board of Directors does hereby authorize,
approve and ratify:
1. the execution by the proper officers of Hold Co., for and on
behalf of Hold Co., and the filing with the Commission of the
Hold Co. Post Effective Amendment to the Registration
Statement pursuant to which Hold Co. will, as the issuer of
the Debt Securities, including the Notes, continue the
offering of Debt Securities thereunder;
2. the execution by the proper officers of Hold Co., for and on
behalf of Hold Co., of the Second Supplemental Indenture
providing for the assumption of Halliburton's liabilities and
obligations under the Second Indenture;
3. the establishment of the Notes as a series of Debt Securities
as provided in the Second Indenture;
4. the continuation of the offering by Hold Co., as the issuer
thereof, of the Debt Securities, including the Notes; and
5. the establishment from time to time of the specific terms of
particular tranches or issues of Notes, and the sale and
issuance from time to time of particular tranches or issues of
Notes, in accordance with the provisions of the Second Senior
Indenture.
FURTHER RESOLVED, that the Chairman of the Board, President
and Chief Executive Officer, the Vice Chairman, any Executive Vice
President and the Vice President and Treasurer of Hold Co. (each, an
"Authorized Officer") be and are and each of them is authorized for and
on behalf of Hold Co. to enter into a distribution agreement for the
Notes (the "Distribution Agreement") with an investment banking firm or
broker-dealer as the distributor (the "Distributor"), which may provide
for, among other things, (i) the Distributor to use its reasonable
efforts to solicit purchases of the Notes, (ii) the purchase of the
Notes by the Distributor acting as principal or (iii) a firm
underwriting of the sale of the Notes, or any or all of such duties and
obligations on the part of the Distributor; and
FURTHER RESOLVED, that any Authorized Officer is authorized to
select one or more broker-dealers ("Additional Distributors") in
addition to the Distributor to perform any or all of the duties and
obligations specified in the preceding resolution, upon written
agreement in such form as may be approved by an Authorized Officer,
with such Authorized Officer's approval to be conclusively evidenced by
his execution and delivery thereof; and
FURTHER RESOLVED, that notwithstanding the provisions of the
preceding resolutions relating to the execution of a Distribution
Agreement and the appointment of a Distributor and Additional
Distributors, Hold Co.
reserves the right:
(i) on its own behalf, to sell the Notes directly
from time to time, in which event no commissions
will be owed or paid in connection therewith;
(ii) to sell the Notes through any member or members
of a group comprised of the Distributor and the
named Additional Distributors ("Distributor
Group") to the exclusion of any other members of
the Distributor Group ("Excluded Distributors")
and in such event no commission or other
remuneration shall be owed to any Excluded
Distributor; and
(iii) to accept or to reject offers to purchase Notes,
in whole or in part; and
FURTHER RESOLVED, that, prior to sale of the Notes, from time
to time and subject to the terms of the preceding resolutions, any duly
Authorized Officer shall on behalf of Hold Co. have the authority to
determine, and to establish by an Officer's Certificate or Note Terms
Certificate prepared, executed and delivered as provided in the Second
Senior Indenture:
(i) the aggregate principal amount and maturities of
the Notes to be offered and the initial offering
price of the Notes;
(ii) whether such Notes are to be Fixed Rate Notes,
Floating Rate Notes or OID Notes (including zero
coupon obligations) and, if interest bearing,
appropriate Interest Record Dates and Interest
Payment Dates and, if OID Notes, appropriate
discount rates with respect thereto;
(iii) whether the Notes are to be Indexed Notes;
(iv) whether the Notes are to be subject to redemption
at the option of Hold Co. and the terms thereof,
if subject to redemption;
(v) whether the Notes will be subject to repayment by
Hold Co. at the option of the Holders thereof
prior to the stated maturity of the Notes, and
the terms thereof, including, without limitation,
designating Optional Repayment Dates;
(vi) the amount of any discounts, allowances or
commissions to be given or paid to the
Distributor and to any Additional Distributors;
and
(vii) any other terms of the Notes and of the offering
and sale thereof which are not inconsistent with
this and the preceding resolutions;
and thereafter to cause appropriate Prospectus Supplements and Pricing
Prospectuses to be prepared and delivered and one or more
Authentication Requests to be delivered to the Trustee for action in
keeping therewith; and
FURTHER RESOLVED, that, if in the opinion of counsel to Hold
Co. such actions are necessary or appropriate, the proper officers of
Hold Co. be and are and each of them is authorized to: (a) cause to be
filed with the Securities and Exchange Commission (i) one or more post
effective amendments to the Registration Statement, and (ii) one or
more prospectus supplements and pricing supplements; (b) enter into
with the Trustee one or more additional amendments of and supplements
to the Second Senior Indenture, (c) take such actions as may be
necessary for compliance by Hold Co. with federal and state securities
laws and (d) take such other actions as may be deemed necessary or
appropriate in furtherance of the preceding resolutions, including
without limitation, entering into additional agreements which are in
furtherance of the offering and sale from time to time of the Notes.
CERTIFICATE OF DESIGNATION,
RIGHTS AND PREFERENCES
OF
SERIES A JUNIOR PARTICIPATING PREFERRED
STOCK, WITHOUT PAR VALUE
of
HALLIBURTON HOLD CO.
Halliburton Hold Co., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
That at a meeting of the Board of Directors of Halliburton Hold Co.
("Hold Co.") the following resolution, creating a series of two (2) million
shares of Preferred Stock, designated as Series A Junior Participating Preferred
Stock was duly adopted pursuant to the authority granted to and vested in the
Board of Directors of this corporation in accordance with the provisions of its
Certificate of Incorporation:
RESOLVED, that, pursuant to the authority granted to
and vested in the Board of Directors of Hold Co. in accordance
with the provisions of the Certificate of Incorporation of
Hold Co., a series of 2,000,000 shares of Series A Junior
Participating Preferred Stock, without par value, of Hold Co.
(the "Preferred Shares") be, and hereby is, created, and that
the designation and amount thereof and the relative rights,
preferences and limitations thereof (in addition to the
provisions set forth in the Certificate of Incorporation of
Hold Co. which are applicable to the Preferred Stock of all
series) are as follows:
I. Designation and Amount. The shares of such series shall be
designated as the "Series A Junior Participating Preferred Stock" (the "Junior
Preferred Stock") and the number of shares constituting such series shall be two
(2) million. Such number of shares may be increased or decreased by resolution
of the Board of Directors; provided, that no decrease shall reduce the number of
shares of Junior Preferred Stock to a number less than that of the shares then
outstanding plus the number of shares issuable upon exercise of outstanding
rights, options or warrants or upon conversion of outstanding securities issued
by the corporation.
II. Dividends and Distributions.
(A) Subject to the prior and superior rights of the
holders of any shares of any series of Preferred Stock ranking
prior and superior to the shares of Junior Preferred Stock
with respect to dividends, the holders of shares of Junior
Preferred Stock, in preference to the holders of common stock,
$2.50 par value, of the corporation (the "Common Stock") and
of any other stock ranking junior (as to dividends) to Junior
Preferred Stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally
available for the purpose, cumulative quarterly dividends
payable in cash or in kind, as hereinafter provided, on the
last day of March, June, September and December in each year
(each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or
fraction of a share of Junior Preferred Stock, in an amount
per share (rounded to the nearest cent) equal to the greater
of (a) $1.00 (payable in cash) or (b) subject to the provision
for adjustment hereinafter set forth, 100 times the aggregate
per share amount (payable in cash) of all cash dividends, and
100 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions, other than a
dividend payable in shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment
Date or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a
share of Junior Preferred Stock. If the corporation shall at
any time declare or pay any dividend on Common Stock payable
in shares of Common Stock or effect a subdivision or
combination of the outstanding shares of Common Stock (by
reclassification or otherwise), into a greater or lesser
number of shares of Common Stock, then in each such case the
amount to which holders of shares of Junior Preferred Stock
were entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number
of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of
Common Stock that was outstanding immediately prior to such
event.
(B) The corporation shall declare a dividend or
distribution on the Junior Preferred Stock as provided in
paragraph (A) of this Section immediately after it declares a
dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, if
no dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $1.00 per share on the Junior
Preferred Stock shall nevertheless accrue and be cumulative on
the outstanding shares of Junior Preferred Stock as provided
in paragraph (C) of this Section.
(C) Dividends shall begin to accrue and be cumulative
on outstanding shares of Junior Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of
issue of such shares of Junior Preferred Stock, unless the
date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record
date for the determination of holders of shares of Junior
Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of
which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued
but unpaid dividends shall not bear interest. Dividends paid
on the shares of Junior Preferred Stock in an amount less than
the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share
by share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the
determination of holders of shares of Junior Preferred Stock
entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be not more than 60
days prior to the date fixed for the payment thereof.
III. Voting Rights. The holders of shares of Junior Preferred Stock
shall have the following voting rights:
(A) Subject to the provision for adjustment
hereinafter set forth, each share of Junior Preferred Stock
shall entitle the holder thereof to 100 votes on all matters
submitted to a vote of the shareholders of the corporation. If
the corporation shall at any time declare or pay any dividend
on Common Stock payable in shares of Common Stock, or effect a
subdivision or combination of the outstanding shares of Common
Stock (by reclassification or otherwise) into a greater or
lesser number of shares of Common Stock, then in each such
case the number of votes per share to which holders of shares
of Junior Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a
fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(B) Except as otherwise provided in the Certificate
of Incorporation or by law, the holders of shares of Junior
Preferred Stock and the holders of shares of Common Stock
shall vote together as one class on all matters submitted to a
vote of shareholders of the corporation.
IV. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends
or distributions payable on the Junior Preferred Stock as
provided in Section II are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether or
not declared, on shares of Junior Preferred Stock outstanding
shall have been paid in full, the corporation shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or
otherwise acquire for consideration any shares
of stock ranking junior (as to dividends) to
the Junior Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking
on a parity (as to dividends) with the Junior
Preferred Stock, except dividends paid ratably
on the Junior Preferred Stock and all such
parity stock on which dividends are payable or
in arrears in proportion to the total amounts
to which the holders of all such shares are
then entitled; or
(iii) purchase or otherwise acquire for
consideration any shares of Junior Preferred
Stock, or any shares of stock ranking on a
parity (as to dividends) with the Junior
Preferred Stock, except in accordance with a
purchase offer made in writing or by
publication (as determined by the Board of
Directors) to all holders of such shares upon
such terms as the Board of Directors, after
consideration of the respective annual
dividend rates and other relative rights and
preferences of the respective series and
classes, shall determine in good faith will
result in fair and equitable treatment among
the respective series or classes.
(B) The corporation shall not permit any subsidiary
of the corporation to purchase or otherwise acquire for
consideration any shares of stock of the corporation unless
the corporation could, under paragraph (A) of this Section IV,
purchase or otherwise acquire such shares at such time and in
such manner.
V. Reacquired Shares. Any shares of Junior Preferred Stock purchased or
otherwise acquired by the corporation in any manner whatsoever shall be retired
and cancelled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock and
may be reissued as part of a series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein.
VI. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the corporation, no distribution shall be made (1)
to the holders of shares of stock ranking junior (as to amounts payable upon
liquidation, dissolution or winding up) to the Junior Preferred Stock unless,
prior thereto, the holders of Junior Preferred Stock shall have received an
amount per share (rounded to the nearest cent) equal to the greater of (a)
$100.00 per share, or (b) an amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of Common Stock, plus, in either case, an
amount equal to accrued and unpaid dividends and distributions thereon, whether
or not declared, to the date of such payment, or (2) to the holders of stock
ranking on a parity (as to amounts payable or upon liquidation, dissolution or
winding up) with the Junior Preferred Stock, except distributions made ratably
on the Junior Preferred Stock and all other such parity stock in proportion to
the total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. If the corporation shall at any time
declare or pay any dividend on Common Stock payable in shares of Common Stock,
or effect a subdivision or combination of the outstanding shares of Common Stock
(by reclassification or otherwise) into a greater or lesser number of shares of
Common Stock, then in each such case the aggregate amount to which holders of
shares of Junior Preferred Stock were entitled immediately prior to such event
under the provision in clause (1) (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
VII. Consolidation, Merger, etc. If the corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash or any other property, or any combination thereof, then in any
such case the shares of Junior Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the aggregate amount of
stock, securities, cash or any other property, or any combination thereof, into
which or for which each share of Common Stock is changed or exchanged. If the
corporation shall at any time declare or pay any dividend on Common Stock
payable in shares of Common Stock, or effect a subdivision or combination of the
outstanding shares of Common Stock (by reclassification or otherwise) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Junior Preferred Stock shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
VIII. No Redemption. The shares of Junior Preferred Stock shall not be
redeemable. So long as any shares of Junior Preferred Stock remain outstanding,
the corporation shall not purchase or otherwise acquire for consideration any
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Junior Preferred Stock unless the corporation
shall substantially concurrently also purchase or acquire for consideration a
proportionate number of shares of Junior Preferred Stock.
IX. Rank. Except as otherwise provided in its Certificate of
Incorporation, the corporation may authorize or create any series of Preferred
Stock ranking prior to or on a parity with the Junior Preferred Stock as to
dividends or as to distribution of assets upon liquidation, dissolution or
winding up.
X. Amendment. The Certificate of Incorporation of the corporation shall
not be amended in any manner which would materially alter or change the powers,
preferences or special rights of the Junior Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of a majority of the
outstanding shares of Junior Preferred Stock, voting together as a single class.
The foregoing resolution was adopted by the Board of Directors of the
corporation, pursuant to the authority vested in it by the Certificate of
Incorporation of the corporation, at a meeting of the Board of Directors duly
held on the 5th day of December, 1996.
IN WITNESS WHEREOF, this Certificate has been executed on behalf of the
Corporation by its Vice President this 9th day of December, 1996.
HALLIBURTON HOLD CO.
By: /s/ Robert M. Kennedy
---------------------------
Robert M. Kennedy
Vice President
HALLIBURTON COMPANY
DIRECTORS' DEFERRED COMPENSATION PLAN
AS AMENDED AND RESTATED
EFFECTIVE as of May 1, 1994
TABLE OF CONTENTS
Page
ARTICLE I PURPOSE OF PLAN..........................................2
ARTICLE II DEFINITIONS..............................................3
ARTICLE III ADMINISTRATION OF THE PLAN...............................5
ARTICLE IV DEFERRED COMPENSATION....................................7
ARTICLE V DEFERRED COMPENSATION SUBJECT TO INTEREST................8
ARTICLE VI STOCK EQUIVALENTS........................................9
ARTICLE VII NATURE OF PLAN..........................................12
ARTICLE VIII TERMINATION OF THE PLAN.................................13
ARTICLE IX AMENDMENT OF THE PLAN...................................14
ARTICLE X GENERAL PROVISIONS......................................15
ARTICLE XI EFFECTIVE DATE..........................................17
HALLIBURTON COMPANY
DIRECTORS' DEFERRED COMPENSATION PLAN
AS AMENDED AND RESTATED
EFFECTIVE as of May 1, 1994
The Board of Directors of Halliburton Company having heretofore
established the Directors' Deferred Compensation Plan, pursuant to the
provisions of Article VII of said Plan, hereby amends and supplements said Plan
to be effective in accordance with the provisions of ARTICLE XI hereof.
ARTICLE I
PURPOSE OF PLAN
The purpose of the Plan is to assist the Directors of the Company in
planning for their retirement.
2
ARTICLE II
DEFINITIONS
Where the following words and phrases appear herein, they shall have
the respective meanings set forth in this ARTICLE II, unless the context clearly
indicates to the contrary.
Section 2.01. "Administrator" shall mean any administrator appointed by
the Committee pursuant to Section 3.01 herein or, in the absence of any such
appointment, the Committee.
Section 2.02. "Board of Directors" shall mean the Board of Directors of
the Company.
Section 2.03. "Committee" shall mean the committee of those individuals
(each of whom shall be a Director) appointed by the Board of Directors pursuant
to Article III hereof.
Section 2.04. "Company" shall mean Halliburton Company.
Section 2.05. "Compensation" shall mean a Participant's compensation
for services as a Director.
Section 2.06. "Deferral Termination Date" shall mean the date a
Participant ceases to be a Director of the Company.
Section 2.07. "Deferred Compensation" shall mean Compensation deferred
pursuant to the provisions of this Plan.
Section 2.08. "Deferred Compensation Account" shall mean the
Participant's Deferred Compensation Account established pursuant to Section 4.03
herein.
Section 2.09. "Director" shall mean a member of the Board of Directors
of the Company.
Section 2.10. "Earned" or any variant thereof, when used herein with
respect to Compensation or Deferred Compensation or interest accrued pursuant to
Section 5.02, shall refer to the end of a Fiscal Quarter and, when used with
respect to a dividend or distribution on the Company's common stock referenced
in Section 6.02, shall refer to the date of payment of such dividend or
distribution by the Company.
Section 2.11. "Fiscal Quarter" shall mean the quarters of the Fiscal
Year ended July 31, October 31, January 31 and April 30.
Section 2.12. "Fiscal Year" shall mean the twelve-consecutive-month
period commencing May 1 of each year.
3
Section 2.13. "Market Price" of the common stock of the Company on any
date shall mean the closing sales price per share for the common stock (or, if
no closing sales price is reported, the average of the bid and ask prices per
share on such date) on the New York Stock Exchange or, if the common stock is
not then listed on such Exchange, such other national or regional securities
exchange upon which the common stock is so listed, as reported in the composite
transactions for the principal United States securities exchange on which the
common stock is then listed or, if the common stock is not then listed on any
such exchange, as reported in The NASDAQ Stock Market.
Section 2.14. "Participant" shall mean any Director of the Company who
has elected to have all or a part of his Compensation deferred pursuant to the
Plan.
Section 2.15. "Plan" shall mean the Halliburton Company Directors'
Deferred Compensation Plan, as amended and restated effective as of May 1, 1994,
and as the same may thereafter be amended from time to time.
Section 2.16. "Plan Earnings" shall mean amounts of interest to which
reference is made in Section 5.01 herein and of dividends and distributions to
which reference is made in Section 6.02 herein.
Section 2.17. "Stock Equivalents Account" shall mean the Participant's
Stock Equivalents Account established pursuant to Section 4.03 herein.
4
ARTICLE III
ADMINISTRATION OF THE PLAN
Section 3.01. Committee. The Board of Directors shall appoint a
Committee to administer, construe and interpret the Plan. Such Committee, or
such successor Committee as may be duly appointed by the Board of Directors,
shall serve at the pleasure of the Board of Directors. Decisions of the
Committee with respect to any matter involving the Plan shall be final and
binding on the Company and all Participants. The Committee may designate an
Administrator to aid the Committee in its administration of the Plan. Such
Administrator shall maintain complete and adequate records pertaining to the
Plan, including but not limited to Participants' Deferred Compensation Accounts
and Stock Equivalent Accounts, and shall serve at the pleasure of the Committee.
Section 3.02. Indemnity.
(a) Indemnification. The Company (the "Indemnifying Party")
hereby agrees to indemnify and hold harmless the members of the
Committee and any Administrator designated by the Committee (the
"Indemnified Parties") against any losses, claims, damages or
liabilities to which any of the Indemnified Parties may become subject
to the extent that such losses, claims, damages or liabilities or
actions in respect thereof arise out of or are based upon any act or
omission of such Indemnified Party in connection with the
administration of this Plan (including any act or omission constituting
negligence on the part of such Indemnified Party, but excluding any act
or omission constituting gross negligence or willful misconduct on the
part of such Indemnified Party), and will reimburse the Indemnified
Party for any legal or other expenses reasonably incurred by him or her
in connection with investigating or defending against any such loss,
claim, damage, liability or action.
(b) Actions. Promptly after receipt by the Indemnified Party
under Section 3.02(a) herein of notice of the commencement of any
action or proceeding with respect to any loss, claim, damage or
liability against which the Indemnified Party believes he or she is
indemnified under Section 3.02(a), the Indemnified Party shall, if a
claim with respect thereto is to be made against the Indemnifying Party
under such Section, notify the Indemnifying Party in writing of the
commencement thereof; provided, however, that the omission so to notify
the Indemnifying Party shall not relieve it from any liability which it
may have to the Indemnified Party to the extent the Indemnifying Party
is not prejudiced by such omission. If any such action or proceeding
shall be brought against the Indemnified Party and it shall notify the
Indemnifying Party of the commencement thereof, the Indemnifying Party
shall be entitled to participate therein, and, to the extent that it
shall wish, to assume the defense thereof, with counsel reasonably
satisfactory to the Indemnified Party, and, after notice from the
Indemnifying Party to the Indemnified Party of its election to assume
5
the defense thereof, the Indemnifying Party shall not be liable to such
Indemnified Party under Section 3.02(a) for any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation or
reasonable expenses of actions taken at the written request of the
Indemnifying Party. The Indemnifying Party shall not be liable for any
compromise or settlement of any such action or proceeding effected
without its consent, which consent will not be unreasonably withheld.
6
ARTICLE IV
DEFERRED COMPENSATION
Section 4.01. Initial Elections by Participants. Any Director of the
Company may at any time elect to participate in the Plan and to have all, or
such percentage as he may specify, of the Compensation otherwise payable to him
as a Director deferred and paid to him after his Deferral Termination Date at
the time and in the manner prescribed in Section 5.02 or Section 6.05. Such
election shall be made by notice in writing delivered to the Administrator and
shall be applicable only with respect to Compensation earned after the end of
the Fiscal Quarter in which such election is made and prior to the earlier of
the effective date of a further election pursuant to Section 4.02 herein or such
Participant's Deferral Termination Date. At the time of making such initial
election hereunder, a Director shall specify the portion, if any, of such
Deferred Compensation which will be (i) held subject to the interest payment
provisions of ARTICLE V hereof or (ii) translated into stock equivalents in
accordance with ARTICLE VI hereof.
Section 4.02. Subsequent Elections by Participants. Subsequent to the
initial election by a Participant provided for in Section 4.01, a Participant
may at any time make a subsequent election in like manner to increase or
decrease the percentage of his Compensation to be deferred pursuant to the Plan
and to elect the portion of such Deferred Compensation and any Plan Earnings to
be (i) held subject to the interest payment provisions of ARTICLE V hereof or
(ii) translated into stock equivalents in accordance with ARTICLE VI hereof. Any
such election shall be effective as of the end of the Fiscal Quarter in which
such election shall be made with respect to any amounts of Deferred Compensation
or Plan Earnings, or both, earned by the Participant during such Fiscal Quarter.
Notwithstanding anything to the contrary herein, no such subsequent election
shall effect a transfer of any amount credited, as of the beginning of such
Fiscal Quarter, to either the Deferred Compensation Account or the Stock
Equivalents Account from such account to the other account.
Section 4.03. Establishment of Deferred Compensation Accounts and Stock
Equivalents Accounts. There shall be established for each Participant an account
to be designated as such Participant's Deferred Compensation Account and, where
appropriate, an account to be designated as such Participant's Stock Equivalents
Account.
Section 4.04. Allocations to Accounts. Any Deferred Compensation and
any Plan Earnings earned by a Participant during a Fiscal Quarter shall be
credited to the Deferred Compensation Account of such Participant on the date
any such amount is earned. As of the end of such Fiscal Quarter, there shall be
deducted from such Participant's Deferred Compensation Account an amount
necessary to satisfy such Participant's specification, if any, pursuant to
Section 4.01 or 4.02 herein, of the portion of such Deferred Compensation and
Plan Earnings to be allocated to such Participant's Stock Equivalents Account in
accordance with Section 6.01 herein.
7
ARTICLE V
DEFERRED COMPENSATION SUBJECT TO INTEREST
Section 5.01. Interest on Deferred Compensation Accounts. A
Participant's Deferred Compensation Account shall be credited as of the end of
each Fiscal Quarter with an amount equivalent to interest for the number of days
in such quarter (based on a fiscal year of 365 days) at Citibank, N.A.'s prime
rate for major corporate borrowers in effect on the first day of such Fiscal
Quarter applied to the balance of such account at the beginning of such Fiscal
Quarter. (No amount credited to a Participant's Deferred Compensation Account
subsequent to the beginning of a Fiscal Quarter shall bear interest during that
Fiscal Quarter.) Interest credited to a Participant's Deferred Compensation
Account shall be held in such account subject to the provisions of Section 4.04
herein. Notwithstanding the foregoing, no interest shall be credited to a
Participant's Deferred Compensation Account with respect to any amount credited
to that account pursuant to Section 6.02 herein subsequent to the close of the
Fiscal Quarter in which the Participant's Deferral Termination Date shall occur.
