FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 2001
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from to
----- -----
Commission File Number 1-3492
HALLIBURTON COMPANY
(a Delaware Corporation)
75-2677995
3600 Lincoln Plaza
500 N. Akard
Dallas, Texas 75201
Telephone Number - Area Code (214) 978-2600
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, par value $2.50 per share:
Outstanding at July 31, 2001 - 429,791,394
HALLIBURTON COMPANY
Index
Page No.
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PART I. FINANCIAL INFORMATION 2-20
Item 1. Financial Statements 2-4
- Condensed Consolidated Statements of Income 2
- Condensed Consolidated Balance Sheets 3
- Condensed Consolidated Statements of Cash Flows 4
- Notes to Quarterly Financial Statements 5-20
1. Management Representations 5
2. Business Segment Information 5-6
3. Acquisitions and Dispositions 6-7
4. Discontinued Operations 7-8
5. Receivables 8
6. Inventories 8-9
7. Commitments and Contingencies 9-14
8. Income Per Share 14
9. Comprehensive Income 15
10. Engineering and Construction Reorganization 15
11. Dresser Financial Information 15-20
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 21-29
Item 3. Quantitative and Qualitative Disclosures about Market Risk 29
PART II. OTHER INFORMATION 30-32
Item 4. Submission of Matters to a Vote of Security Holders 30-31
Item 6. Listing of Exhibits and Reports on Form 8-K 31-32
Signatures 33
Exhibits: - Supplemental Executive Retirement Plan as amended and restated
effective January 1, 2001
- Benefit Restoration Plan as amended and restated effective
January 1, 2001
- Employment Agreement
- Powers of Attorney for Directors
- Powers of Attorney
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- -----------------------------
HALLIBURTON COMPANY
Condensed Consolidated Statements of Income
(Unaudited)
(Millions of dollars and shares except per share data)
Three Months Six Months
Ended June 30 Ended June 30
-----------------------------------------------------
2001 2000 2001 2000
- --------------------------------------------------------------------------------------------------------------------
Revenues:
Services $ 2,812 $ 2,461 $ 5,455 $ 4,937
Sales 498 393 981 756
Equity in earnings of unconsolidated affiliates 29 14 47 34
- --------------------------------------------------------------------------------------------------------------------
Total revenues $ 3,339 $ 2,868 $ 6,483 $ 5,727
- --------------------------------------------------------------------------------------------------------------------
Operating costs and expenses:
Cost of services $ 2,512 $ 2,317 $ 4,945 $ 4,684
Cost of sales 454 348 876 676
General and administrative 101 77 192 160
- --------------------------------------------------------------------------------------------------------------------
Total operating costs and expenses $ 3,067 $ 2,742 $ 6,013 $ 5,520
- --------------------------------------------------------------------------------------------------------------------
Operating income 272 126 470 207
Interest expense (34) (33) (81) (66)
Interest income 6 3 10 10
Foreign currency losses, net (1) (3) (4) (7)
- --------------------------------------------------------------------------------------------------------------------
Income from continuing operations before taxes, minority
interest, and accounting change 243 93 395 144
Provision for income taxes (98) (36) (159) (56)
Minority interest in net income of subsidiaries (2) (5) (7) (9)
- --------------------------------------------------------------------------------------------------------------------
Income from continuing operations before accounting change 143 52 229 79
- --------------------------------------------------------------------------------------------------------------------
Discontinued operations:
Income (loss) from discontinued operations, net of tax
(provision) benefit of $32, ($14), $17, and ($28) (60) 23 (38) 45
Gain on disposal of discontinued operations, net of tax
of $199, $0, $199, and $141 299 - 299 215
- --------------------------------------------------------------------------------------------------------------------
Income from discontinued operations 239 23 261 260
- --------------------------------------------------------------------------------------------------------------------
Cumulative effect of accounting change, net - - 1 -
- --------------------------------------------------------------------------------------------------------------------
Net income $ 382 $ 75 $ 491 $ 339
====================================================================================================================
Basic income per share:
Income from continuing operations before accounting change $ 0.34 $ 0.12 $ 0.54 $ 0.18
Income (loss) from discontinued operations (0.14) 0.05 (0.09) 0.10
Gain on disposal of discontinued operations 0.70 - 0.70 0.49
- --------------------------------------------------------------------------------------------------------------------
Net income $ 0.90 $ 0.17 $ 1.15 $ 0.77
====================================================================================================================
Diluted income per share:
Income from continuing operations before accounting change $ 0.33 $ 0.12 $ 0.53 $ 0.18
Income (loss) from discontinued operations (0.14) 0.05 (0.09) 0.10
Gain on disposal of discontinued operations 0.70 - 0.70 0.48
- --------------------------------------------------------------------------------------------------------------------
Net income $ 0.89 $ 0.17 $ 1.14 $ 0.76
====================================================================================================================
Cash dividends per share $ 0.125 $ 0.125 $ 0.25 $ 0.25
Basic average common shares outstanding 427 444 427 443
Diluted average common shares outstanding 430 449 430 447
See notes to quarterly financial statements.
2
HALLIBURTON COMPANY
Condensed Consolidated Balance Sheets
(Unaudited)
(Millions of dollars and shares except per share data)
June 30 December 31
2001 2000
- ---------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and equivalents $ 328 $ 231
Receivables:
Notes and accounts receivable, net 3,249 3,029
Unbilled work on uncompleted contracts 961 816
- ---------------------------------------------------------------------------------------------------
Total receivables 4,210 3,845
Inventories 855 723
Current deferred income taxes 225 235
Net current assets of discontinued operations - 298
Other current assets 242 236
- ---------------------------------------------------------------------------------------------------
Total current assets 5,860 5,568
Property, plant and equipment after accumulated
depreciation of $3,202 and $3,150 2,483 2,410
Equity in and advances to related companies 500 400
Goodwill, net 608 597
Noncurrent deferred income taxes 300 340
Net noncurrent assets of discontinued operations - 391
Insurance for asbestos litigation claims 575 51
Other assets 335 346
- ---------------------------------------------------------------------------------------------------
Total assets $ 10,661 $ 10,103
===================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Short-term notes payable $ 717 $ 1,570
Current maturities of long-term debt 7 8
Accounts payable 832 782
Accrued employee compensation and benefits 318 267
Advanced billings on uncompleted contracts 475 288
Deferred revenues 105 98
Income taxes payable 239 113
Other current liabilities 664 700
- ---------------------------------------------------------------------------------------------------
Total current liabilities 3,357 3,826
Long-term debt 1,039 1,049
Employee compensation and benefits 472 662
Asbestos litigation claims 699 80
Other liabilities 570 520
Minority interest in consolidated subsidiaries 44 38
- ---------------------------------------------------------------------------------------------------
Total liabilities 6,181 6,175
- ---------------------------------------------------------------------------------------------------
Shareholders' equity:
Common shares, par value $2.50 per share - authorized
600 shares, issued 455 and 453 shares 1,138 1,132
Paid-in capital in excess of par value 339 259
Deferred compensation (70) (63)
Accumulated other comprehensive income (218) (288)
Retained earnings 4,117 3,733
- ---------------------------------------------------------------------------------------------------
5,306 4,773
Less 25 and 26 shares of treasury stock, at cost 826 845
- ---------------------------------------------------------------------------------------------------
Total shareholders' equity 4,480 3,928
- ---------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 10,661 $ 10,103
===================================================================================================
See notes to quarterly financial statements.
3
HALLIBURTON COMPANY
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Millions of dollars)
Six Months
Ended June 30
------------------------------
2001 2000
- ---------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 491 $ 339
Adjustments to reconcile net income to net cash from operations:
Income from discontinued operations (261) (260)
Depreciation, depletion and amortization 258 249
Provision for deferred income taxes 50 38
Distributions from (advances to) related companies, net of
equity in (earnings) losses 26 (1)
Accounting change (1) -
Accrued special charges (6) (24)
Other non-cash items 20 66
Other changes, net of non-cash items:
Receivables and unbilled work (346) (579)
Inventories (145) (33)
Accounts payable 79 12
Other working capital, net 42 (30)
Other operating activities 137 (52)
- ---------------------------------------------------------------------------------------------------
Total cash flows from operating activities 344 (275)
- ---------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (344) (190)
Sales of property, plant and equipment 39 36
(Acquisitions) dispositions of businesses, net (139) (12)
Other investing activities (8) (21)
- ---------------------------------------------------------------------------------------------------
Total cash flows from investing activities (452) (187)
- ---------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Payments on long-term borrowings (9) (305)
(Repayments) borrowings of short-term debt, net (854) (66)
Payments of dividends to shareholders (107) (111)
Proceeds from exercises of stock options 24 57
Payments to reacquire common stock (8) (6)
Other financing activities (3) -
- ---------------------------------------------------------------------------------------------------
Total cash flows from financing activities (957) (431)
- ---------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (12) (14)
Net cash flows from discontinued operations 1,174 804
- ---------------------------------------------------------------------------------------------------
Increase (decrease) in cash and equivalents 97 (103)
Cash and cash equivalents at beginning of period 231 466
- ---------------------------------------------------------------------------------------------------
Cash and equivalents at end of period $ 328 $ 363
===================================================================================================
Supplemental disclosure of cash flow information:
Cash payments during the period for:
Interest $ 16 $ 65
Income taxes $ 145 $ 130
Non-cash investing and financing activities:
Liabilities assumed in acquisitions of businesses $ 18 $ 90
Liabilities disposed of in dispositions of businesses $ 430 $ 498
See notes to quarterly financial statements.
4
HALLIBURTON COMPANY
Notes to Quarterly Financial Statements
(Unaudited)
Note 1. Management Representations
We employ accounting policies that are in accordance with generally
accepted accounting principles in the United States. Preparation of financial
statements in conformity with generally accepted accounting principles requires
us 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.
The accompanying unaudited condensed consolidated financial statements
were prepared using generally accepted accounting principles for interim
financial information, the instructions to Form 10-Q and applicable rules of
Regulation S-X. Accordingly, these financial statements do not include all
information or footnotes required by generally accepted accounting principles
for complete financial statements and should be read together with our 2000
Annual Report on Form 10-K. Prior period amounts have been reclassified to be
consistent with the current presentation.
In our opinion, the condensed consolidated financial statements present
fairly our financial position as of June 30, 2001, the results of our operations
for the three and six months ended June 30, 2001 and 2000 and our cash flows for
the six months then ended. The results of operations for the three and six
months ended June 30, 2001 and 2000 may not be indicative of results for the
full year.
Note 2. Business Segment Information
We have two business segments - Energy Services Group and Engineering
and Construction Group. Our segments are organized around the products and
services provided to our customers. During the fourth quarter of 2000, we
announced restructuring plans to combine engineering, construction, fabrication
and project management operations into one company, Kellogg Brown & Root,
reporting as our Engineering and Construction Group. This restructuring resulted
in some activities moving from the Energy Services Group to the Engineering and
Construction Group, effective January 1, 2001. Prior periods have been restated
for this change.
The following table presents revenues and operating income by business
segment on a comparable basis.
Three Months Six Months
Ended June 30 Ended June 30
------------------------- ----------------------
Millions of dollars 2001 2000 2001 2000
- ---------------------------------------------------------------------------------------------
Revenues:
Energy Services Group $ 2,214 $ 1,615 $ 4,245 $ 3,038
Engineering and Construction Group 1,125 1,253 2,238 2,689
- ---------------------------------------------------------------------------------------------
Total $ 3,339 $ 2,868 $ 6,483 $ 5,727
=============================================================================================
Operating income:
Energy Services Group $ 267 $ 113 $ 467 $ 162
Engineering and Construction Group 25 30 43 79
General corporate (20) (17) (40) (34)
- ---------------------------------------------------------------------------------------------
Total $ 272 $ 126 $ 470 $ 207
=============================================================================================
5
Energy Services Group. The Energy Services Group provides a wide range
of discrete services and products and integrated solutions to customers for the
exploration, development, and production of oil and gas. The customers for this
segment are major, national and independent oil and gas companies. This segment
consists of:
- Halliburton Energy Services provides oilfield services and
products including discrete products and services and integrated
solutions for oil and gas exploration, development and production
throughout the world. Products and services include pressure
pumping equipment and services, logging and perforating, drilling
systems and services, drilling fluids systems, drill bits,
specialized completion and production equipment and services, well
control, integrated solutions, and reservoir description,
- Landmark Graphics provides integrated exploration and production
software information systems and professional services to the
petroleum industry, and
- Other product service lines include surface/subsea operations and
large integrated engineering, procurement, and construction
projects containing both surface and sub-surface components.
Surface/subsea operations provide construction, installation and
servicing of subsea facilities; flexible pipe for offshore
applications; pipeline services for offshore customers;
pipecoating services; feasibility, conceptual and front-end
engineering and design, project management, detailed engineering,
maintenance, procurement, construction site management,
commissioning, startup and debottlenecking of both onshore and
offshore facilities.
Engineering and Construction Group. The Engineering and Construction
Group provides engineering, procurement, construction, project management, and
facilities operation and maintenance for oil and gas and other industrial and
governmental customers. The Engineering and Construction Group, operating as
Kellogg Brown & Root, includes the following five product lines:
- Onshore operations comprises engineering and construction
activities, including liquefied natural gas, ammonia, crude oil
refineries, and natural gas plants,
- Offshore operations includes specialty offshore deepwater
engineering and marine technology and worldwide fabrication
capabilities,
- Government operations provides operations, maintenance and logistics
activities for government facilities and installations,
- Operations and maintenance provides services for private sector
customers, primarily industrial, hydrocarbon and commercial
applications, and
- Asia Pacific operations, based in Australia, provides civil
engineering and consulting services.
Note 3. Acquisitions and Dispositions
Magic Earth acquisition. In April 2001, we signed a definitive
agreement to acquire Magic Earth, Inc., a leading 3-D visualization and
interpretation technology company with broad applications in the area of data
mining. Once the transaction is completed, Magic Earth will become our wholly
owned subsidiary and a part of the Energy Services Group. Under the agreement,
Halliburton will issue stock valued at $100 million, subject to final purchase
price adjustments, to acquire Magic Earth. The transaction is expected to be
completed later this year after various regulatory and other approvals are
received.
PGS Data Management acquisition. In March 2001, Landmark Graphics
acquired the PGS Data Management division of Petroleum Geo-Services ASA (PGS)
for $175 million, subject to a final working capital adjustment. Terms of the
agreement also include a contract that calls for Landmark to provide, for a fee,
strategic data management and distribution services to PGS for three years. We
have preliminarily recorded goodwill of $155 million, subject to the final
valuation of intangible assets and other costs. Goodwill, based on a 15 year
life, will only be amortized through the end of 2001 in accordance with FASB
Statement No. 142.
6
PES acquisition. In February 2000, we acquired the remaining 74% of the
shares of PES (International) Limited that we did not already own. PES is based
in Aberdeen, Scotland, and has developed technology that complements Halliburton
Energy Services' real-time reservoir solutions. To acquire the remaining 74% of
PES, we issued 1.2 million shares of Halliburton common stock. We also issued
rights that will result in the issuance of up to 2.1 million additional shares
of Halliburton common stock between February 2001 and February 2002. In February
2001 we issued 1.0 million shares under the rights. In June 2001, we issued
another 400,000 shares under the rights, leaving up to 700,000 shares to be
issued. We recorded $115 million of goodwill in connection with acquiring the
remaining 74%.
During the second quarter of 2001, we contributed the majority of PES'
assets and technologies, including $130 million of goodwill associated with the
purchase of PES, to a newly formed joint venture, WellDynamics. We received $39
million in cash as an equity equalization adjustment. The remaining assets of
PES relating to completions and well intervention products have been combined
with our existing completions product service line. We own 50% of WellDynamics
and account for this investment using the equity method.
Note 4. Discontinued Operations
In 1999 the Dresser Equipment Group was comprised of six operating
divisions and two joint ventures that manufactured and marketed equipment used
primarily in the energy, petrochemical, power and transportation industries. In
late 1999 and early 2000, we sold our interests in the two joint ventures. These
joint ventures represented nearly half of the group's revenues and operating
profit in 1999. The sale of our interests in the segment's joint ventures
prompted a strategic review of the remaining businesses within the Dresser
Equipment Group. As a result of this review, we determined that the remaining
businesses did not closely fit with our core businesses, long-term goals and
strategic objectives. In April 2000, our Board of Directors approved plans to
sell all the remaining businesses within the Dresser Equipment Group.
In January 2001, we signed a definitive agreement and closed on the
sale of these businesses on April 10, 2001. As part of the terms of the
transaction, we retained a 5.1% equity interest in the Dresser Equipment Group,
which has been renamed Dresser, Inc. In the second quarter of 2001, we
recognized a preliminary pretax gain on the sale of discontinued operations of
$498 million ($299 million after-tax) subject to final purchase price
adjustments. Total value under the agreement was $1.55 billion less assumed
liabilities that resulted in cash proceeds of $1.27 billion from the sale. In
connection with the sale, we accrued certain disposition related costs, realized
$68 million of noncurrent deferred income tax assets, and reduced employee
compensation and benefit liabilities by $152 million for liabilities assumed by
the purchaser. The employee compensation and benefit liabilities were previously
included in "Employee compensation and benefits" in the condensed consolidated
balance sheets.
Gain on disposal of discontinued operations represents the gain on the
sale of the remaining businesses within the Dresser Equipment Group in the
second quarter of 2001 and the gain on the sale of Dresser-Rand in the first
quarter of 2000.
Three Months Six Months
Gain on Disposal of Discontinued Ended June 30 Ended June 30
Operations ---------------------- ----------------------
Millions of dollars 2001 2000 2001 2000
- --------------------------------------------------------------------------------------------------
Proceeds from sale, less
intercompany settlement $ 1,267 $ - $ 1,267 $ 536
Net assets disposed (769) - (769) (180)
- --------------------------------------------------------------------------------------------------
Gain before taxes 498 - 498 356
Income taxes (199) - (199) (141)
- --------------------------------------------------------------------------------------------------
Gain on disposal of discontinued operations $ 299 $ - $ 299 $ 215
==================================================================================================
7
The financial results of the Dresser Equipment Group through March 31,
2001 are presented as discontinued operations in our financial statements.
During the three months ended June 30, 2001, we recorded as discontinued
operations a provision of $92 million as follows:
- $90 million for liabilities less anticipated insurance recoveries
for asbestos claims arising after the 1992 divestiture of INDRESCO,
previously reported as discontinued operations. See Note 7.
