UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the fiscal year ended December 31, 1998
[ ] 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
(Exact name of registrant as specified in its charter)
Delaware 75-2677995
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
3600 Lincoln Plaza, 500 N. Akard St., Dallas, Texas 75201
(Address of principal executive offices)
Telephone Number - Area code (214) 978-2600
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange on
Title of each class which registered
------------------- ----------------
Common Stock par value $2.50 per share New York Stock Exchange
Baroid Corporation 8% Guaranteed Senior Notes due 2003 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of Common Stock held by nonaffiliates on January 29,
1999, determined using the per share closing price on the New York Stock
Exchange Composite tape of $29.69 on that date was approximately
$13,028,800,000.
As of January 29, 1999, there were 440,201,382 shares of Halliburton Company
Common Stock $2.50 par value per share outstanding.
Portions of the Halliburton Company Proxy Statement dated March 25, 1999, are
incorporated by reference into Part III of this report.
<PAGE>
PART I
Item 1. Business.
General Development of Business. Halliburton Company's predecessor was
established in 1919 and incorporated under the laws of the State of Delaware in
1924. Halliburton Company (the Company) provides energy services, engineering
and construction services and manufactures products for the energy industry.
Information related to acquisitions and dispositions is set forth in Note 14 to
the financial statements of this annual report.
Financial Information About Business Segments. The Company is comprised
of three business segments. See Note 2 to the financial statements of this
annual report for financial information about these three business segments.
Description of Services and Products. The following is a summary which
briefly describes the Company's services and products for each business segment.
The Energy Services Group segment provides a wide range of services and
products to provide both discrete services and products and integrated solutions
to customers in the exploration, development and production of oil and natural
gas. The Energy Services Group operates worldwide, serving major oil companies,
independent operators and national oil companies. The segment includes
Halliburton Energy Services (HES), which offers pressure pumping equipment and
services, logging and perforating products and services, drilling systems and
services, drilling fluid systems, drill bits, specialized completion and
production equipment and services and well control products and services; Brown
& Root Energy Services, which provides upstream oil and gas engineering,
procurement and construction, project management and production services, subsea
construction, fabrication and installation of onshore and offshore pipelines,
offshore and production platforms, marine engineering and other marine related
projects; Landmark Graphics Corporation, which provides integrated exploration
and production information systems and professional services; and Halliburton
Energy Development (HED), which creates business opportunities for the
development, production and operation of oil and gas fields in conjunction with
the Company's customers. In March 1999, HED was combined with HES.
The Engineering and Construction Group segment provides: conceptual
design, process design, detailed engineering, procurement, project and
construction management; construction of chemical and petrochemical plants,
refineries, liquefied natural gas (LNG) and gas processing facilities, pulp and
paper mills, metal processing plants, airports, water and wastewater systems;
technical and economic feasibility studies; site evaluation; repair and
refitting of submarines and surface ships; operations and maintenance services,
and engineering, logistics and wastewater management services for commercial
industry, utilities and government customers.
The Dresser Equipment Group segment designs, manufactures and markets
highly engineered products and systems for oil and gas producers, transporters,
processors, distributors and users throughout the world. Products and systems of
this segment include compressors, turbines, generators, electric motors, pumps,
engines and power systems, valves and controls, instruments, meters and pipe
couplings, blowers and gasoline dispensing systems.
Markets and Competition. The Company is one of the world's largest
diversified energy services and engineering and construction services companies.
The Company's services and products are sold in highly competitive markets
throughout the world. Competitive factors impacting sales of the Company's
services and products are: price, service (including the ability to deliver
services and products on an "as needed, where needed" basis), product quality,
warranty and technical proficiency. A growing number of customers are now
indicating a preference for integrated services and solutions. These integrated
services and solutions, in the case of the Energy Services Group, relate to
all phases of exploration, development and production of oil and gas, and in
the case of the Engineering and Construction Group, relate to all phases of
design, procurement, construction project management and maintenance of a
facility. Demand for these types of integrated services and solutions is based
primarily upon quality of service, technical proficiency and value created.