Section 5.02. Distribution of Deferred Compensation Accounts Subject to
Interest. When a Participant's Deferral Termination Date shall occur, the
balance standing in such Participant's Deferred Compensation Account at the end
of the Fiscal Quarter in which such date occurs (after crediting interest
thereto in accordance with Section 5.01 herein) shall be distributed to such
Participant in one of the following alternative forms, as determined by the
Committee in its sole discretion:
(a) a single lump-sum payment;
(b) five equal annual installments; or
(c) ten equal annual installments.
Until payment is made, interest shall continue to accrue in the manner provided
in Section 5.01. All Plan Earnings accrued to the date of payment of any
lump-sum or annual installment shall be paid in conjunction with such payment;
provided, however, that any amount credited to a Participant's Deferred
Compensation Account, pursuant to Section 6.02, (i) after the date of the final
payment made to a Participant pursuant to the first sentence of this Section or
(ii), if no such payment is required hereunder, after the Participant's Deferral
Termination Date shall be paid to such Participant in conjunction with the next
payment made to such Participant pursuant to Section 6.05. The lump-sum payment
or the initial annual installment shall be distributed on the last business day
of January next following the close of the calendar year in which the
Participant's Deferral Termination Date occurs. The remaining installments, if
any, shall be distributed at annual intervals thereafter.
If a Participant's Deferral Termination Date shall occur by reason of
his death or if he shall die after his Deferral Termination Date, but prior to
8
receipt of all distributions provided for in this Section, all cash
distributable hereunder shall be distributed in a lump sum to such Participant's
estate or personal representative as soon as administratively feasible following
such Participant's death.
9
ARTICLE VI
STOCK EQUIVALENTS
Section 6.01. Stock Equivalents Accounts. The number of stock
equivalents to be credited to a Participant's Stock Equivalents Account in
accordance with Section 4.04 shall be determined by dividing the amount of
Deferred Compensation to be allocated to such account pursuant to the
Participant's specifications given in accordance with Article IV by the Market
Price of the Company's common stock on the last trading day of the Fiscal
Quarter specified in Section 4.04. The number of stock equivalents, so
determined, shall be credited to the Stock Equivalents Account established for
the Participant.
Section 6.02. Cash and Property Dividend Credits. Additional credits
shall be made to a Participant's Deferred Compensation Account throughout the
period of such Participant's participation in the Plan, and thereafter until all
distributions to which the Participant is entitled under Section 6.05 or ARTICLE
VIII shall have been made, in amounts equal to the Plan Earnings consisting of
the cash or fair market value of any dividends or distributions declared and
made with respect to the Company's common stock payable in cash, securities
issued by the Company (other than the Company's common stock but including any
such securities convertible into the Company's common stock) or other property
which the Participant would have received from time to time had he been the
owner on the record dates for the payment of such dividends of the number of
shares of the Company's common stock equal to the number of stock equivalents in
his Stock Equivalents Account on such dates. Each such credit shall be effected
as of the payment date for such dividend or distribution. Each and every amount
so credited to a Participant's Deferred Compensation Account shall be held in
such account subject to the provisions of Section 4.04 herein; provided,
however, that no amount credited to the Participant's Deferred Compensation
Account pursuant to this Section 6.02 subsequent to the close of the Fiscal
Quarter in which the Participant's Deferral Termination Date occurs shall be
converted into stock equivalents. Any such amount shall be distributed in cash
as provided in Section 5.02.
Section 6.03. Stock Dividend Credits. Additional credits shall be made
to a Participant's Stock Equivalents Account throughout the period of his
participation in the Plan, and thereafter until all distributions to which the
Participant is entitled under Section 6.05 or ARTICLE VIII shall have been made,
of a number of stock equivalents equal to the number of shares (including
fractional shares) of the Company's common stock to which the Participant would
have been entitled from time to time as common stock dividends had such
Participant been the owner on the record dates for the payments of such stock
dividends of the number of shares of the Company's common stock equal to the
number of stock equivalents credited to his Stock Equivalents Account on such
dates. Such additional credits shall be effected as of the end of the Fiscal
Quarter in which payment of such stock dividend is made.
Section 6.04. Recapitalization. If, as a result of a split or
combination of the Company's outstanding common stock or other recapitalization
or reorganization, the number of shares of the Company's outstanding common
stock is increased or decreased or all or a portion of the Company's outstanding
10
common stock is exchanged for or converted into other securities issued by the
Company (including without limitation securities convertible into the Company's
common stock) or other property, the number of stock equivalents credited to a
Participant's Stock Equivalents Account shall, to the extent reasonably
practicable, be equitably adjusted to give effect to such recapitalization or
reorganization (taking into account the fair market value of any securities or
other property for which the Company's common stock was exchanged or into which
it was converted) as if the Participant had owned of record on the effective
date of such recapitalization or reorganization a number of shares of the
Company's common stock equal to the number of stock equivalents credited to his
Stock Equivalents Account immediately prior thereto. To the extent that any such
adjustment is not reasonably practicable, the Board of Directors shall give
consideration to amending the Plan pursuant to ARTICLE IX in order to give
effect to the purpose of the Plan and, if no such amendments can be effected or
are considered desirable, to terminating the Plan pursuant to ARTICLE VIII.
Section 6.05. Distribution of Cash After Participant's Deferral
Termination Date. When a Participant's Deferral Termination Date shall occur,
the Company shall become obligated to make the distributions prescribed in
paragraphs (a) and (b) below.
(a) An amount in cash equal to the Market Price of the Company's common
stock on the trading day next preceding the dates of distributions provided for
herein multiplied by the number of stock equivalents with respect to which a
distribution is to be made, all as hereinafter set forth. Distribution shall be
made in one of the following alternative forms, as determined by the Committee
in its sole discretion:
(i) a single lump-sum payment;
(ii) five equal annual installments; or
(iii) ten equal annual installments.
If payment is made in installments, the total number of stock equivalents
accumulated in the Participant's Stock Equivalents Account as of the
Participant's Deferral Termination Date shall be divided by five or ten, as
applicable. The number of stock equivalents thus obtained or the total number of
stock equivalents if payment is to be made in a lump sum shall at the time of
each distribution be multiplied by the Market Price of the Company's common
stock on the trading day next preceding the date of such distribution (the
result being hereinafter in this section referred to as an "installment" if
payment is to be made in installments) and an amount in cash equal thereto shall
be distributed to the Participant. The lump-sum payment or the initial annual
installment shall be distributed on the last business day of January next
following the close of the calendar year in which the Participant's Deferral
Termination Date occurs. The remaining installments, if any, shall be
distributed at annual intervals thereafter.
(b) If a Participant's Deferral Termination Date shall occur by reason
of his death or if he shall die after his Deferral Termination Date but prior to
11
receipt of all distributions provided for in this Section, all stock equivalents
and cash distributable hereunder, or the undistributed balance thereof, shall be
distributed to such Participant's estate or personal representative as soon as
administratively feasible following such Participant's death. The total number
of stock equivalents remaining in a Participant's Stock Equivalents Account on
the date of death shall be multiplied by the Market Price of the common stock of
the Company on the date of death, or, if such day is not a trading day, then on
the trading day next following such date, and an amount in cash equal to the
product thus obtained, together with any additional cash distributable
hereunder, shall be distributed in a lump sum to the estate or personal
representative of the Participant as aforesaid.
12
ARTICLE VII
NATURE OF PLAN
The adoption of this Plan and any setting aside of amounts by the
Company with which to discharge its obligations hereunder shall not be deemed to
create a trust. Legal and equitable title to any funds so set aside shall remain
in the Company, and any recipient of benefits hereunder shall have no security
or other interest in such funds. Any and all funds so set aside shall remain
subject to the claims of the general creditors of the Company, present and
future. This provision shall not require the Company to set aside any funds, but
the Company may set aside such funds if it chooses to do so.
13
ARTICLE VIII
TERMINATION OF THE PLAN
The Board of Direcnt's may terminate the Plan at any time. Upon
termination of the Plan, distributions in respect of credits to Participants'
Deferred Compensation Accounts and Stock Equivalents Accounts as of the date of
termination shall be made in the manner and at the time prescribed in Section
5.02 or 6.05; provided, however, that the Board of Direcnt's shall have the
right, by amendment of the Plan made in conjunction with such termination, to
cause distributions in respect of credits to Participants' Deferred Compensation
Accounts and Stock Equivalents Accounts as of the effective date of such
termination of the Plan to be made at such time and in such manner as it may
determine, including, but not limited to, distributions in equal annual
installments of five or ten years or in a lump sum; and further provided that
the value of the accounts on distribution shall be determined in a manner
consistent with the provisions of Section 5.02 and 6.05, as applicable.
14
ARTICLE IX
AMENDMENT OF THE PLAN
The Board of Direcnt's may, without the consent of Participants or
their beneficiaries, amend the Plan at any time and from time to time; provided,
however, that no amendment may deprive a Participant of the amounts allocated to
his or her Deferred Compensation Account or Stock Equivalents Account or be
retroactive in effect to the prejudice of any Participant.
15
ARTICLE X
GENERAL PROVISIONS
Section 10.01. No Preference. No Participant shall have any preference
over the general creditors of the Company in the event of the Company's
insolvency.
Section 10.02. Authorized Payments.
(a) If the Committee receives evidence satisfactory to it that
any person entitled to receive a periodic payment hereunder is, at the
time the benefit is payable, physically, mentally or legally
incompetent to receive such payment and to give a valid receipt
therefor, and that an individual or institution is then maintaining or
has custody of such person and that no guardian, committee or other
representative of the estate of such person has been duly appointed,
the Committee may direcn that such periodic payment or portion thereof
be paid to such individual or institution maintaining or having custody
of such person, and the receipt of such individual or institution shall
be valid and a complete discharge for the payment of such benefit.
(b) Payments to be made hereunder may, at the written request
of the Participant, be made to a bank account designated by such
Participant, provided that deposits to the credit of such Participant
in any bank or trust company shall be deemed payment into his hands.
(c) Notwithstanding any other provisions of the Plan, if any
amounts payable under the Plan are found in a "determination" (within
the meaning of Section 1313(a) of the Internal Revenue Code of 1986) to
have been includible in gross income of a Participant prior to payment
of such amounts hereunder, such amounts shall be paid to such
Participant as soon as practicable after the Committee is advised of
such determination. For purposes of this paragraph, the Committee shall
be entitled to rely on an affidavit by a Participant and a copy of the
determination to the effect that a determination described in the
preceding sentence has occurred.
Section 10.03. Gender Words. Wherever any words are used herein in the
masculine, feminine or neuter gender, they shall be construed as though they
were also used in another gender in all cases where they would so apply, and
whenever any words are used herein in the singular or plural form, they shall be
construed as though they were also used in the other form in all cases where
they would so apply.
Section 10.04. Assignment of Benefits. Benefits provided under the Plan
may not be assigned or alienated, either voluntarily or involuntarily, other
than by will or the applicable laws of descent and distribution.
16
Section 10.05. Conflicts of Laws. THE LAWS OF THE STATE OF TEXAS SHALL
CONTROL THE INTERPRETATION AND PERFORMANCE OF THE TERMS OF THE PLAN. THE PLAN IS
NOT INTENDED TO QUALIFY UNDER SECTION 401(a) OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED, OR TO COMPLY WITH THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
OF 1974, AS AMENDED.
17
ARTICLE XI
EFFECTIVE DATE
This amendment and restatement of the Plan shall be effective as of May
1, 1994, and shall continue in force during subsequent years unless amended or
revoked by action of the Board of Direcnors.
HALLIBURTON COMPANY
By /s/ Thomas H. Cruikshank
------------------------
Thomas H. Cruikshank
Chairman of the Board and
Chief Executive officer
HALLIBURTON COMPANY
1993 STOCK AND LONG-TERM INCENTIVE PLAN
As Amended and Restated May 21, 1996
I. PURPOSE
The purpose of the Halliburton Company 1993 Stock and Long-Term Incentive
Plan (the "Plan") is to provide a means whereby Halliburton Company, a Delaware
corporation (the "Company"), and its Subsidiaries may attract able persons to
enter the employ of the Company and to provide a means whereby those key
employees upon whom the responsibilities of the successful administration and
management of the Company rest, and whose present and potential contributions to
the welfare of the Company are of importance, can acquire and maintain stock
ownership, thereby strengthening their concern for the long-term welfare of the
Company and their desire to remain in its employ. A further purpose of the Plan
is to provide such key employees with additional incentive and reward
opportunities designed to enhance the profitable growth of the Company over the
long term. Accordingly, the Plan provides for granting Incentive Stock Options,
options which do not constitute Incentive Stock Options, Stock Appreciation
Rights, Restricted Stock Awards, Performance Share Awards, Stock Value
Equivalent Awards, or any combination of the foregoing, as is best suited to the
circumstances of the particular employee as provided herein.
II. DEFINITIONS
The following definitions shall be applicable throughout the Plan unless
specifically modified by any paragraph:
(a) "Award" means, individually or collectively, any Option, Stock
Appreciation Right, Restricted Stock Award, Performance Share Award or
Stock Value Equivalent Award.
(b) "Board" means the Board of Direcnors of Halliburton Company.
(c) "Change of Control Value" means, for the purposes of Clause (B) of
Paragraph (e) of Article XII and Clause (B) of Paragraph (f) of Article
XII, the amount determined in Clause (i), (ii) or (iii), whichever is
applicable, as follows: (i) the per share price offered to stockholders of
the Company in any merger, consolidation, sale of assets or dissolution
transaction, (ii) the price per share offered to stockholders of the
Company in any tender offer or exchange offer whereby a Corporate Change
takes place or (iii) if a Corporate Change occurs other than as described
in Clause (i) or Clause (ii), the fair market value per share determined by
the Committee as of the date determined by the Committee to be the date of
cancellation and surrender of an Option or Stock Appreciation Right. If the
consideration offered to stockholders of the Company in any transaction
described in this Paragraph or Paragraphs (d) and (e) of Article XII
consists of anything other than cash, the Committee shall determine the
fair cash equivalent of the portion of the consideration offered which is
other than cash.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any section of the Code shall be deemed to include
any amendments or successor provisions to such section and any regulations
under such section.
(e) "Committee" means the committee selected by the Board to
administer the Plan in accordance with Paragraph (a) of Article IV of the
Plan.
(f) "Common Stock" means the common stock, par value $2.50 per share,
of Halliburton Company.
(g) "Company" means Halliburton Company.
(h) "Corporate Change" means one of the following events: (i) the
merger, consolidation or other reorganization of the Company in which the
outstanding Common Stock is converted into or exchanged for a different
class of securities of the Company, a class of securities of any other
issuer (except a direcn or indirecn wholly owned subsidiary of the
Company), cash or other property; (ii) the sale, lease or exchange of all
or substantially all of the assets of the Company to any other corporation
or entity (except a direcn or indirecn wholly owned subsidiary of the
Company); (iii) the adoption by the stockholders of the Company of a plan
of liquidation and dissolution; (iv) the acquisition (other than any
acquisition pursuant to any other clause of this definition) by any person
or entity, including without limitation a "group" as contemplated by
Section 13(d)(3) of the Exchange Act, of beneficial ownership, as
contemplated by such Section, of more than twenty percent (based on voting
power) of the Company's outstanding capital stock; or (v) as a result of or
in connection with a contested election of direcnors, the persons who were
direcnors of the Company before such election shall cease to constitute a
majority of the Board.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means, as of any specified date, the closing
price of the Common Stock on the New York Stock Exchange (or, if the Common
Stock is not then listed on such exchange, such other national securities
exchange on which the Common Stock is then listed) on that date, or if no
prices are reported on that date, on the last preceding date on which such
prices of the Common Stock are so reported. If the Common Stock is not then
listed on any national securities exchange but is traded over the counter
at the time a determination of its Fair Market Value is required to be made
hereunder, its Fair Market Value shall be deemed to be equal to the average
between the reported high and low sales prices of Common Stock on the most
recent date on which Common Stock was publicly traded. If the Common Stock
is not publicly traded at the time a determination of its value is required
to be made hereunder, the determination of its Fair Market Value shall be
made by the Committee in such manner as it deems appropriate.
(k) "Holder" means an employee of the Company who has been granted an
Award.
(l) "Incentive Stock Option" means an Option within the meaning of
section 422 of the Code.
(m) "Option" means an Award granted under Article VII of the Plan and
includes both Incentive Stock Options to purchase Common Stock and Options
which do not constitute Incentive Stock Options to purchase Common Stock.
(n) "Option Agreement" means a written agreement between the Company
and an employee with respect to an Option.
(o) "Optionee" means an employee who has been granted an Option.
(p) "Parent Corporation" shall have the meaning set forth in section
424(e) of the Code.
(q) "Performance Share Award" means an Award granted under Article X
of the Plan.
(r) "Plan" means the Halliburton Company 1993 Stock and Long-Term
Incentive Plan.
(s) "Restricted Stock Award" means an Award granted under Article IX
of the Plan.
(t) "Rule 16b-3" means Rule 16b-3 of the general Rules and Regulation
of the Securities and Exchange Commission under the Exchange Act, as such
rule is currently in effecn or as hereafter modified or amended.
(u) "Spread" means, in the case of a Stock Appreciation Right, an
amount equal to the excess, if any, of the Fair Market Value of a share of
Common Stock on the date such right is exercised over the exercise price of
such Stock Appreciation Right.
(v) "Stock Appreciation Right" means an Award granted under Article
VIII of the Plan.
(w) "Stock Appreciation Rights Agreement" means a written agreement
between the Company and an employee with respect to an Award of Stock
Appreciation Rights.
(x) "Stock Value Equivalent Award" means an Award granted under
Article XI of the Plan.
(y) "Subsidiary" means a company (whether a corporation, partnership,
joint venture or other form of entity) in which the Company, or a
corporation in which the Company owns a majority of the shares of capital
stock, direcnly or indirecnly, owns a greater than twenty percent equity
interest, except that with respect to the issuance of Incentive Stock
Options the term "Subsidiary" shall have the same meaning as the term
"subsidiary corporation" as defined in section 424(f) of the Code.
III. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be effecnive upon the date of its adoption by the Board,
provided the Plan is approved by the stockholders of the Company within twelve
months thereafter and on or prior to the date of the first annual meeting of
stockholders of the Company held subsequent to the acquisition of an equity
security by a Holder hereunder for which exemption is claimed under Rule 16b-3.
Notwithstanding any provision of the Plan or in any Option Agreement or Stock
Appreciation Rights Agreement, no Option or Stock Appreciation Right shall be
exercisable prior to such stockholder approval. No further Awards may be granted
under the Plan after ten years from the date the Plan is adopted by the Board.
Subject to the provisions of Article XIII, the Plan shall remain in effecn until
all Options and Stock Appreciation Rights granted under the Plan have been
exercised or expired by reason of lapse of time, all restrictions imposed upon
Restricted Stock Awards have lapsed and all Performance Share Awards and Stock
Value Equivalent Awards have been satisfied.
IV. ADMINISTRATION
(a) Composition of Committee. The Plan shall be administered by a committee
which shall be (i) appointed by the Board and (ii) constituted so as to permit
the Plan to comply with Rule 16b-3.
(b) Powers. The Committee shall have sole authority, in its discretion, to
determine which employees of the Company and its Subsidiaries shall receive an
Award, the time or times when such Award shall be made, whether an Incentive
Stock Option, nonqualified Option or Stock Appreciation Right shall be granted,
the number of shares of Common Stock which may be issued under each Option,
Stock Appreciation Right and Restricted Stock Award, and the value of each
Performance Share Award and Stock Value Equivalent Award. In making such
determinations the Committee may take into account the nature of the services
rendered by the respective employees, their present and potential contribution
to the Company's success and such other factors as the Committee in its
discretion shall deem relevant.
(c) Additional Powers. The Committee shall have such additional powers as
are delegated to it by the other provisions of the Plan. Subject to the express
provisions of the Plan, the Committee is authorized to construe the Plan and the
respective agreements executed thereunder, to prescribe such rules and
regulations relating to the Plan as it may deem advisable to carry out the Plan,
and to determine the terms, restrictions and provisions of each Award, including
such terms, restrictions and provisions as shall be requisite in the judgment of
the Committee etermuse designated Options to qualify as Incentive Stock Options,
and to make all other determinations necessary or advisable for administering
the Plan. The Committee may correcn any defect or supply any omission or
reconcile any inconsistency in any agreement relating to an Award in the manner
and to the extent it shall deem expedient to carry it into effecn. The
determinations of the Committee on the matters referred to in this Article IV
shall be conclusive.
V. GRANT OF OPTIONS, STOCK APPRECIATION RIGHTS, RESTRICTED STOCK
AWARDS, PERFORMANCE SHARE AWARDS AND STOCK VALUE EQUIVALENT
AWARDS; SHARES SUBJECT TO THE PLAN
(a) Award Limits. The Committee may from time to time grant Awards to one
or more employees determined by it to be eligible for participation in the Plan
in accordance with the provisions of Article VI. The aggregate number of shares
of Common Stock that may be issued under the Plan shall not exceed 5,500,000
shares and no more than 1,600,000 of such shares may be issued in the form of
Restricted Stock Awards. Notwithstanding anything contained herein to the
contrary, the number of Option shares or Stock Appreciation Rights, singly or in
combination, granted to any employee in any one calendar year shall not in the
aggregate exceed 500,000. Any of such shares which remain unissued and which are
not subject to outstanding Options or Awards at the termination of the Plan
shall cease to be subject to the Plan, but, until termination of the Plan, the
Company shall at all times reserve a sufficient number of shares to meet the
requirements of the Plan. Shares shall be deemed to have been issued under the
Plan only to the extent actually issued and delivered pursuant to an Award. To
the extent that an Award lapses or the rights of its Holder terminate or the
Award is paid in cash, any shares of Common Stock subject to such Award shall
again be available for the grant of an Award. The aggregate number of shares
which may be issued under the Plan shall be subject to adjustment in the same
manner as provided in Article XII with respect to shares of Common Stock subject
to Options then outstanding. Separate stock certificates shall be issued by the
Company for those shares acquired pursuant to the exercise of an Incentive Stock
Option and for those shares acquired pursuant to the exercise of any Option
which does not constitute an Incentive Stock Option.
(b) Stock Offered. The stock to be offered pursuant to the grant of an
Award may be authorized but unissued Common Stock or Common Stock previously
issued and outstanding and reacquired by the Company.
VI. ELIGIBILITY
Awards made pursuant to the Plan may be granted only to individuals who, at
the time of grant, are key employees of the Company or any Parent Corporation or
Subsidiary of the Company. Awards may not be granted to any director of the
Company who is not an employee of the Company or to any member of the Committee.
An Award made pursuant to the Plan may be granted on more than one occasion to
the same person, and such Award may include an Incentive Stock Option, an Option
which is not an Incentive Stock Option, an Award of Stock Appreciation Rights, a
Restricted Stock Award, a Performance Share Award, a Stock Value Equivalent
Award or any combination thereof. Each Award shall be evidenced by a written
instrument duly executed by or on behalf of the Company.
VII. STOCK OPTIONS
(a) Stock Option Agreement. Each Option shall be evidenced by an Option
Agreement between the Company and the Optionee which shall contain such terms
and conditions as may be approved by the Committee. The terms and conditions of
the respective Option Agreements need not be identical. Specifically, an Option
Agreement may provide for the payment of the option price, in whole or in part,
by the delivery of a number of shares of Common Stock (plus cash if necessary)
having a Fair Market Value equal to such option price. Each Option Agreement
shall provide that the Option may not be exercised earlier than six months from
the date of grant and shall specify the effecn of termination of employment on
the exercisability of the Option.
(b) Option Period. The term of each Option shall be as specified by the
Committee at the date of grant.
(c) Limitations on Exercise of Option. An Option shall be exercisable in
whole or in such installments and at such times as determined by the Committee.