- $2 million for other non-engineering and construction related
asbestos claims for businesses previously disposed of by Dresser
Industries, Inc. which were accounted for as continuing operations
in prior periods.
Three Months Six Months
Income (loss) from Discontinued Ended June 30 Ended June 30
Operations ------------------------- -----------------------
Millions of dollars 2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------
Revenues $ - $ 354 $ 359 $ 691
===============================================================================================
Operating income $ - $ 37 $ 37 $ 73
Asbestos litigation claims, net of
insurance recoveries (92) - (92) -
Tax benefit (expense) 32 (14) 17 (28)
- -----------------------------------------------------------------------------------------------
Net income (loss) $ (60) $ 23 $ (38) $ 45
===============================================================================================
Net Assets of Discontinued Operations December 31
Millions of dollars 2000
- --------------------------------------------------------------------
Receivables $ 286
Inventories 255
Other current assets 22
Accounts payable (104)
Other current liabilities (161)
- --------------------------------------------------------------------
Net current assets of discontinued operations $ 298
====================================================================
Net property, plant and equipment $ 219
Goodwill, net 257
Other assets 30
Employee compensation and benefits (113)
Other liabilities (2)
- --------------------------------------------------------------------
Net noncurrent assets of discontinued operations $ 391
====================================================================
Note 5. Receivables
Our receivables are generally not collateralized. With the exception of
claims and change orders that are in the process of being negotiated with
customers, unbilled work on uncompleted contracts generally represents work
currently billable, and this work is usually billed during normal billing
processes in the next several months. Claims and change orders included in
unbilled receivables amounted to $154 million and $113 million at June 30, 2001
and December 31, 2000, respectively.
Note 6. Inventories
Inventories to support continuing operations at June 30, 2001 and
December 31, 2000 are composed of the following:
June 30 December 31
---------------- ---------------
Millions of dollars 2001 2000
- --------------------------------------------------------------------
Finished products and parts $ 541 $ 486
Raw materials and supplies 226 178
Work in process 88 59
- --------------------------------------------------------------------
Total $ 855 $ 723
====================================================================
8
Inventories on the last-in, first-out method were $77 million at June
30, 2001 and $66 million at December 31, 2000. If the average cost method had
been used, total inventories would have been about $29 million higher than
reported at June 30, 2001 and $28 million higher than reported at December 31,
2000.
Note 7. Commitments and Contingencies
Asbestos litigation. Since 1976, our subsidiary, Dresser Industries,
Inc. and its former divisions or subsidiaries have been defending numerous
lawsuits in which it is alleged that some products they manufactured contained
asbestos and as a result the individual plaintiffs were injured through
inhalation of asbestos fibers. Since then, we have entered into agreements with
our insurance companies, to recover in whole or in part, indemnity payments,
legal fees and expenses for specific categories of asbestos claims. We are
negotiating with those insurance companies for coverage for the remaining
categories of these claims. Because these agreements are governed by exposure
dates, payment type and the product involved, the covered amount varies by
claim. In addition, we have brought lawsuits against several other insurance
companies to recover additional amounts related to these asbestos claims.
Dresser's discussions with London-based carriers and Equitas lead us to believe
that they are attempting to impose new documentation requirements on many
insureds. The current coverage-in-place agreements that Dresser has with some of
these carriers contains specific but different documentation requirements. We
believe that any new documentation requirements are inconsistent with the
current coverage-in-place agreements and are unenforceable.
Our Engineering and Construction Group is also involved in asbestos
claims litigation. In these lawsuits, claimants allege they have sustained
injuries from the inhalation of asbestos fibers contained in some of the
materials used in various construction and renovation projects involving our
Kellogg Brown & Root subsidiary. Our primary insurance coverage for Kellogg
Brown & Root for the applicable years was written by Highlands Insurance
Company. Highlands was a subsidiary of Halliburton Energy Services, Inc. prior
to its spin-off to our shareholders in early 1996. Most claims filed against
Kellogg Brown & Root allege exposure to asbestos prior to the spin-off of
Highlands and are disposed of for less than the limits of the Highlands
policies. We were unable, in negotiations with Highlands during 1999 and early
2000, to reach an agreement on the amount of insurance coverage Highlands is
obligated to provide for these claims. On April 5, 2000, Highlands filed a
lawsuit in Delaware Chancery Court alleging that, as part of the spin-off in
1996, Halliburton assumed liability for all asbestos claims filed against
Halliburton after the spin-off. Highlands also alleged that Halliburton did not
adequately disclose to Highlands the existence of Halliburton's subsidiaries'
potential asbestos liability. On August 23, 2000, Highlands issued a letter
denying coverage under the policies based on its assertions in the Delaware
lawsuit. We believe that Highlands is contractually obligated to provide
insurance coverage for asbestos claims filed against Kellogg Brown & Root and we
are asserting our right to insurance coverage vigorously. On April 24, 2000,
Halliburton filed a lawsuit against Highlands in Harris County, Texas, claiming
that Highlands breached its contractual obligation to provide insurance
coverage. We have asked the Texas court to order Highlands to provide coverage
for asbestos claims under the guaranteed cost policies issued by Highlands to
Kellogg Brown & Root. This lawsuit is stayed pending resolution of the Delaware
litigation.
On March 21, 2001 the Delaware Chancery Court ruled that Highlands was
not obligated to provide insurance coverage for asbestos claims filed against
Kellogg Brown & Root. The court ruled that the agreements entered into by
Highlands and Halliburton at the time of the spin-off terminated the policies
previously written by Highlands that would otherwise have covered these claims.
This ruling, if it is not reversed on appeal, would eliminate our primary
insurance covering asbestos claims against Kellogg Brown & Root for periods
prior to the spin-off. We and our legal counsel, Vinson & Elkins L.L.P.,
believe, however, that the court's ruling is wrong. We are in the process of
appealing the ruling to the Delaware Supreme Court, which will hear oral
argument on September 17, 2001. It may be early 2002 before the Delaware Supreme
Court rules on our appeal. Vinson & Elkins has rendered an opinion to us that it
is very likely that the ruling of the Chancery Court will be reversed because
the ruling clearly contravenes the provisions of the applicable agreements
between Highlands and Halliburton. Vinson & Elkins has also opined to us that it
is likely that we will ultimately prevail in this litigation.
9
Since 1976, approximately 327,000 asbestos claims have been filed
against us in regards to the above claims. About 30,000 of these claims relate
to Brown & Root, now part of Kellogg Brown & Root. The balance of these claims
relate to former Dresser divisions and subsidiaries or other Halliburton
entities. Approximately 182,000 of these claims have been settled or disposed of
at a gross cost of approximately $138 million, with recoveries from insurance
companies paying or expected to pay all but approximately $37 million. Asbestos
claims continue to be filed against us, with about 45,000 claims filed in 2000
and about 46,000 filed in the first two quarters of 2001. At June 30, 2001,
there were about 145,000 open asbestos claims asserted against us, including
about 24,000 associated with insurance recoveries we expect to collect from
Highlands. This number of open claims compares with approximately 117,000 open
claims at the end of 2000. Open claims at June 30, 2001 also include 13,000
claims for which settlements are pending.
We have accrued reserves for our estimate of our liability for known
asbestos claims that have been asserted against us. Our estimate of the cost of
resolving asserted asbestos claims is based on our historical litigation
experience, our prior completed settlements and our estimate of amounts we will
recover from insurance companies. Our estimate of recoveries from insurance
companies, other than Highlands Insurance Company, is based on agreements we
have with a number of insurance companies, or in those instances in which
agreements are still in negotiation or in litigation, our estimate of our
ultimate recovery from insurance companies. We believe that the insurance
companies with which we have signed agreements will be able to meet their share
of future obligations under these agreements.
Highlands parent company, Highlands Insurance Group, Inc., has stated
in its SEC filings that, if Highlands is ultimately required to pay asbestos
claims asserted against Kellogg Brown & Root, the payments could have a material
adverse impact on its financial position. Highlands has reported that its
statutory capital surplus was $131.3 million as of March 31, 2001, up from
$127.4 million at the end of the year 2000, and down from $166.7 million at the
end of 1999. On April 3, 2001, Standard & Poor's announced that it had lowered
its financial strength rating on Highlands and its affiliates to `BBpi' to
reflect uncertainty regarding the adequacy of their capitalization and
liquidity. On April 20, 2001 A.M. Best, a leading insurance rating agency,
downgraded Highlands and its affiliates to "B" (Fair) from "B++" (Very Good) to
reflect concerns about the group's capitalization adequacy and poor operating
results. Although we do not know the extent of the impact of these developments
on Highlands, we believe that Highlands still has the ability to pay
substantially all of the asbestos claims at issue in the pending litigation,
assuming the litigation is successfully concluded in our favor.
Harbison-Walker Asbestos Claims
Our subsidiary, Dresser Industries, Inc., acquired Harbison-Walker
Refractories Company in 1967. After the acquisition, Dresser operated the
refractory business as a division. In 1992, Dresser placed the refractory
business and several other businesses in a subsidiary, INDRESCO, Inc., and
spun-off INDRESCO to Dresser's shareholders as a new publicly held company. In
conjunction with the spin-off, Dresser and Harbison-Walker, then called
INDRESCO, entered into an agreement, which allocated between them responsibility
for asbestos claims related to the refractory business. Dresser agreed to retain
claims filed prior to the spin-off. Harbison-Walker agreed to assume claims
filed after the spin-off and to indemnify and defend Dresser from those claims.
They also agreed that Harbison-Walker would have access to substantial amounts
of Dresser's insurance coverage. This insurance would reimburse Harbison-Walker
for defense costs and indemnity payments incurred defending the asbestos claims
Harbison-Walker assumed. This insurance requires Harbison-Walker to first pay
defense and indemnity costs and then seek reimbursement. This insurance, which
includes policies issued by more than 20 different insurance carriers, including
the Lloyds-related Equitas, also covers other types of claims against Dresser,
including asbestos claims from other former Dresser businesses.
Subsequent to the spin-off, INDRESCO formed a new holding company,
Global Industrial Technologies, Inc. and changed INDRESCO's name to
Harbison-Walker Refractories Company, leaving it as a subsidiary of Global. At
the end of 1999, RHI AG, an Austrian company, acquired Global.
10
In June 2001, Harbison-Walker informed Dresser that it was unable to
pay a large number of asbestos claims settlements it had negotiated with
plaintiffs. Harbison-Walker requested that Dresser provide it with financial
assistance to pay these settlements. Since receiving its request, we have
conducted an investigation of the status of the asbestos claims assumed by
Harbison-Walker. We believe that at June 30, 2001, Harbison-Walker was defending
approximately 112,000 open claims it assumed under the 1992 agreement, including
approximately 35,000 new refractory related claims which were filed during the
first half of this year, many of which name Dresser as a defendant based on its
prior ownership of the refractory business. Based upon information we developed,
including our own experience managing asbestos claims and our analysis of
Harbison-Walker's claims management, we have estimated our exposure on these
open claims. Harbison-Walker's average historical claim settlements have been
significantly higher than we have experienced with our similar refractory claim
settlements. In addition, Harbison-Walker appears to have entered into
settlements of 47,000 to 52,000 additional claims for an aggregate amount that
may exceed $320 million. Harbison-Walker has historically recovered more than
90% of their asbestos claims settlements through their insurance coverage. None
of the above Harbison-Walker claims have been included in previous asbestos
claims reported by Halliburton due to our reliance on Harbison-Walker's defense
and indemnity obligations under the 1992 spin-off agreement.
Based on its request for assistance, we believe that Harbison-Walker
does not have the financial ability to comply with its defense and indemnity
requirements under the 1992 spin-off agreement. Dresser's discussions with some
of the insurance carriers obligated to provide coverage for these claims
indicate that it is likely that they will refuse to pay Harbison-Walker's
existing settlements. In addition, Equitas and other London-based insurance
carriers have notified Harbison-Walker and Dresser that they will attempt to
impose new documentation requirements on reimbursement claims made on this
insurance. The current coverage-in-place agreement that Dresser and
Harbison-Walker have with these carriers contains specific but different
documentation requirements. We believe that any new documentation requirements
are inconsistent with the current coverage-in-place agreement and are
unenforceable.
Based on our investigation, Dresser has decided that it will not
provide financial assistance to Harbison-Walker to pay the settlements
Harbison-Walker has negotiated but is unable to pay. Dresser has also decided
that it will not relieve Harbison-Walker of its obligations under the 1992
agreement. We believe that Harbison-Walker is no longer able to provide and is
not providing Dresser with an adequate defense and indemnity as required under
the 1992 agreement. As a result, Dresser will separately and aggressively assert
its own defense of those claims that name Dresser as a defendant, including any
new claims.
On August 2, 2001, Harbison-Walker filed a lawsuit in the District
Court of Jefferson County, Texas alleging that Dresser and Halliburton breached,
among other things, provisions of the 1992 spin-off agreement and the
coverage-in-place agreements as well as commercially disparaged Harbison-Walker
and tortiously interfered with its contractual relationships. Harbison-Walker's
lawsuit bases these allegations on the press releases issued by Halliburton on
June 28, 2001 and July 25, 2001.
We believe that these allegations are without merit and will vigorously
defend against them. On August 7, 2001, Dresser and Halliburton filed a Motion
to Compel Arbitration in the Jefferson County action based on the arbitration
provision contained in the 1992 spin-off agreement. In our motion, we asked the
Court to dismiss Harbison-Walker's lawsuit and order the parties to arbitrate
all of the disputes arising out of the interpretation and implementation of the
spin-off agreement.
Also on August 7, 2001, Dresser filed a lawsuit, in the United States
District Court for the Northern District of Texas, against Harbison-Walker's
parent company, RHI AG, an Austrian corporation, Harbison-Walker's affiliates,
and Dresser's insurance companies. In this lawsuit, Dresser alleges that:
- Harbison-Walker, in concert with its affiliates and agents,
fraudulently billed Dresser's historic general liability insurers
for asbestos-related costs that Harbison-Walker had yet to pay;
- Harbison, its affiliates and agents have violated federal mail
fraud and money laundering statutes, and thus, have violated the
Racketeer Influenced Corrupt Organizations Act, commonly referred
to as a RICO action; and
- The actions of Harbison-Walker, its affiliates and agents constitute
common law conversion and conspiracy.
11
Finally, Dresser also seeks a declaratory judgment that the amounts
these insurance companies improperly paid to Harbison-Walker in response to the
fraudulent billings do not erode the insurance coverage available to Dresser for
its asbestos-related liabilities.
Also on August 7, 2001, Dresser filed a comprehensive insurance
coverage lawsuit, in the District Court of Dallas County, Texas, against its
historic general liability insurers. Dresser seeks, among other relief, a
declaratory judgment that Dresser is entitled to insurance coverage for all of
its asbestos-related liabilities arising out of its pre-November 1, 1985
operations or the operations of its predecessors acquired prior to November 1,
1985. Dresser filed this lawsuit to further protect its insurance coverage asset
in light of several developments including:
- Harbison-Walker's attempt to improperly access insurance
coverage; and
- London-based insurers' lawsuits against other unrelated
policyholders seeking to unilaterally and improperly modify
existing coverage-in-place agreements.
Summary
Based on our analysis of the believed number of current claims pending
against Harbison-Walker and our experience with our other asbestos claims, we
recorded as discontinued operations in the 2001 second quarter an accrual of $92
million ($60 million, after tax) for potential liabilities for open and settled
asbestos claims at June 30, 2001.
Discontinued Operations Asbestos Reserve June 30
Millions of dollars 2001
- ---------------------------------------------------------------------------------
Harbison-Walker open claims liability $ 576
Estimated insurance recoveries - Harbison-Walker (518)
Harbison-Walker settled but not paid liability 32
Dresser Industries, Inc. claims on disposed businesses 14
Estimated insurance recoveries - Dresser Industries, Inc. (12)
- ---------------------------------------------------------------------------------
Asbestos claims in discontinued operations, net of insurance $ 92
=================================================================================
A summary of our reserves for all open asbestos claims and
corresponding estimated insurance recoveries, including the above, is as
follows:
June 30 December 31
--------------- ----------------
Millions of dollars 2001 2000
- --------------------------------------------------------------------------------------
Asbestos litigation claims $ 699 $ 80
Estimated insurance recoveries:
Highlands Insurance Company (37) (39)
Other insurance carriers (538) (12)
- --------------------------------------------------------------------------------------
Insurance for asbestos litigation claims (575) (51)
- --------------------------------------------------------------------------------------
Net liability for known open asbestos claims $ 124 $ 29
======================================================================================
The above are included in noncurrent assets and liabilities due to the
extended time periods involved to settle claims.
In addition to the above, accounts receivable include amounts we expect
to collect from Highlands Insurance Company of $20 million for payments we
already have made on asbestos claims. If our appeal of the Chancery Court's
ruling in the Highlands litigation is ultimately unsuccessful, we will be unable
to collect this $20 million as well as the $37 million estimated recovery from
Highlands. This may have a material adverse impact on the results of our
operations and our financial position at that time.
12
Accounts receivable for billings to other insurance carriers for
payments made on asbestos claims were $11 million at June 30, 200l and $13
million at December 31, 2000.
The uncertainties of asbestos litigation, resolution of the newly filed
Harbison-Walker and insurance litigation, and the possibility that a series of
adverse court rulings or new legislation affecting the asbestos claims
litigation or settlement process make it difficult to accurately predict and
could materially impact the resolution of our asbestos claims. Subject to this
difficulty, however, and based upon:
- our historical experience with similar claims;
- the time elapsed since Dresser and its former divisions or
subsidiaries discontinued sale of products containing asbestos;
- the time elapsed since Kellogg Brown & Root used materials
containing asbestos in any construction process;
- our understanding of the facts and circumstances that gave rise to
asbestos claims; and
- our estimate of amounts we will recover from insurance companies,
we believe that the known open asbestos claims asserted against us will be
resolved without a material adverse effect on our financial position or results
of operations.
Fort Ord litigation. Brown & Root Services, now operating as Kellogg
Brown & Root, is a defendant in civil litigation pending in federal court in
Sacramento, California. The lawsuit alleges that Brown & Root Services violated
provisions of the False Claims Act while performing work for the United States
Army at Fort Ord in California. This lawsuit was filed by a former employee in
1997. Brown & Root Services has denied the allegations and is preparing to
defend itself at trial. Further proceedings in this civil lawsuit have been
stayed while the investigation referred to in the next paragraph is ongoing. We
believe that it is remote that this civil litigation will result in any material
amount of damages being assessed against us, although the cost of our defense
could well exceed $1 million before the matter is brought to a conclusion.