The Company conducts business worldwide in over 120 countries. Since
the markets for the Company's services and products are so large and cross many
geographic lines, a meaningful estimate of the number of competitors cannot be
made. These markets are, however, highly competitive with many substantial
companies operating in each market. Generally, the Company's services and
products are marketed through its own servicing and sales organizations. A small
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percentage of sales of the Energy Service Group's and Dresser Equipment Group's
products is made by supply stores and third-party representatives.
Operations in some countries may be adversely affected by unsettled
political conditions, expropriation or other governmental actions, and exchange
control and currency problems. The Company believes the geographic
diversification of its business activities reduces the risk that loss of its
operations in any one country would be material to the conduct of its operations
taken as a whole. Information regarding the Company's exposures to foreign
currency fluctuations, risk concentration and financial instruments used to
minimize risk is included in management's discussion and analysis of financial
condition and results of operations under the caption "Financial Instrument
Market Risk" and in Note 15 to the financial statements of this annual report.
Customers and Backlog. In 1998, 1997, and 1996, respectively, 85%, 84%
and 81% of the Company's revenues were derived from the sale of products and
services to, including construction for, the energy industry. Approximately 10%
of the total backlog at December 31, 1998 was for equipment manufacturing
contracts. The following schedule summarizes the backlog of engineering and
construction projects and equipment manufacturing contracts at December 31, 1998
and 1997:
<TABLE>
<CAPTION>
Millions of dollars 1998 1997
--------------------------------------------------------------------------------
<S> <C> <C>
Firm orders $10,472 $12,087
Government orders firm but not yet funded,
letters of intent and contracts awarded but
not signed 705 591
--------------------------------------------------------------------------------
Total $11,177 $12,678
--------------------------------------------------------------------------------
</TABLE>
It is estimated that 65% of the backlog existing at December 31, 1998
will be completed during 1999. The Company's backlog excludes contracts for
recurring hardware and software maintenance and support services. Backlog is not
necessarily indicative of future operating results because backlog figures are
subject to substantial fluctuations. Arrangements included in backlog are in
many instances extremely complex, nonrepetitive in nature and may fluctuate in
contract value. Many contracts do not provide for a fixed amount of work to be
performed and are subject to modification or termination by the customer. Due to
the size of certain contracts, the termination or modification of any one or
more contracts or the addition of other contracts may have a substantial and
immediate effect on backlog.
Raw Materials. Raw materials essential to the Company's business are
normally readily available. Where the Company is dependent on a single supplier
for any materials essential to its business, the Company is confident that it
could make satisfactory alternative arrangements in the event of an interruption
in the supply of such materials.
Research, Development and Patents. The Company maintains an active
research and development program to assist in the improvement of existing
products and processes, the development of new products and processes and the
improvement of engineering standards and practices that serve the changing needs
of its customers. Information relating to expenditures for research and
development is included in Note 1 and Note 2 to the financial statements of this
annual report.
The Company owns a large number of patents and has pending a
substantial number of patent applications covering various products and
processes. The Company is also licensed under patents owned by others. The
Company does not consider a particular patent or group of patents to be material
to the Company's business.
Seasonality. Weather and natural phenomena can temporarily affect the
performance of the Company's services. Winter months in the Northern Hemisphere
tend to affect operations negatively, but the widespread geographical locations
of the Company's operations serve to mitigate the seasonal nature of the
Company's business.
Employees. At December 31, 1998, the Company employed approximately
107,800 people.
Regulation. The Company is subject to various environmental laws and
regulations. Compliance with such requirements has not substantially increased
capital expenditures, adversely affected the Company's competitive position or
2
<PAGE>
materially affected the Company's earnings. The Company does not anticipate any
material adverse effects in the foreseeable future as a result of existing
environmental laws and regulations. Note 10 to the financial statements of
this annual report discusses the Company's involvement as a potentially
responsible party in the remedial activities to clean up several "Superfund"
sites.
Item 2. Properties.
Information relating to lease payments is included in Note 10 to the
financial statements of this annual report. The Company's owned and leased
facilities, as described below, are suitable for their intended use.