(d) Special Limitations on Incentive Stock Options. To the extent that the
aggregate Fair Market Value (determined at the time the respective Incentive
Stock Option is granted) of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by an individual during any calendar
year under all incentive stock option plans of the Company and its Parent
Corporation and Subsidiaries exceeds $100,000, such excess Incentive Stock
Options shall be treated as Options which do not constitute Incentive Stock
Options. The Committee shall determine, in accordance with applicable provisions
of the Code, Treasury Regulations and other administrative pronouncements, which
of an Optionee's Incentive Stock Option will not constitute Incentive Stock
Options because of such limitation and shall notify the Optionee of such
determination as soon as practicable after such determination. No Incentive
Stock Option shall be granted to an individual if, at the time the Option is
granted, such individual owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of its Parent
Corporation or a Subsidiary, within the meaning of section 422(b)(6) of the
Code, unless (i) at the time such Option is granted the option price is at least
110% of the Fair Market Value of the Common Stock subject to the Option and (ii)
such Option by its terms is not exercisable after the expiration of five years
from the date of grant.
(e) Option Price. The purchase price of Common Stock issued under each
Option shall be determined by the Committee, but such purchase price shall not
be less than the Fair Market Value of Common Stock subject to the Option on the
date the Option is granted.
(f) Options and Rights in Substitution for Stock Options Granted by Other
Corporations. Options and Stock Appreciation Rights may be granted under the
Plan from time to time in substitution for stock options held by employees of
corporations who become, or who became prior to the effecnive date of the Plan,
key employees of the Company or of any Subsidiary as a result of a merger or
consolidation of the employing corporation with the Company or such Subsidiary,
or the acquisition by the Company or a Subsidiary of all or a portion of the
assets of the employing corporation, or the acquisition by the Company or a
Subsidiary of stock of the employing corporation with the result that such
employing corporation becomes a Subsidiary.
VIII. STOCK APPRECIATION RIGHTS
(a) Stock Appreciation Rights. A Stock Appreciation Right is the right to
receive an amount equal to the Spread with respect to a share of Common Stock
upon the exercise of such Stock Appreciation Right. Stock Appreciation Rights
may be granted in connection with the grant of an Option, in which case the
Option Agreement will provide that exercise of Stock Appreciation Rights will
result in the surrender of the right to purchase the shares under the Option as
to which the Stock Appreciation Rights were exercised. Alternatively, Stock
Appreciation Rights may be granted independently of Options in which case each
Award of Stock Appreciation Rights shall be evidenced by a Stock Appreciation
Rights Agreement between the Company and the Holder which shall contain such
terms and conditions as may be approved by the Committee. The terms and
conditions of the respective Stock Appreciation Rights Agreements need not be
identical. The Spread with respect to a Stock Appreciation Right may be payable
either in cash, shares of Common Stock with a Fair Market Value equal to the
Spread or in a combination of cash and shares of Common Stock. With respect to
Stock Appreciation Rights that are subject to Section 16 of the Exchange Act,
however, the Committee shall, except as provided in Paragraphs (e) and (f) of
Article XII, retain sole discretion (i) to determine the form in which payment
of the Stock Appreciation Right will be made (i.e., cash, securities or any
combination thereof) or (ii) to approve an election by a Holder to receive cash
in full or partial settlement of Stock Appreciation Rights. Upon the exercise of
any Stock Appreciation Rights granted hereunder, the number of shares reserved
for issuance under the Plan shall be reduced only to the extent that shares of
Common Stock are actually issued in connection with the exercise of such Right.
Each Stock Appreciation Rights Agreement shall provide that the Stock
Appreciation Rights may not be exercised earlier than six months from the date
of grant and shall specify the effecn of termination of employment on the
exercisability of the Stock Appreciation Rights.
(b) Exercise Price. The exercise price of each Stock Appreciation Right
shall be determined by the Committee, but such exercise price shall not be less
than the Fair Market Value of a share of Common Stock on the date the Stock
Appreciation Right is granted.
(c) Exercise Period. The term of each Stock Appreciation Right shall be as
specified by the Committee at the date of grant.
(d) Limitations on Exercise of Stock Appreciation Right. A Stock
Appreciation Right shall be exercisable in whole or in such installments and at
such times as determined by the Committee.
IX. RESTRICTED STOCK AWARDS
(a) Restricted Period To Be Established by the Committee. At the time a
Restricted Stock Award is made, the Committee shall establish a period of time
(the "Restriction Period") applicable to such Award; provided, however, that,
except as set forth below and as permitted by Paragraph (b) of this Article IX,
such Restriction Period shall not be less than three (3) years from the date of
grant (the "Minimum Criteria"). An award which provides for the lapse of
restrictions on shares applicable to such Award in equal annual installments
over a period of at least three (3) years from the date of grant shall be deemed
to meet the Minimum Criteria. The foregoing notwithstanding, with respect to
Restricted Stock Awards of up to an aggregate 275,000 shares (subject to
adjustment as set forth in Article XII), the Minimum Criteria shall not apply
and the Committee may establish such lesser Restriction Periods applicable to
such Awards as it shall determine in its discretion. Subject to the foregoing,
each Restricted Stock Award may have a different Restriction Period, in the
discretion of the Committee. The Restriction Period applicable to a particular
Restricted Stock Award shall not be changed except as permitted by Paragraph (b)
of this Article or by Article XII.
(b) Other Terms and Conditions. Common Stock awarded pursuant to a
Restricted Stock Award shall be represented by a stock certificate registered in
the name of the Holder of such Restricted Stock Award or, at the option of the
Company, in the name of a nominee of the Company. The Holder shall have the
right to receive dividends during the Restriction Period, to vote the Common
Stock subject thereto and to enjoy all other stockholder rights, except that (i)
the Holder shall not be entitled to possession of the stock certificate until
the Restriction Period shall have expired, (ii) the Company shall retain custody
of the stock during the Restriction Period, (iii) the Holder may not sell,
transfer, pledge, exchange, hypothecate or otherwise dispose of the stock during
the Restriction Period and (iv) a breach of the terms and conditions established
by the Committee pursuant to the Restricted Stock Award shall cause a forfeiture
of the Restricted Stock Award. At the time of such Award, the Committee may, in
its sole discretion, prescribe additional terms, conditions or restrictions
relating to Restricted Stock Awards, including, but not limited to, rules
pertaining to the termination of employment (by retirement, disability, death or
otherwise) of a Holder prior to expiration of the Restriction Period.
(c) Payment for Restricted Stock. A Holder shall not be required to make
any payment for Common Stock received pursuant to a Restricted Stock Award,
except to the extent otherwise required by law and except that the Committee
may, in its discretion, charge the Holder an amount in cash not in excess of the
par value of the shares of Common Stock issued under the Plan to the Holder.
(d) Miscellaneous. Nothing in this Article shall prohibit the exchange of
shares issued under the Plan (whether or not then subject to a Restricted Stock
Award) pursuant to a plan of reorganization for stock or securities in the
Company or another corporation a party to the reorganization, but the stock or
securities so received for shares then subject to the restrictions of a
Restricted Stock Award shall become subject to the restrictions of such
Restricted Stock Award. Any shares of stock received as a result of a stock
split or stock dividend with respect to shares then subject to a Restricted
Stock Award shall also become subject to the restrictions of the Restricted
Stock Award.
X. PERFORMANCE SHARE AWARDS
(a) Performance Period. The Committee shall establish, with respect to and
at the time of each Performance Share Award, a performance period over which the
performance applicable to the Performance Share Award of the Holder shall be
measured.
(b) Performance Share Awards. Each Performance Share Award may have a
maximum value established by the Committee at the time of such Award.
(c) Performance Measures. A Performance Share Award may be awarded to an
employee contingent upon future performance of the employee, the Company or any
Subsidiary, division or department thereof by or in which he is employed during
the performance period, the Fair Market Value of Common Stock or the increase
thereof during the performance period, combinations thereof, or such other
provisions as the Committee may determine to be appropriate. The Committee shall
establish the performance measures applicable to such performance prior to the
beginning of the performance period but subject to such later revisions as the
Committee shall deem appropriate to reflect significant, unforeseen events or
changes.
(d) Awards Criteria. In determining the value of Performance Share Awards,
the Committee may take into account an employee's responsibility level,
performance, potential, other Awards and such other considerations as it deems
appropriate.
(e) Payment. Following the end of the performance period, the Holder of a
Performance Share Award shall be entitled to receive payment of an amount, not
exceeding the maximum value of the Performance Share Award, if any, based on the
achievement of the performance measures for such performance period, as
determined by the Committee in its sole discretion. Payment of a Performance
Share Award (i) may be made in cash, Common Stock or a combination thereof, as
determined by the Committee in its sole discretion, (ii) shall be made in a lump
sum or in installments as prescribed by the Committee in its sole discretion and
(iii) to the extent applicable, shall be based on the Fair Market Value of the
Common Stock on the payment date. If a payment of cash is to be made on a
deferred basis, the Committee shall establish whether interest shall be
credited, the rate thereof and any other terms and conditions applicable
thereto.
(f) Termination of Employment. The Committee shall determine the effect of
termination of employment during the performance period on an employee's
Performance Share Award.
XI. STOCK VALUE EQUIVALENT AWARDS
(a) Stock Value Equivalent Awards. Stock Value Equivalent Awards are rights
to receive an amount equal to the Fair Market Value of shares of Common Stock or
rights to receive an amount equal to any appreciation or increase in the Fair
Market Value of Common Stock over a specified period of time, which vest over a
period of time as established by the Committee, without payment of any amounts
by the Holder thereof (except to the extent otherwise required by law) or
satisfaction of any performance criteria or objectives. Each Stock Value
Equivalent Award may have a maximum value established by the Committee at the
time of such Award.
(b) Award Period. The Committee shall establish, with respect to and at the
time of each Stock Value Equivalent Award, a period over which the Award shall
vest with respect to the Holder.
(c) Awards Criteria. In determining the value of Stock Value Equivalent
Awards, the Committee may take into account an employee's responsibility level,
performance, potential, other Awards and such other considerations as it deems
appropriate.
(d) Payment. Following the end of the determined period for a Stock Value
Equivalent Award, the Holder of a Stock Value Equivalent Award shall be entitled
to receive payment of an amount, not exceeding the maximum value of the Stock
Value Equivalent Award, if any, based on the then vested value of the Award.
Payment of a Stock Value Equivalent Award (i) shall be made in cash, (ii) shall
be made in a lump sum or in installments as prescribed by the Committee in its
sole discretion and (iii) shall be based on the Fair Market Value of the Common
Stock on the payment date. Cash dividend equivalents may be paid during, or may
be accumulated and paid at the end of, the determined period with respect to a
Stock Value Equivalent Award, as determined by the Committee. If payment of cash
is to be made on a deferred basis, the Committee shall establish whether
interest shall be credited, the rate thereof and any other terms and conditions
applicable thereto.
(e) Termination of Employment. The Committee shall determine the effect of
termination of employment during the applicable vesting period on an employee's
Stock Value Equivalent Award.
XII. RECAPITALIZATION OR REORGANIZATION
(a) Except as hereinafter otherwise provided, in the event of any
recapitalization, reorganization, merger, consolidation, combination, exchange,
stock dividend, stock split, extraordinary dividend or divestiture (including a
spin-off) or any other change in the corporate structure or shares of Common
Stock occurring after the date of the grant of an Award, the Committee may, in
its discretion, make such adjustment as to the number and price of shares of
Common Stock or other consideration subject to such Awards as the Committee
shall deem appropriate in order to prevent dilution or enlargement of rights of
the Holders.
(b) The existence of the Plan and the Awards granted hereunder shall not
affect in any way the right or power of the Board or the stockholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of debt or equity securities having any
priority or preference with respect to or affecting Common Stock or the rights
thereof, the dissolution or liquidation of the Company or any sale, lease,
exchange or other disposition of all or any part of its assets or business or
any other corporate act or proceeding.
(c) The shares with respect to which Options may be granted are shares of
Common Stock as presently constituted, but if, and whenever, prior to the
expiration of an Option theretofore granted, the Company shall effect a
subdivision or consolidation of shares of Common Stock or the payment of a stock
dividend on Common Stock without receipt of consideration by the Company, the
number of shares of Common Stock with respect to which such Option may
thereafter be exercised (i) in the event of an increase in the number of
outstanding shares shall be proportionately increased, and the purchase price
per share shall be proportionately reduced, and (ii) in the event of a reduction
in the number of outstanding shares shall be proportionately reduced, and the
purchase price per share shall be proportionately increased.
(d) If the Company recapitalizes or otherwise changes its capital
structure, thereafter upon any exercise of an Option theretofore granted the
Optionee shall be entitled to purchase under such Option, in lieu of the number
of shares of Common Stock as to which such Option shall then be exercisable, the
number and class of shares of stock and securities and the cash and other
property to which the Optionee would have been entitled pursuant to the terms of
the recapitalization if, immediately prior to such recapitalization, the
Optionee had been the holder of record of the number of shares of Common Stock
then covered by such Option.
(e) In the event of a Corporate Change, then no later than (i) two business
days prior to any Corporate Change referenced in Clause (i), (ii), (iii) or (v)
of the definition thereof or (ii) ten business days after any Corporate Change
referenced in Clause (iv) of the definition thereof, the Committee, acting in
its sole discretion without the consent or approval of any Optionee, shall act
to effect one or more of the following alternatives with respect to outstanding
Options which acts may vary among individual Optionees, may vary among Options
held by individual Optionees and, with respect to acts taken pursuant to Clause
(i) above, may be contingent upon effectuation of the Corporate Change: (A)
accelerate the time at which Options then outstanding may be exercised so that
such Options may be exercised in full for a limited period of time on or before
a specified date (before or after such Corporate Change) fixed by the Committee,
after which specified date all unexercised Options and all rights of Optionees
thereunder shall terminate, (B) require the mandatory surrender to the Company
by selected Optionees of some or all of the outstanding Options held by such
Optionees (irrespective of whether such Options are then exercisable under the
provisions of the Plan) as of a date (before or after such Corporate Change)
specified by the Committee, in which event the Committee shall thereupon cancel
such Options and pay to each Optionee an amount of cash per share equal to the
excess, if any, of the Change of Control Value of the shares subject to such
Option over the exercise price(s) under such Options for such shares, (C) make
such adjustments to Options then outstanding as the Committee deems appropriate
to reflect such Corporate Change (provided, however, that the Committee may
determine in its sole discretion that no adjustment is necessary to Options then
outstanding) or (D) provide that thereafter upon any exercise of an Option
theretofore granted the Optionee shall be entitled to purchase under such
Option, in lieu of the number of shares of Common Stock as to which such Option
shall then be exercisable, the number and class of shares of stock or other
securities or property (including, without limitation, cash) to which the
Optionee would have been entitled pursuant to the terms of the agreement of
merger, consolidation or sale of assets or plan of liquidation and dissolution
if, immediately prior to such merger, consolidation or sale of assets or any
distribution in liquidation and dissolution of the Company, the Optionee had
been the holder of record of the number of shares of Common Stock then covered
by such Option.
(f) In the event of a Corporate Change, then no later than (i) two business
days prior to any Corporate Change referenced in Clause (i), (ii), (iii) or (v)
of the definition thereof or (ii) ten business days after any Corporate Change
referenced in Clause (iv) of the definition thereof, the Committee, acting in
its sole discretion without the consent or approval of any Holder of a Stock
Appreciation Right, shall act to effect one or more of the following
alternatives with respect to outstanding Stock Appreciation Rights which acts
may vary among individual Holders, may vary among Stock Appreciation Rights held
by individual Holders and, with respect to acts taken pursuant to Clause (ii)
above, may be contingent upon effectuation of the Corporate Change: (A)
accelerate the time at which Stock Appreciation Rights then outstanding may be
exercised so that such Stock Appreciation Rights may be exercised in full for a
limited period of time on or before a specified date (before or after such
Corporate Change) fixed by the Committee, after which specified date all
unexercised Stock Appreciation Rights and all rights of Holders thereunder shall
terminate, (B) require the mandatory surrender to the Company by selected
Holders of Stock Appreciation Rights of some or all of the outstanding Stock
Appreciation Rights held by such Holders (irrespective of whether such Stock
Appreciation Rights are then exercisable under the provisions of the Plan) as of
a date (before or after such Corporate Change) specified by the Committee, in
which event the Committee shall thereupon cancel such Stock Appreciation Rights
and pay to each Holder an amount of cash equal to the Spread with respect to
such Stock Appreciation Rights with the Fair Market Value of the Common Stock at
such time to be deemed to be the Change of Control Value or (C) make such
adjustments to Stock Appreciation Rights then outstanding as the Committee deems
appropriate to reflect such Corporate Change (provided, however, that the
Committee may determine in its sole discretion that no adjustment is necessary
to Stock Appreciation Rights then outstanding).
(g) Except as hereinbefore expressly provided, the issuance by the Company
of shares of stock of any class or securities convertible into shares of stock
of any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
shares of Common Stock subject to Options or Stock Appreciation Rights
theretofore granted, the purchase price per share of Common Stock subject to
Options or the calculation of the Spread with respect to Stock Appreciation
Rights.
(h) Plan provisions to the contrary notwithstanding, with respect to any
Stock Value Equivalent Awards which have been approved but which are unpaid at
the time a Corporate Change occurs, the Committee may, in its discretion,
provide (i) for full vesting of such Awards as of the date of such Corporate
Change and (ii) for payment of the then value of such Awards as soon as
administratively feasible following the Corporate Change with the value of such
Awards to be based on the Change of Control Value of the Common Stock.
(i) Plan provisions to the contrary notwithstanding, with respect to any
Performance Share Awards which have been approved but which are unpaid at the
time a Corporate Change occurs, the Committee may, in its discretion, provide
(i) for full vesting of such Awards as of the date of such Corporate Change,
(ii) for payment of the then value of such Awards as soon as administratively
feasible following the Corporate Change, with the value of such Awards to be
based, to the extent applicable, on the Change of Control Value of the Common
Stock, (iii) that any provisions in Awards regarding forfeiture of unpaid Awards
shall not be applicable from and after a Corporate Change with respect to Awards
made prior to such Corporate Change and (iv) that all performance measures
applicable to unpaid Awards at the time of a Corporate Change shall be deemed to
have been satisfied in full during the performance period upon the occurrence of
such Corporate Change.
(j) Plan provisions to the contrary notwithstanding, with respect to any
Restricted Stock Awards outstanding at the time a Corporate Change occurs, the
Committee may, in its discretion, provide (i) for full vesting of all Common
Stock awarded to the Holders pursuant to such Restricted Stock Awards as of the
date of such Corporate Change and (ii) that all restrictions applicable to such
Restricted Stock Award shall terminate as of such date.
XIII. AMENDMENT OR TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan or alter or amend the
Plan or any part thereof from time to time; provided that no change in any Award
theretofore granted may be made which would impair the rights of the Holder
without the consent of the Holder, and provided, further, that the Board may
not, without approval of the stockholders, amend the Plan:
(a) to increase the aggregate number of shares which may be issued
pursuant to the provisions of the Plan on exercise or surrender of
Options or Stock Appreciation Rights or pursuant to Restricted Stock
Awards or Performance Share Awards, except as provided in Article XII;
(b) to change the minimum Option price;
(c) to change the class of employees eligible to receive Awards or
increase materially the benefits accruing to employees under the Plan;
(d) to extend the maximum period during which Awards may be granted
under the Plan;
(e) to modify materially the requirements as to eligibility for
participation in the Plan; or
(f) to decrease any authority granted to the Committee hereunder in
contravention of Rule 16b-3.
XIV. OTHER
(a) No Right To An Award. Neither the adoption of the Plan nor any action
of the Board or of the Committee shall be deemed to give an employee any right
to be granted an Option to purchase Common Stock, a Stock Appreciation Right, a
right to a Restricted Stock Award or a right to a Performance Share Award or
Stock Value Equivalent Award or any other rights hereunder except as may be
evidenced by an Award or by an Option Agreement duly executed on behalf of the
Company, and then only to the extent of and on the terms and conditions
expressly set forth therein. The Plan shall be unfunded. The Company shall not
be required to establish any special or separate fund or to make any other
segregation of funds or assets to assure the payment of any Award.
(b) No Employment Rights Conferred. Nothing contained in the Plan or in any
Award made hereunder shall (i) confer upon any employee any right with respect
to continuation of employment with the Company or any Subsidiary or (ii)
interfere in any way with the right of the Company or any Subsidiary to
terminate his or her employment at any time.
(c) Other Laws; Withholding. The Company shall not be obligated to issue
any Common Stock pursuant to any Award granted under the Plan at any time when
the offering of the shares covered by such Award has not been registered under
the Securities Act of 1933 and such other state and federal laws, rules or
regulations as the Company or the Committee deems applicable and, in the opinion
of legal counsel for the Company, there is no exemption from the registration
requirements of such laws, rules or regulations available for the issuance and
sale of such shares. No fractional shares of Common Stock shall be delivered,
nor shall any cash in lieu of fractional shares be paid. The Company shall have
the right to deduct in connection with all Awards any taxes required by law to
be withheld and to require any payments necessary to enable it to satisfy its
withholding obligations. The Committee may permit the Holder of an Award to
elect to surrender, or authorize the Company to withhold, shares of Common Stock
(valued at their Fair Market Value on the date of surrender or withholding of
such shares) in satisfaction of the Company's withholding obligation, subject to
such restrictions as the Committee deems necessary to satisfy the requirements
of Rule 16b-3.
(d) No Restriction on Corporate Action. Nothing contained in the Plan shall
be construed to prevent the Company or any Subsidiary from taking any corporate
action which is deemed by the Company or such Subsidiary to be appropriate or in
its best interest, whether or not such action would have an adverse effect on
the Plan or any Award made under the Plan. No employee, beneficiary or other
person shall have any claim against the Company or any Subsidiary as a result of
any such action.
(e) Restrictions on Transfer. An Award shall not be transferable otherwise
than by will or the laws of descent and distribution and shall be exercisable
during the lifetime of the Holder only by such Holder or the Holder's guardian
or legal representative. The Option Agreement, Stock Appreciation Rights
Agreement or other written instrument evidencing an Award shall specify the
effect of the death of the Holder on the Award.
(f) Rule 16b-3. It is intended that the Plan and any grant of an Award made
to a person subject to Section 16 of the Exchange Act meet all of the
requirements of Rule 16b-3. If any provision of the Plan or any such Award would
disqualify the Plan or such Award under, or would otherwise not comply with,
Rule 16b-3, such provision or Award shall be construed or deemed amended to
conform to Rule 16b-3.
(g) Governing Law. This Plan shall be construed in accordance with the laws
of the State of Texas, except to the extent that it implicates matters which are
the subject of the General Corporation Law of the State of Delaware which
matters shall be governed by the latter law.
HALLIBURTON ELECTIVE DEFERRAL PLAN
AS AMENDED AND RESTATED EFFECTIVE
JANUARY 1, 1997
TABLE OF CONTENTS
ARTICLE PAGE
I - Definitions and Construction ...................... I-1
II - Participation ..................................... II-1
III - Account Credits ................................... III-1
IV - Withdrawals ....................................... IV-1
V - Payment of Benefits ............................... V-1
VI - Administration of the Plan......................... VI-1
VII - Administration of Funds............................ VII-1
VIII - Nature of the Plan................................. VIII-1
IX - Participating Employers ........................... IX-1
X - Miscellaneous ..................................... X-1
(i)
HALLIBURTON ELECTIVE DEFERRAL PLAN
HALLIBURTON COMPANY, having heretofore established the Halliburton
Elective Deferral Plan, pursuant to Section 10.4 of said Plan, hereby amends and
restates said Plan effective as of January 1, 1997.
(ii)
I.
Definitions and Construction
1.1 Definitions. Where the following words and phrases appear in the
Plan, they shall have the respective meanings set forth below, unless their
context clearly indicates to the contrary.
(1) Account: A memorandum bookkeeping account established on the records of
the Employer for a Participant that is credited with amounts determined
in accordance with Article III of the Plan. As of any determination
date, a Participant's benefit under the Plan shall be equal to the
amount credited to his Account as of such date. A Participant shall
have a 100% nonforfeitable interest in his Account at all times.
(1A) Act: The Employee Retirement Income Security Act of 1974, as amended.
(2) Base Salary: The base rate of cash compensation paid by the Employer to
or for the benefit of a Participant for services rendered or labor
performed while a Participant, including base pay a Participant could
have received in cash in lieu of (A) deferrals pursuant to Section 3.1
and (B) contributions made on his behalf to any qualified plan
maintained by the Employer or to any cafeteria plan under section 125
of the Code maintained by the Employer.
(3) Bonus Compensation: With respect to any Participant for a Plan Year,
the amount awarded under a bonus plan maintained by the Employer.