Although in 1998 the United States Department of Justice declined to
join this litigation, it has advised us that Brown & Root Services is the target
of a federal grand jury investigation regarding the contract administration
issues raised in the civil litigation. Brown & Root Services has been served
with grand jury subpoenas, which required the production of documents relating
to the Fort Ord contract and similar contracts at other locations. We have also
been informed that several current and former employees will be called to
testify before the grand jury. We have retained independent counsel for these
employees. We are cooperating in this investigation. The United States
Department of Justice has not made any specific allegations against Brown & Root
Services.
Environmental. We are subject to numerous environmental legal and
regulatory requirements related to our operations worldwide. We take a proactive
approach to evaluating and addressing the environmental impact of our
operations. Each year we assess and remediate contaminated properties in order
to avoid future liabilities and comply with legal and regulatory requirements.
On occasion we are involved in specific environmental litigation and claims,
including the clean-up of properties we own or have operated as well as efforts
to meet or correct compliance-related matters.
Some of our subsidiaries and former operating entities are involved as
a potentially responsible party or PRP in remedial activities to clean-up
several "Superfund" sites under United States federal law and comparable state
laws. Kellogg Brown & Root is one of nine PRP's named at the Tri-State Mining
District "Superfund" Site, also known as the Jasper County "Superfund" Site.
Based on our negotiations with federal regulatory authorities and our evaluation
of our responsibility for remediation at small portions of this site, we do not
believe we will be compelled to make expenditures which will have a material
adverse effect on our financial position or results of operations. However, the
United States Department of the Interior and the State of Missouri have
indicated that they might make a separate claim against Kellogg Brown & Root for
natural resource damages. Discussions with them have not been concluded and we
are unable to make a judgement about the amount of damages they may seek.
13
We also incur costs related to compliance with ever-changing
environmental, legal and regulatory requirements in the jurisdictions where we
operate. It is very difficult to quantify the potential liabilities. We do not
expect these expenditures to have a material adverse effect on our consolidated
financial position or our results of operations.
During the second quarter of 2001, we accrued $15 million for
environmental matters related to liabilities retained on properties included in
the sale of Dresser Equipment Group. Our accrued liabilities for environmental
matters were $49 million as of June 30, 2001 and $31 million as of December 31,
2000.
Other. We are a party to various other legal proceedings. We expense
the cost of legal fees related to these proceedings. We believe any liabilities
we may have arising from these proceedings will not be material to our
consolidated financial position or our results of operations.
Note 8. Income Per Share
Three Months Six Months
Ended June 30 Ended June 30
Millions of dollars and shares except ---------------------------- ---------------------------
per share data 2001 2000 2001 2000
- ----------------------------------------------------------------------------------------------------------------
Income from continuing operations before
accounting change $ 143 $ 52 $ 229 $ 79
================================================================================================================
Basic weighted average shares 427 444 427 443
Effect of common stock equivalents 3 5 3 4
- ----------------------------------------------------------------------------------------------------------------
Diluted weighted average shares 430 449 430 447
================================================================================================================
Income per common share from continuing
operations before accounting change:
Basic $ 0.34 $ 0.12 $ 0.54 $ 0.18
================================================================================================================
Diluted $ 0.33 $ 0.12 $ 0.53 $ 0.18
================================================================================================================
Income from discontinued operations:
Basic $ 0.56 $ 0.05 $ 0.61 $ 0.59
================================================================================================================
Diluted $ 0.56 $ 0.05 $ 0.61 $ 0.58
================================================================================================================
Basic income per share is based on the weighted average number of
common shares outstanding during the period. Diluted income per share includes
additional common shares that would have been outstanding if potential common
shares with a dilutive effect had been issued. Included in the computation of
diluted income per share are the outstanding rights issued in connection with
the PES acquisition of up to 2.1 million shares of Halliburton common stock. See
Note 3. Excluded from the computation of diluted income per share are options to
purchase 1.9 million and 1.0 million shares of common stock which were
outstanding during the three months ended June 30, 2001 and June 30, 2000,
respectively. Also excluded from the computation of diluted income per share are
options to purchase 2.1 million and 1.3 million shares of common stock which
were outstanding during the six months ended June 30, 2001 and June 30, 2000,
respectively. These options were outstanding during these respective periods,
but were excluded because the option exercise price was greater than the average
market price of the common shares.
14
Note 9. Comprehensive Income
The components of other comprehensive income adjustments to net income
include the cumulative translation adjustment of some of our foreign entities,
minimum pension liability adjustments and unrealized gains or (losses) on
investments and derivatives.
Three Months Six Months
Ended June 30 Ended June 30
---------------------------- ----------------------------
Millions of dollars 2001 2000 2001 2000
- ------------------------------------------------------------------------------------------------------------------
Net income $ 382 $ 75 $ 491 $ 339
Cumulative translation adjustment, net of tax (4) (40) (46) (50)
Less reclassification adjustment for (gains)
included in net income 102 - 102 (11)
Adjustment to minimum pension liability 12 - 12 -
Unrealized gains on investments and derivatives 4 - 2 -
- ------------------------------------------------------------------------------------------------------------------
Total comprehensive income $ 496 $ 35 $ 561 $ 278
==================================================================================================================
Accumulated other comprehensive income at June 30, 2001 and December
31, 2000 consisted of the following:
June 30 December 31
--------------- ---------------
Millions of dollars 2001 2000
- ------------------------------------------------------------------------------------------------
Cumulative translation adjustment $ (219) $ (275)
Minimum pension liability - (12)
Unrealized gains (losses) on investments and derivatives 1 (1)
- ------------------------------------------------------------------------------------------------
Total accumulated other comprehensive income $ (218) $ (288)
================================================================================================
Note 10. Engineering and Construction Reorganization
As a result of the reorganization of our engineering and construction
businesses, we took actions in the fourth quarter of 2000 to reduce our cost
structure including asset related charges of $20 million and personnel related
charges of $16 million. Asset related write-offs of equipment, engineering
reference designs and capitalized software were all completed by December 31,
2000. Personnel related payments of $11 million have been made and the
elimination of approximately 30 senior management positions is substantially
complete. We expect remaining payments under severance arrangements to be
completed during 2001.
Note 11. Dresser Financial Information
Since becoming a wholly owned subsidiary, Dresser Industries, Inc. has
ceased filing periodic reports with the Securities and Exchange Commission.
Dresser's 8% guaranteed senior notes, which were initially issued by Baroid
Corporation, remain outstanding and are fully and unconditionally guaranteed by
Halliburton. In January 1999, as part of a legal reorganization associated with
the merger, Halliburton Delaware, Inc., our first tier holding company
subsidiary, was merged into Dresser. The majority of our operating assets and
activities are now included in Dresser and its subsidiaries. In August 2000, the
Securities and Exchange Commission released revised rules governing the
financial statements of guarantors and issuers of guaranteed registered
securities. The following condensed consolidating financial information presents
Halliburton and our subsidiaries on a stand-alone basis using the equity method
of accounting for our interest in our subsidiaries.
15
Condensed Consolidating Statements of Income
Quarter ended June 30, 2001
Dresser
Non-issuer/ Industries, Halliburton Consolidated
Non-guarantor Inc. Company Consolidating Halliburton
Millions of dollars Subsidiaries (Issuer) (Guarantor) Adjustments Company
- -----------------------------------------------------------------------------------------------------------------------
Total revenues $ 3,339 $ 170 $ 525 $ (695) $ 3,339
Cost of revenues (2,966) - - - (2,966)
General and administrative (101) - - - (101)
Interest expense (16) (8) (10) - (34)
Interest income 5 3 29 (31) 6
Other, net 10 125 (17) (119) (1)
- -----------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before taxes and minority interest 271 290 527 (845) 243
Provision for income taxes (99) (4) 5 - (98)
Minority interest in net income of
subsidiaries (2) - - - (2)
- -----------------------------------------------------------------------------------------------------------------------
Income from continuing operations 170 286 532 (845) 143
Income from discontinued operations - 239 - - 239
- -----------------------------------------------------------------------------------------------------------------------
Net income $ 170 $ 525 $ 532 $ (845) $ 382
=======================================================================================================================
Condensed Consolidating Statements of Income
Quarter ended June 30, 2000
Dresser
Non-issuer/ Industries, Halliburton Consolidated
Non-guarantor Inc. Company Consolidating Halliburton
Millions of dollars Subsidiaries (Issuer) (Guarantor) Adjustments Company
- -----------------------------------------------------------------------------------------------------------------------
Total revenues $ 2,868 $ 96 $ 119 $ (215) $ 2,868
Cost of revenues (2,665) - - - (2,665)
General and administrative (77) - - - (77)
Interest expense (10) (14) (9) - (33)
Interest income 3 36 15 (51) 3
Other, net (2) - (1) - (3)
- -----------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before taxes and minority interest 117 118 124 (266) 93
Provision for income taxes (39) 1 2 - (36)
Minority interest in net income of
subsidiaries (5) - - - (5)
- -----------------------------------------------------------------------------------------------------------------------
Income from continuing operations 73 119 126 (266) 52
Income from discontinued operations 23 - - - 23
- -----------------------------------------------------------------------------------------------------------------------
Net income $ 96 $ 119 $ 126 $ (266) $ 75
=======================================================================================================================
16
Condensed Consolidating Statements of Income
Six Months ended June 30, 2001
Dresser
Non-issuer/ Industries, Halliburton Consolidated
Non-guarantor Inc. Company Consolidating Halliburton
Millions of dollars Subsidiaries (Issuer) (Guarantor) Adjustments Company
- -------------------------------------------------------------------------------------------------------------------------
Total revenues $ 6,483 $ 306 $ 673 $ (979) $ 6,483
Cost of revenues (5,821) - - - (5,821)
General and administrative (192) - - - (192)
Interest expense (21) (17) (44) 1 (81)
Interest income 9 6 29 (34) 10
Other, net (1) 146 (4) (145) (4)
- -------------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before taxes, minority interest and
accounting change 457 441 654 (1,157) 395
Provision for income taxes (167) (7) 15 - (159)
Minority interest in net income of
subsidiaries (7) - - - (7)
- -------------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before accounting change 283 434 669 (1,157) 229
Income from discontinued operations 22 239 - - 261
Cumulative effect of accounting change, net 1 - - - 1
- -------------------------------------------------------------------------------------------------------------------------
Net income $ 306 $ 673 $ 669 $(1,157) $ 491
=========================================================================================================================
Condensed Consolidating Statements of Income
Six Months ended June 30, 2000
Dresser
Non-issuer/ Industries, Halliburton Consolidated
Non-guarantor Inc. Company Consolidating Halliburton
Millions of dollars Subsidiaries (Issuer) (Guarantor) Adjustments Company
- -----------------------------------------------------------------------------------------------------------------------
Total revenues $ 5,727 $ 169 $ 425 $ (594) $ 5,727
Cost of revenues (5,360) - - - (5,360)
General and administrative (160) - - - (160)
Interest expense (14) (27) (25) - (66)
Interest income 10 65 29 (94) 10
Other, net (6) - (1) - (7)
- -----------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before taxes and minority interest 197 207 428 (688) 144
Provision for income taxes (64) 3 5 - (56)
Minority interest in net income of
subsidiaries (9) - - - (9)
- -----------------------------------------------------------------------------------------------------------------------
Income from continuing operations 124 210 433 (688) 79
Income from discontinued operations 45 215 - - 260
- -----------------------------------------------------------------------------------------------------------------------
Net income $ 169 $ 425 $ 433 $ (688) $ 339
=======================================================================================================================
17
Condensed Consolidating Balance Sheets
June 30, 2001
Dresser
Non-issuer/ Industries, Halliburton Consolidated
Non-guarantor Inc. Company Consolidating Halliburton
Millions of dollars Subsidiaries (Issuer) (Guarantor) Adjustments Company
- -----------------------------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and equivalents $ 166 $ 6 $ 156 $ - $ 328
Receivables:
Notes and accounts receivable, net 1,556 1,693 - - 3,249
Unbilled work on uncompleted contracts 959 - 2 - 961
- -----------------------------------------------------------------------------------------------------------------------
Total receivables 2,515 1,693 2 - 4,210
Inventories 855 - - - 855
Other current assets 461 1 5 - 467
- -----------------------------------------------------------------------------------------------------------------------
Total current assets 3,997 1,700 163 - 5,860
Property, plant and equipment, net 2,483 - - - 2,483
Equity in and advances to
unconsolidated affiliates 457 43 - - 500
Intercompany receivable from
consolidated affiliates - - 2,638 (2,638) -
Equity in and advances to
consolidated affiliates - 5,351 3,182 (8,533) -
Goodwill, net 523 85 - - 608
Insurance for asbestos litigation claims 57 518 - 575
Other assets 585 37 13 - 635
- -----------------------------------------------------------------------------------------------------------------------
Total assets $ 8,102 $ 7,734 $ 5,996 $(11,171) $10,661
=======================================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts and notes payable $ 796 $ 58 $ 702 $ - $ 1,556
Other current liabilities 1,539 219 43 - 1,801
- -----------------------------------------------------------------------------------------------------------------------
Total current liabilities 2,335 277 745 - 3,357
Long-term debt 200 439 400 - 1,039
Intercompany payable from
consolidated affiliates (585) 3,223 - (2,638) -
Asbestos litigation claims 90 609 - 699
Other liabilities 955 4 83 - 1,042
Minority interest in consolidated
subsidiaries 44 - - - 44
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities 3,039 4,552 1,228 (2,638) 6,181
Shareholders' equity:
Common shares 391 - 1,138 (391) 1,138
Other shareholders' equity 4,672 3,182 3,630 (8,142) 3,342
- -----------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 5,063 3,182 4,768 (8,533) 4,480
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 8,102 $ 7,734 $ 5,996 $(11,171) $10,661
=======================================================================================================================
18
Condensed Consolidating Balance Sheets
December 31, 2000
Dresser
Non-issuer/ Industries, Halliburton Consolidated
Non-guarantor Inc. Company Consolidating Halliburton
Millions of dollars Subsidiaries (Issuer) (Guarantor) Adjustments Company
- -----------------------------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and equivalents $ 216 $ 11 $ 4 $ - $ 231
Receivables:
Notes and accounts receivable, net 2,966 63 - - 3,029
Unbilled work on uncompleted contracts 816 - - - 816
- -----------------------------------------------------------------------------------------------------------------------
Total receivables 3,782 63 - - 3,845
Inventories 723 - - - 723
Other current assets 753 1 15 - 769
- -----------------------------------------------------------------------------------------------------------------------
Total current assets 5,474 75 19 - 5,568
Property, plant and equipment, net 2,410 - - - 2,410
Equity in and advances to
unconsolidated affiliates 258 142 - - 400
Intercompany receivable from
consolidated affiliates 68 - 2,138 (2,206) -
Equity in and advances to
consolidated affiliates - 6,558 4,220 (10,778) -
Goodwill, net 510 87 - - 597
Other assets 1,109 5 14 - 1,128
- -----------------------------------------------------------------------------------------------------------------------
Total assets $ 9,829 $ 6,867 $ 6,391 $(12,984) $10,103
=======================================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts and notes payable $ 756 $ 64 $ 1,540 $ - $ 2,360
Other current liabilities 1,374 36 56 - 1,466
- -----------------------------------------------------------------------------------------------------------------------
Total current liabilities 2,130 100 1,596 - 3,826
Long-term debt 205 444 400 - 1,049
Intercompany payable from
consolidated affiliates - 2,206 - (2,206) -
Other liabilities 1,118 26 118 - 1,262
Minority interest in consolidated
subsidiaries 38 - - - 38
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities 3,491 2,776 2,114 (2,206) 6,175
Shareholders' equity:
Common shares 391 - 1,132 (391) 1,132
Other shareholders' equity 5,947 4,091 3,145 (10,387) 2,796
- -----------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 6,338 4,091 4,277 (10,778) 3,928
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 9,829 $ 6,867 $ 6,391 $(12,984) $10,103
=======================================================================================================================
19
Condensed Consolidating Statements of Cash Flows
Six Months ended June 30, 2001
Dresser
Non-issuer/ Industries, Halliburton Consolidated
Non-guarantor Inc. Company Consolidating Halliburton
Millions of dollars Subsidiaries (Issuer) (Guarantor) Adjustments Company
- ------------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities $ 251 $ 46 $ 47 $ - $ 344
Capital expenditures (344) - - - (344)
Sales of property, plant and equipment 39 - - - 39
Other investing activities (147) - 1,032 (1,032) (147)
Payments on long-term borrowings (4) (5) - - (9)
Borrowings (repayments) of
short-term debt, net (18) - (836) - (854)
Payments of dividends to shareholders - - (107) - (107)
Proceeds from exercises of stock options - - 24 - 24
Payments to reacquire common stock - (8) - (8)
Other financing activities 185 (1,220) - 1,032 (3)
Effect of exchange rate on cash (12) - - - (12)
Net cash flows from discontinued
operations - 1,174 - - 1,174
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and equivalents $ (50) $ (5) $ 152 $ - $ 97
========================================================================================================================
Condensed Consolidating Statements of Cash Flows
Six Months ended June 30, 2000
Dresser
Non-issuer/ Industries, Halliburton Consolidated
Non-guarantor Inc. Company Consolidating Halliburton
Millions of dollars Subsidiaries (Issuer) (Guarantor) Adjustments Company
- -----------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities $ (291) $ 27 $ (11) $ - $ (275)
Capital expenditures (190) - - - (190)
Sales of property, plant and equipment 36 - - - 36
Other investing activities (33) - 87 (87) (33)
Payments on long-term borrowings (5) (300) - - (305)
Borrowings (repayments) of
short-term debt, net 28 - (94) - (66)
Payments of dividends to shareholders - - (111) - (111)
Proceeds from exercises of stock options - - 57 - 57
Payments to reacquire common stock - - (6) - (6)
Other financing activities (330) 243 - 87 -
Effect of exchange rate on cash (14) - - - (14)
Net cash flows from discontinued
operations 804 - - - 804
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and equivalents $ 5 $ (30) $ (78) $ - $ (103)
=======================================================================================================================
20
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
- --------------------------------------------------------------------------------
In this section, we discuss the operating results and general financial
condition of Halliburton Company and its subsidiaries. We explain:
- factors and risks that impact our business;
- why our earnings and expenses for the second quarter of 2001 differ
from the second quarter of 2000;
- why our earnings and expenses for the first six months of 2001
differ from the first six months of 2000;
- factors that impacted our cash flows; and
- other items that materially affect our financial condition or
earnings.