Energy Services Group manufacturing facilities owned by the Company
cover approximately 4.9 million square feet. Principal locations of these
manufacturing facilities are Tulsa and Duncan, Oklahoma; Alvarado, Amarillo,
Carrollton, Dallas, Fort Worth, Garland, Longview, and Houston, Texas; Colorado
Springs, Colorado; Arbroath, Scotland; Reynosa, Mexico; Newcastle and
Manchester, England, and Maturin Mongas, Venezuela. An idle facility in Davis,
Oklahoma was sold in 1998. The facility in Amarillo is idle. The manufacturing
facility in Garland, Texas is leased to another company. The Energy Services
Group also leases manufacturing facilities covering approximately 608,000 square
feet. Principal locations of these facilities are Malvern, Pennsylvania;
Houston, Texas; Jurong, Singapore; Panama City, Florida;
Basingstoke, England; and Calgary, Alberta, Canada. The facilities in
Basingstoke, England are subleased to another company.
Research, development and engineering activities are carried out in owned
facilities covering approximately 460,000 square feet. The major sites are in
Houston, Austin and Carrollton, Texas; Duncan, Oklahoma; and Aberdeen, Scotland;
and in leased facilities covering approximately 300,000 square feet in Houston,
Texas; Englewood and Denver, Colorado; Leatherhead and Dorking, England;
Leiderdrop, Holland; and Singapore. The facility in Dorking, England was idle
at the end of 1998. The Energy Services Group marine fabrication facilities
owned by the Company cover approximately 550 acres in Belle Chasse, Louisiana;
Greens Bayou, Texas; and Nigg and Wick, Scotland. The Belle Chasse, facility is
leased to another company and the facility in Nigg, Scotland is leased to a
joint venture of the Company. The Energy Services Group has 13 grinding
facilities owned or leased by the Company. The Energy Services Group also has
mineral rights to proven and prospective reserves of barite and bentonite.
Such rights included leaseholds and mining claims and property owned in
fee. Based on the number of tons of each of the above minerals consumed
in fiscal 1998, the Company estimates its reserves, which it considers to be
proven, to be sufficient for operations for the foreseeable future. In
addition, service centers, sales offices and field warehouses are operated at
approximately 290 locations in the United States, almost all of which are
owned, and at approximately 360 locations outside the United States in both the
Eastern and Western Hemispheres.
Engineering and Construction Group fabricating facilities cover
approximately 468,000 square feet in Houston, Texas and Edmonton, Canada, of
which 388,000 square feet in Houston is leased to another company. Engineering
and design, project management and procurement services activities are carried
out in owned facilities covering approximately 650,000 square feet. Major sites
of these activities are Houston and Baytown, Texas; Edmonton, Canada; Bundaberg
and Emerald, Australia; Plymouth and Greenford, England. These activities are
also carried out at leased facilities covering approximately 1.4 million square
feet. Major sites are in Mobile, Alabama; Alhambra, California; London,
England; Parkside, Victoria Park, Milton and Melbourne, Australia. The
Engineering and Construction Group operates dockyard facilities owned by a 51%
owned subsidiary of the Company covering approximately 155 acres in Plymouth,
England. Approximately 27 acres of this facility are subleased. In addition,
project offices, field camps, service centers, and sales offices are operated at
approximately 10 locations in the United States, almost all of which are
owned, and at approximately 15 locations outside the United States in both
the Eastern and Western Hemispheres.
Dresser Equipment Group owns approximately 9.9 million square feet of
manufacturing facilities. Major sites are in Austin, Stafford and Houston,
Texas; Broken Arrow, Oklahoma; Painted Post, Olean and Wellsville, New York;
Minneapolis, Minnesota; Stratford, Connecticut; Berea, Kentucky; Bradford,
Pennsylvania; Salisbury, Maryland; Waukesha, Wisconsin; Avon, Massachusettes;
Connersville, Indiana; Einbeck, Germany; Naples and Voghera, Italy; Malmo,
Sweden; LeHavre and Conde, France; Huddersfield, England; Bonnyrigg and
Petreavie, Scotland; and Rio de Janeiro, Brazil. Dresser Equipment Group
leases approximately 1.4 million square feet of manufacturing facilities. The
major sites are in Houston, Texas; Shanghai, China; Kongsberg, Norway; and
Salisbury, Maryland. In addition, service centers, sales offices and field
warehouses are operated at approximately 75 locations in the United States,
almost all of which are owned, and at approximately 65 locations outside the
United States in both the Eastern and Western Hemispheres.