(4) Code: The Internal Revenue Code of 1986, as amended.
(5) Compensation Committee: The Compensation Committee of the Directors.
(6) Committee: The administrative committee appointed by the Compensation
Committee to administer the Plan.
(7) Company: Halliburton Company.
(8) Company Stock: The common stock of Halliburton Company.
(9) Directors: The Board of Directors of the Company.
I-1
(10) Employer: The Company and each eligible organization designated as an
Employer in accordance with the provisions of Article IX of the Plan.
(11) Participant: Each individual who has been selected for participation in
the Plan and who has become a Participant pursuant to Article II.
(12) Plan: The Halliburton Elective Deferral Plan, as amended from time to
time.
(13) Plan Year: The twelve-consecutive month period commencing January 1 of
each year.
(14) Retirement: The date the Participant retires in accordance with the
terms of his Employer's retirement policy as in effect at that time.
(15) Stock Equivalent Unit: A measure of value equal to one share of Company
Stock. A Stock Equivalent Unit shall exist only for purposes of the
Plan and matters related thereto, and in no event shall any holder of a
Stock Equivalent Unit have any right to receive any actual share of
Company Stock by reason thereof except as specifically provided in the
Plan or have any right as a shareholder of the Company.
(16) Trust: The trust, if any, established under the Trust Agreement.
(17) Trust Agreement: The agreement, if any, entered into between the
Employer and the Trustee pursuant to Article VIII.
(18) Trust Fund: The funds and properties, if any, held pursuant to the
provisions of the Trust Agreement, together with all income, profits
and increments thereto.
(19) Trustee: The trustee or trustees appointed by the Committee who are
qualified and acting under the Trust Agreement at any time.
(20) Unforeseeable Emergency: A severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of the
Participant or of a dependent (as defined in section 152(a) of the
Code) of the Participant, loss of the Participant's property due to
casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant.
1.2 Number and Gender. Wherever appropriate herein, words used in the
singular shall be considered to include the plural and words used in the plural
shall be considered to include the singular. The masculine gender, where
appearing in the Plan, shall be deemed to include the feminine gender.
1.3 Headings. The headings of Articles and Sections herein are included
solely for convenience, and if there is any conflict between such headings and
the text of the Plan, the text shall control.
I-2
II.
Participation
2.1 Participation. Participants in the Plan are those employees of the
Employer (a) who are subject to the income tax laws of United States, (b) who
are officers or members of a select group of highly compensated employees of the
Employer, and (c) who are selected by the Committee, in its sole discretion, as
Participants. The Committee shall notify each Participant of his selection as a
Participant. Subject to the provisions of Section 2.2, a Participant shall
remain eligible to defer Base Salary and/or Bonus Compensation hereunder for
each Plan Year following his initial year of participation in the Plan.
2.2 Cessation of Active Participation. Notwithstanding any provision
herein to the contrary, an individual who has become a Participant in the Plan
shall cease to be entitled to defer Base Salary and/or Bonus Compensation
hereunder effective as of any date designated by the Committee. Any such
Committee action shall be communicated to the affected individual prior to the
effective date of such action.
II-1
III.
Account Credits
3.1 Base Salary Deferrals.
(a) Any Participant may elect to defer receipt of an integral
percentage of from 5% to 50% of his Base Salary, in 5% increments, for any Plan
Year; provided, however, that a Participant may elect to defer receipt of an
integral percentage of from 5% to 90% of his Base Salary, in 5% increments, for
the Plan Year in which he is first eligible to participate in the Plan. A
Participant's election to defer receipt of a percentage of his Base Salary for
any Plan Year shall be made on or before the last day of the preceding Plan
Year. Notwithstanding the foregoing, if an individual initially becomes a
Participant other than on the first day of a Plan Year, such Participant's
election to defer receipt of a percentage of his Base Salary for such Plan Year
may be made no later than 30 days after he becomes a Participant, but such
election shall be prospective only. The reduction in a Participant's Base Salary
pursuant to his election shall be effected by Base Salary reductions as of each
payroll period within the election period. Base Salary for a Plan Year not
deferred by a Participant pursuant to this Paragraph shall be received by such
Participant in cash, except as provided by any other plan maintained by the
Employer. Deferrals of Base Salary under this Plan shall be made before elective
deferrals or contributions of Base Salary under any other plan maintained by the
Employer. Base Salary deferrals made by a Participant shall be credited to such
Participant's Account as of the date the Base Salary deferred would have been
received by such Participant in cash had no deferral been made pursuant to this
Section. Except as provided in Paragraph (b), deferral elections for a Plan Year
pursuant to this Section shall be irrevocable.
(b) A Participant shall be permitted to revoke his election to
defer receipt of his Base Salary for any Plan Year in the event of an
Unforeseeable Emergency, as determined by the Committee in its sole discretion.
For purposes of the Plan, the decision of the Committee regarding the existence
or nonexistence of an Unforeseeable Emergency of a Participant shall be final
and binding. Further, the Committee shall have the authority to require a
Participant to provide such proof as it deems necessary to establish the
existence and significant nature of the Participant's Unforeseeable Emergency. A
Participant who is permitted to revoke his Base Salary deferral election during
a Plan Year shall not be permitted to resume Base Salary deferrals under the
Plan until the next following Plan Year.
3.2 Bonus Compensation Deferrals. Any Participant may elect to defer
receipt of an integral percentage of from 5% to 90% of his Bonus Compensation,
in 5% increments, for any Plan Year. A Participant's election to defer receipt
of a percentage of his Bonus Compensation for any Plan Year shall be made
on or before the last day of the preceding Plan Year. Notwithstanding the
foregoing, if any individual initially becomes a Participant other than on the
III-1
first day of a Plan Year, such Participant's election to defer receipt of a
percentage of his Bonus Compensation for such Plan Year may be made no later
than 30 days after he becomes a Participant, but such election shall apply only
to a pro rata portion of his Bonus Compensation for such Plan Year based upon
the number of complete months remaining in such Plan Year divided by twelve. A
Participant shall make a separate election under this Section with respect to
Bonus Compensation payable in cash and Bonus Compensation payable in Company
Stock. If Bonus Compensation for a Plan Year is payable in more than one future
Plan Year under the applicable bonus plan, a Participant shall also make a
separate election under this Section with respect to such Bonus Compensation for
each Plan Year in which such Bonus Compensation is payable. Bonus Compensation
for a Plan Year not deferred by a Participant pursuant to this Section shall be
received by such Participant in cash or in Company Stock, as applicable, except
as provided by any other plan maintained by the Employer. Deferrals of Bonus
Compensation under this Plan shall be made before elective deferrals or
contributions of Bonus Compensation under any other plan maintained by the
Employer. Bonus Compensation deferrals made by a Participant shall be credited
to such Participant's Account as of the date the Bonus Compensation deferred
would have been received by such Participant had no deferral been made pursuant
to this Section 3.2. Deferrals of Bonus Compensation payable in Company Stock
shall be rounded to the nearest whole shares of Company Stock and credited to
the Participant's Account as a number of Stock Equivalent Units equal to the
number of shares of Company Stock deferred. Deferral elections for a Plan Year
pursuant to this Section shall be irrevocable.
3.3 Earnings Credits. For each Plan Year, a Participant's Account shall
be credited semi-annually on June 30 and December 31 with an amount of earnings
based on the weighted average balance of such Account (excluding Stock
Equivalent Units) during the preceding six months and the Moody's corporate bond
average annual yield for long-term investment grade bonds during the six-month
period ended seven months prior to each semi-annual earnings credit date, plus
2%. (For example, the rate earned for the six months ended December 31, 1995
would be based on the average Moody's rate for the six months ended May 31,
1995, plus 2%.) So long as there is any balance in any Account, such Account
shall continue to receive earnings credits pursuant to this Section. If a
Participant's Account is credited with shares of Stock Equivalent Units pursuant
to Section 3.2, such Participant shall be paid an amount equal to the dividends
that would have been payable if such Stock Equivalent Units were actual shares
of Company Stock at the same time such dividends are payable to actual
shareholders of the Company.
3.4 Adjustments to Stock Equivalent Units. In the event of any change
in the outstanding Company Stock by reason of any stock dividend, stock split,
reverse stock split, combination of shares, or similar event, the number of
credited Stock Equivalent Units shall be appropriately adjusted by the
Committee, whose determination shall be conclusive.
III-2
IV.
Withdrawals
Participants shall be permitted to make withdrawals from the Plan only
in the event of an Unforeseeable Emergency, as determined by the Committee in
its sole discretion. No withdrawal shall be allowed to the extent that such
Unforeseeable Emergency is or may be relieved (a) through reimbursement or
compensation by insurance or otherwise, (b) by liquidation of the Participant's
assets, to the extent the liquidation of such assets would not itself cause
severe financial hardship or (c) by cessation of Base Salary deferrals under the
Plan pursuant to Section 3.1(b). Further, the Committee shall permit a
Participant to withdraw only the amount it determines, in its sole discretion,
to be reasonably needed to satisfy the Unforeseeable Emergency.
IV-1
V.
Payment of Benefits
5.1 Payment Election Generally. In conjunction with each deferral
election made by a Participant pursuant to Article III for a Plan Year, such
Participant shall elect, subject to Sections 5.4, 5.5, 5.7 and 5.8, the time and
the form of payment with respect to such deferral and the earnings credited
thereto. Except as provided in Section 5.3, any such election regarding the time
and form of payment of a deferral and the earnings credited thereto shall be
irrevocable once made.
5.2 Time of Benefit Payment. With respect to each deferral election
made by a Participant pursuant to Article III, such Participant shall elect to
commence payment of such deferral and the earnings credited thereto on one of
the following dates:
(a) Retirement; or
(b) A specific future month and year, but not earlier than
five years from the date of the deferral if the Participant has not
attained age fifty-five at the time of the deferral or one year from
the date of the deferral if the Participant has attained age fifty-
five at the time of the deferral, and not later than the first day of
the year in which the Participant attains age seventy.
5.3 Form of Benefit Payment. With respect to each deferral election
made by a Participant pursuant to Article III, such Participant shall elect the
form of payment with respect to such deferral and the earnings credited thereto
from one of the following forms:
(a) A lump sum; or
(b) Installment payments for a period not to exceed ten years.
Installment payments shall be paid annually on the first business day of January
of each Plan Year; provided however, that not later than sixty days prior to the
date payment is to commence, a Participant may elect to have his installment
payments paid quarterly on the first business day of each calendar quarter. Each
installment payment shall be determined by multiplying the deferral and the
earnings credited thereto at the time of the payment by a fraction, the
numerator of which is one and the denominator of which is the number of
remaining installment payments to be made to Participant. In the event the total
amount credited to a Participant's Account (including the fair market value of
Stock Equivalent Units) does not exceed $50,000, the Committee may, in its sole
discretion, pay such amounts in a lump sum.
5.4 Total and Permanent Disability. If a Participant becomes totally
and permanently disabled while employed by the Employer, payment of the amounts
credited to such Participant's Account shall commence on the first business day
of the second calendar quarter following the date the Committee makes a
determination that the Participant is totally and permanently disabled, in the
V-1
form of payment determined in accordance with Section 5.3. The above
notwithstanding, if such Participant is already receiving payments pursuant to
Section 5.2(b) and Section 5.3(b), such payments shall continue. For purposes of
the Plan, a Participant shall be considered totally and permanently disabled if
the Committee determines, based on a written medical opinion (unless waived by
the Committee as unnecessary), that such Participant is permanently incapable of
performing his job for physical or mental reasons.
5.5 Death. In the event of a Participant's death at a time when
amounts are credited to such Participant's Account, such amounts shall be paid
to such Participant's designated beneficiary or beneficiaries in five annual
installments commencing as soon as administratively feasible after such
Participant's date of death. However, the Participant's designated beneficiary
or beneficiaries may request a lump sum payment based upon hardship, and the
Committee, in its sole discretion, may approve such request.
5.6 Designation of Beneficiaries.
(a) Each Participant shall have the right to designate the
beneficiary or beneficiaries to receive payment of his benefit in the event of
his death. Each such designation shall be made by executing the beneficiary
designation form prescribed by the Committee and filing same with the Committee.
Any such designation may be changed at any time by execution of a new
designation in accordance with this Section.
(b) If no such designation is on file with the Committee at the
time of the death of the Participant or such designation is not effective for
any reason as determined by the Committee, then the designated beneficiary or
beneficiaries to receive such benefit shall be as follows:
(1) If a Participant leaves a surviving spouse, his benefit
shall be paid to such surviving spouse;
(2) If a Participant leaves no surviving spouse, his benefit
shall be paid to such Participant's executor or administrator, or to
his heirs at law if there if no administration of such Participant's
estate.
5.7 Other Termination of Employment. If a Participant terminates his
employment with the Employer before Retirement for a reason other than total and
permanent disability or death, the amounts credited to such Participant's
Account shall be paid to the Participant in a lump sum no less than thirty days
and no more than one year after the Participant's date of termination of
employment.
5.8 Change in the Company's Credit Rating. If the Standard & Poor's
rating for the Company's senior indebtedness falls below BBB, the amounts
credited to Participants' Accounts shall be paid to the Participants in a lump
sum within forty-five days after the date of change of such credit rating.
V-2
5.9 Payment of Stock Equivalent Units. When the payment of a
Participant's Account commences pursuant to this Article, Stock Equivalent Units
credited to such Participant's Account shall be paid to the Participant,
pursuant to the form of payment provided in this Article, either in shares of
Company Stock (based upon one share of Company Stock for each Stock Equivalent
Unit) or in cash based upon the fair market value of the shares of Company Stock
represented by such Stock Equivalent Units on the thirtieth day prior to the
date of payment. The determination as to whether payment shall be made in shares
of Company Stock or in cash shall be made by the Committee in its sole
discretion, except that payment shall not be in the form of shares of Company
Stock if, at the time of payment, the Participant is subject to section 16 of
the Securities Exchange Act of 1934, as amended. For purposes of determining the
fair market value of a share of Company Stock on a particular date, if the
Company Stock is traded on a national stock exchange, the fair market value of a
share of Company Stock on a particular date shall be equal to the average of the
reported high and low sales prices of the Company Stock on such exchange on that
date, or if no prices are reported on that date, on the last preceding date on
which such prices of the Company Stock are so reported. If the Company Stock is
publicly traded, but is not traded on a national stock exchange, at the time a
determination of its fair market value is required to be made hereunder, its
fair market value shall be deemed to be equal to the average between the closing
bid and asked price of the Company Stock on the date the value is to be
determined, or if the Company Stock was not traded on such date, on the last
preceding date the Company Stock was publicly traded. If the Company Stock is
not publicly traded at the time a determination of its value is required to be
made hereunder, the determination of its fair market value shall be made by the
Committee in such manner as it deems appropriate.
5.10 Payment of Benefits. To the extent the Trust Fund, if any, has
sufficient assets, the Trustee shall pay benefits to Participants or their
beneficiaries, except to the extent the Employer pays the benefits directly and
provides adequate evidence of such payment to the Trustee. To the extent the
Trustee does not or cannot pay benefits out of the Trust Fund, the benefits
shall be paid by the Employer. Any benefit payments made to a Participant or for
his benefit pursuant to any provision of the Plan shall be debited to such
Participant's Account. Except as provided in Section 5.9, all benefit payments
shall be made in cash to the fullest extent practicable.
5.11 Unclaimed Benefits. In the case of a benefit payable on behalf of
a Participant, if the Committee is unable to locate the Participant or
beneficiary to whom such benefit is payable, upon the Committee's determination
thereof, such benefit shall be forfeited to the Employer. Notwithstanding the
foregoing, if subsequent to any such forfeiture the Participant or beneficiary
to whom such benefit is payable makes a valid claim for such benefit, such
forfeited benefit shall be paid by the Employer or restored to the Plan by the
Employer.
5.12 No Acceleration of Bonus Compensation. The time of payment of any
Bonus Compensation that the Participant has elected to defer but that has not
yet been credited to the Participant's Account because it is not yet payable
without regard to the deferral shall not be accelerated as a result of the
provisions of this Article. If, pursuant to the provisions of this Article,
payment of such Bonus Compensation would no longer be deferred at the time it
becomes payable, such Bonus Compensation shall be paid to the Participant within
90 days of the date it would have been payable had the Participant not made a
deferral election.
V-3
VI.
Administration of the Plan
6.1 Committee Powers and Duties. The general administration of the
Plan shall be vested in the Committee. The Committee shall supervise the
administration and enforcement of the Plan according to the terms and provisions
hereof and shall have all powers necessary to accomplish these purposes,
including, but not by way of limitation, the right, power, authority, and duty:
(a) To make rules, regulations, and bylaws for the
administration of the Plan that are not inconsistent with the terms and
provisions hereof, and to enforce the terms of the Plan and the rules
and regulations promulgated thereunder by the Committee;
(b) To construe in its discretion all terms, provisions,
conditions, and limitations of the Plan;
(c) To correct any defect or to supply any omission or to
reconcile any inconsistency that may appear in the Plan in such manner
and to such extent as it shall deem in its discretion expedient to
effectuate the purposes of the Plan;
(d) To employ and compensate such accountants, attorneys,
investment advisors, and other agents, employees, and independent
contractors as the Committee may deem necessary or advisable for the
proper and efficient administration of the Plan;
(e) To determine in its discretion all questions relating to
eligibility;
(f) To determine whether and when there has been a termination
of a Participant's employment with the Employer, and the reason for
such termination;
(g) To make a determination in its discretion as to the right
of any person to a benefit under the Plan and to prescribe procedures
to be followed by distributees in obtaining benefits hereunder; and
(h) To receive and review reports from the Trustee as to the
financial condition of the Trust Fund, if any, including its receipts
and disbursements.
6.2 Self-Interest of Participants. No member of the Committee shall
have any right to vote or decide upon any matter relating solely to himself
under the Plan (including, without limitation, Committee decisions under Article
II) or to vote in any case in which his individual right to claim any benefit
under the Plan is particularly involved. In any case in which a Committee member
is so disqualified to act and the remaining members cannot agree, the
Compensation Committee shall appoint a temporary substitute member to exercise
all the powers of the disqualified member concerning the matter in which he is
disqualified.
VI-1
6.3 Claims Review. In any case in which a claim for Plan benefits of a
Participant or beneficiary is denied or modified, the Committee shall furnish
written notice to the claimant within ninety days (or within 180 days if
additional information requested by the Committee necessitates an extension of
the ninety-day period), which notice shall:
(a) State the specific reason or reasons for the denial or
modification;
(b) Provide specific reference to pertinent Plan provisions on
which the denial or modification is based;
(c) Provide a description of any additional material or
information necessary for the Participant, his beneficiary, or
representative to perfect the claim and an explanation of why such
material or information is necessary; and
(d) Explain the Plan's claim review procedure as contained
herein.
In the event a claim for Plan benefits is denied or modified, if the
Participant, his beneficiary, or a representative of such Participant or
beneficiary desires to have such denial or modification reviewed, he must,
within sixty days following receipt of the notice of such denial or
modification, submit a written request for review by the Committee of its
initial decision. In connection with such request, the Participant, his
beneficiary, or the representative of such Participant or beneficiary may review
any pertinent documents upon which such denial or modification was based and may
submit issues and comments in writing. Within sixty days following such request
for review the Committee shall, after providing a full and fair review, render
its final decision in writing to the Participant, his beneficiary or the
representative of such Participant or beneficiary stating specific reasons for
such decision and making specific references to pertinent Plan provisions upon
which the decision is based. If special circumstances require an extension of
such sixty-day period, the Committee's decision shall be rendered as soon as
possible, but not later than 120 days after receipt of the request for review.
If an extension of time for review is required, written notice of the extension
shall be furnished to the Participant, beneficiary, or the representative of
such Participant or beneficiary prior to the commencement of the extension
period.
6.4 Employer to Supply Information. The Employer shall supply full and
timely information to the Committee, including, but not limited to, information
relating to each Participant's compensation, age, retirement, death, or other
cause of termination of employment and such other pertinent facts as the
Committee may require. The Employer shall advise the Trustee, if any, of such of
the foregoing facts as are deemed necessary for the Trustee to carry out the
Trustee's duties under the Plan and the Trust Agreement. When making a
determination in connection with the Plan, the Committee shall be entitled to
rely upon the aforesaid information furnished by the Employer.
VI-2
6.5 Indemnity. The Company shall indemnify and hold harmless each
member of the Committee against any and all expenses and liabilities arising out
of his administrative functions or fiduciary responsibilities, including any
expenses and liabilities that are caused by or result from an act or omission
constituting the negligence of such member in the performance of such functions
or responsibilities, but excluding expenses and liabilities that are caused by
or result from such member's own gross negligence or willful misconduct.
Expenses against which such member shall be indemnified hereunder shall include,
without limitation, the amounts of any settlement or judgment, costs, counsel
fees, and related charges reasonably incurred in connection with a claim
asserted or a proceeding brought or settlement thereof.
VI-3
VII.
Administration of Funds
7.1 Payment of Expenses. All expenses incident to the administration of
the Plan and Trust, including but not limited to, legal, accounting, Trustee
fees, and expenses of the Committee, may be paid by the Employer and, if not
paid by the Employer, shall be paid by the Trustee from the Trust Fund, if any.
7.2 Trust Fund Property. All income, profits, recoveries,
contributions, forfeitures and any and all moneys, securities and properties of
any kind at any time received or held by the Trustee, if any, shall be held for
investment purposes as a commingled Trust Fund pursuant to the terms of the
Trust Agreement. The Committee shall maintain one or more Accounts in the name
of each Participant, but the maintenance of an Account designated as the Account
of a Participant shall not mean that such Participant shall have a greater or
lesser interest than that due him by operation of the Plan and shall not be
considered as segregating any funds or property from any other funds or property
contained in the commingled fund. No Participant shall have any title to any
specific asset in the Trust Fund, if any.
VII-1
VIII.
Nature of the Plan
The Employer intends and desires by the adoption of the Plan to
recognize the value to the Employer of the past and present services of
employees covered by the Plan and to encourage and assure their continued
service with the Employer by making more adequate provision for their future
retirement security. The Plan is intended to constitute an unfunded, unsecured
plan of deferred compensation for a select group of management or highly
compensated employees of the Employer. Plan benefits herein provided are to be
paid out of the Employer's general assets. The Plan constitutes a mere promise
by the Employers to make benefit payments in the future and Participants have
the status of general unsecured creditors of the Employers. Nevertheless,
subject to the terms hereof and of the Trust Agreement, if any, the Employers,
or the Company on behalf of the Employers, may transfer money or other property
to the Trustee and the Trustee shall pay Plan benefits to Participants and their
beneficiaries out of the Trust Fund.
The Committee, in its sole discretion, may establish the Trust and
direct the Employers to enter into the Trust Agreement and adopt the Trust for
purposes of the Plan. In such event, the Employers shall remain the owner of all
assets in the Trust Fund and the assets shall be subject to the claims of each
Employer's creditors if such Employer ever becomes insolvent. For purposes
hereof, an Employer shall be considered "insolvent" if (a) the Employer is
unable to pay its debts as they become due, or (b) the Employer is subject to a
pending proceeding as a debtor under the United States Bankruptcy Code (or any
successor federal statute). The chief executive officer of the Employer and its
board of directors shall have the duty to inform the Trustee in writing if the
Employer becomes insolvent. Such notice given under the preceding sentence by
any party shall satisfy all of the parties' duty to give notice. When so
informed, the Trustee shall suspend payments to the Participants and hold the
assets for the benefit of the Employer's general creditors. If the Trustee
receives a written allegation that the Employer is insolvent, the Trustee shall
suspend payments to the Participants and hold the Trust Fund for the benefit of
the Employer's general creditors, and shall determine within the period
specified in the Trust Agreement whether the Employer is insolvent. If the
Trustee determines that the Employer is not insolvent, the Trustee shall resume
payments to the Participants. No Participant or beneficiary shall have any
preferred claim to, or any beneficial ownership interest in, any assets of the
Trust Fund.
VIII-1
IX.