BUSINESS ENVIRONMENT
Our continuing business is organized around two business segments:
- Energy Services Group; and
- Engineering and Construction Group.
The results of Dresser Equipment Group are reported as discontinued
operations.
We currently operate in over 100 countries throughout the world,
providing a comprehensive range of discreet and integrated products and services
to the petroleum industry, and to other industrial and governmental customers.
The majority of our consolidated revenues is derived from the sale of services
and products, including engineering and construction activities, to large oil
and gas companies. These services and products are used throughout the energy
industry, from earliest phases of exploration and development of oil and gas
reserves through the refining and distribution process.
The industries we serve are highly competitive with many substantial
competitors for each segment. No country other than the United States or the
United Kingdom accounts for more than 10% of our operations. Unsettled political
conditions, expropriation or other governmental actions, exchange controls or
currency devaluation may result in the increased business risk in any one
country. We believe the geographic diversification of our business activities
reduces the risk that loss of business in any one country would be material to
our consolidated results of operations.
Halliburton Company
Spending on exploration and production activities and investments in
capital expenditures for refining and distribution facilities by large oil and
gas companies have a significant impact on the activity levels within our two
business segments. Based on industry surveys, 2001 capital spending by our
customers for oil and gas exploration and production is estimated to increase by
at least 20% compared to 2000. Through the first six months of 2001, this
increased spending has contributed to higher levels of worldwide drilling
activity.
Drilling activity increases in North America, primarily related to
demand for natural gas, has generated much of the growth in demand for our
products and services during 2001. Despite recent volatility in crude oil and
United States natural gas prices, and speculation about future supply and demand
imbalances, we expect average activity levels within North America in 2001 to be
higher than 2000. Internationally, sustained strong crude oil prices have
resulted in steadily increasing levels of capital spending and drilling,
primarily by major oil and gas companies, including national oil companies.
Generally, international oil and gas field development projects, particularly
deepwater projects in West Africa and Brazil, have longer lead times, economics
based on longer-term commodity prices, and are less likely to be delayed due to
fluctuating short-term prices. We anticipate improvements in rig activity
outside North America through the end of 2001 to benefit our Energy Services
Group operations. In addition we expect our engineering and construction backlog
to benefit later this year from projects in the process of contract finalization
and increased bid activity on new and previously delayed projects.
Over the longer-term, we expect increased global demand for oil and
natural gas, additional spending to replace depleting reserves and continued
technological advances in our products and services to provide growth
opportunities for our products and services.
21
Energy Services Group
High natural gas and crude oil prices during the first half of 2001
have contributed to increased demand for the products and services provided by
the Energy Services Group. Activity has been highest in the United States,
reflecting primarily the increased levels of drilling for natural gas. The
rotary rig count in the United States continued to increase and averaged 1,188
rigs in the first half of 2001, an increase of 47% over the average for the
first half of 2000. Despite recent volatility in natural gas prices, Henry Hub
gas prices for the first six months of 2001 averaged $5.51/MCF, well above the
$3.08/MCF average for the first half of 2000. Higher activity levels have
increased our equipment and personnel utilization, resulting in increased
profitability and pricing strength, particularly within the United States. Crude
oil prices, another business indicator, remained strong throughout the first
half of 2001, with West Texas Intermediate averaging nearly $29 per barrel,
which is basically flat with the first six-month average in 2000. While some
uncertainty exists in the United States about natural gas and crude oil prices,
we expect activity to remain at strong levels through the third quarter of 2001.
Future spending by our customers will become clearer as they begin to prepare
their capital budgets for 2002 and as visibility of future oil and gas prices
improves during the second half of 2001.
The turnaround in international rig activity continued through the
first half of 2001, with the average rig count at 737 rigs working compared to
an average of 602 in the first six-month period of 2000, an increase of 22%.
Compared to the second quarter of 2000, revenues for the Energy Services Group
were higher across all geographic areas. These increases reflect both the strong
demand for our products and services within the United States as well as the
continued increases in exploration and production spending elsewhere by our
customers. In the short-term, we expect the Energy Services Group to provide
continued growth in both revenues and earnings in the United States and
internationally, especially in the North Sea, Latin America, and the Middle
East.
Engineering and Construction Group
Our Engineering and Construction Group has not yet benefited from the
positive factors which provided opportunities for growth in the Energy Services
Group. While both segments provide products and services to many of the same
customers, oilfield service activities have been first to benefit from the
increased activity levels. The downturn in the energy industry that began in
1998 led our customers to severely curtail many large engineering and
construction projects during 2000 and into 2001. During this time, a series of
mergers and consolidations among our major customers also reduced our customers'
levels of investment in refining and distribution facilities as they evaluated
existing capacities. Due to the lack of opportunities existing throughout 2000,
combined with an extremely competitive global engineering and construction
environment, we restructured our Engineering and Construction Group in late 2000
and the first quarter of 2001. Engineering, construction, fabrication and
project management capabilities are now part of one operating company - Kellogg
Brown & Root. This flatter, more responsive organization is now positioned to
benefit from the expected increases in engineering and construction project
spending. Based upon our technologies and proven capabilities on complex
projects, combined with recent and pending project awards and increasing levels
of bid activity, we are optimistic about our financial performance continuing to
improve later this year and as we move into 2002. In addition, we also see
emerging engineering and construction project opportunities in liquefied natural
gas, gas-to-liquids, and deepwater production. Growth opportunities exist to
provide additional support services to governmental agencies in the United
States and other countries, including the United Kingdom. The demand for these
services is expected to grow as governments at all levels seek to control costs
and improve services by outsourcing various functions.
RESULTS OF OPERATIONS IN 2001 COMPARED TO 2000
- ----------------------------------------------
Second Quarter of 2001 Compared with the Second Quarter of 2000
Second Quarter
REVENUES ---------------------------- Increase
Millions of dollars 2001 2000 (decrease)
- ---------------------------------------------------------------------------------------
Energy Services Group $ 2,214 $ 1,615 $ 599
Engineering and Construction Group 1,125 1,253 (128)
- ---------------------------------------------------------------------------------------
Total revenues $ 3,339 $ 2,868 $ 471
=======================================================================================
22
Consolidated revenues in the second quarter of 2001 of $3.3 billion
increased $471 million, or 16%, compared to the second quarter of 2000.
International revenues were 60% of total revenues for the second quarter of 2001
and 67% in the second quarter of 2000.
Energy Services Group revenues were $2.2 billion for the second quarter
of 2001, an increase of 37% over the second quarter of 2000. International
revenues were 55% of total revenues in the second quarter of 2001 as compared to
63% in the second quarter of 2000. North America benefited from higher rig
counts and gas prices, increased equipment utilization and pricing improvements.
Our oilfield services product service line revenue of $1.8 billion increased 40%
year-over-year. Pressure pumping, which represents almost 50% of that revenue,
achieved revenue growth of 48% while drilling fluids and drilling services
increased 41% and 39%, respectively. Revenues from the remaining oilfield
product service lines also showed substantial increases year-over-year.
Geographically, North America oilfield services revenues increased 58%, while
Latin America and Europe/Africa revenues increased 33% and 24%, respectively.
Oilfield services revenues in the Middle East and Asia Pacific both rose by
approximately 13%. Particularly strong revenue improvements were reported in
Russia, Venezuela, Egypt, Brazil, United Kingdom, Nigeria, and Indonesia.
Revenues for the remainder of the segment increased $100 million over the second
quarter of 2000 with the largest increase attributable to a major project in
Brazil that began in late 2000. Integrated exploration and production
information systems revenues increased 25% for the second quarter as compared to
the second quarter of 2000 reflecting the positive impact of the data management
acquisition. Activity in our surface/subsea operations was basically flat
year-over-year.
Engineering and Construction Group revenues were $128 million, or 10%,
lower in the second quarter of 2001 compared to the second quarter of 2000.
About 69% of the segment's revenues were from international activities as
compared to 72% in the second quarter last year. Decreases in revenues were
mostly attributable to the completion of large onshore projects that have not
been replaced with new projects. Our customers have continued to delay major
projects in the downstream sector and focus on maintaining existing facilities.
This focus contributed to the 18% increase in revenues from our operations and
maintenance product line revenues year-over-year. Revenues from the government
services product line were 5% higher for the second quarter of 2001 as compared
to the second quarter in 2000 with increases in ship refitting in the United
Kingdom and management and engineering. Increases in the government operations
product line were partially offset by a $36 million decrease in a logistical
support contract in the Balkans which has progressed from the construction phase
to the sustainment phase over the past 12 months.
Second Quarter
OPERATING INCOME -------------------------- Increase
Millions of dollars 2001 2000 (decrease)
- -------------------------------------------------------------------------------------
Energy Services Group $ 267 $ 113 $ 154
Engineering and Construction Group 25 30 (5)
General corporate (20) (17) (3)
- -------------------------------------------------------------------------------------
Total operating income $ 272 $ 126 $ 146
=====================================================================================
Consolidated operating income of $272 million was 116% higher in the
second quarter of 2001 compared to the second quarter of 2000.
Energy Services Group operating income for the second quarter of 2001
more than doubled compared to the second quarter of 2000. Oilfield services
product service lines operating income increased by $169 million, or 172%,
year-over-year due to higher equipment and personnel use combined with improved
pricing. Operating income increased over 150% in our pressure pumping, logging,
drill bits, and drilling services businesses. All oilfield services' geographic
regions had significant increases in operating income, particularly in North
America where operating income rose 126% reflecting pricing improvements and
higher activity levels. Operating income for the remainder of the segment
declined by $15 million. Increased operating income from our major project in
Brazil was offset by lower utilization and activity levels in our surface/subsea
product service line. The second quarter of 2000 also benefited from the impact
of a $4 million favorable resolution of a royalty issue in our integrated
exploration and production information systems business.
23
Engineering and Construction Group operating income for the second
quarter of 2001 decreased by $5 million from the same period in 2000 on lower
revenues. Operating margins were basically flat year-over-year.
General corporate expense for the second quarter of 2001 was $20
million.
NONOPERATING ITEMS
Interest expense of $34 million for the second quarter of 2001
increased $1 million compared to the second quarter of 2000.
Interest income was $6 million in the second quarter of 2001, an
increase from the second quarter of 2000 interest income of $3 million.
Foreign exchange losses, net were $1 million in the current year
quarter compared to $3 million in the prior year second quarter.
Provision for income taxes of $98 million resulted in an effective tax
rate of 40.3%, up slightly from the second quarter of 2000 rate of 38.7%.
Income from continuing operations was $143 million in the second
quarter of 2001 compared to $52 million in the prior year quarter.
Income (loss) from discontinued operations was ($60) million for the
second quarter of 2001 as compared to $23 million for the second quarter of
2000. Loss from discontinued operations for the current year quarter represents
$90 million, before tax, of accrued expenses related to asbestos claims net of
insurance recoveries arising after the divestiture of INDRESCO which related to
the Harbison-Walker business as well as $2 million for other Dresser Industries,
Inc. non-engineering and construction asbestos claims related to businesses
disposed in prior years which were previously accounted for in continuing
operations. See Note 7. The second quarter of 2000 consists of the Dresser
Equipment Group's net income.
Gain on disposal of discontinued operations of $299 million after-tax
or $0.70 per diluted share in 2001, resulted from the sale of our remaining
businesses in the Dresser Equipment Group.
Net income for the second quarter of 2001 was $382 million, or $0.89
per diluted share. The prior year's quarterly net income was $75 million, or
$0.17 per diluted share.
First Six Months of 2001 Compared with the First Six Months of 2000
First Six Months
REVENUES --------------------------------- Increase
Millions of dollars 2001 2000 (decrease)
- ----------------------------------------------------------------------------------------------
Energy Services Group $ 4,245 $ 3,038 $ 1,207
Engineering and Construction Group 2,238 2,689 (451)
- ----------------------------------------------------------------------------------------------
Total revenues $ 6,483 $ 5,727 $ 756
==============================================================================================
Consolidated revenues in the first six months of 2001 of $6.5 billion
increased 13% compared to the first six months of 2000. International revenues
were 61% of total revenues for the first half of 2001 and 66% in the first half
of 2000 as activity and pricing in the United States increased more rapidly than
internationally.
Energy Services Group revenues were higher by $1.2 billion in the first
half of 2001, an increase of 40% from the first half of 2000. International
revenues were 57% of total revenues for the first six months of 2001 as compared
to 63% for the first six months of 2000. Revenues increased across all
geographical regions and all product service lines within our oilfield services
operations. This improvement was primarily due to increased activity
attributable to higher rig counts. Pricing improvements in the United States
also contributed to increased revenues. Revenues from our oilfield services
product service lines were $3.4 billion for the first six months of 2001
compared to $2.4 billion for the first six months of 2000. Our pressure pumping
business experienced growth of 47% while logging revenues grew by 55%. Other
business within the oilfield services product service lines achieved growth
rates of 15% to 49%. Geographically, our oilfield service's product service
lines achieved a 59% growth rate in North America with significant increases
internationally in Venezuela, Brazil, Russia, Norway, Egypt, and Saudi Arabia.
Revenues for the remainder of the segment increased $265 million year-over-year
which was primarily due to the start-up of a major project in Brazil.
24
Engineering and Construction Group revenues decreased $451 million, or
17%, from the first six months of 2001 compared to the first six months of 2000.
Year-over-year revenues were 14% lower in North America and decreased 18%
outside North America. The decline in international revenues is mainly due to
the completion of several onshore and offshore projects. Government operations
product line revenues were lower by 10% due to the contract in the Balkans
moving from the construction phase to the sustainment phase. As a result of our
customers' focus on plant operations and maintaining existing facilities, the
operations and maintenance product line increased 15% partially offsetting the
revenue declines in other product lines.
First Six Months
OPERATING INCOME --------------------------------- Increase
Millions of dollars 2001 2000 (decrease)
- ----------------------------------------------------------------------------------------------
Energy Services Group $ 467 $ 162 $ 305
Engineering and Construction Group 43 79 (36)
General corporate (40) (34) (6)
- ----------------------------------------------------------------------------------------------
Total operating income $ 470 $ 207 $ 263
==============================================================================================
Consolidated operating income of $470 million was 127% higher in the
first six months of 2001 compared to the first six months of 2000.
Energy Services Group operating income for the first half of 2001
increased $305 million, or 188%, as compared to the first half of 2000.
Operating income in our oilfield services product service line tripled
reflecting increased activity and pricing improvements especially in the United
States. Significant improvements were also made in Latin America and the Middle
East. Operating income increased within all areas of the oilfield services
product service lines with the most substantial increases in pressure pumping,
logging, drilling services and drill bits. Operating income for the remainder of
the segment decreased $2 million. Operating income decreased because the prior
year included a $4 million favorable resolution of disputed royalties by our
integrated exploration and production information systems and lower operating
margins in our surface/subsea product service line partially offset by improved
operating income from our major project in Brazil.
Engineering and Construction Group operating income declined by $36
million from the first half of 2001 as compared to the first half of 2000. The
reduction reflects lower activity levels.
General corporate expenses for the first half of 2001 were $40 million.
The increase of $6 million over the first half of 2000 is due partially to
expenses incurred for the retirement of several executives earlier this year.
NONOPERATING ITEMS
Interest expense of $81 million for the first six months of 2001
increased $15 million compared to the first six months of 2000. The increase is
due to additional short-term debt incurred in the fourth quarter of 2000 and
outstanding through early April, 2001. This increase in short-term debt was
primarily due to repurchases of our common stock under our repurchase program
and borrowings associated with the PGS Data Management acquisition. Cash
received of $1.3 billion in April, 2001 from the sale of our remaining
businesses within the Dresser Equipment Group was used to repay our short-term
borrowings.
Interest income was $10 million in the first six months of 2001 and was
flat compared to the first six months in 2000.
Foreign exchange losses, net were $4 million in the first six months of
2001 compared to $7 million in the first six months of 2000.
Provision for income taxes of $159 million resulted in an effective tax
rate of 40.3% for the first six months of 2001, up slightly from the rate of
38.9% for the first six months of 2000.
Income from continuing operations was $229 million in the first six
months of 2001 compared to $79 million in the first six months of 2000.
25
Income (loss) from discontinued operations of ($38) million in 2001
primarily represents $90 million, before tax, of accrued expenses related to
asbestos claims net of insurance recoveries arising after the divestiture of
INDRESCO involving the Harbison-Walker business (see Note 7), net of income from
the Dresser Equipment Group for the first quarter of 2001. Income from
discontinued operations of $45 million for the first six months of 2000 is
composed of net earnings from the Dresser Equipment Group.
Gain on disposal of discontinued operations of $299 million after-tax,
or $0.70 per diluted share, in 2001 resulted from the sale of our remaining
businesses in the Dresser Equipment Group in April 2001. For the first six
months of 2000, the gain on disposal of discontinued operations of $215 million
after-tax, or $0.48 per diluted share, resulted from the sale of our 51%
interest in Dresser-Rand to Ingersoll-Rand in January 2000.
Cumulative effect of accounting change, net of $1 million reflects the
impact of adoption of Statement of Financial Accounting Standard No. 133,
"Accounting for Derivative Instruments and for Hedging Activities." After
recording the cumulative effect of the change our estimated annual expense under
Financial Accounting Standards No. 133 is not expected to be materially
different from amounts expensed under the prior accounting treatment.
Net income for the first six months of 2001 was $491 million, or $1.14
per diluted share. Net income for the first six months of 2000 was $339 million,
or $0.76 per diluted share.
LIQUIDITY AND CAPITAL RESOURCES
We ended the second quarter of 2001 with cash and equivalents of $328
million, an increase of $97 million from the end of 2000.
Cash flows from operating activities provided $344 million in the first
half of 2001 compared to using $275 million in the same period of 2000. Working
capital items, which include receivables, inventories, accounts payable and
other working capital, net, used $370 million of cash in the first six months of
2001 compared to $630 million in the same period of 2000.
Cash flows used in investing activities were $452 million in the first
half of 2001 and $187 million in the same period of 2000. Capital expenditures
in the first six months of 2001 were $344 million as compared to $190 million
for the first six months of 2000. In March 2001 we acquired the PGS Data
Management division of Petroleum Geo-Services ASA for approximately $175 million
cash.