3
<PAGE>
General Corporate operates from leased facilities in Dallas, Texas
covering approximately 25,000 square feet. The Company also leases approximately
5,500 square feet of space in Washington, D.C. The Company owns approximately
1 million square feet of office and campus space in Houston, Texas which is
occupied by multiple business units and shared services groups who conduct
administrative, procurement, and engineering design activities. These activities
are carried on in leased facilities covering approximately 100,000 square feet
in Surrey and Eastleigh, England. The Company also owns approximately 203,000
square feet of office and campus space in Leatherhead, England where multiple
business units and shared services groups conduct administrative, procurement
and engineering design activities.
Due to the acquisition (the Merger) of Dresser Industries, Inc.
(Dresser), and in response to the industry downturn due to declining oil and gas
prices, the Company has certain manufacturing, administrative and service
support facilities that are no longer fully utilized. The Company has enacted
plans to vacate facilities that are now considered excess. In 1998, the Company
recorded facility consolidation charges of $126.2 million to provide for the
costs to dispose of owned properties or exit leased facilities. See Note 7 to
the annual consolidated financial statements for additional information on the
facility consolidations.
Item 3. Legal Proceedings.
Information relating to various commitments and contingencies is
described in Note 10 to the financial statements of this annual report.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders during
the fourth quarter of 1998.
4
<PAGE>
Executive Officers of the Registrant.
The following table indicates the names and ages at December 31, 1998
of the executive officers of the registrant along with a listing of all offices
held by each during the past five years:
Name and Age Offices Held and Term of Office
- ------------ -------------------------------
* William E. Bradford Chairman of the Board, since September 1998
(Age 63) Director of Registrant, since September 1998
Chairman of the Board of Dresser Industries,
Inc., December 1996 to September 1998
Chief Executive Officer of Dresser Industries,
Inc., November 1995 to September 1998
President of Dresser Industries, Inc., March 1992
to December 1996
Chief Operating Officer of Dresser Industries,
Inc., March 1992 to November 1995
Jerry H. Blurton Vice President and Treasurer, since July 1996
(Age 54) Vice President - Finance & Administration of
Halliburton Energy Services, August 1995 to
July 1996
Vice President - Finance, 1991 to August 1995
* Richard B. Cheney Chief Executive Officer, since October 1995
(Age 57) Director of Registrant, since October 1995
Chairman of the Board, January 1996 to September
1998
President, October 1995 to May 1997
Senior Fellow, American Enterprise Institute,
1993 to October 1995
Secretary, U.S. Department of Defense, 1989
to 1993
Lester L. Coleman Executive Vice President and General Counsel,
(Age 56) since May 1993
President of Energy Services Group, September
1991 to May 1993
* David J. Lesar President and Chief Operating Officer, since
(Age 45) May 1997
President and Chief Executive Officer of Brown &
Root, Inc., since September 1996
Executive Vice President and Chief Financial
Officer, August 1995 to May 1997
Executive Vice President of Finance and
Administration of Halliburton Energy
Services, November 1993 to August 1995
Partner, Arthur Andersen LLP, 1988 to November
1993
Gary V. Morris Executive Vice President and Chief Financial
(Age 45) Officer, since May 1997
Senior Vice President - Finance, February 1997
to May 1997
Senior Vice President, May 1996 to February 1997
Vice President - Finance of Brown & Root, Inc.,
June 1995 to May 1996
Vice President - Finance of Halliburton Energy
Services, December 1993 to June 1995
Controller, December 1991 to December 1993
R. Charles Muchmore, Jr. Vice President and Controller, since August 1996
(Age 45) Finance & Administration Director - Europe/Africa
of Halliburton Energy Services, September
1995 to August 1996
Regional Finance & Administration Manager -
Europe/Africa of Halliburton Energy Services,
December 1989 to September 1995
5
<PAGE>
Executive Officers of the Registrant (continued).