Participating Employers
The Committee may designate any entity or organization eligible by law
to participate in this Plan as an Employer by written instrument delivered to
the Secretary of the Company and the designated Employer. Such written
instrument shall specify the effective date of such designated participation,
may incorporate specific provisions relating to the operation of the Plan which
apply to the designated Employer only and shall become, as to such designated
Employer and its employees, a part of the Plan. Each designated Employer shall
be conclusively presumed to have consented to its designation and to have agreed
to be bound by the terms of the Plan and any and all amendments thereto upon its
submission of information to the Committee required by the terms of or with
respect to the Plan; provided, however, that the terms of the Plan may be
modified so as to increase the obligations of an Employer only with the consent
of such Employer, which consent shall be conclusively presumed to have been
given by such Employer upon its submission of any information to the Committee
required by the terms of or with respect to the Plan. Except as modified by the
Committee in its written instrument, the provisions of this Plan shall be
applicable with respect to each Employer separately, and amounts payable
hereunder shall be paid by the Employer which employs the particular
Participant, if not paid from the Trust Fund.
IX-1
X.
Miscellaneous
10.1 Not Contract of Employment. The adoption and maintenance of the
Plan shall not be deemed to be a contract between the Employer and any person or
to be consideration for the employment of any person. Nothing herein contained
shall be deemed to give any person the right to be retained in the employ of the
Employer or to restrict the right of the Employer to discharge any person at any
time nor shall the Plan be deemed to give the Employer the right to require any
person to remain in the employ of the Employer or to restrict any person's right
to terminate his employment at any time.
10.2 Alienation of Interest Forbidden. Except as hereinafter provided,
the interest of a Participant or his beneficiary or beneficiaries hereunder may
not be sold, transferred, assigned, or encumbered in any manner, either
voluntarily or involuntarily, and any attempt so to anticipate, alienate, sell,
transfer, assign, pledge, encumber, or charge the same shall be null and void;
neither shall the benefits hereunder be liable for or subject to the debts,
contracts, liabilities, engagements or torts of any person to whom such benefits
or funds are payable, nor shall they be an asset in bankruptcy or subject to
garnishment, attachment or other legal or equitable proceedings. Plan provisions
to the contrary notwithstanding, the Committee shall comply with the terms and
provisions of an order that satisfies the requirements for a "qualified domestic
relations order" as such term is defined in section 206(d)(3)(B) of the Act,
including an order that requires distributions to an alternate payee prior to a
Participant's "earliest retirement age" as such term is defined in section
206(d)(3)(E)(ii) of the Act.
10.3 Withholding. All deferrals and payments provided for hereunder
shall be subject to applicable withholding and other deductions as shall be
required of the Employer under any applicable local, state or federal law.
10.4 Amendment and Termination. The Compensation Committee may from
time to time, in its discretion, amend, in whole or in part, any or all of the
provisions of the Plan; provided, however, that no amendment may be made that
would impair the rights of a Participant with respect to amounts already
allocated to his Account. The Compensation Committee may terminate the Plan at
any time. In the event that the Plan is terminated, the balance in a
Participant's Account shall be paid to such Participant or his designated
beneficiary in a single lump sum payment of cash (or shares of Company Stock, if
applicable, pursuant to the provisions of Section 5.9) in full satisfaction of
all of such Participant's or beneficiary's benefits hereunder. Any such
amendment to or termination of the Plan shall be in writing and signed by any
member of the Compensation Committee.
X-1
10.5 Severability. If any provision of this Plan shall be held illegal
or invalid for any reason, said illegality or invalidity shall not affect the
remaining provisions hereof; instead, each provision shall be fully severable
and the Plan shall be construed and enforced as if said illegal or invalid
provision had never been included herein.
10.6 Governing Laws. All provisions of the Plan shall be construed in
accordance with the laws of Texas except to the extent preempted by federal law.
X-2
HALLIBURTON COMPANY
SENIOR EXECUTIVES'
DEFERRED COMPENSATION PLAN
AS AMENDED AND RESTATED
EFFECTIVE JANUARY 1, 1996
TABLE OF CONTENTS
ARTICLE I: PURPOSE OF THE PLAN..................... ............ I-1
ARTICLE II: DEFINITIONS.......................................... II-1
ARTICLE III: ADMINISTRATION OF THE PLAN............... ........... III-1
ARTICLE IV: ALLOCATIONS UNDER THE PLAN,
PARTICIPATION IN THE PLAN AND
SELECTION FOR AWARDS......................... IV-1
ARTICLE V: NON-ASSIGNABILITY OF AWARDS.......................... V-1
ARTICLE VI: VESTING.............................................. VI-1
ARTICLE VII: DISTRIBUTION OF AWARDS............................... VII-1
ARTICLE VIII: NATURE OF PLAN....................................... VIII-1
ARTICLE IX: FUNDING OF OBLIGATION................................ IX-1
ARTICLE X: AMENDMENT OR TERMINATION OF PLAN..................... X-1
ARTICLE XI: GENERAL PROVISIONS................................... XI-1
ARTICLE XII: EFFECTIVE DATE....................................... XII-1
(i)
HALLIBURTON COMPANY
SENIOR EXECUTIVES'
DEFERRED COMPENSATION PLAN
Halliburton Company, having heretofore established the Halliburton
Company Senior Executives' Deferred Compensation Plan, pursuant to the
provisions of Article X of said Plan, hereby amends and restates said Plan to be
effective in accordance with the provisions of Article XII hereof.
(ii)
ARTICLE I
Purpose of the Plan
The purpose of the Halliburton Company Senior Executives' Deferred
Compensation Plan is to promote growth of the Company, provide an additional
means of attracting and holding qualified, competent executives and provide
supplemental retirement benefits for the Participants.
I-1
ARTICLE II
Definitions
(A) "Account(s)" shall mean a Participant's Deferred Compensation
Account, ERISA Restoration Account, and/or Mandatory Deferral Account, including
amounts credited thereto.
(B) "Administrative Committee" shall mean the administrative committee
appointed by the Compensation Committee to administer the Plan.
(C) "Allocation Year" shall mean the calendar year for which an
allocation is made to a Participant's Account pursuant to Article IV.
(D) "Board of Directors" shall mean the Board of Directors of the
Company.
(E) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(F) "Compensation Committee" shall mean the Compensation Committee of
the Board of Directors.
(G) "Company" shall mean Halliburton Company.
(H) "Deferred Compensation Account" shall mean an individual account
for each Participant on the books of such Participant's Employer to which is
credited amounts allocated for the benefit of such Participant pursuant to the
provisions of Article IV, Paragraph (E).
(I) "Employee" shall mean any senior executive, including an officer of
an Employer (whether or not he is also a director thereof), who is employed by
an Employer on a full-time basis, who is compensated for such employment by a
regular salary, and who, in the opinion of the Compensation Committee, is one of
the key personnel of an Employer in a position to contribute materially to its
continued growth and development and to its future financial success, or who in
the past has contributed materially to its growth, development and financial
success. The term does not include independent contractors or persons who are
retained by an Employer as consultants only.
(J) "Employer" shall mean the Company and any Subsidiary designated as
an Employer in accordance with the provisions of Article III of the Plan.
(J1) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
(K) "ERISA Restoration Account" shall mean an individual account for
each Participant on the books of such Participant's Employer to which is
credited amounts allocated for the benefit of such Participant pursuant to the
provisions of Article IV, Paragraph (G). Such Account shall include amounts
II-1
allocated to a Participant's "Excess Benefit Account" prior to January 1, 1995.
(L) "Excess Remuneration Account" shall mean an individual account for
each Participant on the books of such Participant's Employer to which is
credited amounts allocated for the benefit of such Participant pursuant to the
provisions of Article IV, Paragraph (H).
(M) "Participant" shall mean an Employee who is allocated deferred
compensation hereunder.
(N) "Plan" shall mean the Halliburton Company Senior Executives'
Deferred Compensation Plan, as amended and restated January 1, 1996, and as the
same may thereafter be amended from time to time.
(O) "Subsidiary" shall mean at any given time, any other corporation of
which an aggregate of 80% or more of the outstanding voting stock is owned of
record or beneficially, directly or indirectly, by the Company or any other of
its Subsidiaries or both.
(P) "Termination of Service" shall mean severance from employment with
an Employer for any reason other than a transfer between Employers.
(Q) "Trust" shall mean any trust created pursuant to the provisions of
Article IX.
(R) "Trust Agreement" shall mean the agreement establishing the Trust.
(S) "Trustee" shall mean the trustee of the Trust.
(T) "Trust Fund" shall mean assets under the Trust as may exist from
time to time.
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ARTICLE III
Administration of the Plan
(A) The Compensation Committee shall appoint an Administrative
Committee to administer, construe and interpret the Plan. Such Administrative
Committee, or such successor Administrative Committee as may be duly appointed
by the Compensation Committee, shall serve at the pleasure of the Compensation
Committee. Decisions of the Administrative Committee with respect to any matter
involving the Plan shall be final and binding on the Company, its shareholders,
each Employer and all officers and other executives of the Employers. For
purposes of the Employee Retirement Income Security Act of 1974, the
Administrative Committee shall be the Plan "administrator" and shall be the
"named fiduciary" with respect to the general administration of the Plan.
(B) The Administrative Committee shall maintain complete and adequate
records pertaining to the Plan, including but not limited to Participants'
Accounts, amounts transferred to the Trust, reports from the Trustee and all
other records which shall be necessary or desirable in the proper administration
of the Plan. The Administrative Committee shall furnish the Trustee such
information as is required to be furnished by the Administrative Committee or
the Company pursuant to the Trust Agreement.
(C) The Company (the "Indemnifying Party") hereby agrees to indemnify
and hold harmless the members of the Administrative Committee (the "Indemnified
Parties") against any losses, claims, damages or liabilities to which any of the
Indemnified Parties may become subject to the extent that such losses, claims,
damages or liabilities or actions in respect thereof arise out of or are based
upon any act or omission of the Indemnified Party in connection with the
administration of this Plan (including any act or omission of such Indemnified
Party constituting negligence, but excluding any act or omission of such
Indemnified Party constituting gross negligence or wilful misconduct), and will
reimburse the Indemnified Party for any legal or other expenses reasonably
incurred by him or her in connection with investigating or defending against any
such loss, claim, damage, liability or action.
(D) Promptly after receipt by the Indemnified Party under the preceding
paragraph of notice of the commencement of any action or proceeding with respect
to any loss, claim, damage or liability against which the Indemnified Party
believes he or she is indemnified under the preceding paragraph, the Indemnified
Party shall, if a claim with respect thereto is to be made against the
Indemnifying Party under such paragraph, notify the Indemnifying Party in
writing of the commencement thereof; provided, however, that the omission so to
notify the Indemnifying Party shall not relieve it from any liability which it
may have to the Indemnified Party to the extent the Indemnifying Party is not
prejudiced by such omission. If any such action or proceeding shall be brought
against the Indemnified Party, and it shall notify the Indemnifying Party of the
commencement thereof, the Indemnifying Party shall be entitled to participate
therein, and, to the extent that it shall wish, to assume the defense thereof,
with counsel reasonably satisfactory to the Indemnified Party, and, after notice
from the Indemnifying Party to the Indemnified Party of its election to assume
the defense thereof, the Indemnifying Party shall not be liable to such
III-1
Indemnified Party under the preceding paragraph for any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation or reasonable expenses of
actions taken at the written request of the Indemnifying Party. The Indemnifying
Party shall not be liable for any compromise or settlement of any such action or
proceeding effected without its consent, which consent will not be unreasonably
withheld.
(E) The Administrative Committee may designate any Subsidiary as an
Employer by written instrument delivered to the Secretary of the Company and the
designated Employer. Such written instrument shall specify the effective date of
such designated participation, may incorporate specific provisions relating to
the operation of the Plan which apply to the designated Employer only and shall
become, as to such designated Employer and its employees, a part of the Plan.
Each designated Employer shall be conclusively presumed to have consented to its
designation and to have agreed to be bound by the terms of the Plan and any and
all amendments thereto upon its submission of information to the Administrative
Committee required by the terms of or with respect to the Plan; provided,
however, that the terms of the Plan may be modified so as to increase the
obligations of an Employer only with the consent of such Employer, which consent
shall be conclusively presumed to have been given by such Employer upon its
submission of any information to the Administrative Committee required by the
terms of or with respect to the Plan. Except as modified by the Administrative
Committee in its written instrument, the provisions of this Plan shall be
applicable with respect to each Employer separately, and amounts payable
hereunder shall be paid by the Employer which employs the particular
Participant, if not paid from the Trust Fund.
(F) No member of the Administrative Committee shall have any right to
vote or decide upon any matter relating solely to himself under the Plan or to
vote in any case in which his individual right to claim any benefit under the
Plan is particularly involved. In any case in which an Administrative Committee
member is so disqualified to act and the remaining members cannot agree, the
Compensation Committee shall appoint a temporary substitute member to exercise
all the powers of the disqualified member concerning the matter in which he is
disqualified.
III-2
ARTICLE IV
Allocations Under the Plan,
Participation in the Plan and Selection for Awards
(A) Only Employees shall be eligible to be Participants in the Plan.
The Compensation Committee shall be the sole judge of who shall be eligible to
be a Participant for any Allocation Year. The selection of an Employee to be a
Participant for a particular Allocation Year shall not constitute him a
Participant for another Allocation Year unless he is selected to be a
Participant for such other Allocation Year by the Compensation Committee.
(B) Each Allocation Year the Compensation Committee shall, in its sole
discretion, determine what amounts shall be available for allocation to the
Accounts of the Participants pursuant to Paragraph (E) below.
(C) No award shall be made to any person while he is a voting member of
the Compensation Committee.
(D) The Compensation Committee from time to time may adopt, amend or
revoke such regulations and rules as it may deem advisable for its own purposes
to guide in determining which of the Employees it shall deem to be Participants
for a particular Allocation Year and the method and manner of payment thereof to
the Participants.
(E) The Compensation Committee, during the Allocation Year involved or
during the next succeeding Allocation Year, shall determine which eligible
Employees it shall designate as Participants for such Allocation Year and the
amounts allocated to each Participant for such Allocation Year. In making its
determination, the Compensation Committee shall consider such factors as the
Compensation Committee may in its sole discretion deem material. The
Compensation Committee, in its sole discretion, may notify an Employee at any
time during a particular Allocation Year or in the Allocation Year following the
Allocation Year for which the award is made that he has been selected as a
Participant for all or part of such Allocation Year, and may determine and
notify him of the amount which shall be allocated to him for such Allocation
Year. The decision of the Compensation Committee in selecting an Employee to be
a Participant or in making any allocation to him shall be final and conclusive,
and nothing herein shall be deemed to give any Employee or his legal
representatives or assigns any right to be a Participant for such Allocation
Year or to be allocated any amount except to the extent of the amount, if any,
allocated to a Participant for a particular Allocation Year, but at all times
subject to the provisions of the Plan.
(F) An Employee whose Service is Terminated during the Allocation Year
and who, on the date of Termination of Service, was eligible to be a Participant
may be selected as a Participant for such part of the Allocation Year prior to
his Termination and be granted such award with respect to his services during
such part of the Allocation Year as the Compensation Committee, in its sole
discretion and under any rules it may promulgate, may determine.
IV-1
(G) The Administrative Committee shall determine for each Allocation
Year which Participants' allocations of Employer contributions and forfeitures
under qualified defined contribution plans sponsored by the Employers have been
reduced for such Allocation Year by reason of the application of Section
401(a)(17) or Section 415 of the Code, or any combination of such Sections, or
by reason of elective deferrals under the Halliburton Elective Deferral Plan,
and shall allocate to the credit of each such Participant under the Plan an
amount equal to the amount of such reductions applicable to such Participant.
(H) The Compensation Committee may, in its discretion, allocate to the
credit of a Participant an amount equal to the amount of any remuneration
payable by the Employer to such Participant which would otherwise be treated as
excessive employee remuneration under Section 162(m) of the Code for any
Allocation Year, rather than paying any such excessive remuneration to such
Participant.
(I) Allocations to Participants under the Plan shall be made by
crediting their respective Accounts on the books of their Employers as of the
last day of the Allocation Year. Allocations under Paragraph (E) above shall be
credited to the Participants' Deferred Compensation Accounts, allocations under
Paragraph (G) above shall be credited to the Participants' ERISA Restoration
Accounts and allocations under Paragraph (H) above shall be credited to
Participants' Mandatory Deferral Account. Accounts of Participants shall also be
credited with interest as of the last day of each Allocation Year, at the rate
set forth in Paragraph (J) below, on the average monthly credit balance of the
Account being calculated by using the balance of each Account on the first day
of each month. Prior to Termination of Service, the annual interest shall
accumulate as a part of the Account balance. After Termination of Service, the
annual interest for such Allocation Year may be paid as more particularly set
forth hereinafter.
(J) Interest shall be credited on amounts allocated to Participants'
Deferred Compensation Accounts at the rate of 5% per annum for periods prior to
Termination of Service. Interest shall be credited on amounts allocated to
Participants' ERISA Restoration Accounts and Mandatory Deferral Accounts, and on
amounts allocated to Participants' Deferred Compensation Accounts for periods
subsequent to Termination of Service, at the rate of 10% per annum.
IV-2
ARTICLE V
Non-Assignability of Awards
No Participant shall have any right to commute, encumber, pledge,
transfer or otherwise dispose of or alienate any present or future right or
expectancy which he or she may have at any time to receive payments of any
allocations made to such Participant, all such allocations being expressly
hereby made non-assignable and non-transferable; provided, however, that nothing
in this Article shall prevent transfer (A) by will, (B) by the applicable laws
of descent and distribution or (C) pursuant to an order that satisfies the
requirements for a "qualified domestic relations order" as such term is defined
in section 206(d)(3)(B) of the ERISA and section 414(p)(1)(A) of the Code,
including an order that requires distributions to an alternate payee prior to a
Participant's "earliest retirement age" as such term is defined in section
206(d)(3)(E)(ii) of the ERISA and section 414(p)(4)(B) of the Code. Attempts to
transfer or assign by a Participant (other than in accordance with the preceding
sentence) shall, in the sole discretion of the Compensation Committee after
consideration of such facts as it deems pertinent, be grounds for terminating
any rights of such Participant to any awards allocated to but not previously
paid over to such Participant.
V-1
ARTICLE VI
Vesting
All amounts credited to a Participant's Accounts shall be fully vested
and not subject to forfeiture for any reason except as provided in Article V.
VI-1
ARTICLE VII
Distribution of Awards
(A) Upon Termination of Service of a Participant, the Administrative
Committee (i) shall certify to the Trustee or the treasurer of the Employer, as
applicable, the amount credited to each of the Participant's Accounts on the
books of each Employer for which the Participant was employed at a time when he
earned an award hereunder, (ii) shall determine whether the payment of the
amount credited to each of the Participant's Accounts under the Plan is to be
paid directly by the applicable Employer, from the Trust Fund, if any, or by a
combination of such sources (except to the extent the provisions of the Trust
Agreement, if any, specify payment from the Trust Fund) and (iii) shall
determine and certify to the Trustee or the treasurer of the Employer, as
applicable, the method of payment of the amount credited to each of a
Participant's Accounts, selected by the Administrative Committee from among the
following alternatives:
(1) A single lump sum payment upon Termination of Service;
(2) A payment of one-half of the Participant's balance upon
Termination of Service, with payment of the additional one-half to be
made on or before the last day of a period of one year following
Termination; or
(3) Payment in monthly installments over a period not to
exceed ten years with such payments to commence upon Termination of
Service.
The above notwithstanding, if the total amount credited to the Participant's
Accounts upon Termination of Service is less than $50,000, such amount shall
always be paid in a single lump sum payment upon Termination of Service.
(B) The Trustee or the treasurer of the Employer, as applicable, shall
thereafter make payments of awards in the manner and at the times so designated,
subject, however, to all of the other terms and conditions of this Plan and the
Trust Agreement, if any. This Plan shall be deemed to authorize the payment of
all or any portion of a Participant's award from the Trust Fund to the extent
such payment is required by the provisions of the Trust Agreement, if any.
(C) Interest on the second half of a payment under Paragraph (A)(2)
above shall be paid with the final payment, while interest on payments under
Paragraph (A)(3) above may be paid at each year end or may be paid as a part of
a level monthly payment computed by the Administrative Committee through the use
of such tables as the Administrative Committee shall select from time to time
for such purpose.
(D) If a Participant shall die while in the service of an Employer, or
after Termination of Service and prior to the time when all amounts payable to
him under the Plan have been paid to him, any remaining amounts payable to the
Participant hereunder shall be payable to the estate of the Participant. The
Administrative Committee shall cause the Trustee or the treasurer of the
Employer, as applicable, to pay to the estate of the Participant all of the
awards then standing
VII-1
to his credit in a lump sum or in such other form of payment consistent with the
alternative methods of payment set forth above as the Administrative Committee
shall determine after considering such facts and circumstances relating to the
Participant and his estate as it deems pertinent.
(E) If the Plan is terminated pursuant to the provisions of Article X,
the Compensation Committee may, at its election and in its sole discretion,
cause the Trustee or the treasurer of the Employer, as applicable, to pay to all
Participants all of the awards then standing to their credit in the form of lump
sum payments.
VII-2
ARTICLE VIII
Nature of Plan
This Plan constitutes a mere promise by the Employers to make benefit
payments in the future and Participants have the status of general unsecured
creditors of the Employers. Further, the adoption of this Plan and any setting
aside of amounts by the Employers with which to discharge their obligations
hereunder shall not be deemed to create a trust; legal and equitable title to
any funds so set aside shall remain in the Employers, and any recipient of
benefits hereunder shall have no security or other interest in such funds. Any
and all funds so set aside shall remain subject to the claims of the general
creditors of the Employers, present and future. This provision shall not require
the Employers to set aside any funds, but the Employers may set aside such funds
if they choose to do so.
VIII-1
ARTICLE IX
Funding of Obligation
Article VIII above to the contrary notwithstanding, the Employers may
fund all or part of their obligations hereunder by transferring assets to a
trust if the provisions of the trust agreement creating the Trust require the
use of the Trust's assets to satisfy claims of an Employer's general unsecured
creditors in the event of such Employer's insolvency and provide that no
Participant shall at any time have a prior claim to such assets. Any transfers
of assets to a trust may be made by each Employer individually or by the Company
on behalf of all Employers. The assets of the Trust shall not be deemed to be
assets of this Plan.
IX-1
ARTICLE X
Amendment or Termination of Plan
The Compensation Committee shall have the power and right from time to
time to modify, amend, supplement, suspend or terminate the Plan as it applies
to each Employer, provided that no such change in the Plan may deprive a
Participant of the amounts allocated to his or her Accounts or be retroactive in
effect to the prejudice of any Participant and the interest rate applicable to
amounts credited to Participants' Accounts for periods subsequent to Termination
of Service shall not be reduced below 6% per annum. Any such modification,
amendment, supplement, suspension or termination shall be in writing and signed
by a member of the Compensation Committee.
X-1
ARTICLE XI
General Provisions
(A) No Participant shall have any preference over the general creditors
of an Employer in the event of such Employer's insolvency.
(B) Nothing contained herein shall be construed to give any person the
right to be retained in the employ of an Employer or to interfere with the right
of an Employer to terminate the employment of any person at any time.
(C) If the Administrative Committee receives evidence satisfactory to
it that any person entitled to receive a payment hereunder is, at the time the
benefit is payable, physically, mentally or legally incompetent to receive such
payment and to give a valid receipt therefor, and that an individual or
institution is then maintaining or has custody of such person and that no
guardian, committee or other representative of the estate of such person has
been duly appointed, the Administrative Committee may direct that such payment
thereof be paid to such individual or institution maintaining or having custody
of such person, and the receipt of such individual or institution shall be valid
and a complete discharge for the payment of such benefit.
(D) Payments to be made hereunder may, at the written request of the
Participant, be made to a bank account designated by such Participant, provided
that deposits to the credit of such Participant in any bank or trust company
shall be deemed payment into his hands.
(E) Wherever any words are used herein in the masculine, feminine or
neuter gender, they shall be construed as though they were also used in another
gender in all cases where they would so apply, and whenever any words are used
herein in the singular or plural form, they shall be construed as though they
were also used in the other form in all cases where they would so apply.
(F) THIS PLAN SHALL BE CONSTRUED AND ENFORCED UNDER THE LAWS
OF THE STATE OF TEXAS EXCEPT TO THE EXTENT PREEMPTED BY FEDERAL
LAW.
XI-1
ARTICLE XII
Effective Date
This amendment and restatement of the Plan shall be effective from and
after January 1, 1996 and shall continue in force during subsequent years unless
amended or revoked by action of the Compensation Committee.