Cash flows from financing activities used $957 million in the first six
months of 2001 as compared to $431 million for the first six months of 2000.
With the proceeds from the sale of the remaining businesses in Dresser Equipment
Group in April 2001 and Dresser-Rand and Ingersoll-Dresser Pump in 2000, we
repaid our short-term debt. We paid dividends of $107 million to our
shareholders in the first six months of 2001 as compared to $111 million in the
first six months of 2000. On July 12, 2001 we issued $425 million of two and
five year medium-term notes under our medium-term note program. The notes
consist of $275 million of 6% fixed rate notes due August 1, 2006 and $150
million of floating rate notes due July 16, 2003. Net proceeds from the two
medium-term note offerings were used to reduce short-term debt.
Cash flows from discontinued operations provided $1.2 billion in the
first six months of 2001 as compared to $804 million for the first six months of
2000. Cash flows for 2001 and 2000 include the proceeds from the sale of the
remainder of Dresser Equipment Group of $1,267 million and Dresser-Rand and
Ingersoll-Dresser Pump of $913 million, respectively.
Capital resources from internally generated funds and access to capital
markets are sufficient to fund our working capital requirements and investing
activities. Our combined short-term notes payable and long-term debt was 28% of
total capitalization at June 30, 2001 compared to 40% at December 31, 2000.
ASBESTOS LITIGATION
During the second quarter of 2001, we experienced an upward trend in
the rate that new asbestos claims are filed against us. In addition, during the
quarter we became aware that a former subsidiary of Dresser, Harbison-Walker
Refractories Company, is failing to provide us with an adequate indemnity and
defense from asbestos claims it assumed when it was spun-off by Dresser in 1992.
A more complete discussion of these matters is contained in Note 7 to our
Quarterly Financial Statements.
26
ENVIRONMENTAL MATTERS
We are subject to numerous environmental, legal and regulatory
requirements related to our operations worldwide. As a result of those
obligations, we are involved in environmental litigation and claims, the
clean-up of properties we own or have operated, and efforts to meet or correct
compliance-related matters.
SHARE REPURCHASE PROGRAM
On April 25, 2000 our Board of Directors approved plans to implement a
share repurchase program for up to 44 million shares, or about 10% of our
outstanding common stock. As of June 30, 2001 we had repurchased over 20 million
shares at a cost of $759 million. No shares of common stock were repurchased
during the first half of 2001 under this plan; however, we may periodically make
repurchases of our common stock under this program as we deem appropriate.
ACCOUNTING CHANGES
In July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 141 "Business Combinations" which requires
the purchase method of accounting for business combination transactions
initiated after June 30, 2001.
In July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 142 "Goodwill and Other Intangible
Assets". The statement requires that goodwill recorded on acquisitions completed
prior to July 1, 2001 be amortized through December 31, 2001. Goodwill
amortization is precluded on acquisitions completed after June 30, 2001.
Effective January 1, 2002, goodwill will no longer be amortized but will be
tested for impairment as set forth in the statement. We are currently reviewing
the new standard and evaluating the effects of this standard on our future
financial condition, results of operations, and accounting policies and
practices. Amortization of goodwill for the first six months of 2001 totaled $23
million.
CONVERSION TO THE EURO CURRENCY
In 1999 some member countries of the European Union established fixed
conversion rates between their existing currencies and the European Union's
common currency (euro). This action was the first step towards transition from
existing national currencies to the use of the euro as a common currency. The
transition period for the introduction of the euro ends June 30, 2002. Issues
resulting from the introduction of the euro include converting information
technology systems, reassessing currency risk, negotiating and amending existing
contracts and processing tax and accounting records. We are addressing these
issues and do not expect the transition to the euro to have a material effect on
our financial condition or results of operations.
FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 provides safe
harbor provisions for forward-looking information. Forward-looking information
is based on projections and estimates, not historical information. Some
statements in this Form 10-Q are forward-looking and use words like "may," "may
not," "believes," "do not believe," "expects," "do not expect," "do not
anticipate," and similar expressions. We may also provide oral or written
forward-looking information in other materials we release to the public.
Forward-looking information involves risks and uncertainties and reflects our
best judgement based on current information. Our results of operations can be
affected by inaccurate assumptions we make or by known or unknown risks and
uncertainties. In addition, other factors may affect the accuracy of our
forward-looking information. As a result, no forward-looking information can be
guaranteed. Actual events and the results of operations may vary materially.
While it is not possible to identify all factors, we continue to face
many risks and uncertainties that could cause actual results to differ from our
forward-looking statements including:
Geopolitical and legal
- trade restrictions and economic embargoes imposed by the United
States and other countries;
- unsettled political conditions, war, civil unrest, currency controls
and governmental actions in the numerous countries in which we
operate;
27
- operations in countries with significant amounts of political risk,
including, for example, Algeria, Angola, Libya, Nigeria, and Russia;
- changes in foreign exchange rates;
- changes in governmental regulations in the numerous countries in
which we operate including, for example, regulations that:
- encourage or mandate the hiring of local contractors; and
- require foreign contractors to employ citizens of, or purchase
supplies from, a particular jurisdiction;
- litigation, including, for example, contract disputes, asbestos
litigation, insurance litigation, and environmental litigation; and
- environmental laws, including, for example, those that require
emission performance standards for facilities;
Weather related
- the effects of severe weather conditions, including, for example,
hurricanes and tornadoes, on operations and facilities; and
- the impact of prolonged severe or mild weather conditions on the
demand for and price of oil and natural gas;
Customers
- the magnitude of governmental spending and outsourcing for military
and logistical support of the type that we provide;
- changes in capital spending by customers in the oil and gas industry
for exploration, development, production, processing, refining, and
pipeline delivery networks;
- changes in capital spending by governments for infrastructure
projects of the sort that we perform;
- consolidation of customers in the oil and gas industry; and
- claim negotiations with engineering and construction customers on
cost variances and change orders on major projects;
Industry
- technological and structural changes in the industries that we
serve;
- sudden changes in energy prices that could undermine the fundamental
strength of the world economy or our customers;
- changes in the price of oil and natural gas, resulting from:
- OPEC's ability to set and maintain production levels and prices
for oil;
- the level of oil production by non-OPEC countries;
- the policies of governments regarding exploration for and
production and development of their oil and natural gas
reserves; and
- the level of demand for oil and natural gas;
- changes in the price or the availability of commodities that we use;
- risks that result from entering into fixed fee engineering,
procurement and construction projects of the types that we provide
where failure to meet schedules, cost estimates or performance
targets could result in nonreimbursable costs which cause the
project not to meet our expected profit margins;
- risks that result from entering into complex business arrangements
for technically demanding projects where failure by one or more
parties could result in monetary penalties; and
- the risk inherent in the use of derivative instruments of the sort
that we use which could cause a change in value of the derivative
instruments as a result of:
- adverse movements in foreign exchange rates, interest rates, or
commodity prices, or
- the value and time period of the derivative being different than
the exposures or cash flows being hedged;
28
Personnel and mergers/reorganizations/dispositions
- increased competition in the hiring and retention of employees in
specific areas, including, for example, energy services operations,
accounting and finance;
- integration of acquired businesses into Halliburton, including:
- standardizing information systems or integrating data from
multiple systems;
- maintaining uniform standards, controls, procedures and
policies; and
- combining operations and personnel of acquired businesses with
ours;
- effectively reorganizing operations and personnel within
Halliburton;
- replacing discontinued lines of businesses with acquisitions that
add value and complement our core businesses; and
- successful completion of planned dispositions.
In addition, future trends for pricing, margins, revenues and
profitability remain difficult to predict in the industries we serve. We do not
assume any responsibility to publicly update any of our forward-looking
statements regardless of whether factors change as a result of new information,
future events or for any other reason. You should review any additional
disclosures we make in our 10-Q, 8-K and 10-K reports to the Securities and
Exchange Commission. We also suggest that you listen to our quarterly earnings
release conference calls with financial analysts.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
- -------------------------------------------------------------------
We are exposed to financial instrument market risk from changes in
foreign currency exchange rates, interest rates and to a limited extent,
commodity prices. We selectively hedge these exposures through the use of
derivative instruments to mitigate our market risk from these exposures. The
objective of our hedging is to protect our cash flows related to interest rates
and sales or purchases of goods or services from market fluctuations. Our use of
derivative instruments includes the following types of market risk:
- volatility of the currency and interest rates;
- time horizon of the derivative instruments;
- market cycles; and
- the type of derivative instruments used.
We do not use derivative instruments for trading purposes. We do not
consider any of our hedging activities to be material.
29
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
At our Annual Meeting of Stockholders held on May 15, 2001,
stockholders were asked to consider and act upon:
(1) the election of Directors for the ensuing year,
(2) a proposal to ratify the appointment of Arthur Andersen LLP as
independent accountants to examine the financial statements and
books and records of Halliburton for 2001,
(3) a stockholder proposal on work performed in Myanmar (Burma),
(4) a stockholder proposal on indexing executive stock options, and
(5) a stockholder proposal on the executive compensation system.
The following table sets out, for each matter where applicable, the
number of votes cast for, against or withheld, as well as the number of
abstentions and broker non-votes.
(1) Election of Directors:
Name of Nominee Votes For Votes Withheld
Lord Clitheroe 353,073,550 6,059,561
Robert L. Crandall 353,143,397 5,989,714
Kenneth T. Derr 353,299,822 5,833,289
Charles J. DiBona 353,159,817 5,973,294
Lawrence S. Eagleburger 344,947,671 14,185,440
William R. Howell 353,148,146 5,984,965
Ray L. Hunt 300,487,137 58,645,974
David J. Lesar 353,176,448 5,956,663
Aylwin B. Lewis 353,144,149 5,988,962
J. Landis Martin 347,909,211 11,223,900
Jay A. Precourt 353,358,887 5,774,224
Debra L. Reed 353,159,141 5,973,970
C. J. Silas 353,286,750 5,846,361
(2) Proposal to ratify the appointment of Arthur Andersen LLP as the
independent auditors for Halliburton for the year 2001:
Number of Votes For 355,558,953
Number of Votes Against 2,275,328
Number of Votes Abstain 1,298,830
Number of Broker Non-Votes 0
(3) Proposal on work performed in Myanmar(Burma):
Number of Votes For 32,183,611
Number of Votes Against 270,625,586
Number of Votes Abstain 13,175,536
Number of Broker Non-Votes 43,148,378
30
(4) Proposal on indexing executive stock options:
Number of Votes For 42,046,243
Number of Votes Against 268,952,953
Number of Votes Abstain 4,985,537
Number of Broker Non-Votes 43,148,378
(5) Proposal on executive compensation system:
Number of Votes For 24,390,208
Number of Votes Against 286,618,757
Number of Votes Abstain 4,975,768
Number of Broker Non-Votes 43,148,378
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
* 10.1 Supplemental Executive Retirement Plan as amended and restated
effective January 1, 2001.
* 10.2 Benefit Restoration Plan as amended and restated effective
January 1, 2001.
* 10.3 Employment agreement.
* 24.1 Powers of attorney for the following directors signed in May 2001:
Kenneth T. Derr
Aylwin B. Lewis
Debra L. Reed
* 24.2 Powers of attorney for Douglas L. Foshee, Robert R. Harl and
Edgar J. Ortiz.
* Filed with this Form 10-Q.
(b) Reports on Form 8-K
Date Filed Date of Earliest Event Description of Event
- --------------------------- ------------------------ ----------------------------------------------------------
During the second quarter of 2001:
April 11, 2001 April 10, 2001 Item 5. Other Events for a press release announcing the
sale of Dresser Equipment Group to an investor group for
$1.55 billion in cash and assumed liabilities.
April 27, 2001 April 25, 2001 Item 5. Other Events for a press release announcing 2001
first quarter earnings.
May 1, 2001 April 30, 2001 Item 5. Other Events for a press release announcing the
signing of a definitive agreement to acquire Magic
Earth, Inc., a leading 3-D visualization and
interpretation technology company with broad
applications in the area of data mining.
31
Date Filed Date of Earliest Event Description of Event
- --------------------------- ------------------------ ----------------------------------------------------------
May 10, 2001 April 10, 2001 Item 5. Other Events for a press release on the
Agreement and Plan of Recapitalization as amended and
restated effective April 10, 2001 among Halliburton
Company, Dresser B.V. and DEG Acquisitions, LLC.
May 16, 2001 May 15, 2001 Item 5. Other Events for a press release announcing that
shareholders have elected all thirteen nominees to the
board of directors, ratified the appointment of Arthur
Andersen LLP to audit the financial statements for the
year 2001, and voted against three shareholder
proposals. The board of directors has declared a second
quarter dividend of 12.5 cents a share on common stock,
payable June 27, 2001 to shareholders of record at the
close of business on June 6, 2001.
June 7, 2001 June 4, 2001 Item 5. Other Events for a press release announcing
Grandbasin as a Landmark Company.
June 29, 2001 June 28, 2001 Item 5. Other Events for a press release announcing
Harbison-Walker Refractories Company request for
financial assistance for asbestos claims.
During the third quarter of 2001:
July 12, 2001 July 12, 2001 Item 5. Other Events for a press release announcing the
issuance of $275 million of fixed-rate notes due August
1, 2006 and $150 million of floating notes due July 16,
2003 for a total of $425 million in medium-term notes.
July 20, 2001 July 19, 2001 Item 5. Other Events for a press release announcing the
board of directors declared a 2001 third quarter
dividend of 12.5 cents a share payable September 27,
2001 to shareholders of record at the close of business
on September 6, 2001.
July 27, 2001 July 25, 2001 Item 5. Other Events for a press release announcing 2001
second quarter earnings.
July 27, 2001 July 25, 2001 Item 5. Other Events for a press release announcing
Douglas L. Foshee as executive vice president and chief
financial officer effective August 6, 2001.
32
SIGNATURES
As required by the Securities Exchange Act of 1934, the registrant has
authorized this report to be signed on behalf of the registrant by the
undersigned authorized individuals.
HALLIBURTON COMPANY
Date: August 9, 2001 By: /s/ Gary V. Morris
--------------------------------------
Gary V. Morris
Executive Vice President
/s/ R. Charles Muchmore, Jr.
--------------------------------------
R. Charles Muchmore, Jr.
Vice President and Controller and
Principal Accounting Officer
33
HALLIBURTON COMPANY
SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
AS AMENDED AND RESTATED
EFFECTIVE JANUARY 1, 2001
TABLE OF CONTENTS
ARTICLE PAGE
ARTICLE I: PURPOSE OF THE PLAN........................... 1
ARTICLE II: DEFINITIONS................................... 1
ARTICLE III: ADMINISTRATION OF THE PLAN.................... 2
ARTICLE IV: ALLOCATIONS UNDER THE PLAN,
PARTICIPATION IN THE PLAN AND
SELECTION FOR AWARDS.......................... 4
ARTICLE V: NON-ASSIGNABILITY OF AWARDS................... 5
ARTICLE VI: VESTING....................................... 5
ARTICLE VII: DISTRIBUTION OF AWARDS........................ 5
ARTICLE VIII: NATURE OF PLAN................................ 6
ARTICLE IX: FUNDING OF OBLIGATION......................... 7
ARTICLE X: AMENDMENT OR TERMINATION OF PLAN.............. 7
ARTICLE XI: GENERAL PROVISIONS............................ 7
ARTICLE XII: EFFECTIVE DATE................................ 8
(i)
HALLIBURTON COMPANY
SUPPLEMENTAL
EXECUTIVE RETIREMENT 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 splits said Plan into the
Halliburton Company Supplemental Executive Retirement Plan and the Halliburton
Company Benefit Restoration Plan and amends and restates the Halliburton Company
Supplemental Executive Retirement Plan to read as follows and 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 Supplemental Executive
Retirement Plan is to provide supplemental retirement benefits to Participants
in order to promote growth of the Company and provide additional means of
attracting and holding qualified competent executives.
ARTICLE II
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.
(A) Account: 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
(D) and interest credited pursuant to the provisions of Article IV, Paragraph
(G).
(B) Administrative Committee: The administrative committee appointed
by the Compensation Committee to administer the Plan.
(C) Allocation Year: The calendar year for which an allocation is made
to a Participant's Account pursuant to Article IV.
(D) Board: The Board of Directors of the Company.
(E) Code: The Internal Revenue Code of 1986, as amended.
(F) Compensation Committee: The Compensation Committee of the Board.
(G) Company: Halliburton Company.
(H) Employee: Any employee of an Employer. The term does not include
independent contractors or persons who are retained by an Employer as
consultants only.
(I) Employer: The Company and any Subsidiary designated as an Employer
in accordance with the provisions of Article III of the Plan.
(J) ERISA: The Employee Retirement Income Security Act of 1974, as
amended.
(K) Participant: A Senior Executive who is selected as a Participant
for an Allocation Year. The Compensation Committee shall be the sole judge of
who shall be eligible to be a Participant for any Allocation Year. The selection
of a Senior Executive to be a Participant for a particular Allocation Year shall
not constitute him or her a Participant for another Allocation Year unless he or
she is selected to be a Participant for such other Allocation Year by the
Compensation Committee.
1
(L) Plan: The Halliburton Company Supplemental Executive Retirement
Plan, as amended and restated January 1, 2001, and as the same may thereafter be
amended from time to time.
(M) Senior Executive: An Employee who is a senior executive, including
an officer, of an Employer (whether or not he or she is also a director
thereto), 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.
(N) Subsidiary: At any given time, a company (whether a corporation,
partnership, llimited liability company or other form of entity) in which the
Company or any other of the Subsidiaries or both owns, directly or indirectly,
an aggregate equity interest of 80% or more.
(O) Termination of Service: Severance from employment with an Employer
for any reason other than a transfer between Employers.
(P) Trust: Any trust created pursuant to the provisions of Article IX.
(Q) Trust Agreement: The agreement establishing the Trust.
(R) Trustee: The trustee of the Trust.
(S) Trust Fund: Assets under the Trust as may exist from time to time.
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
2
Party constituting negligence, but excluding any act or omission of such
Indemnified Party constituting gross negligence or willful 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
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 or herself under the
Plan or to vote in any case in which his or her 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 or she is disqualified.
3
ARTICLE IV
Allocations Under the Plan,
Participation in the Plan and Selection for Awards
(A) 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 (D) below.
(B) No award shall be made to any person while he or she is a voting
member of the Compensation Committee.
(C) 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 Senior Executives it shall deem to be
Participants for a particular Allocation Year and the method and manner of
payment thereof to the Participants.
(D) The Compensation Committee, during the Allocation Year involved or
during the next succeeding Allocation Year, shall determine which Senior
Executives 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 a Senior Executive 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 or she has been selected
as a Participant for all or part of such Allocation Year, and may determine and
notify him or her of the amount which shall be allocated to such Participant for
such Allocation Year. The decision of the Compensation Committee in selecting a
Senior Executive to be a Participant or in making any allocation to him or her
shall be final and conclusive, and nothing herein shall be deemed to give any
Senior Executive or his or her 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.
(E) A Senior Executive whose service is terminated during the
Allocation Year may be selected as a Participant for such part of the Allocation
Year prior to his or her Termination of Service and be granted such award with
respect to his or her 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.
(F) 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. 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 (G) 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
in Article VII, Paragraph (C).
4
(G) Interest shall be credited on amounts allocated to Participants'
Accounts at the rate of 5% per annum for periods prior to Termination of Service
and at the rate of 10% per annum for periods subsequent to Termination of
Service.
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.
ARTICLE VI
Vesting
All amounts credited to a Participant's Account shall be fully vested
and not subject to forfeiture for any reason except as provided in Article V.
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 the Participant's Account on the books of
each Employer for which the Participant was employed at a time when he or she
earned an award hereunder, (ii) shall determine whether the payment of the
amount credited to the Participant's Account 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 a Participant's Account, selected by
the Administrative Committee from among the following alternatives:
(1) A single lump sum payment upon Termination of Service;
5
(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 of Service; 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
Account 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 methodologies 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 or her under the Plan have been paid to such Participant, 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 to his or her 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 or
her 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.
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.
6
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.
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 Account 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.
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 or her hands.
7
(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.
ARTICLE XII
Effective Date
This amendment and restatement of the Plan shall be effective from and
after January 1, 2001 and shall continue in force during subsequent years unless
amended or revoked by action of the Compensation Committee.
HALLIBURTON COMPANY
By /s/ David J. Lesar
-------------------------------------
Chairman of the Board, President
and Chief Executive Officer
8
HALLIBURTON COMPANY
BENEFIT RESTORATION PLAN
AS AMENDED AND RESTATED
EFFECTIVE JANUARY 1, 2001
TABLE OF CONTENTS
ARTICLE PAGE
ARTICLE I: PURPOSE OF THE PLAN...................... 1
ARTICLE II: DEFINITIONS.............................. 1
ARTICLE III: ADMINISTRATION OF THE PLAN............... 2
ARTICLE IV: ALLOCATIONS UNDER THE PLAN,
PARTICIPATION IN THE PLAN AND
SELECTION FOR AWARDS..................... 4
ARTICLE V: NON-ASSIGNABILITY OF AWARDS............ 4
ARTICLE VI: VESTING................................ 5
ARTICLE VII: DISTRIBUTION OF AWARDS................. 5
ARTICLE VIII: NATURE OF PLAN......................... 6
ARTICLE IX: FUNDING OF OBLIGATION.................. 6
ARTICLE X: AMENDMENT OR TERMINATION OF PLAN....... 7
ARTICLE XI: GENERAL PROVISIONS..................... 7
ARTICLE XII: EFFECTIVE DATE......................... 8
(i)
HALLIBURTON COMPANY
BENEFIT RESTORATION 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 splits said Plan into the
Halliburton Company Supplemental Executive Retirement Plan and the Halliburton
Company Benefit Restoration Plan and amends and restates the Halliburton
Company Benefit Restoration Plan to read as follows and 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 Benefit Restoration Plan is to
provide a vehicle to restore qualified plan benefits which are reduced as a
result of limitations on contributions imposed under the Internal Revenue Code
or due to participation in other company sponsored plans and to defer
compensation that would otherwise be treated as excessive employee remuneration
within the meaning of Section 162(m) of the Internal Revenue Code.
ARTICLE II
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.
(A) Account: 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, Paragraphs
(A) and (B), amounts transferred to the Plan from other deferred compensation
plans, and interest credited pursuant to the provisions of Article IV, Paragraph
(D).
(B) Administrative Committee: The administrative committee appointed by
the Compensation Committee to administer the Plan.
(C) Allocation Year: The calendar year for which an allocation is made
to a Participant's Account pursuant to Article IV.
(D) Board: The Board of Directors of the Company.
(E) Code: The Internal Revenue Code of 1986, as amended.
(F) Compensation Committee: The Compensation Committee of the Board.
(G) Company: Halliburton Company.
(H) Employee: Any employee of an Employer. The term does not include
independent contractors or persons who are retained by an Employer as
consultants only.
(I) Employer: The Company and any Subsidiary designated as an Employer
in accordance with the provisions of Article III of the Plan.
(J) ERISA: The Employee Retirement Income Security Act of 1974, as
amended.
(K) Participant: An Employee whose compensation from the Employers for
an Allocation Year is in excess of the limit set forth in Section 401 (a)(17) of
the Code for such Allocation Year or who has made elective deferrals for such
Allocation Year under the Halliburton Elective Deferral Plan.
1
(L) Pension Equalizer Contribution: Pension Equalizer Contribution as
defined in the Halliburton Retirement and Savings Plan.
(M) Plan: The Halliburton Company Benefit Restoration Plan, as amended
and restated January 1, 2001, and as the same may thereafter be amended from
time to time.
(N) Subsidiary: At any given time, a company (whether a corporation,
partnership, limited liability company or other form of entity) in which the
Company or any other of its Subsidiaries or both owns, directly or indirectly,
an aggregate equity interest of 80% or more.
(O) Termination of Service: Severance from employment with an Employer
for any reason other than a transfer between Employers.
(P) Trust: Any trust created pursuant to the provisions of Article IX.
(Q) Trust Agreement: The agreement establishing the Trust.
(R) Trustee: The trustee of the Trust.
(S) Trust Fund: Assets under the Trust as may exist from time to time.
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 willful misconduct), and will
2
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
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 or herself under the
Plan or to vote in any case in which his or her 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 or she is disqualified.
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ARTICLE IV
Allocations Under the Plan,
Participation in the Plan and Selection for Awards
(A) The Administrative Committee shall determine for each Allocation
Year which Participants' allocations of Employer contributions (other than
matching 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 (except that reductions of a Participant's
Pension Equalizer Contribution by reason of the application of Section 415 of
the Code shall not be taken into account), 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. In addition, the Administrative
Committee shall allocate to the credit of each Participant under the Plan an
amount equal to 4% of the sum of (i) the amount of such Participant's
compensation (as such term is defined in the applicable qualified defined
contribution plan) deferred under the Halliburton Elective Deferral Plan for
such Allocation Year and (ii) the amount of such compensation not so deferred
that is in excess of the compensation limit under Section 401 (a)(17) of the
Code for such Allocation Year.
(B) The Compensation Committee may, in its discretion, allocate to the
credit of a Participant under the Plan all or any part of any remuneration
payable by the Employer to such Participant which would otherwise be treated as
excessive employee remuneration within the meaning of Section 162(m) of the Code
for any Allocation Year, rather than paying such excessive remuneration to such
Participant.
(C) Allocations to Participants under the Plan shall be made by
crediting their respective Account on the books of their Employers as of the
last day of the Allocation Year, except that an allocation under Paragraph (B)
shall be credited to a Participant on the date the amount would have been paid
to the Participant had it not been deferred pursuant to the provisions of
Paragraph (B). 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 (D)
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 in
Article VII, Paragraph (C).
(D) Interest shall be credited on amounts allocated to Participants'
Account at the rate of 10% per annum.
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 the Article shall prevent transfer (A) by will, (B) by the applicable laws of
4
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.
ARTICLE VI
Vesting
All amounts credited to a Participant's Account shall be fully vested
and not subject to forfeiture for any reason except as provided in Article V.
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 the Participant's Account on the books of
each Employer for which the Participant was employed at a time when he or she
earned an award hereunder, (ii) shall determine whether the payment of the
amount credited to the Participant's Account 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 a Participant's Account, 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
Account 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
5
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 methodologies 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 or her under the Plan have been paid to such Participant, 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 to his or her 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 or
her 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.
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.
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.
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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 Account 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.
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 or her 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.
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ARTICLE XII
Effective Date
This amendment and restatement of the Plan shall be effective from and
after January 1, 2001 and shall continue in force during subsequent years unless
amended or revoked by action of the Compensation Committee.
HALLIBURTON COMPANY
By /s/ David J. Lesar
--------------------------------------
Chairman of the Board, President
and Chief Executive Officer
8
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement, including Exhibits A and B hereto
("Agreement"), is entered into by and between Halliburton Company ("Employer" or
"Halliburton") and Douglas L. Foshee ("Employee"), to be effective on August 6,
2001 (the "Effective Date").
W I T N E S S E T H:
WHEREAS, Employer is desirous of employing Employee pursuant to the
terms and conditions and for the consideration set forth in this Agreement, and
Employee is desirous of entering the employ of Employer pursuant to such terms
and conditions and for such consideration.
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants, and obligations contained herein, Employer and Employee agree as
follows:
ARTICLE 1: EMPLOYMENT AND DUTIES:
1.1. Employer agrees to employ Employee, and Employee agrees to be
employed by Employer, beginning as of the Effective Date and continuing until
the date of termination of Employee's employment pursuant to the provisions of
Article 3 (the "Term"), subject to the terms and conditions of this Agreement.
1.2. Beginning as of the Effective Date, Employee shall be employed as
Executive Vice President and Chief Financial Officer of Employer. Employee
agrees to serve in the assigned position or in such other executive capacities
as may be requested from time to time by Employer and to perform diligently and
to the best of Employee's abilities the duties and services appertaining to such
positions as reasonably determined by Employer, as well as such additional or
different duties and services appropriate to such positions which Employee from
time to time may be reasonably directed to perform by Employer.
1.3. Employee shall at all times comply with and be subject to such
policies and procedures as Halliburton may establish from time to time,
including, without limitation, the Halliburton Company Code of Business Conduct
(the "Code of Business Conduct").
1.4. Employee shall, during the period of Employee's employment by
Employer, devote Employee's full business time, energy, and best efforts to the
business and affairs of Employer. Employee may not engage, directly or
indirectly, in any other business, investment, or activity that interferes with
Employee's performance of Employee's duties hereunder, is contrary to the
interest of Employer or any of its affiliated subsidiaries and divisions
(collectively, the "Halliburton Entities" or, individually, a "Halliburton
Entity"), or requires any significant portion of Employee's business time. The
foregoing notwithstanding, the parties recognize and agree that Employee may
engage in passive personal investments and other business activities which do
not conflict with the business and affairs of the Halliburton Entities or
interfere with Employee's performance of his or her duties hereunder. Employee
may not serve on the board of directors of any entity other than a Halliburton
Entity during the Term without the approval thereof in accordance with
Employer's policies and procedures regarding such service. Employee shall be
permitted to retain any compensation received for approved service on any
unaffiliated corporation's board of directors.
1.5. Employee acknowledges and agrees that Employee owes a fiduciary
duty of loyalty, fidelity and allegiance to act at all times in the best
interests of the Employer and the other Halliburton Entities and to do no act
which would, directly or indirectly, injure any such entity's business,
interests, or reputation. It is agreed that any direct or indirect interest in,
connection with, or benefit from any outside activities, particularly commercial
activities, which interest might in any way adversely affect Employer, or any
Halliburton Entity, involves a possible conflict of interest. In keeping with
Employee's fiduciary duties to Employer, Employee agrees that Employee shall not
knowingly become involved in a conflict of interest with Employer or the
Halliburton Entities, or upon discovery thereof, allow such a conflict to
continue. Moreover, Employee shall not engage in any activity that might involve
a possible conflict of interest without first obtaining approval in accordance
with Halliburton's policies and procedures.
1.6 Nothing contained herein shall be construed to preclude the
transfer of Employee's employment to another Halliburton Entity ("Subsequent
Employer") as of, or at any time after, the Effective Date and no such transfer
shall be deemed to be a termination of employment for purposes of Article 3
hereof; provided, however, that, effective with such transfer, all of Employer's
obligations hereunder shall be assumed by and be binding upon, and all of
Employer's rights hereunder shall be assigned to, such Subsequent Employer and
the defined term "Employer" as used herein shall thereafter be deemed amended to
mean such Subsequent Employer. Except as otherwise provided above, all of the
terms and conditions of this Agreement, including without limitation, Employee's
rights and obligations, shall remain in full force and effect following such
transfer of employment.
ARTICLE 2: COMPENSATION AND BENEFITS:
2.1. Employee's base salary during the Term shall be not less than
$500,000 per annum which shall be paid in accordance with the Employer's
standard payroll practice for its executives. Employee's base salary may be
increased from time to time with the approval of the Compensation Committee of
Halliburton's Board of Directors (the "Compensation Committee") or its delegate,
as applicable. Such increased base salary shall become the minimum base salary
under this Agreement and may not be decreased thereafter without the written
consent of Employee.
2.2. During the Term, Employee shall participate in the Halliburton
Annual Performance Pay Plan, or any successor annual incentive plan approved by
the Compensation Committee; provided, however, that all determinations relating
to Employee's participation, including, without limitation, those relating to
the performance goals applicable to Employee and Employee's level of
participation and payout opportunity, shall be made in the sole discretion of
the person or committee to whom such authority has been granted pursuant to such
plan's terms.
2.3. Employer shall grant to Employee under the Halliburton Company
1993 Stock and Long-Term Incentive Plan (the"1993 Plan") a non-qualified stock
option to purchase up to 34,594 shares of Employer's common stock at an exercise
price equal to the closing price of Employer's common stock on the Effective
Date. The other terms and conditions of such option are set forth in Exhibit A
attached hereto, and forming a part of, this Agreement.
2
2.4. Employer will grant to Employee under the 1993 Plan 20,000 shares
of Employer's common stock subject to restrictions and other terms and
conditions set forth in Exhibit B attached hereto, and forming as part of, this
Agreement.
2.5. During the Term, Employer shall pay or reimburse Employee for all
actual, reasonable and customary expenses incurred by Employee in the course of
his or her employment; including, but not limited to, travel, entertainment,
subscriptions and dues associated with Employee's membership in professional,
business and civic organizations; provided that such expenses are incurred and
accounted for in accordance with Employer's applicable policies and procedures.
2.6. While employed by Employer, Employee shall be allowed to
participate, on the same basis generally as other executive employees of
Employer, in all general employee benefit plans and programs, including
improvements or modifications of the same, which on the Effective Date or
thereafter are made available by Employer to all or substantially all of
Employer's similarly situated executive employees. Such benefits, plans, and
programs may include, without limitation, medical, health, and dental care, life
insurance, disability protection, and qualified and non-qualified retirement
plans. Except as specifically provided herein, nothing in this Agreement is to
be construed or interpreted to increase or alter in any way the rights,
participation, coverage, or benefits under such benefit plans or programs than
provided to similarly situated executive employees pursuant to the terms and
conditions of such benefit plans and programs. While employed by Employer,
Employee shall be eligible to receive awards under the 1993 Plan or any
successor stock-related plan adopted by Halliburton's Board of Directors;
provided, however, that the foregoing shall not be construed as a guarantee with
respect to the type, amount or frequency of such awards, if any, such decisions
being solely within the discretion of the Compensation Committee or its
delegate, as applicable.
2.7. Employer shall not, by reason of this Article 2, be obligated to
institute, maintain, or refrain from changing, amending or discontinuing, any
incentive compensation, employee benefit or stock or stock option program or
plan, so long as such actions are similarly applicable to covered employees
generally.
2.8. Employer may withhold from any compensation, benefits, or amounts
payable under this Agreement all federal, state, city, or other taxes as may be
required pursuant to any law or governmental regulation or ruling.
ARTICLE 3: TERMINATION OF EMPLOYMENT AND EFFECTS OF SUCH TERMINATION:
3.1. Employee's employment with Employer shall be terminated (i) upon
the death of Employee, (ii) upon Employee's Retirement (as defined below), (iii)
upon Employee's Permanent Disability (as defined below), or (iv) at any time by
Employer upon written notice to Employee, or by Employee upon thirty (30) days'
written notice to Employer, for any or no reason.
3
3.2. If Employee's employment is terminated by reason of any of the
following circumstances, Employee shall not be entitled to receive the benefits
set forth in Section 3.3 hereof:
(i) Death.
(ii) Retirement. "Retirement" shall mean either (a) Employee's
retirement at or after normal retirement age (either
voluntarily or pursuant to Halliburton's retirement policy) or
(b) the voluntary termination of Employee's employment by
Employee in accordance with Employer's early retirement policy
for other than Good Reason (as defined below).
(iii) Permanent Disability. "Permanent Disability" shall mean
Employee's physical or mental incapacity to perform his or her
usual duties with such condition likely to remain continuously
and permanently as determined by the Compensation Committee.
(iv) Voluntary Termination. "Voluntary Termination" shall mean a
termination of employment in the sole discretion and at the
election of Employee for other than Good Reason. "Good Reason"
shall mean (a) a termination of employment by Employee because
of a material breach by Employer of any material provision of
this Agreement which remains uncorrected for thirty (30) days
following written notice of such breach by Employee to Employer,
provided such termination occurs within sixty (60) days after
the expiration of the notice period or (b) a termination of
employment by Employee within six (6) months after a material
reduction in Employee's rank or responsibility with Employer.
(v) Termination for Cause. Termination of Employee's employment by
Employer for Cause. "Cause" shall mean any of the following:
(a) Employee's gross negligence or willful misconduct in the
performance of the duties and services required of Employee
pursuant to this Agreement, (b) Employee's final conviction of a
felony, (c) a material violation of the Code of Business
Conduct or (d) Employee's material breach of any material
provision of this Agreement which remains uncorrected for thirty
(30) days following written notice of such breach to Employee by
Employer. Determination as to whether or not Cause exists for
termination of Employee's employment will be made by the
Compensation Committee.
In the event Employee's employment is terminated under any of the
foregoing circumstances, all future compensation to which Employee is otherwise
entitled and all future benefits for which Employee is eligible shall cease and
terminate as of the date of termination, except as specifically provided in this
Section 3.2. Employee, or his or her estate in the case of Employee's death,
shall be entitled to pro rata base salary through the date of such termination
and shall be entitled to any individual bonuses or individual incentive
compensation not yet paid but payable under Employer's or Halliburton's plans
for years prior to the year of Employee's termination of employment, but shall
not be entitled to any bonus or incentive compensation for the year in which he
or she terminates employment or any other payments or benefits by or on behalf
4
of Employer except for those which may be payable pursuant to the terms of
Employer's or Halliburton's employee benefit plans (as defined in Section 3.4),
stock, stock option or incentive plans, or the applicable agreements underlying
such plans.