HALLIBURTON COMPANY
By /s/ Dale P. Jones
----------------------------
Dale P. Jones
Vice Chairman
XII-1
HALLIBURTON ANNUAL PERFORMANCE PAY PLAN
AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1997
INDEX
ARTICLE I.................................................................... 1
PURPOSE 1
ARTICLE II................................................................... 2
DEFINITIONS.................................................................. 2
2.1 Definitions................................................ 2
-----------
2.2 Number..................................................... 5
------
2.3 Headings................................................... 5
--------
ARTICLE III.................................................................. 5
PARTICIPATION................................................................ 5
3.1 Participants............................................... 5
------------
3.2 Partial Plan Year Participation............................. 5
-------------------------------
3.3 No Right to Participate..................................... 7
-----------------------
3.4 Plan Exclusive............................................. 7
--------------
3.5 Consent to Dispute Resolution.............................. 7
-----------------------------
ARTICLE IV................................................................... 7
ADMINISTRATION............................................................... 7
ARTICLE V.................................................................... 8
REWARD DETERMINATIONS........................................................ 8
5.1 Performance Measures....................................... 8
--------------------
5.2 Performance Requirements................................... 8
------------------------
5.3 Reward Determinations....................................... 9
---------------------
5.4 Reward Opportunities ...................................... 9
--------------------
5.5 Discretionary Adjustments.................................. 9
-------------------------
5.6 Discretionary Bonuses...................................... 10
---------------------
ARTICLE VI.................................................................. 10
DISTRIBUTION OF REWARDS..................................................... 10
6.1 Form and Timing of Payment................................ 10
--------------------------
6.2 Excess Remuneration....................................... 10
-------------------
6.3 Elective Deferral......................................... 11
-----------------
6.4 Tax Withholding........................................... 11
---------------
6.5 No Interest or Dividend Equivalents....................... 11
-----------------------------------
6.6 Lump Sum Payments......................................... 11
-----------------
ARTICLE VII.................................................................. 12
TERMINATION OF EMPLOYMENT.................................................... 12
7.1 Termination of Service During Plan Year.................... 12
---------------------------------------
7.2 Termination of Service After End of Plan Year But Prior
-------------------------------------------------------
to Full Payment............................................ 13
---------------
ARTICLE VIII................................................................. 13
RIGHTS OF PARTICIPANTS AND BENEFICIARIES..................................... 13
8.1 Status as a Participant or Beneficiary..................... 13
--------------------------------------
8.2 Employment................................................. 14
----------
8.3 Nontransferability......................................... 14
------------------
8.4 Nature of Plan............................................. 14
--------------
ARTICLE IX................................................................... 15
CORPORATE CHANGE............................................................. 15
ARTICLE X.................................................................... 16
AMENDMENT AND TERMINATION.................................................... 16
ARTICLE XI................................................................... 16
MISCELLANEOUS................................................................ 16
11.1 Governing Law.............................................. 16
-------------
11.2 Severability............................................... 16
------------
11.3 Successor.................................................. 16
---------
11.4 Effective Date............................................. 17
--------------
HALLIBURTON
ANNUAL PERFORMANCE PAY PLAN
The Compensation Committee of Directors of Halliburton Company, having
heretofore established the Halliburton Annual Performance Pay Plan (formerly
known as the Annual Reward Plan), pursuant to the provisions of Article X of
said Plan, hereby amends and restates said Plan to be effective in accordance
with the provisions of Section 11.4 hereof.
ARTICLE I
PURPOSE
The purpose of the Halliburton Annual Performance Pay Plan (the "Plan")
is to reward management and other key employees of the Company and its
Affiliates for improving financial results which drive the creation of value for
shareholders of the Company and thereby, serve to attract, motivate, reward and
retain high caliber employees required for the success of the Company. The Plan
provides a means to link total and individual cash compensation to Company
performance, as measured by Cash Value Added ("CVA") and, where appropriate,
other CVA-related performance measures on the basis of Participant sharing in
CVA improvement, a demonstrated driver of shareholder value. In addition, to
further relate compensation earned under the Plan to shareholder value creation
and to provide incentives for Participants to focus on a time frame longer than
one year, the Plan provides that one-half of incentive compensation earned for a
Plan Year will be paid in cash following the end of the Plan Year and the
remaining one-half will be converted into Common Stock Equivalents and paid in
cash installments in the second and third years after the Plan Year, each
installment based on the value at the time of payment of one-half of such Common
Stock Equivalents.
1
ARTICLE II
DEFINITIONS
2.1 Definitions. Where the following words and phrases appear in
the Plan, they shall have the respective meanings set forth below, unless their
context clearly indicates to the contrary.
"Affiliate" shall mean a Subsidiary of the Company or a
division or designated group of the Company or a Subsidiary.
"Base Salary" shall mean the regular cash compensation
actually paid during a Plan Year to a Participant for services rendered
or labor performed while participating in the Plan, including base pay
a Participant could have received in cash in lieu of (i) contributions
made on such Participant's behalf to a qualified Plan maintained by the
Company or to any cafeteria plan under Section 125 of the Code
maintained by the Company and (ii) deferrals of compensation made at
the Participant's election pursuant to a plan or arrangement of the
Company or an Affiliate, but excluding any Rewards under this Plan and
any other bonuses, incentive pay or special awards.
"Beneficiary" shall mean the person, persons, trust or trusts
entitled by Will or the laws of descent and distribution to receive the
benefits specified under the Plan in the event of the Participant's
death prior to full payment of a Reward.
"Board of Directors" shall mean the Board of Directors of the
Company.
"Business Unit CVA" shall mean the respective CVA of
designated business units, each calculated on an aggregate basis for
their respective operations.
"Cause" shall mean (i) the conviction of the Participant of a
felony under Federal law or the law of the state in which such action
occurred, (ii) dishonesty in course of fulfilling the Participant's
employment duties or (iii) the disclosure by the Participant to any
unauthorized person or competitor of any confidential information or
confidential knowledge as to the business or affairs of the Company and
its Affiliates.
"CEO" shall mean the Chief Executive Officer of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Committee" shall mean the Compensation Committee of Directors
of the Company, appointed by the Board of Directors from among its
members, no member of which shall be an employee of the Company or a
Subsidiary.
2
"Common Stock" shall mean the common stock, par value $2.50
per share, of the Company.
"Common Stock Equivalent" shall mean a unit entitling a
Participant to receive at a designated time or times in the future a
cash payment equal to the Fair Market Value at such time or times of
one share of Common Stock.
"Company" shall mean Halliburton Company and its successors.
"Company CVA" shall mean CVA calculated on a consolidated
basis.
"Corporate Change" shall have the meaning ascribed in Article
II, Paragraph (h) of the Company's 1993 Stock and Long-Term Incentive
Plan, as amended.
"CVA" shall mean the difference between operating cash flow
and a capital charge, calculated in accordance with the criteria and
guidelines set forth in the Corporate Policy entitled "Cash Value Added
(CVA)," as in effect at the time any such calculation is made.
"CVA Drivers" shall mean such other measurements of operating
performance as may be approved by the CEO which are applicable to
Participants within particular Participant Categories.
"Deferred Payment Date" shall mean, with respect to a
particular Plan Year, the last business day of February of the second
and third years following the end of such Plan Year.
"Dispute Resolution Program" shall mean the Halliburton
Dispute Resolution Plan.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"Executive Committee" shall mean the Executive Committee of
the Company.
"Fair Market Value" shall mean the average closing price per
share of the Common Stock on the New York Stock Exchange (or, if the
Common Stock is not then listed on such exchange, such other national
securities exchange on which the Common Stock is then listed) for the
ten (10) trading days immediately preceding a Payment Date, a Deferred
Payment Date or such other date on which the Common Stock Equivalents
are to be valued pursuant to the Plan provisions. If the Common Stock
is not publicly traded on a national securities exchange at the time a
determination of its value is required to be made hereunder, the
determination of its Fair Market Value shall be made by the Committee
in such manner as it deems appropriate.
3
"Group CVA" shall mean the respective CVA of the Halliburton
Energy Group and the Engineering and Construction Services Group, each
calculated on an aggregate basis for their respective operations.
"Key Employees" shall mean regular, full-time employees of the
Company or an Affiliate below the Officer level.
"Officer" shall mean a full officer of the Company or an
Affiliate.
"Participant" shall mean any active employee of the Company or
an Affiliate who participates in the Plan pursuant to the provisions of
Article III hereof. An employee shall not be eligible to participate in
the Plan while on a leave of absence.
"Participant Category" shall mean a grouping of Participants
determined in accordance with the applicable provisions of Article III.
"Payment Date" shall mean, with respect to a particular Plan
Year, the last business day of February of the year next following the
end of such Plan Year.
"Performance Goals" shall mean, for a particular Plan Year,
established levels of applicable Performance Measures.
"Performance Measures" shall mean the criteria used in
determining Performance Goals for particular Participant Categories,
which may include one or more of the following: Company CVA, Group CVA,
Business Unit CVA and CVA Drivers.
"Plan" shall mean the Halliburton Annual Performance Pay Plan
(formerly known as the Halliburton Company Annual Reward Plan) as
amended and restated effective January 1, 1997, and as the same may
thereafter be amended from time to time.
"Plan Year" shall mean the calendar year ending December 31,
1995 and each subsequent calendar year thereafter.
"Reward" shall mean the dollar amount of incentive
compensation payable to a Participant under the Plan for a Plan Year
determined in accordance with Section 5.3.
"Reward Opportunity" shall mean, with respect to each
Participant Category, incentive reward payment amounts, expressed as a
percentage of Base Salary, which corresponds to various levels of
pre-established Performance Goals, determined pursuant to the Reward
Schedule.
"Reward Schedule" shall mean the schedule which aligns the
level of achievement of applicable Performance Goals with Reward
Opportunities for a particular Plan Year, such that the level of
achievement of the pre-established Performance Goals at the end of such
Plan Year will determine the actual Reward.
4
"Section 16 Officer" shall mean an officer who is subject to
Section 16 of the Securities Exchange Act of 1934, as amended, and the
rules promulgated thereunder.
"Subsidiary" shall mean any corporation 50 percent or more of
whose voting power is owned, directly or indirectly, by the Company.
2.2 Number. Wherever appropriate herein, words used in the
singular shall be considered to include the plural and words used in the plural
shall be considered to include the singular.
2.3 Headings. The headings of Articles and Sections herein are
included solely for convenience, and if there is any conflict between headings
and the text of the Plan, the text shall control.
ARTICLE III
PARTICIPATION
3.1 Participants. Active employees who are members of the
Executive Committee and Section 16 Officers as of the beginning of each Plan
Year shall be Participants for such Plan Year. In addition, such other Officers
and Key Employees as may be designated annually as Participants by the CEO prior
to the last day of February each Plan Year shall be Participants for such Plan
Year.
3.2 Partial Plan Year Participation. If, after the beginning of a
Plan Year, an employee who was not previously a Participant for such Plan Year
(i) is newly appointed or elected as a member of the Executive Committee or a
Section 16 Officer or (ii) returns to active employment as a member of the
Executive Committee or as a Section 16 Officer following a leave of absence,
such employee shall become a Participant effective with such appointment or
election or return to active service, as the case may be, for the balance of the
5
Plan Year, on a prorated basis, unless the Committee shall determine, in its
sole discretion, that the participation shall be delayed until the beginning of
the next Plan Year. If, after the beginning of the Plan Year, (i) a person is
newly elected or appointed as an Officer (other than a Section 16 Officer) or is
newly hired, promoted or transferred into a position in which he or she is a Key
Employee, or (ii) an employee who was not previously a Participant for such Plan
Year returns to active employment as an Officer (other than a Section 16
Officer) or a Key Employee following a leave of absence, the CEO, or his
delegate, may designate in writing such person as a Participant for the pro rata
portion of such Plan Year beginning on the first day of the month following such
designation.
If an employee who has previously been designated as a Participant for
a particular Plan Year takes a leave of absence during such Plan Year, all of
such Participant's rights to a Reward for such Plan Year shall be forfeited,
unless the Committee (with respect to a Participant who is a member of the
Executive Committee or a Section 16 Officer) or the CEO (with respect to any
other Participant) shall determine that such Participant's Reward for such Plan
Year shall be prorated based upon that portion of the Plan Year during which he
or she was an active Participant, in which case the prorated portion of the
Reward shall be paid in accordance with the applicable provisions of Article VI.
Each Participant shall be assigned to a Participant Category at the
time he or she becomes a Participant for a particular Plan Year. If a
Participant thereafter incurs a change in status due to promotion, demotion,
reassignment or transfer, (i) the Committee, in the case of the CEO or other
Section 16 Officer or (ii) the CEO, or his delegate, in the case of any other
Participant, may approve in writing such adjustment in such Participant's Reward
6
Opportunity as deemed appropriate under the circumstances (including termination
of participation in the Plan for the remainder of the Plan Year), such
adjustment to be made on a pro rata basis for the balance of the Plan Year
effective with the first day of the month following such approval, unless some
other effective date is specified.
3.3 No Right to Participate. Except as provided in Sections 3.1
and 3.2, no Participant or other employee of the Company shall, at any time,
have a right to participate in the Plan for any Plan Year, notwithstanding
having previously participated in the Plan.
3.4 Plan Exclusive. No employee shall simultaneously participate
in this Plan and in any other short-term incentive plan of the Company or an
Affiliate unless such employee's participation in such other plan is approved by
the CEO, or his delegate.
3.5 Consent to Dispute Resolution. Participation in the Plan
constitutes consent by the Participant to be bound by the terms and conditions
of the Dispute Resolution Program which in substance requires that all disputes
arising out of or in any way related to employment with the Company or its
Affiliates, including any disputes concerning the Plan, be resolved exclusively
through such program, which includes binding arbitration as the last step.
ARTICLE IV
ADMINISTRATION
Each Plan Year, the Committee shall establish the basis for payments
under the Plan in relation to given Performance Goals, as more fully described
in Article V hereof, and, following the end of each Plan Year, determine the
actual Reward payable for each Participant Category. The Committee is authorized
to construe and interpret the Plan, to prescribe, amend and rescind rules,
regulations and procedures relating to its administration and to make all other
7
determinations necessary or advisable for administration of the Plan. The CEO
shall have such authority as is expressly provided in the Plan. In addition, as
permitted by law, the Committee and the CEO may delegate such of their
respective authority granted under the Plan as deemed appropriate; provided,
however, that (i) the Committee may not delegate its authority with respect to
matters relating to the CEO and other Section 16 Officers and (ii) the Committee
and the CEO may not delegate their respective authority under Article V hereof.
Decisions of the Committee and the CEO, or their respective delegaterning
accordance with the authority granted hereby or delegated pursuant hereto shall
be conclusive and binding. Subject only to compliance with the express
provisions hereof, the Committee, the CEO and their respective delegater may act
in their sole and absolute discretion with respect to matters within their
authority under the Plan.
ARTICLE V
REWARD DETERMINATIONS
5.1 Performance Measures. CVA shall be the primary Performance
Measure in determining Performance Goals for any Plan Year. In addition,
appropriate CVA Drivers applicable to particular Participants within certain
Participant Categorier may also be used as Performance Measures.
5.2 Performance Requirements. Prior to the last day of February of
each Plan Year, (i) the Committee shall approve the Company CVA, applicable
Group CVA and applicable Business Unit CVA Performance Goals for certain
Participant Categorier and the CEO shall approve appropriate CVA Drivers
applicable to certain Participants and (ii) the Committee shall establish a
Reward Schedule which aligns the level of achievement of applicable Performance
8
Goals with Reward Opportunitier, such that the level of achievement of the
pre-established Performance Goals at the end of the Plan Year will determine the
actual Reward.
5.3 Reward Determinations. After the end of each Plan Year, (i)
the Committee shall determine the extent to which the Performance Goals (other
than CVA Drivers) have been achieved (ii) and the CEO shall determine the extent
to which the applicable CVA Drivers have been achieved, and the amount of the
Reward shall be computed for each Participant in accordance with the Reward
Schedule.
5.4 Reward Opportunitier. The established Reward Opportunitier
may vary in relation to the Participant Categorier and within the Participant
Categorier. In the event a Participant changes Participant Categorier during a
Plan Year, the Participant's Reward Opportunitier shall be adjusted in
accordance with the applicable provisions of Section 3.2.
5.5 Discretionary Adjustments. Once established, Performance Goals
will not be changed during the Plan Year. However, if the Committee, in its sole
and absolute discretion, determines that there has been (i) a change in the
business, operations, corporate or capital structure, (ii) a change in the
manner in which business is conducted or (iii) any other material change or
event which will impact one or more Performance Goals in a manner the Committee
did not intend, then the Committee may, reasonably contemporaneously with such
change or event, make such adjustments as it shall deem appropriate and
equitable in the manner of computing the relevant Performance Measures
applicable to such Performance Goal or Goals for the Plan Year; provided,
however, that the CEO shall be authorized, subject to the review and oversight
of the Committee, to make adjustments in the manner of computing one or more CVA
9
Drivers if, when evaluated in accordance with the standards set forth in the
preceding sentence, he shall deem such adjustments to be appropriate and
equitable.
5.6 Discretionary Bonuses. Notwithstanding any other provision
contained herein to the contrary, the Committee may, in its sole discretion,
make such other or additional bonus payments to a Participant as it shall deem
appropriate.
ARTICLE VI
DISTRIBUTION OF REWARDS
6.1 Form and Timing of Payment. Except as otherwise provided
below, one-half of the amount of each Reward shall be paid in cash on the
Payment Date, or as soon thereafter as practicable. Payment of the remaining
amount of the Reward shall be deferred and paid in accordance with the
provisions set forth below.
The remaining one-half of the Reward shall be converted into Common
Stock Equivalents, the number of which shall be determined by using the Fair
Market Value per share of the Common Stock as of the Payment Date, rounded to
the next even-numbered whole share. A cash payment equal to the Fair Market
Value of one-half of the Common Stock Equivalents as of the first Deferred
Payment Date shall be made on such date, or as soon thereafter as practicable;
and a cash payment equal to the Fair Market Value of the remaining Common Stock
Equivalents as of the second Deferred Payment Date shall be made on such date,
or as soon thereafter as practicable.
6.2 Excess Remuneration. Notwithstanding the provisions of Section
6.1, the Committee may, in its discretion, with respect to a Participant who is
a "covered employee" for purposes of Section 162(m) of the Code, determine that
payment of that portion of a Reward which would otherwise cause such
10
Participant's compensation to exceed the limitation on the amount of
compensation deductible by the Company in any taxable year pursuant to such
Section 162(m), shall be deferred until such Participant is no longer a "covered
employee."
6.3 Elective Deferral. Nothing herein shall be deemed to preclude
a Participant's election to defer receipt of a percentage of his or her Reward
beyond the time such amount would have been payable hereunder pursuant to the
Halliburton Elective Deferral Plan or other similar plan.
6.4 Tax Withholding. The Company or employing entity through
which payment of a Reward is to be made shall have the right to deduct from any
payment hereunder any amounts that Federal, state, local or foreign tax laws
require with respect to such payments.
6.5 No Interest or Dividend Equivalents. No interest or dividend
equivalents shall be accrued or paid under this Plan on the amount of any
portion of a Reward as to which distribution is deferred.
6.6 Lump Sum Payments. Notwithstanding the provisions of Section
6.1,the CEO may, from time to time, determine that Participants in certain
designated Participant Categories below the Officer level are to receive payment
of their respective Rewards in a lump sum on the Payment Date, rather than
pursuant to the deferral provisions of Section 6.1.
Notwithstanding the provisions of Section 6.1, in the event of
termination of a Participant's employment for any reason other than death (in
which event payment shall be made in accordance with the applicable provisions
of Article VII), such Participant shall receive the amount of any Reward (or
prorated portion thereof) which is payable pursuant to Section 7.1, and/or the
remaining unpaid portion of any Reward which is payable pursuant to Section 7.2
11
in lump sum payment, unless the Committee (with respect to the CEO or other
Section 16 Officer) or the CEO (with respect to any other Participant) shall
determine that such amounts shall be paid in accordance with the deferral
provisions of Section 6.1. In addition, the CEO (except with respect to himself
or other Section 16 Officers, in which case such authorization shall be made by
the Committee) may, on a case by case basis to facilitate Plan administration,
authorize the lump sum cash payment of the amount of a Reward and/or the
remaining unpaid portion of a Reward in lieu of the deferral provisions of
Section 6.1, if the amount of such payment is deemed to be too small to justify
its deferral.
Lump sum payment shall be paid in cash on the Plan Year Payment Date
with respect to the Reward (or the prorated portion thereof) earned for such
Plan Year. With respect to lump sum payment of the unpaid amount of Rewards
earned for prior Plan Years, the aggregate Fair Market Value of a Participant's
remaining Common Stock Equivalents for such Plan Years shall be determined as of
the Participant's termination date or the date the lump sum payment is
authorized pursuant to the last sentence of the preceding paragraph, as
applicable, and paid in cash as soon thereafter as practicable.
ARTICLE VII
TERMINATION OF EMPLOYMENT
7.1 Termination of Service During Plan Year. In the event a
Participant's employment is terminated prior to the last business day of a Plan
Year for any reason other than death, normal retirement at or after age 65 or
disability (as determined by the CEO or his delegate), all of such Participant's
rights to a Reward for such Plan Year shall be forfeited, unless the Committee
(with respect to a Participant who was the CEO or other Section 16 Officer) or
12
the CEO (with respect to any other Participant) shall determine that such
Participant's Reward for such Plan Year shall be prorated based upon that
portion of the Plan Year during which he or she was a Participant, in which case
the prorated portion of the Reward shall be paid in accordance with the
applicable provisions of Article VI. In the case of death during the Plan Year,
the prorated amount of such Participant's Reward shall be paid to the
Participant's estate, or if there is no administration of the estate, to the
heirs at law, on the Payment Date, or as soon thereafter as practicable. In the
case of disability or normal retirement at or after age 65, the prorated amount
of a Participant's Reward shall be paid in accordance with the applicable
provisions of Article VI.
7.2 Termination of Service After End of Plan Year But Prior to
Full Payment. If a Participant's employment is terminated for any reason other
than termination for Cause the unpaid amount of any Reward applicable to any
previous Plan Year shall be paid to the Participant in accordance with the
applicable provisions of Article VI, except in the case of death, in which case
the amount of the Reward then unpaid shall be paid to such Participant's estate,
or of there is no administration of the estate, to the heirs at law, as soon as
practicable.
If a Participant's employment is terminated for Cause, all of such
Participant's rights to the unpaid amount of any Reward applicable to any
previous Plan Year shall be forfeited.
ARTICLE VIII
RIGHTS OF PARTICIPANTS AND BENEFICIARIES
8.1 Status as a Participant or Beneficiary. Neither status as a
Participant or Beneficiary shall be construed as a commitment that any Reward
will be paid or payable under the Plan.
13
8.2 Employment. Nothing contained in the Plan or in any document
related to the Plan or to any Reward shall confer upon any Participant any right
to continue as an employee or in the employ of the Company or an Affiliate or
constitute any contract or agreement of employment for a specific term or
interfere in any way with the right of the Company or an Affiliate to reduce
such person's compensation, to change the position held by such person or to
terminate the employment of such person, with or without cause.
8.3 Nontransferability. No benefit payable under, or interest in,
this Plan shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge and any such attempted
action shall be void and no such benefit or interest shall be, in any manner,
liable for, or subject to, debts, contracts, liabilities or torts of any
Participant or Beneficiary; provided, however, that, nothing in this Section 8.3
shall prevent transfer (i) by Will, (ii) by applicable laws of descent and
distribution or (iii) pursuant to an order that satisfies the requirements for a
"qualified domestic relations order" as such term is defined in section
206(d)(3)(B) of ERISA and section 414(p)(1)(A) of the Code, including an order
that requires distributions to an alternate payee prior to a Participant's
"earliest retirement age" as such term is defined in section 206(d)(3)(E)(ii) of
ERISA and section 414(p)(4)(B) of the Code. Any attempt at transfer, assignment
or other alienation prohibited by the preceding sentence shall be disregarded
and all amounts payable hereunder shall be paid only in accordance with the
provisions of the Plan.