3.3 If Employee's employment is terminated by Employee for Good Reason
or by Employer for any reason other than as set forth in Section 3.2 above
Employee shall be entitled to each of the following:
(i) To the extent not otherwise specifically provided in any
underlying restricted stock agreements, Halliburton, at its
option and in its sole discretion, shall either (a) cause all
shares of Halliburton common stock previously granted to
Employee under the 1993 Plan, and any similar plan adopted by
Halliburton in the future, which at the date of termination of
employment are subject to restrictions (the "Restricted Shares")
to be forfeited, in which case, Employer will pay Employee a
lump sum cash payment equal to the value of the Restricted
Shares (based on the closing price of Halliburton common stock
on the New York Stock Exchange on the date of termination of
employment); or (b) cause the forfeiture restrictions with
respect to the Restricted Shares lapse and such shares shall be
retained by Employee.
(ii) Subject to the provisions of Section 3.4, Employer shall pay to
Employee a severance benefit consisting of a single lump sum
cash payment equal to two years' of Employee's base salary as in
effect at the date of Employee's termination of employment. Such
severance benefit shall be paid no later than sixty (60) days
following Employee's termination of employment.
(iii) Employee shall be entitled to any individual bonuses or
individual incentive compensation not yet paid but payable
under Employer's or Halliburton's plans for years prior to the
year of Employee's termination of employment. Such amounts
shall be paid to Employee in a single lump sum cash payment no
later than sixty (60) days following Employee's termination of
employment.
(iv) Employee shall be entitled to any individual bonuses or
individual incentive compensation under Employer's or
Halliburton's plans for the year of Employee's termination of
employment determined as if Employee had remained employed by
the Employer for the entire year. Such amounts shall be paid to
Employee at the time that such amounts are paid to similarly
situated employees except that no portion of such amounts shall
be deferred to future years.
3.4. The severance benefit paid to Employee pursuant to Section 3.3
shall be in consideration of Employee's continuing obligations hereunder after
such termination, including, without limitation, Employee's obligations under
Article 4. Further, as a condition to the receipt of such severance benefit,
Employer, in its sole discretion, may require Employee to first execute a
release, in the form established by Employer, releasing Employer and all other
Halliburton Entities, and their officers, directors, employees, and agents, from
5
any and all claims and from any and all causes of action of any kind or
character, including, but not limited to, all claims and causes of action
arising out of Employee's employment with Employer and any other Halliburton
Entities or the termination of such employment. The performance of Employer's
obligations under Section 3.3 and the receipt of the severance benefit provided
thereunder by Employee shall constitute full settlement of all such claims and
causes of action. Employee shall not be under any duty or obligation to seek or
accept other employment following a termination of employment pursuant to which
a severance benefit payment under Section 3.3 is owing and the amounts due
Employee pursuant to Section 3.3 shall not be reduced or suspended if Employee
accepts subsequent employment or earns any amounts as a self-employed
individual. Employee's rights under Section 3.3 are Employee's sole and
exclusive rights against the Employer or its affiliates and the Employer's sole
and exclusive liability to Employee under this Agreement, in contract, tort or
otherwise, for the termination of his or her employment relationship with
Employer. Employee agrees that all disputes relating to Employee's termination
of employment, including, without limitation, any dispute as to "Cause" or
"Voluntary Termination" and any claims or demands against Employer or
Halliburton based upon Employee's employment for any monies other than those
specified in Section 3.3, shall be resolved through the Halliburton Dispute
Resolution Plan as provided in Section 5.6 hereof; provided, however, that
decisions as to whether "Cause" exists for termination of the employment
relationship with Employee and whether and as of what date Employee has become
permanently disabled are delegated to the Compensation Committee for
determination and any dispute of Employee with any such decision shall be
limited to whether the Compensation Committee reached such decision in good
faith. Nothing contained in this Article 3 shall be construed to be a waiver by
Employee of any benefits accrued for or due Employee under any employee benefit
plan (as such term is defined in the Employees' Retirement Income Security Act
of 1974, as amended) maintained by Employer or Halliburton except that Employee
shall not be entitled to any severance benefits pursuant to any severance plan
or program of the Employer or Halliburton.
3.5. Termination of the employment relationship does not terminate
those obligations imposed by this Agreement which are continuing obligations,
including, without limitation, Employee's obligations under Article 4.
ARTICLE 4: OWNERSHIP AND PROTECTION OF INTELLECTUAL PROPERTY AND CONFIDENTIAL
INFORMATION:
4.1. All information, ideas, concepts, improvements, discoveries, and
inventions, whether patentable or not, which are conceived, made, developed or
acquired by Employee, individually or in conjunction with others, during
Employee's employment by Employer or any of its affiliates (whether during
business hours or otherwise and whether on Employer's premises or otherwise)
which relate to the business, products or services of Employer or its affiliates
(including, without limitation, all such information relating to corporate
opportunities, research, financial and sales data, pricing and trading terms,
evaluations, opinions, interpretations, acquisition prospects, the identity of
customers or their requirements, the identity of key contacts within the
customer's organizations or within the organization of acquisition prospects, or
marketing and merchandising techniques, prospective names, and marks), and all
6
writings or materials of any type embodying any of such items, shall be the sole
and exclusive property of Employer or its affiliates, as the case may be.
4.2. Employee acknowledges that the businesses of Employer and its
affiliates are highly competitive and that their strategies, methods, books,
records, and documents, their technical information concerning their products,
equipment, services, and processes, procurement procedures and pricing
techniques, the names of and other information (such as credit and financial
data) concerning their customers and business affiliates, all comprise
confidential business information and trade secrets which are valuable, special,
and unique assets which Employer or its affiliates use in their business to
obtain a competitive advantage over their competitors. Employee further
acknowledges that protection of such confidential business information and trade
secrets against unauthorized disclosure and use is of critical importance to
Employer and its affiliates in maintaining their competitive position. Employee
hereby agrees that Employee will not, at any time during or after his or her
employment by Employer, make any unauthorized disclosure of any confidential
business information or trade secrets of Employer or its affiliates, or make any
use thereof, except in the carrying out of his or her employment
responsibilities hereunder. Confidential business information shall not include
information in the public domain (but only if the same becomes part of the
public domain through a means other than a disclosure prohibited hereunder). The
above notwithstanding, a disclosure shall not be unauthorized if (i) it is
required by law or by a court of competent jurisdiction or (ii) it is in
connection with any judicial, arbitration, dispute resolution or other legal
proceeding in which Employee's legal rights and obligations as an employee or
under this Agreement are at issue; provided, however, that Employee shall, to
the extent practicable and lawful in any such events, give prior notice to
Employer of his or her intent to disclose any such confidential business
information in such context so as to allow Employer or its affiliates an
opportunity (which Employee will not oppose) to obtain such protective orders or
similar relief with respect thereto as may be deemed appropriate.
4.3. All written materials, records, and other documents made by, or
coming into the possession of, Employee during the period of Employee's
employment by Employer which contain or disclose confidential business
information or trade secrets of Employer or its affiliates shall be and remain
the property of Employer, or its affiliates, as the case may be. Upon
termination of Employee's employment by Employer, for any reason, Employee
promptly shall deliver the same, and all copies thereof, to Employer.
4.4 For purposes of this Article 4, "affiliates" shall mean entities in
which Employer or Halliburton has a 20% or more direct or indirect equity
interest.
ARTICLE 5: MISCELLANEOUS:
5.1. Except as otherwise provided in Section 4.4 hereof, for purposes
of this Agreement, the terms "affiliate" or "affiliated" means an entity who
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with Halliburton or in which
Halliburton has a 50% or more equity interest.
7
5.2. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when received by or tendered to Employee, Halliburton or
Employer, as applicable, by pre-paid courier or by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to Employer or Halliburton, to Halliburton Company at 3600 Lincoln
Plaza, 500 North Akard Street, Dallas, Texas 75201-3391, to the
attention of the General Counsel.
If to Employee, to his or her last known personal residence.
5.3. This Agreement 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 conflicts of law, unless preempted by federal law, in which case
federal law shall govern; provided, however, that the Halliburton Dispute
Resolution Plan and the Federal Arbitration Act shall govern in all respects
with regard to the resolution of disputes hereunder.
5.4. No failure by either party hereto at any time to give notice of
any breach by the other party of, or to require compliance with, any condition
or provision of this Agreement shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
5.5. It is a desire and intent of the parties that the terms,
provisions, covenants, and remedies contained in this Agreement shall be
enforceable to the fullest extent permitted by law. If any such term, provision,
covenant, or remedy of this Agreement or the application thereof to any person,
association, or entity or circumstances shall, to any extent, be construed to be
invalid or unenforceable in whole or in part, then such term, provision,
covenant, or remedy shall be construed in a manner so as to permit its
enforceability under the applicable law to the fullest extent permitted by law.
In any case, the remaining provisions of this Agreement or the application
thereof to any person, association, or entity or circumstances other than those
to which they have been held invalid or unenforceable, shall remain in full
force and effect.
5.6. It is the mutual intention of the parties to have any dispute
concerning this Agreement 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 Halliburton Dispute Resolution Plan; provided, however,
that the Employer, on its own behalf and on behalf of any of the Halliburton
Entities, shall be entitled to seek a restraining order or injunction in any
court of competent jurisdiction to prevent any breach or the continuation of any
breach of the provisions of Article 4 and Employee hereby consents that such
restraining order or injunction may be granted without the necessity of the
Employer posting any bond. The parties agree that the resolution of any such
dispute through such Plan shall be final and binding. A copy of the Halliburton
Dispute Resolution Plan, as currently in effect, is attached to this Agreement
for information purposes. Halliburton reserves the right to amend such Plan or
discontinue such Plan at any time.
5.7. This Agreement shall be binding upon and inure to the benefit of
Employer, to the extent herein provided, Halliburton and any other person,
association, or entity which may hereafter acquire or succeed to all or
8
substantially all of the business or assets of Employer or Halliburton by any
means whether direct or indirect, by purchase, merger, consolidation, or
otherwise. Employee's rights and obligations under this Agreement are personal
and such rights, benefits, and obligations of Employee shall not be voluntarily
or involuntarily assigned, alienated, or transferred, whether by operation of
law or otherwise, without the prior written consent of Employer, other than in
the case of death or incompetence of Employee.
5.8. This Agreement replaces and merges any previous agreements and
discussions pertaining to the subject matter covered herein. This Agreement
constitutes the entire agreement of the parties with regard to the terms of
Employee's employment, termination of employment and severance benefits, and
contains all of the covenants, promises, representations, warranties, and
agreements between the parties with respect to such matters. Each party to this
Agreement acknowledges that no representation, inducement, promise, or
agreement, oral or written, has been made by either party with respect to the
foregoing matters which is not embodied herein, and that no agreement,
statement, or promise relating to the employment of Employee by Employer that is
not contained in this Agreement shall be valid or binding. Any modification of
this Agreement will be effective only if it is in writing and signed by each
party whose rights hereunder are affected thereby, provided that any such
modification must be authorized or approved by the Compensation Committee or its
delegate, as appropriate.
IN WITNESS WHEREOF, Employer and Employee have duly executed this
Agreement in multiple originals to be effective on the Effective Date.
HALLIBURTON COMPANY
By: /s/ David J. Lesar
--------------------------------------
Name: David J. Lesar
Title: Chairman of the Board, President
and Chief Executive Officer
EMPLOYEE
/s/ Douglas L. Foshee
------------------------------------------
Douglas L. Foshee
9
Exhibit A To Executive Employment Agreement
Effective August 6, 2001, Between Halliburton Company
And Douglas L. Foshee
NONSTATUTORY STOCK OPTION AGREEMENT
GRANTED , 2001
-------------
Grantee: ("Employee")
------------
Aggregate Number of Shares Subject to Option:
-------------
Option Price: $
------------
Expiration (subject to terms and conditions of Agreement): 10 years
The terms and conditions of the Nonstatutory Stock Option Agreement are set
forth on pages 2 through 5.
I HEREBY AGREE TO THE TERMS AND CONDITIONS HEREINAFTER SET FORTH IN THIS
NONSTATUTORY STOCK OPTION AGREEMENT DATED , 2001.
---------
- ------------------------------- ----------------------------------
Employee Signature Date
Please sign in the space indicated above to indicate your acceptance of this
Option grant and complete the information requested below. (Note that all fields
must be completed.) RETURN THIS PAGE WITHIN 60 DAYS OF RECEIPT TO:
ANN PHILIPP, LAW DEPARTMENT
HALLIBURTON COMPANY
3600 LINCOLN PLAZA
500 NORTH AKARD STREET
DALLAS, TEXAS 75201-3391
FAX: (214) 978-2783 (facsimile copies are acceptable)
PLEASE PRINT
- ---------------------------------- -------------------------------------------
Name (First, Middle Initial, Last) U.S. Social Security Number (if applicable)
- ---------------------------------- -------------------------------------------
Address (Street or P. O. Box) Foreign I.D. (if applicable)
- ---------------------------------- -------------------------------------------
Address (City and State/Province) Birth Date (Month/Day/Year)
- ---------------------------------- -------------------------------------------
Address (Postal Code, Country) Daytime Phone Number
- ---------------------------------- -------------------------------------------
Name of Employer (Business Unit) Payroll ID Number
United States Citizen: Yes No
----- -----
E-mail address:
-----------------------------------------------------------------
NONSTATUTORY STOCK OPTION AGREEMENT
TERMS AND CONDITIONS
AGREEMENT made as of the day of , 2001, between
----- -----------
HALLIBURTON COMPANY, a Delaware corporation (the "Company"), and Employee.
To carry out the purposes of the HALLIBURTON COMPANY 1993 STOCK AND
LONG-TERM INCENTIVE PLAN (the "Plan"), by affording Employee the opportunity to
purchase shares of common stock, par value $2.50 per share, of the Company
("Stock"), and in consideration of the mutual agreements and other matters set
forth herein and in the Plan, the Company and Employee hereby agree as follows:
1. Grant of Option. The Company hereby irrevocably grants to Employee
the right and option ("Option") to purchase all or any part of the number of
shares of Stock, on the terms and conditions set forth herein and in the Plan,
which Plan is incorporated herein by reference as a part of this Agreement. This
Option shall not be treated as an incentive stock option within the meaning of
section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code").
2. Purchase Price. The purchase price of Stock purchased pursuant to
the exercise of this Option shall be $ per share, which has been
------
determined to be not less than the fair market value of the Stock at the date of
grant of this Option. For all purposes of this Agreement, fair market value of
Stock shall be determined in accordance with the provisions of the Plan.
3. Exercise of Option. Subject to the earlier expiration of this Option
as herein provided, this Option may be exercised, by written notice to the
Company at its principal executive office addressed to the attention of its Vice
President and Secretary, at any time and from time to time after the date of
grant hereof, but, except as otherwise provided below, this Option shall not be
exercisable for more than a percentage of the aggregate number of shares offered
by this Option determined by the vesting dates as indicated below to the date of
such exercise, in accordance with the following schedule:
Percentage of Shares
Vesting Dates That May be Purchased
Prior to April 1, 2003 0%
April 1, 2003 25%
April 1, 2004 50%
April 1, 2005 75%
April 1, 2006 100%
This Option is not transferable otherwise than by will or the laws of
descent and distribution or pursuant to a "qualified domestic relations order"
as defined by the Code. The foregoing notwithstanding, while employed by the
Company, Employee may, in Employee's sole discretion but subject to compliance
with such rules and procedures as the Company may establish, transfer this
Option (or a portion thereof) to Employee's spouse, children or grandchildren
(including adopted and step children and grandchildren) ("Immediate Family"), to
a trust solely for the benefit of Employee and members of Employee's Immediate
Family, or to a partnership or limited liability company whose only partners or
shareholders are Employee and members of Employee's Immediate Family. Employee's
rights under this Agreement shall pass to the transferee and such transferee may
exercise this Option (or such portion thereof as has been transferred) and all
rights granted by this Agreement to the extent Employee was entitled to exercise
this Option during Employee's lifetime, or in the event of Employee's death, to
the extent this Option would have been exercisable by Employee's beneficiaries
or heirs had this Option not been transferred prior to death. Upon any attempt
to transfer, assign, pledge, hypothecate or otherwise dispose of this Option or
of such rights contrary to the provisions hereof or in the Plan, or upon the
levy of any attachment or similar process upon this Option or such rights, this
Option and such rights shall immediately become null and void.
Except as provided above, this Option may be exercised during
Employee's lifetime only by Employee, Employee's guardian or legal
representative or a transferee under a qualified domestic relations order. This
Option may be exercised only while Employee remains an employee of the Company,
subject to the following exceptions:
(a) If Employee's employment with the Company terminates by
reason of disability (disability being defined as being physically or
mentally incapable of performing either the Employee's usual duties as
an Employee or any other duties as an Employee that the Company
reasonably makes available and such condition is likely to remain
continuously and permanently, as determined by the Company or employing
subsidiary), this Option may be exercised in full by Employee (or
Employee's estate or the person who acquires this Option by will or the
laws of descent and distribution or otherwise by reason of the death of
Employee) at any time during the period ending on the earlier of the
Expiration Date (as defined below) or the third anniversary of such
termination date.
(b) If Employee dies while in the employ of the Company,
Employee's estate, or the person who acquires this Option by will or
the laws of descent and distribution or otherwise by reason of the
death of Employee, may exercise this Option in full at any time during
the period ending on the earlier of the Expiration Date or the third
anniversary of the date of Employee's death.
(c) If Employee's employment with the Company terminates by
reason of normal retirement at or after age 65, this Option may be
exercised by Employee at any time during the period ending on the
Expiration Date, but only as to the number of shares Employee was
entitled to purchase on the date of such exercise in accordance with
the schedule set forth above. In connection with the termination of
Employee's employment with the Company by reason of early retirement,
applicable management of the Company and/or business unit may recommend
to the Committee or its delegate, as applicable, that this Option be
retained. In such event, the Committee or its delegate, as the case may
be, shall consider such recommendation and may, in the Committee's or
such delegate's sole discretion, approve the retention of this Option
following such early retirement, in which case the Option may be
exercised by Employee at any time during the period ending on the
Expiration Date, but only as to the number of shares Employee was
entitled to purchase on the date of such exercise in accordance with
the schedule set forth above. If, after retirement as set forth above,
Employee should die, this Option may be exercised in full by Employee's
estate (or the person who acquires this Option by will or the laws of
descent and distribution or otherwise by reason of the death of the
Employee) during the period ending on the earlier of the Expiration
Date or the third anniversary of the date of Employee's death.