8.4 Nature of Plan. No Participant, Beneficiary or other person
shall have any right, title or interest in any fund or in any specific asset of
the Company or any Affiliate by reason of any Reward hereunder. There shall be
no funding of any benefits which may become payable hereunder. Nothing contained
14
in the Plan (or in any document related thereto), nor the creation or adoption
of the Plan, nor any action taken pursuant to the provisions of the Plan shall
create, or be construed to create, a trust of any kind or a fiduciary
relationship between the Company or an Affiliate and any Participant,
Beneficiary or other person. To the extent that a Participant, Beneficiary or
other person acquires a right to receive payment with respect to a Reward
hereunder, such right shall be no greater than the right of any unsecured
general creditor of the Company or other employing entity, as applicable. All
amounts payable under the Plan shall be paid from the general assets of the
Company or employing entity, as applicable, and no special or separate fund or
deposit shall be established and no segregation of assets shall be made to
assure payment of such amounts. Nothing in the Plan shall be deemed to give any
employee any right to participate in the Plan except in accordance herewith.
ARTICLE IX
CORPORATE CHANGE
In the event of a Corporate Change, (i) with respect to a Participant's
Reward Opportunity for the Plan Year in which the Corporate Change occurred,
such Participant shall be entitled to an immediate cash payment equal to the
maximum amount of Reward he or she would have been entitled to receive for the
Plan Year, prorated to the date of the Corporate Change; and (ii) with respect
to Rewards earned in prior Plan Years which have not been paid in full, the Fair
Market Value of each Participant's remaining Common Stock Equivalents for all
such Plan Years shall be determined as of the Corporate Change and paid in cash
immediately.
15
ARTICLE X
AMENDMENT AND TERMINATION
Notwithstanding anything herein to the contrary, the Committee may, at
any time, terminate or, from time to time amend, modify or suspend the Plan;
provided, however, that, without the prior consent of the Participants affected,
no such action may adversely affect any rights or obligations with respect to
any Rewards theretofore earned for a particular Plan Year, whether or not the
amounts of such Rewards have been computed and whether or not such Rewards are
then payable.
ARTICLE XI
MISCELLANEOUS
11.1 Governing Law. The Plan and all related documents shall
be governed by, and construed in accordance with, the laws of the State of
Texas, without giving effect to the principles of conflicts of law thereof,
except to the extent preempted by federal law. The Federal Arbitration Act shall
govern all matters with regard to arbitrability.
11.2 Severability. If any provision of the Plan shall be held
illegal or invalid for any reason, said illegality or invalidity shall not
affect the remaining provisions hereof; instead, each provision shall be fully
severable and the Plan shall be construed and enforced as if said illegal or
invalid provision had never been included herein.
11.3 Successor. All obligations of the Company under the Plan shall
be binding upon and inure to the benefit of any successor to the Company,
whether the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation, or otherwise, of all or substantially all of
the business and/or assets of the Company.
16
11.4 Effective Date. This amendment and restatement of the Plan shall
be effective from and after January 1, 1997, and shall remain in effect until
such time as it may be terminated or amended pursuant to Article X.
EARLY RETIREMENT
AGREEMENT AND RELEASE
This Early Retirement Agreement and Release (the "Agreement and
Release") is made and entered into between Tommy E. Knight ("Officer") and Brown
& Root Corporate Services, Inc. ("BRCSI"), for and on behalf of itself and its
affiliated companies. As used herein, "Brown & Root" means BRCSI and all of its
parents, subsidiary and affiliated companies. Halliburton Company
("Halliburton") is the ultimate parent company of Brown & Root.
R E C I T A L S:
WHEREAS, Officer, at various times, has been an employee and officer of
Brown & Root and/or trusts, committees or other entities sponsored or managed by
Brown & Root or Halliburton (collectively, with Brown & Root, the "Brown & Root
Entities" or, individually, a "Brown & Root Entity"); and
WHEREAS, Officer and Brown & Root desire to set forth the terms of
Officer's continued employment, resignation and early retirement; and
WHEREAS, Officer and Brown & Root desire to avoid the expense, delay
and uncertainty attendant to any claims which may arise from Officer's
resignation from Brown & Root and/or any of the other Brown & Root Entities, and
his early retirement; and
WHEREAS, Officer desires to release any claims or causes of action he
may have arising from or relating to his employment or service with Brown & Root
or any of the Brown & Root Entities; and
WHEREAS, Brown & Root desires to release certain claims or causes of
action it may have arising from or relating to Officer's employment or service
with Brown & Root or any of the Brown & Root Entities;
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Officer and Brown
& Root hereby agree:
1. Continued Employment.
During the period from the Effective Date (as hereinafter defined)
through the close of business on December 31, 1996, Officer will continue to be
employed as an employee of BRCSI. Effective September 24, 1996, Officer
voluntarily resigns as officer of Brown & Root and from all other positions,
posts, offices and assignments with any Brown & Root Entity, including, without
1
limitation, service as a member of the Executive Committee of Halliburton and as
a trustee of the Halliburton Foundation, Inc.
2. Early Retirement.
Officer hereby voluntarily resigns from employment with Brown & Root
and any other Brown & Root Entity effective as of the close of business on
December 31, 1996 and Officer hereby tenders his election of early retirement as
of December 31, 1996 (the "Termination Date"). Officer hereby requests that his
early retirement be approved by the appropriate person or committee as, and to
the extent, required pursuant to applicable policy and/or any plans of Brown &
Root and Halliburton in which he participates. Brown & Root agrees to seek
approval or consent of Officer's retirement as an early retirement by the
appropriate person or committee which may be required under applicable policy
and/or each of the plans of Brown & Root and Halliburton in which he
participates. Officer acknowledges and agrees that (i) from and after September
25, 1996, he shall have no authority to, and shall not, act as an officer of
Brown & Root, or in any other capacity for any Brown & Root Entity, and (ii)
from and after January 1, 1997, he shall have no authority to, and shall not,
act as an employee of any Brown & Root Entity.
3. Brown & Root's Obligations.
A.
Salary and Bonus. Brown & Root shall pay Officer his regular salary at the rate
in effect on September 24, 1996 to the Termination Date. Brown & Root shall also
pay Officer the unpaid amount of Officer's Reward for the 1995 Plan Year and the
amount of any Reward which may be payable for the 1996 Plan Year under the
Halliburton Company Annual Reward Plan (the "Annual Reward Plan"), with such
amount to be calculated as if Officer were a member of the Executive Committee
of Halliburton Company and an officer of Brown & Root through December 31, 1996,
such payments to be made pursuant to the applicable Annual Reward Plan
provisions. (Defined terms used in the preceding sentence shall have the
meanings ascribed to them in the Annual Award Plan.) All such payments shall be
paid less customary withholding for taxes and applicable deductions, and shall
be subject to any elections made by Officer pursuant to the Halliburton Elective
Deferral Plan. Officer acknowledges that the payments made pursuant to this
paragraph are in full satisfaction of all wages, benefits and other compensation
owed by any of the Brown & Root Entities to Officer for employment or service to
the Termination Date.
B. Early Retirement Payments. Brown & Root shall pay Officer a
lump sum early retirement payment in the gross amount of $600,000, payable on
the Termination Date. Brown & Root shall also pay Officer an additional lump
early retirement payment in the gross amount of $300,000, provided Officer has
complied in full with the Affiliate's Agreement dated July 2, 1996 ("Affiliate's
Agreement") previously signed by Officer, a copy of which is attached as
2
Exhibit A. No part of the $300,000 early retirement payment shall be paid to
Officer if Officer violates any of the provisions of the Affiliate's Agreement.
If payment of the additional lump sum early retirement payment of $300,000 is to
be made to Officer, it shall be made as soon as administratively feasible
following the expiration of Officer's obligations under the Affiliate's
Agreement but in no event later than two weeks after that expiration.
Such payments shall be less customary withholding for taxes. In the
event that Officer is entitled to severance payments pursuant to any severance
plan or program of Brown & Root that cannot be voluntarily released by Officer,
the payments set forth in this paragraph shall be offset and reduced by any such
payments.
C. Vesting of Stock. Effective with the Termination Date, all
shares of stock issued to Officer under the Halliburton Company Career Executive
Incentive Stock Plan (the "Career Plan") as to which restrictions have not
lapsed as of the Termination Date shall be retained by Officer and all
restrictions on any shares thus retained shall lapse, all pursuant to the terms
of the Officer's restricted stock agreements and the Career Plan.
D. Vesting of Stock Options. Officer's rights to the stock
options granted under the Halliburton Company 1993 Stock and Long-Term Incentive
Plan (the "Stock and Long-Term Incentive Plan") shall be governed by the express
terms of the respective stock option agreements, which are dated February 14,
1996, January 31, 1995, February 16, 1994, and May 18, 1993, and Officer may
exercise such options, if at all, as permitted by such stock option agreements
and for the length of time as permitted by such stock option agreements for an
employee whose employment with Brown & Root has terminated by reason of early
retirement with the consent of the Committee administering the Stock and
Long-Term Incentive Plan or its delegate.
E. Participation in Retiree Medical Plan. Officer shall be
eligible to participate in the Halliburton Retiree Medical Plan under the same
terms and conditions as other Brown & Root early retirees.
F. SERP Contribution. The sum of $600,000 shall be contributed
to Officer's Deferred Compensation Account in the Halliburton Company Senior
Executives' Deferred Compensation Plan (the "SERP") as of the end of the 1996
allocation year. Upon approval of the administrative committee appointed to
administer the SERP, Officer shall receive the amounts in the accounts under the
SERP in monthly installments over a period of ten years with such payments to
commence in accordance with the terms of the SERP. Thereafter, the terms and
conditions of the SERP shall govern Officer's rights and obligations with
respect to all amounts in the SERP.
G. TOP FLEX Plan. Brown & Root shall pay Officer any remaining
TOP FLEX balance as of the Termination Date, subject to the terms of the TOP
FLEX Plan.
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H. Continuing Participation in Benefit Plans. Except as
otherwise specified in the preceding paragraphs, from and after the Termination
Date, Officer shall be entitled to receive the benefits to which he is entitled
under any employee pension or welfare benefit plan of Brown & Root or
Halliburton according to its terms. In the event of any change in or
modification of any employee pension or welfare benefit plan after the
Termination Date, including changes, if any, that may effect reduction or
termination of benefits, Officer and any beneficiaries through him in such plan
or plans will be subject to such changes and modifications on the same terms and
conditions as all other participants or beneficiaries, except as to benefits in
which Officer is fully vested at the time of his termination of employment.
I. Reimbursement For Office Rental. Beginning in January 1997,
Brown & Root shall pay to Officer $1,250 a month for office expenses for a
period of twenty-four months. This payment is to be sent via regular mail to
Officer's last known address by no later than the tenth of each month, unless
otherwise agreed to in writing by Officer and Brown & Root.
J. Indemnification of Officer. Brown & Root, on behalf of
itself, its officers, directors, and shareholders ("Releasing Group") agrees to
and shall indemnify and hold harmless Officer, his agents, heirs, successors,
and representatives, from and against any and all claims, losses, damages,
causes of action, suits, and liability of every kind, including all expenses of
litigation, administrative proceedings, investigations, court costs, attorneys'
fees and expenses, for injury to or death of any person, or for damage to any
property, arising out of or in connection with the work done by Officer in the
course of his employment with Releasing Group. Such indemnity shall apply where
the claims, losses, damages, causes of action, suits, or liabilities arise in
whole or in part from the negligence of Officer. It is the expressed intention
of the parties hereto, both Officer and the Releasing Group, that the indemnity
provided for in this paragraph is indemnity by Releasing Group to indemnify and
protect Officer from the consequences of his own negligence, whether that
negligence is the sole or concurring cause of the injury, death, or damage.
K. Approval by Compensation Committee. This Agreement and
Release and Officer's retirement as an early retirement is subject to and
contingent upon the approval of such actions by the Compensation Committee of
the Board of Directors of Halliburton Company (the "Compensation Committee").
Brown & Root agrees to present this Agreement and Release and Officer's request
for early retirement to the Compensation Committee for approval and shall use
its best efforts to obtain such approvals; provided, however, that the approval
of Officer's retirement as an early retirement shall be subject to Officer's
execution and delivery on the Termination Date of the separate release as called
for under Paragraph 11 hereof. Execution of this Agreement and Release by BRCSI
shall be conclusive evidence that such approvals have been obtained.
4
4. Prior Rights and Obligations. This Agreement and Release
extinguishes all rights, if any, which Officer may have, and obligations, if
any, which any of the Brown & Root Entities may have, contractual or otherwise,
relating to the employment or resignation from employment of Officer with Brown
& Root or any of the other Brown & Root Entities.
Notwithstanding the foregoing provisions of this Paragraph 4, nothing
in this Agreement and Release shall be interpreted or applied in such a manner
as to limit, extinguish, or otherwise adversely affect Officer's rights and the
obligations of any of the Brown & Root Entities under the Stock and Long-Term
Incentive Plan, the Career Plan, the SERP, the TOP FLEX Plan, or the Halliburton
Elective Deferral Plan. Similarly and notwithstanding the foregoing provisions
of this Paragraph 4, this Agreement and Release does not affect any rights that
Officer may have under any qualified plan.
5. Expenses. Officer shall, within thirty (30) days of the Termination
Date, submit all actual, reasonable and customary expenses incurred by him in
the course of his employment with proper documentation, which, upon
verification, Brown & Root shall reimburse promptly in accordance with Brown &
Root's reimbursement policy. Officer acknowledges and agrees that he has no
authority to incur any expenses after the Termination Date which are not
authorized by this Agreement and Release, and further agrees that Brown & Root
shall have no obligation to reimburse expenses not submitted within the time set
forth above or incurred after the Termination Date which are not authorized by
this Agreement and Release.
6. Company Assets. Officer hereby represents and warrants that he has
no claim or right, title or interest in any property designated on any of the
Brown & Root Entities' books as the property or assets of any of the Brown &
Root Entities. On or before the Termination Date, he shall deliver to Brown &
Root any such property in his possession or control, including, without
limitation, any credit cards furnished by Brown & Root Entities for his use.
7. Proprietary and Confidential Information. In accordance with
Officer's existing and continuing obligations, Officer agrees and acknowledges
that the various Brown & Root Entities have developed and own valuable
information which is confidential, unique and specific to the Brown & Root
Entities ("Proprietary and Confidential Information") and which includes without
limitation financial data, marketing plans, current business and implementation
plans, and market surveys related to the past, present or currently planned
business of various of the Brown & Root Entities. Except as may be required by
law, Officer agrees that he will not at any time disclose to others, permit to
be disclosed, use, permit to be used, copy or permit to be copied, any such
Proprietary and Confidential Information (whether or not developed by Officer)
without prior written consent of the Chief Executive Officer of Brown & Root,
Inc. Except as may be required by law, Officer further agrees to maintain in
confidence any proprietary and confidential information of third parties
received or of which he has knowledge as a result of his employment. The
prohibitions of this Paragraph 7 shall not apply, however, to information in the
5
public domain (but only if the same becomes part of the public domain through a
means other than a disclosure prohibited hereunder) or to information which is
generally known in the industries in which the Brown & Root Entities compete.
Notwithstanding the foregoing provisions of this Paragraph 7, nothing in this
Agreement and Release shall prohibit Officer from being employed as an employee
or consultant by a competitor of the Brown & Root Entities.
8. Documents. Officer agrees to leave in his office or deliver to Brown
& Root at the termination of his employment all correspondence, memoranda,
notes, records, data or information, analysis, or other documents and all copies
thereof, made, composed or received by Officer, solely or jointly with others,
and which are in Officer's possession, custody or control and which are related
in any manner to the past, present or anticipated business of any of the Brown &
Root Entities. In this regard, Officer hereby grants and conveys to Brown & Root
all right, title and interest in and to, including without limitation, the right
to possess, print, copy, and sell or otherwise dispose of, any reports, records,
papers, summaries, photographs, drawings, data, information or other documents
in writing, and copies, abstracts or summaries thereof, which may have been
prepared by Officer or under his direction or which may have come into his
possession in any way during the term of his employment with any of the Brown &
Root Entities which related in any manner to past, present or anticipated
business of any of the Brown & Root Entities. Notwithstanding the foregoing
provisions of this Paragraph 8, nothing in this Agreement and Release shall
operate to preclude Officer from maintaining possession of personal
correspondence, commendation letters, photographs, awards, and the like, and
published documents like proxy statements.
9. Cooperation. Officer shall cooperate with the Brown & Root Entities
to the extent reasonably required in all matters relating to the winding up of
his pending work on behalf of any Brown & Root Entity and the orderly transfer
of any such pending work as designated by Brown & Root. Officer shall take such
further action and execute any such further documents as may be reasonably
necessary or appropriate in order to carry out the provisions and purposes of
this Agreement and Release. Officer will provide such cooperation hereunder at
such times and in such locations as are reasonably convenient and agreeable to
Officer and Brown & Root. Brown & Root agrees that, if it requests Officer to
devote any time greater than one hour to such request for information after the
Termination Date, it shall compensate Officer for his time at a reasonable and
mutually agreeable rate.
10. Officer's Representation. Officer represents, warrants and agrees
that he has not filed any claims, appeals, complaints, charges or lawsuits
against any of the Brown & Root Entities or their respective employees,
officers, directors, shareholders, agents and representatives (collectively,
including Brown & Root, the "Brown & Root Parties") with any governmental agency
or court and that he will not file or permit to be filed or accept benefit from
any claim, complaint or petition filed with any court by him or on his behalf at
any time hereafter; provided, however, this shall not limit Officer from
enforcing his rights under this Agreement and Release. Further, Officer
6
represents and warrants that no other person or entity has any interest in, or
assignment of, any claims or causes of action he may have against any Brown &
Root Party and which he now releases in their entirety.
11. Releases. Officer agrees to release, acquit and discharge and does
hereby release, acquit and discharge Brown & Root, all Brown & Root Entities,
and all Brown & Root Parties, collectively and individually, from any and all
claims and from any and all causes of action, of any kind or character, whether
now known or not known, he may have against any of them, including, but not
limited to, any claim for benefits, compensation, costs, damages, expenses,
remuneration, salary, or wages; and all claims or causes of action arising from
his employment, termination of employment, or any alleged discriminatory
employment practices, including but not limited to any and all claims or causes
of action arising under the Age Discrimination in Employment Act, as amended, 29
U.S.C. ss. 621, et seq. ("ADEA") and any and all claims or causes of action
arising under any other federal, state or local laws pertaining to
discrimination in employment or equal employment opportunity; except that the
parties agree that Officer's release, acquittal and discharge shall not relieve
Brown & Root from its obligations under this Agreement and Release. This release
also applies to any claims brought by any person or agency or class action under
which Officer may have a right or benefit.
In the event that the Effective Date of this Agreement and Release
occurs before Officer's Termination Date, as a condition precedent to Brown &
Root's and Halliburton's obligations to consent to Officer's early retirement,
pay the early retirement payment, make the SERP contribution, approve the
vesting of Officer's restricted stock and provide any other benefits called for
under Section 3 above which would not otherwise be payable or receivable in the
absence of this Agreement and Release, Officer agrees to execute and deliver on
the Termination Date a separate release, containing language substantially
similar to that set forth in the preceding paragraph, in order to release any
claims that may arise between the Effective Date and the Termination Date.
Brown & Root and all Brown & Root Entities, collectively and
individually, agree to release, acquit and discharge and do hereby release,
acquit and discharge Officer from any and all claims and from any and all causes
of action, of any kind or character, whether now known or not known, Brown &
Root and the Brown & Root Entities may have against Officer; except that the
parties agree that Brown & Root's and the Brown & Root Entities' release,
acquittal and discharge shall not apply to any cause of action arising out of
conduct of the Officer that constitutes fraud or criminal acts or to any causes
of action that Officer fraudulently concealed from Brown & Root or the Brown &
Root Entities.
12. No Admissions. Officer expressly understands and agrees that the
terms of this Agreement and Release are contractual and not merely recitals and
that the agreements herein and consideration paid is to compromise doubtful and
disputed claims, avoid litigation, and buy peace, and that no statement or
consideration given shall be construed as an admission of any claim by any Brown
& Root Party, all such admissions being expressly denied. Moreover, neither this
7
Agreement and Release nor anything in this Agreement and Release shall be
construed to be or shall be admissible in any proceeding as evidence of or an
admission by Brown & Root of any violation of its policies, procedures, state or
federal laws or regulations. This Agreement and Release may be admitted into
evidence, however, in any proceeding to enforce the Agreement and Release. The
parties agree that, should either or both intend to introduce this document into
evidence in such a proceeding, that they will first jointly petition the Court
to admit the document into evidence under an order protecting its
confidentiality to the greatest extent reasonably possible under the applicable
laws and rules of procedure.
13. Enforcement of Agreement and Release and Dispute Resolution. No
waiver or nonaction with respect to any breach by the other party of any
provision of this Agreement and Release, nor the waiver or nonaction with
respect to any breach of the provisions of similar agreements with other
employees shall be construed to be a waiver of any succeeding breach of such
provision, or as a waiver of the provision itself. Should any provisions hereof
be held to be invalid or wholly or partially unenforceable, such holdings shall
not invalidate or void the remainder of this Agreement and Release. Portions
held to be invalid or unenforceable shall be revised and reduced in scope so as
to be valid and enforceable, or, if such is not possible, then such portion
shall be deemed to have been wholly excluded with the same force and effect as
if they had never been included herein.
It is the mutual intention of the parties to have any disputes
concerning this Agreement and Release resolved out of court. Accordingly, the
parties agree that any such dispute shall, as the sole and exclusive remedy, be
submitted for resolution through the Brown & Root Dispute Resolution Program.
The parties each recognize that in the event any breach of this Agreement and
Release is alleged against one of the parties, the other party shall be
entitled, if it so elects, to institute and prosecute proceedings related to
such alleged breach through the Brown & Root Dispute Resolution Program. The
parties agree that such resolution of any dispute through the program shall be
binding and final.
14. Choice of Law. This Agreement and Release shall be governed by and
construed and enforced, in all respects, in accordance with the law of the State
of Texas, without regard to principles of conflict of law, unless preempted by
federal law, in which case federal law shall govern, except that the Federal
Arbitration Act shall govern in all respects with regard to the resolution of
disputes hereunder.
15. Merger. This Agreement and Release supersedes, replaces and merges
all previous agreements and discussions relating to the same or similar subject
matters between Officer and Brown & Root and constitutes the entire agreement
between Officer and Brown & Root with respect to the subject matter of this
Agreement and Release. This Agreement and Release may not be changed or
terminated orally, and no change, termination or waiver of this Agreement and
8
Release or any of the provisions herein contained shall be binding unless made
in writing and signed by all parties, and in the case of Brown & Root, by an
authorized officer of BRCSI.
16. Confidentiality. Officer agrees that, following execution of this
Agreement and Release, he will not disclose the terms thereof or the
consideration for it received from Brown & Root, to any other person, except
Officer's spouse, attorney or financial advisors, and, only on the condition
that such other person agrees to keep such information strictly confidential.
The foregoing obligations of confidentiality shall not apply to information that
is required to be disclosed as a result of any applicable law, rule or
regulation of any governmental authority or any court. Notwithstanding the
foregoing provisions of this Paragraph 16, this Agreement and Release does not
preclude Officer from revealing to prospective or subsequent employers or
business associates his legal obligations to Brown & Root as contained in
Paragraph 7 of this Agreement and Release.
17. ADEA Rights. Officer acknowledges and agrees:
(a) that he has at least twenty-one days to review
this Agreement and Release before accepting;
(b) that he has been advised in writing by Brown &
Root to consult with an attorney regarding the terms
of this Agreement and Release;
(c) that, if he accepts this Agreement and Release,
he has seven days following the execution of this
Agreement and Release to revoke this Agreement and
Release.
18. Agreement and Release Voluntary. Officer acknowledges and agrees
that he has carefully read this Agreement and Release and understands that,
except as expressly reserved herein, it is a release of all claims, known and
unknown, past or present including all claims under the Age Discrimination in
Employment Act. He further agrees that he has entered into this Agreement and
Release for the above stated consideration. He warrants that he is fully
competent to execute this Agreement and Release which he understands to be
contractual. He further acknowledges that he executes this Agreement and Release
of his own free will, after having a reasonable period of time to review, study
and deliberate regarding its meaning and effect, and after being advised to
consult an attorney, and without reliance on any representation of any kind or
character not expressly set forth herein. Finally, he executes this Agreement
and Release fully knowing its effect and voluntarily for the consideration
stated above.
19. Effective Date. The Effective Date shall be 10 days after the
execution of this Agreement and Release by Officer and BRCSI provided Officer
has not exercised his right of revocation pursuant to Paragraph 17(c) above.