(d) If Employee's employment with the Company terminates for
any reason other than those set forth in subparagraphs (a) through (c)
above, this Option may be exercised by Employee at any time during the
period of 30 days following such termination, or by Employee's estate
(or the person who acquires this Option by will or the laws of descent
and distribution or otherwise by reason of the death of the Employee)
during a period of six months following Employee's death if Employee
dies during such 30-day period, but in each case only as to the number
of shares Employee was entitled to purchase hereunder upon exercise of
this Option as of the date Employee's employment so terminates.
This Option shall not be exercisable in any event prior to the
expiration of six months from the date of grant hereof or after the expiration
of ten years from the date of grant hereof (the "Expiration Date")
notwithstanding anything hereinabove contained. The purchase price of shares as
to which this Option is exercised shall be paid in full at the time of exercise
(a) in cash (including check, bank draft or money order payable to the order of
the Company), (b) by delivering to the Company shares of Stock having a fair
market value equal to the purchase price and which shares, if acquired from the
Company, have been held by Employee for more than six months, or (c) by a
combination of cash or Stock. Payment may also be made by delivery (including by
facsimile transmission) to the Company of an executed irrevocable option
exercise form, coupled with irrevocable instructions to a broker-dealer
designated by the Company to simultaneously sell a sufficient number of the
shares as to which the option is exercised and deliver directly to the Company
that portion of the sales proceeds representing the exercise price. No fraction
of a share of Stock shall be issued by the Company upon exercise of an Option or
accepted by the Company in payment of the purchase price thereof; rather,
Employee shall provide a cash payment for such amount as is necessary to effect
the issuance and acceptance of only whole shares of Stock. Unless and until a
certificate or certificates representing such shares shall have been issued by
the Company to Employee, Employee (or the person permitted to exercise this
Option in the event of Employee's death) shall not be or have any of the rights
or privileges of a shareholder of the Company with respect to shares acquirable
upon an exercise of this Option.
4. Withholding of Tax. To the extent that the exercise of this Option
or the disposition of shares of Stock acquired by exercise of this Option
results in compensation income to Employee for federal or state income tax
purposes, Employee shall deliver to the Company at the time of such exercise or
disposition such amount of money or shares of Stock as the Company may require
to meet its withholding obligation under applicable tax laws or regulations,
and, if Employee fails to do so, the Company is authorized to withhold from any
cash or Stock remuneration then or thereafter payable to Employee any tax
required to be withheld by reason of such resulting compensation income. Upon an
exercise of this Option, the Company is further authorized in its discretion to
satisfy any such withholding requirement out of any cash or shares of Stock
distributable to Employee upon such exercise.
5. Status of Stock. Notwithstanding any other provision of this
Agreement, in the absence of an effective registration statement for issuance
under the Securities Act of 1933, as amended (the "Act"), of the shares of Stock
acquirable upon exercise of this Option, or an available exemption from
registration under the Act, issuance of shares of Stock acquirable upon exercise
of this Option will be delayed until registration of such shares is effective or
an exemption from registration under the Act is available. The Company intends
to use its best efforts to ensure that no such delay will occur. In the event
exemption from registration under the Act is available upon an exercise of this
Option, Employee (or the person permitted to exercise this Option in the event
of Employee's death or incapacity), if requested by the Company to do so, will
execute and deliver to the Company in writing an agreement containing such
provisions as the Company may require to assure compliance with applicable
securities laws.
Employee agrees that the shares of Stock which Employee may acquire by
exercising this Option will not be sold or otherwise disposed of in any manner
which would constitute a violation of any applicable securities laws, whether
federal or state. Employee also agrees (i) that the certificates representing
the shares of Stock purchased under this Option may bear such legend or legends
as the Company deems appropriate in order to assure compliance with applicable
securities laws, (ii) that the Company may refuse to register the transfer of
the shares of Stock purchased under this Option on the stock transfer records of
the Company if such proposed transfer would in the opinion of counsel
satisfactory to the Company constitute a violation of any applicable securities
law and (iii) that the Company may give related instructions to its transfer
agent, if any, to stop registration of the transfer of the shares of Stock
purchased under this Option.
6. Employment Relationship. For purposes of this Agreement, Employee
shall be considered to be in the employment of the Company as long as Employee
remains an employee of either the Company, a parent or subsidiary corporation
(as defined in section 424 of the Code) of the Company, or a corporation or a
parent or subsidiary of such corporation assuming or substituting a new option
for this Option. Any question as to whether and when there has been a
termination of such employment, and the cause of such termination, shall be
determined by the Committee or its delegate, as appropriate, and such
determination shall be final.
7. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of any successors to the Company and all persons lawfully claiming
under Employee.
8. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Texas.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officer thereunto duly authorized, and Employee has executed
this Agreement, all as of the day and year first above written.
HALLIBURTON COMPANY
By:
--------------------------------------
David J. Lesar
Chairman of the Board, President and
Chief Executive Officer
Exhibit B To Executive Employment Agreement
Effective August 6, 2001, Between Halliburton Company
and Douglas L. Foshee
RESTRICTED STOCK AGREEMENT
AGREEMENT made as of the day of , 2001, between
------ ----------
HALLIBURTON COMPANY, a Delaware corporation (the "Company"), and
---------------
("Employee").
1. Award.
(a) Shares. Pursuant to the Halliburton Company 1993 Stock and
Long-Term Incentive Plan (the "Plan") _________ shares (the "Restricted Shares")
of the Company's common stock, par value $2.50 per share ("Stock"), shall be
issued as hereinafter provided in Employee's name subject to certain
restrictions thereon.
(b) Issuance of Restricted Shares. The Restricted Shares shall be
issued upon acceptance hereof by Employee and upon satisfaction of the
conditions of this Agreement.
(c) Plan Incorporated. Employee acknowledges receipt of a copy
of the Plan, and agrees that this award of Restricted Shares shall be subject to
all of the terms and conditions set forth in the Plan, including future
amendments thereto, if any, pursuant to the terms thereof, which Plan is
incorporated herein by reference as a part of this Agreement.
2. Restricted Shares. Employee hereby accepts the Restricted Shares
when issued and agrees with respect thereto as follows:
(a) Forfeiture Restrictions. The Restricted Shares may not be sold,
assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered
or disposed of to the extent then subject to the Forfeiture Restrictions (as
hereinafter defined), and in the event of termination of Employee's employment
with the Company or employing subsidiary for any reason other than (i) normal
retirement on or after age sixty-five, (ii) death or (iii) disability as
determined by the Company or employing subsidiary, or except as otherwise
provided in the last two sentences of subparagraph (b) of this Paragraph 2,
Employee shall, for no consideration, forfeit to the Company all Restricted
Shares to the extent then subject to the Forfeiture Restrictions. The
prohibition against transfer and the obligation to forfeit and surrender
Restricted Shares to the Company upon termination of employment are herein
referred to as "Forfeiture Restrictions." The Forfeiture Restrictions shall be
binding upon and enforceable against any transferee of Restricted Shares.
(b) Lapse of Forfeiture Restrictions. The Forfeiture Restrictions
shall lapse as to the Restricted Shares in accordance with the following
schedule provided that Employee has been continuously employed by the Company
from the date of this Agreement through the lapse date:
Percentage of Total
Number of Restricted Shares
as to Which Forfeiture
Lapse Date Restrictions Lapse
---------- ------------------------------------
First Anniversary of the
date of this Agreement 10%
Second Anniversary of the
date of this Agreement 10%
Third Anniversary of the
date of this Agreement 10%
Fourth Anniversary of the
date of this Agreement 10%
Fifth Anniversary of the
date of this Agreement 10%
Sixth Anniversary of the
date of this Agreement 10%
Seventh Anniversary of the
date of this Agreement 10%
Eighth Anniversary of the
date of this Agreement 10%
Ninth Anniversary of the
date of this Agreement 10%
Tenth Anniversary of the
date of this Agreement 10%
Notwithstanding the foregoing, the Forfeiture Restrictions shall lapse as to all
of the Restricted Shares on the earlier of (i) the occurrence of a Corporate
Change (as such term is defined in the Plan), (ii) the date Employee's
employment with the Company is terminated by reason of death, disability (as
determined by the Company or employing subsidiary) or normal retirement on or
after age sixty-five or (iii) the date on which Employee shall become entitled
to the severance benefits set forth in Section 3.3 of that certain Executive
Employment Agreement by and between Employee and the Company. In the event
Employee's employment is terminated for any other reason, including retirement
prior to age sixty-five with the approval of the Company or employing
subsidiary, the Committee which administers the Plan (the "Committee") or its
delegate, as appropriate, may, in the Committee's or such delegate's sole
discretion, approve the lapse of Forfeiture Restrictions as to any or all
Restricted Shares still subject to such restrictions, such lapse to be effective
on the date of such approval or Employee's termination date, if later.
2
(c) Certificates. A certificate evidencing the Restricted Shares
shall be issued by the Company in Employee's name, or at the option of the
Company, in the name of a nominee of the Company, pursuant to which Employee
shall have voting rights and shall be entitled to receive all dividends unless
and until the Restricted Shares are forfeited pursuant to the provisions of this
Agreement. The certificate shall bear a legend evidencing the nature of the
Restricted Shares, and the Company may cause the certificate to be delivered
upon issuance to the Secretary of the Company or to such other depository as may
be designated by the Company as a depository for safekeeping until the
forfeiture occurs or the Forfeiture Restrictions lapse pursuant to the terms of
the Plan and this award. Upon request of the Committee or its delegate, Employee
shall deliver to the Company a stock power, endorsed in blank, relating to the
Restricted Shares then subject to the Forfeiture Restrictions. Upon the lapse of
the Forfeiture Restrictions without forfeiture, the Company shall cause a new
certificate or certificates to be issued without legend in the name of Employee
for the shares upon which Forfeiture Restrictions lapsed. Notwithstanding any
other provisions of this Agreement, the issuance or delivery of any shares of
Stock (whether subject to restrictions or unrestricted) may be postponed for
such period as may be required to comply with applicable requirements of any
national securities exchange or any requirements under any law or regulation
applicable to the issuance or delivery of such shares. The Company shall not be
obligated to issue or deliver any shares of Stock if the issuance or delivery
thereof shall constitute a violation of any provision of any law or of any
regulation of any governmental authority or any national securities exchange.
3. Withholding of Tax. To the extent that the receipt of the
Restricted Shares or the lapse of any Forfeiture Restrictions results in income
to Employee for federal or state income tax purposes, Employee shall deliver to
the Company at the time of such receipt or lapse, as the case may be, such
amount of money or shares of unrestricted Stock as the Company may require to
meet its withholding obligation under applicable tax laws or regulations, and,
if Employee fails to do so, the Company is authorized to withhold from any cash
or Stock remuneration then or thereafter payable to Employee any tax required to
be withheld by reason of such resulting compensation income.
4. Status of Stock. Employee agrees that the Restricted Shares will
not be sold or otherwise disposed of in any manner which would constitute a
violation of any applicable federal or state securities laws. Employee also
agrees (i) that the certificates representing the Restricted Shares may bear
such legend or legends as the Company deems appropriate in order to assure
compliance with applicable securities laws, (ii) that the Company may refuse to
register the transfer of the Restricted Shares on the stock transfer records of
the Company if such proposed transfer would be in the opinion of counsel
satisfactory to the Company constitute a violation of any applicable securities
law and (iii) that the Company may give related instructions to its transfer
agent, if any, to stop registration of the transfer of the Restricted Shares.
5. Employment Relationship. For purposes of this Agreement, Employee
shall be considered to be in the employment of the Company as long as Employee
remains an employee of either the Company, any successor corporation or a parent
or subsidiary corporation (as defined in section 424 of the Code) of the Company
or any successor corporation. Any question as to whether and when there has been
3
a termination of such employment, and the cause of such termination, shall be
determined by the Committee, or its delegate, as appropriate, and its
determination shall be final.
6. Committee's Powers. No provision contained in this Agreement shall
in any way terminate, modify or alter, or be construed or interpreted as
terminating, modifying or altering any of the powers, rights or authority vested
in the Committee or, to the extent delegated, in its delegate pursuant to the
terms of the Plan or resolutions adopted in furtherance of the Plan, including,
without limitation, the right to make certain determinations and elections with
respect to the Restricted Shares.
7. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of any successors to the Company and all persons lawfully claiming
under Employee.
8. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Texas.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by an officer thereunto duly authorized, and Employee has executed this
Agreement, all as of the date first above written.
HALLIBURTON COMPANY
By:
--------------------------------------
David J. Lesar
Chairman of the Board, President
and Chief Executive Officer
-------------------------------
Employee
4
RESTRICTED STOCK AGREEMENT
(Date)
(Name)
(Shares)
Ten year vesting period
Please Check Appropriate Item (One of the boxes must be checked):
I do not desire the alternative tax treatment provided for in the
--------
Internal Revenue Code Section 83(b).
I do desire the alternative tax treatment provided for in Internal
-------*
Revenue Code Section 83(b) and desire that forms for such purpose be
forwarded to me.
* I acknowledge that the Company has suggested that before this block is
checked that I check with a tax consultant of my choice.
Please furnish the following information for shareholder records:
- ------------------------------------ --------------------------------
(Given name and initial must be used Social Security Number
for stock registry) (if applicable)
- ------------------------------------ --------------------------------
Address (Street or P. O. Box) Birth Date
Month/Day/Year
- ------------------------------------ --------------------------------
Address (City and State/Province) Name of Employer (Business Unit)
- ------------------------------------ --------------------------------
Address (Postal Code, Country) Payroll ID Number
United States Citizen: Yes No
--- --- --------------------------------
Day phone Number
E-mail address:
-----------------------------------------------------------------
PROMPTLY NOTIFY THIS OFFICE OF ANY CHANGE IN ADDRESS.
5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do hereby
constitute and appoint Susan S. Keith, John M. Allen and Bruce A. Metzinger, or
any of them acting alone, my true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, to prepare and sign for me, and
in my name, place and stead, in any and all capacities, any and all reports as
may from time to time be required under Section 16(a) of the Securities Exchange
Act of 1934, as amended, and the rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, and to file the same with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done (with full power to each of them to act
alone), as fully and to all intents and purposes as I might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitutes, may lawfully do or cause to be done
by virtue hereof.
This Power of Attorney shall remain in full force and effect until
revoked by me in writing.
IN WITNESS WHEREOF, I hereto set my hand this 21st day of May, 2001.
/s/ Kenneth T. Derr
-----------------------------------------
Kenneth T. Derr
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do hereby
constitute and appoint Susan S. Keith, John M. Allen and Bruce A. Metzinger, or
any of them acting alone, my true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, to prepare and sign for me, and
in my name, place and stead, in any and all capacities, any and all reports as
may from time to time be required under Section 16(a) of the Securities Exchange
Act of 1934, as amended, and the rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, and to file the same with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done (with full power to each of them to act
alone), as fully and to all intents and purposes as I might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitutes, may lawfully do or cause to be done
by virtue hereof.
This Power of Attorney shall remain in full force and effect until
revoked by me in writing.
IN WITNESS WHEREOF, I hereto set my hand this 15th day of May, 2001.
/s/ Aylwin B. Lewis
-----------------------------------------
Aylwin B. Lewis
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do hereby
constitute and appoint Susan S. Keith, John M. Allen and Bruce A. Metzinger, or
any of them acting alone, my true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, to prepare and sign for me, and
in my name, place and stead, in any and all capacities, any and all reports as
may from time to time be required under Section 16(a) of the Securities Exchange
Act of 1934, as amended, and the rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, and to file the same with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done (with full power to each of them to act
alone), as fully and to all intents and purposes as I might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitutes, may lawfully do or cause to be done
by virtue hereof.
This Power of Attorney shall remain in full force and effect until
revoked by me in writing.
IN WITNESS WHEREOF, I hereto set my hand this 15th day of May, 2001.
/s/ Debra L. Reed
-----------------------------------
Debra L. Reed
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do hereby
constitute and appoint Susan S. Keith, John M. Allen and Bruce A. Metzinger, or
any of them acting alone, my true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, to prepare and sign for me, and
in my name, place and stead, in any and all capacities, any and all reports as
may from time to time be required under Section 16(a) of the Securities Exchange
Act of 1934, as amended, and the rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, and to file the same with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done (with full power to each of them to act
alone), as fully and to all intents and purposes as I might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitutes, may lawfully do or cause to be done
by virtue hereof.
This Power of Attorney shall remain in full force and effect until
revoked by me in writing.
IN WITNESS WHEREOF, I hereto set my hand this 6th day of August, 2001.
/s/ Douglas L. Foshee
-----------------------------------
Douglas L. Foshee
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do hereby
constitute and appoint Susan S. Keith, John M. Allen and Bruce A. Metzinger, or
any of them acting alone, my true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, to prepare and sign for me, and
in my name, place and stead, in any and all capacities, any and all reports as
may from time to time be required under Section 16(a) of the Securities Exchange
Act of 1934, as amended, and the rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, and to file the same with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done (with full power to each of them to act
alone), as fully and to all intents and purposes as I might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitutes, may lawfully do or cause to be done
by virtue hereof.
This Power of Attorney shall remain in full force and effect until
revoked by me in writing.
IN WITNESS WHEREOF, I hereto set my hand this 7th day of August, 2001.
/s/ Robert R. Harl
---------------------------
Robert R. Harl
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, do hereby
constitute and appoint Lester L. Coleman, Susan S. Keith and John M. Allen, or
any of them acting alone, my true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, to prepare and sign for me, and
in my name, place and stead, in any and all capacities, any and all reports as
may from time to time be required under Section 16(a) of the Securities Exchange
Act of 1934, as amended, and the rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, and to file the same with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done (with full power to each of them to act
alone), as fully and to all intents and purposes as I might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitutes, may lawfully do or cause to be done
by virtue hereof.
This Power of Attorney shall remain in full force and effect until
revoked by me in writing.
IN WITNESS WHEREOF, I hereto set my hand this 24th day of May, 2001.
/s/ Edgar J. Ortiz
-------------------------------------
Edgar J. Ortiz