9
20. Headings. The section headings contained herein are for the
purpose of convenience only and are not intended to define or limit the contents
of such sections.
IN WITNESS WHEREOF, the parties have caused this Agreement and Release
to be executed in multiple counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
11/5/96 /s/ T. E. Knight
- ----------------- -------------------------------------
Date TOMMY E. KNIGHT
The undersigned is an officer of
Brown & Root Corporate Services, Inc.
and is authorized to execute this
Agreement and Release on behalf of
Brown & Root Corporate Services, Inc.
and Brown & Root.
BROWN & ROOT CORPORATE SERVICES, INC.
11/6/96 By: /s/ David J. Lesar
- ----------------- -------------------------------------
Date Name: David J. Lesar
Title: President and Chief Executive
Officer
10
EXHIBIT A
AFFILIATE'S AGREEMENT
July 2, 1996
Halliburton Company
3600 Lincoln Plaza
500 North Akard Street
Dallas, Texas 75201-3391
Ladies and Gentlemen:
The undersigned has been advised that, as of the date hereof, the
undersigned may be deemed to be an "affiliate" of Halliburton Company, a
Delaware corporation (the "Acquiror"), as that term is defined in the
Regulations of the Commissions under the Securities Act.
The undertakings contained in this Affiliate's Agreement are being
given by the undersigned in connection with that certain Agreement and Plan of
Merger by and among Acquiror, Halliburton Acq. Company, a newly formed Delaware
corporation and a wholly-owned Subsidiary of Acquiror ("Newco"), and Landmark
Graphics Corporation, a Delaware corporation (the "Company") dated as of June
30, 1996 (the "Merger Agreement"), providing for, among other things, the merger
of the Company with and into Newco (the "Merger"). Capitalized terms used but
not defined herein are defined in Annex A to the Merger Agreement and are used
herein with the same meanings as ascribed to them therein.
The undersigned understands that the Merger will be treated for
financial accounting purposes as a "pooling of interests" in accordance with
generally accepted accounting principles and that the staff of the Commission
has issued certain guidelines that should be followed to ensure the application
of pooling of interests accounting to the transaction.
In consideration of the agreements contained herein, the Acquiror's
reliance on this letter in connection with the consummation of the Merger and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the undersigned hereby represents, warrants and agrees
that the undersigned will not make any sale, transfer or other disposition of
(i) Company Common Stock during the period from the date hereof until the
earlier of the Effective Time and the termination of the Merger Agreement (which
period, if the Merger is consummated, will be greater than thirty (30) days) or
11
(ii) Acquiror Common Stock owned by the undersigned until such time as financial
statements that include at least thirty (30) days of combined operations of the
Company and the Acquiror after the Merger shall have been publicly reported,
unless the undersigned shall have delivered to the Acquiror, prior to any such
sale, transfer or other disposition, a written opinion from Arthur Andersen LLP,
independent public accountants for the Acquiror, or a written no-action letter
from the accounting staff of the Commission, in either case in form and
substance reasonably satisfactory to the Acquiror, to the effect that such sale,
transfer or other disposition will not cause the Merger not to be treated as a
"pooling of interests" for financial accounting purposes in accordance with
generally accepted accounting principles and the Regulations of the Commission.
If you are in agreement with the foregoing, please so indicate by
signing below and returning a copy of this letter to the undersigned, at which
time this letter shall become a binding agreement between us.
Very truly yours,
By: /s/ T. E. Knight
------------------------
Name: Tommy E. Knight
Title: President and
Chief Executive Officer
Date: July 9, 1996
Address: Brown & Root, Inc.
4100 Clinton Drive
Houston, Texas 77020-6299
ACCEPTED this 10th day
of July, 1996
HALLIBURTON COMPANY
By: /s/ Susan S. Keith
------------------------------
Name: Susan S. Keith
Title: Vice President and Secretary
Exhibit 11
HALLIBURTON COMPANY
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
The calculation below for earnings per share of the $2.50 par value Common
Stock of the Company on a primary and fully diluted basis is submitted in
accordance with Regulation S-K item 601(b)(11).
1996 1995 1994
----------- ----------- -----------
(In millions except per share data)
Primary:
Net income $ 300.4 $ 183.7 $ 180.9
Average number of common shares outstanding 126.1 124.7 124.2
Primary net income per share: $ 2.38 $ 1.47 $ 1.45
- ---------------------------------------------------------------------------------------------------------------------
Fully diluted:
Net income $ 300.4 $ 183.7 $ 180.9
Add after-tax interest expense applicable to
Zero Coupon Convertible Subordinated
Debentures due 2006 - 12.5 13.2
-----------------------------------------
Adjusted net income $ 300.4 $ 196.2 $ 194.1
Adjusted average number of common shares outstanding 126.3 128.4 127.4
Fully diluted net income per share: $ 2.38 $ 1.53 $ 1.52
The foregoing computations do not reflect any significant potentially dilutive
effect the Company's Preferred Stock Purchase Rights Plan could have in the
event such Rights become exercisable and any shares of either Series A Junior
Participating Preferred Stock or Common Stock of the Company are issued upon the
exercise of such Rights. Reference is made to Note 8 to the financial statements
of this Annual Report.
Exhibit 21
HALLIBURTON COMPANY
SUBSIDIARIES OF THE REGISTRANT
DECEMBER 31, 1996
State Or
Country Of
Name Of Company Incorporation
Avalon Financial Services, Ltd. Cayman Islands
Breswater Marine Contracting BV Netherlands
Brown & Root (Overseas) Limited United Kingdom
Brown & Root A/S Norway
Brown & Root Corporate Services, Inc. Delaware
Brown & Root Ealing Technical Services Limited United Kingdom
Brown & Root Energy Services A/S Norway
Brown & Root Far East Engineers Pte Ltd. Delaware
Brown & Root Highlands Fabricators Limited United Kingdom
Brown & Root Holdings, Inc. Delaware
Brown & Root Industrial Services, Inc. Delaware
Brown & Root International, Inc. Delaware
Brown & Root International, Inc. (Panama) Panama
Brown & Root Limited United Kingdom
Brown & Root NA Limited British Virgin Islands
Brown & Root Projects Limited United Kingdom
Brown & Root Pty Limited Australia
Brown & Root Saudi Limited Co. Saudi Arabia
Brown & Root Services Corporation Delaware
Brown & Root Skoda SRO Ltd. Czech Republic
Brown & Root Technical Services, Inc. Delaware
Brown & Root Toll Road Investment Partners, Inc. Delaware
Brown & Root, Inc. Delaware
Dawson Group Pty Ltd. Australia
European Marine Contractors Limited United Kingdom
G&H Management Company Delaware
Gearhart (United Kingdom) Limited United Kingdom
Halliburton (Proprietary) Limited South Africa
Halliburton Affiliates Corporation Delaware
Halliburton Argentina SA Argentina
Halliburton Australia Pty Ltd. Australia
Halliburton BV Netherlands
Halliburton Canada Inc. Canada
Halliburton Company Germany GmbH Germany
Halliburton de Mexico, SA de CV Mexico
Halliburton Delaware, Inc. Delaware
Halliburton Energy Services Asia, Inc. Texas
Halliburton Energy Services Nigeria Limited Nigeria
Halliburton Energy Services, Inc. Delaware
Halliburton Equipment Company SAE Egypt
Halliburton Global, Ltd. Cayman Islands
Halliburton Holdings Limited United Kingdom
Halliburton Holdings, Inc. Delaware
Halliburton International, Inc. Delaware
Halliburton Italiana SpA Italy
Halliburton Latin America SA Panama
Halliburton Limited United Kingdom
Halliburton Manufacturing and Services Limited United Kingdom
Exhibit 21 (Cont.)
HALLIBURTON COMPANY
SUBSIDIARIES OF THE REGISTRANT
DECEMBER 31, 1996
State Or
Country Of
Name Of Company Incorporation
Halliburton Norway, Inc. Delaware
Halliburton NUS Corporation Delaware
Halliburton Offshore Services, Inc. Delaware
Halliburton Overseas Limited Cayman Islands
Halliburton Products & Services Limited Cayman Islands
Halliburton SAS France
Halliburton Servicos Ltda Brazil
Halliburton Singapore Pte Ltd. Singapore
Halliburton West Africa Ltd. Delaware
Halliburton Worldwide Limited Cayman Islands
HLS (West Africa) Holdings, Inc. Texas
HLS Well Evaluation Limited United Kingdom
Howard Humphreys & Partners Limited United Kingdom
Howard Humphreys Group Limited United Kingdom
Hunting- Brae Limited United Kingdom
Landmark EAME, Ltd. United Kingdom
Landmark Graphics Corporation Delaware
Landmark Graphics Europe/Africa, Inc. Delaware
Laurel Financial Services BV Netherlands
MIHC, Inc. Delaware
Overseas Marine Leasing Company Delaware
PT Gema Sembrown Indonesia
PT Halliburton Indonesia Indonesia
PT Halliburton Logging Services Indonesia Indonesia
Rockwater Holdings Limited United Kingdom
Rockwater Limited United Kingdom
Rockwater, Inc. Delaware
Seaforth Maritime Limited United Kingdom
Servicios Halliburton de Venezuela, SA Delaware
(1) Each of the subsidiaries named conducts its business under its corporate
name and, in a few instances, under a shortened form of its corporate name.
(2) Registrant has 100% direct or indirect ownership in the subsidiaries named
except for the following: Brown & Root NA Limited, 50%; Brown & Root Saudi
Limited Co., 49%; Brown & Root Skoda SRO Ltd., 66%; European Marine
Contractors Ltd., 50%; Halliburton Energy Services Nigeria Limited, 80%;
European Marine Contractors Ltd., 50%; Halliburton Energy Services Nigeria
Limited, 80%; European Marine Contractors Ltd., 50%; Halliburton Energy
Services Nigeria Limited, 80%; Halliburton Equipment Company SAE, 75%;
Hunting-Brae Limited, 31%; PT Gema Sembrown, 45%; Brown & Root Energy
Services A/S, 75%; PT Halliburton Indonesia, 80%; and PT Halliburton
Logging Services Indonesia, 80%.
(3) The names of approximately 146 subsidiaries have been omitted since the
unnamed subsidiaries considered in the aggregate would not constitute a
significant subsidiary as defined by Item 601(b)(21).
Exhibit 23(a)
Consent of Independent Public Accountants
As independent public accountants, we consent to the incorporation by
reference of our report dated January 22, 1997, included in this Form 10-K into
the Company's previously filed registration statement on Form S-3 (No.
33-65772)
Arthur Andersen LLP
Dallas, Texas,
March 21, 1997
Exhibit 23(b)
Consent of Independent Accountants
We consent to the incorporation by reference in the Registration Statement (Form
S-3 No. 33-65772) and related Prospectus of Halliburton Company of our report
dated 15 February 1996, with respect to the financial statements of European
Marine Contractors Limited included in the Annual Report (Form 10-K) of
Halliburton Company for the year ended 31 December 1995 filed with the
Securities and Exchange Commission and incorporated by reference in the Annual
Report (Form 10-K) of Halliburton Company for the year ended 31 December 1996.
Ernst & Young
London, England
21 March 1997
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, a Director of
Halliburton Company, do hereby constitute and appoint Richard B. Cheney, David
J. Lesar and Susan S. Keith, or any of them acting alone, my true and lawful
attorneys or attorney, to do any and all acts and things and execute any and all
instruments which said attorneys or attorney may deem necessary or advisable to
enable Halliburton Company to comply with the Securities Exchange Act of 1934,
as amended, and all rules, regulations and requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing of Annual
Reports on Form 10-K, including specifically, but without limitation thereof,
power and authority to sign my name as Director of Halliburton Company to the
Annual Reports on Form 10-K required to be filed with the Securities and
Exchange Commission for the year ended 1996 and for all subsequent years until
revoked by me or otherwise cancelled, and to any instruments or documents filed
as a part of or in connection therewith; and I hereby ratify and confirm all
that said attorneys or attorney shall do or cause to be done by virtue hereof.
IN TESTIMONY WHEREOF, witness my hand this 20th day of February, 1997.
/s/ R. J. Stegemeier
----------------------
Richard J. Stegemeier
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, a Director of
Halliburton Company, do hereby constitute and appoint Richard B. Cheney, David
J. Lesar and Susan S. Keith, or any of them acting alone, my true and lawful
attorneys or attorney, to do any and all acts and things and execute any and all
instruments which said attorneys or attorney may deem necessary or advisable to
enable Halliburton Company to comply with the Securities Exchange Act of 1934,
as amended, and all rules, regulations and requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing of Annual
Reports on Form 10-K, including specifically, but without limitation thereof,
power and authority to sign my name as Director of Halliburton Company to the
Annual Reports on Form 10-K required to be filed with the Securities and
Exchange Commission for the year ended 1996 and for all subsequent years until
revoked by me or otherwise cancelled, and to any instruments or documents filed
as a part of or in connection therewith; and I hereby ratify and confirm all
that said attorneys or attorney shall do or cause to be done by virtue hereof.
IN TESTIMONY WHEREOF, witness my hand this 20th day of February, 1997.
/s/ Anne L. Armstrong
-----------------------
Anne L. Armstrong
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, a Director of
Halliburton Company, do hereby constitute and appoint Richard B. Cheney, David
J. Lesar and Susan S. Keith, or any of them acting alone, my true and lawful
attorneys or attorney, to do any and all acts and things and execute any and all
instruments which said attorneys or attorney may deem necessary or advisable to
enable Halliburton Company to comply with the Securities Exchange Act of 1934,
as amended, and all rules, regulations and requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing of Annual
Reports on Form 10-K, including specifically, but without limitation thereof,
power and authority to sign my name as Director of Halliburton Company to the
Annual Reports on Form 10-K required to be filed with the Securities and
Exchange Commission for the year ended 1996 and for all subsequent years until
revoked by me or otherwise cancelled, and to any instruments or documents filed
as a part of or in connection therewith; and I hereby ratify and confirm all
that said attorneys or attorney shall do or cause to be done by virtue hereof.
IN TESTIMONY WHEREOF, witness my hand this 20th day of February, 1997.
/s/ Clitheroe
---------------
Lord Clitheroe
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, a Director of
Halliburton Company, do hereby constitute and appoint Richard B. Cheney, David
J. Lesar and Susan S. Keith, or any of them acting alone, my true and lawful
attorneys or attorney, to do any and all acts and things and execute any and all
instruments which said attorneys or attorney may deem necessary or advisable to
enable Halliburton Company to comply with the Securities Exchange Act of 1934,
as amended, and all rules, regulations and requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing of Annual
Reports on Form 10-K, including specifically, but without limitation thereof,
power and authority to sign my name as Director of Halliburton Company to the
Annual Reports on Form 10-K required to be filed with the Securities and
Exchange Commission for the year ended 1996 and for all subsequent years until
revoked by me or otherwise cancelled, and to any instruments or documents filed
as a part of or in connection therewith; and I hereby ratify and confirm all
that said attorneys or attorney shall do or cause to be done by virtue hereof.
IN TESTIMONY WHEREOF, witness my hand this 20th day of February, 1997.
/s/ Robert L. Crandall
-------------------------
Robert L. Crandall
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, a Director of
Halliburton Company, do hereby constitute and appoint Richard B. Cheney, David
J. Lesar and Susan S. Keith, or any of them acting alone, my true and lawful
attorneys or attorney, to do any and all acts and things and execute any and all
instruments which said attorneys or attorney may deem necessary or advisable to
enable Halliburton Company to comply with the Securities Exchange Act of 1934,
as amended, and all rules, regulations and requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing of Annual
Reports on Form 10-K, including specifically, but without limitation thereof,
power and authority to sign my name as Director of Halliburton Company to the
Annual Reports on Form 10-K required to be filed with the Securities and
Exchange Commission for the year ended 1996 and for all subsequent years until
revoked by me or otherwise cancelled, and to any instruments or documents filed
as a part of or in connection therewith; and I hereby ratify and confirm all
that said attorneys or attorney shall do or cause to be done by virtue hereof.
IN TESTIMONY WHEREOF, witness my hand this 20th day of February, 1997.
/s/ W. R. Howell
--------------------
W. R. Howell
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, a Director of
Halliburton Company, do hereby constitute and appoint Richard B. Cheney, David
J. Lesar and Susan S. Keith, or any of them acting alone, my true and lawful
attorneys or attorney, to do any and all acts and things and execute any and all
instruments which said attorneys or attorney may deem necessary or advisable to
enable Halliburton Company to comply with the Securities Exchange Act of 1934,
as amended, and all rules, regulations and requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing of Annual
Reports on Form 10-K, including specifically, but without limitation thereof,
power and authority to sign my name as Director of Halliburton Company to the
Annual Reports on Form 10-K required to be filed with the Securities and
Exchange Commission for the year ended 1996 and for all subsequent years until
revoked by me or otherwise cancelled, and to any instruments or documents filed
as a part of or in connection therewith; and I hereby ratify and confirm all
that said attorneys or attorney shall do or cause to be done by virtue hereof.
IN TESTIMONY WHEREOF, witness my hand this 20th day of February, 1997.
/s/ Dale P. Jones
--------------------
Dale P. Jones
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, a Director of
Halliburton Company, do hereby constitute and appoint Richard B. Cheney, David
J. Lesar and Susan S. Keith, or any of them acting alone, my true and lawful
attorneys or attorney, to do any and all acts and things and execute any and all
instruments which said attorneys or attorney may deem necessary or advisable to
enable Halliburton Company to comply with the Securities Exchange Act of 1934,
as amended, and all rules, regulations and requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing of Annual
Reports on Form 10-K, including specifically, but without limitation thereof,
power and authority to sign my name as Director of Halliburton Company to the
Annual Reports on Form 10-K required to be filed with the Securities and
Exchange Commission for the year ended 1996 and for all subsequent years until
revoked by me or otherwise cancelled, and to any instruments or documents filed
as a part of or in connection therewith; and I hereby ratify and confirm all
that said attorneys or attorney shall do or cause to be done by virtue hereof.
IN TESTIMONY WHEREOF, witness my hand this 20th day of February, 1997.
/s/ C. J. Silas
------------------
C. J. Silas
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, a Director of
Halliburton Company, do hereby constitute and appoint Richard B. Cheney, David
J. Lesar and Susan S. Keith, or any of them acting alone, my true and lawful
attorneys or attorney, to do any and all acts and things and execute any and all
instruments which said attorneys or attorney may deem necessary or advisable to
enable Halliburton Company to comply with the Securities Exchange Act of 1934,
as amended, and all rules, regulations and requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing of Annual
Reports on Form 10-K, including specifically, but without limitation thereof,
power and authority to sign my name as Director of Halliburton Company to the
Annual Reports on Form 10-K required to be filed with the Securities and
Exchange Commission for the year ended 1996 and for all subsequent years until
revoked by me or otherwise cancelled, and to any instruments or documents filed
as a part of or in connection therewith; and I hereby ratify and confirm all
that said attorneys or attorney shall do or cause to be done by virtue hereof.
IN TESTIMONY WHEREOF, witness my hand this 20th day of February, 1997.
/s/ Roger T. Staubach
------------------------
Roger T. Staubach
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, a Director of
Halliburton Company, do hereby constitute and appoint Richard B. Cheney, David
J. Lesar and Susan S. Keith, or any of them acting alone, my true and lawful
attorneys or attorney, to do any and all acts and things and execute any and all
instruments which said attorneys or attorney may deem necessary or advisable to
enable Halliburton Company to comply with the Securities Exchange Act of 1934,
as amended, and all rules, regulations and requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing of Annual
Reports on Form 10-K, including specifically, but without limitation thereof,
power and authority to sign my name as Director of Halliburton Company to the
Annual Reports on Form 10-K required to be filed with the Securities and
Exchange Commission for the year ended 1996 and for all subsequent years until
revoked by me or otherwise cancelled, and to any instruments or documents filed
as a part of or in connection therewith; and I hereby ratify and confirm all
that said attorneys or attorney shall do or cause to be done by virtue hereof.
IN TESTIMONY WHEREOF, witness my hand this 20th day of February, 1997.
/s/ E. L. Williamson
-----------------------
E. L. Williamson
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, a Director of
Halliburton Company, do hereby constitute and appoint David J. Lesar and Susan
S. Keith, or any of them acting alone, my true and lawful attorneys or attorney,
to do any and all acts and things and execute any and all instruments which said
attorneys or attorney may deem necessary or advisable to enable Halliburton
Company to comply with the Securities Exchange Act of 1934, as amended, and all
rules, regulations and requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing of Annual Reports on Form 10-K,
including specifically, but without limitation thereof, power and authority to
sign my name as Director of Halliburton Company to the Annual Reports on Form
10-K required to be filed with the Securities and Exchange Commission for the
year ended 1996 and for all subsequent years until revoked by me or otherwise
cancelled, and to any instruments or documents filed as a part of or in
connection therewith; and I hereby ratify and confirm all that said attorneys or
attorney shall do or cause to be done by virtue hereof.
IN TESTIMONY WHEREOF, witness my hand this 20th day of February, 1997.
/s/ Richard B. Cheney
-----------------------
Richard B. Cheney
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, a Director of
Halliburton Company, do hereby constitute and appoint Richard B. Cheney, David
J. Lesar and Susan S. Keith, or any of them acting alone, my true and lawful
attorneys or attorney, to do any and all acts and things and execute any and all
instruments which said attorneys or attorney may deem necessary or advisable to
enable Halliburton Company to comply with the Securities Exchange Act of 1934,
as amended, and all rules, regulations and requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing of Annual
Reports on Form 10-K, including specifically, but without limitation thereof,
power and authority to sign my name as Director of Halliburton Company to the
Annual Reports on Form 10-K required to be filed with the Securities and
Exchange Commission for the year ended 1996 and for all subsequent years until
revoked by me or otherwise cancelled, and to any instruments or documents filed
as a part of or in connection therewith; and I hereby ratify and confirm all
that said attorneys or attorney shall do or cause to be done by virtue hereof.
IN TESTIMONY WHEREOF, witness my hand this 20th day of February, 1997.
/s/ Delano E. Lewis
------------------------
Delano E. Lewis
5
1000000
YEAR 9-MOS 6-MOS 3-MOS
DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
DEC-31-1996 SEP-30-1996 JUN-30-1996 MAR-31-1996
214 95 73 154
0 0 0 0
1702 1741 1716 1654
44 0 0 0
292 316 310 307
2398 2399 2330 2353
3561 3499 3448 3425
2269 2275 2276 2284
4437 4314 4105 4028
1505 1511 1362 1341
200 200 200 200
0 0 0 323
0 0 0 0
323 323 323 0
1836 1734 1674 1623
4437 4314 4105 4028
0 0 0 0
7385 5395 3536 1705
0 0 0 0
6731 4961 3262 1592
0 0 0 0
0 0 0 0
24 18 11 5
404 236 182 72
103 44 64 27
300 193 117 46
0 0 0 0
0 0 0 0
0 0 0 0
300 193 117 46
2.38 1.53 0.93 0.36
2.38 1.53 0.93 0.36
5
1000000
YEAR 9-MOS 6-MOS 3-MOS
DEC-31-1995 DEC-31-1995 DEC-31-1995 DEC-31-1995
DEC-31-1995 SEP-30-1995 JUN-30-1995 MAR-31-1995
240 144 373 349
0 0 0 0
1499 1399 1420 1354
38 0 0 0
256 282 268 288
2186 2026 2312 2222
3422 3411 3471 3421
2264 2291 2352 2324
3862 3970 4313 4181
1198 1036 933 849
200 242 629 635
0 0 0 0
0 0 0 0
323 323 322 322
1598 1810 1840 1792
3862 3970 4313 4181
0 0 0 0
5883 4295 2766 1319
0 0 0 0
5260 3820 2462 1189
0 0 0 0
0 0 0 0
47 41 26 13
387 266 162 66
138 95 60 25
249 171 102 42
(66) (66) 2 1
0 0 0 0
0 0 0 0
184 105 104 42
1.47 0.84 0.83 0.34
1.53 0.88 0.86 0.35
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
0
1000000
YEAR
DEC-31-1994
DEC-31-1994
441
0
1340
36
274
2250
3482
2364
4197
884
635
0
0
322
1768
4197
0
5661
0
5189
0
0
48
298
122
175
6
0
0
181
1.45
1.52