Name and Age Offices Held and Term of Office
- ------------ -------------------------------
Lewis W. Powers Senior Vice President, since May 1996
(Age 52) Vice President - Europe/Africa of Halliburton
Energy Services, April 1993 to May 1996
Senior Vice President of Operations of Otis
Engineering, June 1989 to April 1993
Louis A. Raspino Shared Services Vice President - Finance,
(Age 46) effective March 1999
Senior Vice President - Strategic Planning &
Business Development, Burlington Resources,
Inc. (oil and gas exploration and
production), October 1997 to June 1998
Senior Vice President and Chief Financial
Officer, Louisiana Land & Exploration Company
(oil and gas exploration, production and
refining), September 1995 to October 1997
Treasurer, Louisiana Land & Exploration Company,
1992 to September 1995
* Donald C. Vaughn Vice Chairman, since September 1998
(Age 62) President and Chief Operating Officer of Dresser
Industries, Inc., December 1996 to
September 1998
Executive Vice President, Dresser Industries,
Inc., November 1995 to December 1996
Senior Vice President - Operations, Dresser
Industries, Inc., January 1992 to
November 1995
Chairman, President and Chief Executive Officer
of M. W. Kellogg, Inc., June 1995 to
June 1996
Chairman and Chief Executive Officer of The M. W.
Kellogg Company, September 1986 to June 1996
President of The M. W. Kellogg Company, November
1983 to June 1995
* Members of the Executive Committee of the registrant.
There are no family relationships between the executive officers of the
registrant.
6
<PAGE>
PART II
Item 5.Market for the Registrant's Common Stock and Related Stockholder Matters.
The Company's common stock is traded on the New York Stock Exchange and
the Swiss Exchange. Information relating to market prices of common stock and
quarterly divided payment is included under the caption "Quarterly Data and
Market Price Information" on page 55 of this annual report. Cash dividends on
common stock for 1997 and 1998 were paid in March, June, September and December
of each such year. The board of directors of Halliburton (the Board) intends
to consider the payment of quarterly dividends on the outstanding shares of
Halliburton common stock. The declaration and payment of future dividends,
however, will be at the discretion of the Board and will depend upon, among
other things, future earnings of Halliburton, its general financial condition,
the success of its business activities, its capital requirements and general
business conditions. At December 31, 1998, there were approximately 27,665
shareholders of record. In calculating the number of shareholders, the Company
considers clearing agencies and security position listings as one shareholder
for each agency or listing.
Item 6. Selected Financial Data.
Information relating to selected financial data is included on pages
52 through 54 of this annual report.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Information relating to management's discussion and analysis of
financial condition and results of operations is included on pages 9 through
18 of this annual report.
Item 7(a). Quantitative and Qualitative Disclosures About Market Risk.
Information relating to market risk is included in management's
discussion and analysis of financial condition and results of operations under
the caption "Financial Instrument Market Risk" on pages 14 through 15 of this
annual report.
7
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Item 8. Financial Statements and Supplementary Data.
<TABLE>
<CAPTION>
Page No.
<S> <C>
Report of Arthur Andersen LLP, Independent Public Accountants 19
Responsibility for Financial Reporting 20
Consolidated Statements of Income for the years ended
December 31, 1998, 1997 and 1996 21
Consolidated Balance Sheets at December 31, 1998 and 1997 22
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 23
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1998, 1997 and 1996 24-25
Notes to Financial Statements
1. Significant accounting policies 26
2. Business segment information 28
3. Inventories 30
4. Property, plant and equipment 30
5. Related companies 30
6. Income taxes 32
7. Special charges and credits 34
8. Lines of credit, notes payable and long-term debt 37
9. Dresser financial information 38
10. Commitments and contingencies 38
11. Income per share 41
12. Common stock 41
13. Series A junior participating preferred stock 43
14. Acquisitions and dispositions 44
15. Financial instruments and risk management 46
16. Retirement plans 47
Quarterly Data and Market Price Information 55
</TABLE>
The related financial statement schedules are included under Part IV,
Item 14 of this annual report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
8
<PAGE>
HALLIBURTON COMPANY
Management's Discussion and Analysis of Financial Condition and
Results of Operations
HALLIBURTON / DRESSER MERGER
On September 29, 1998, the acquisition (the Merger) of Dresser
Industries, Inc. (Dresser) by the Company was completed. The Merger was
accounted for using the pooling of interests method of accounting for business
combinations. Accordingly, the Company's financial statements have been restated
to include the results of Dresser for all periods presented. See Note 14 to the
annual consolidated financial statements. Prior to the Merger, Dresser was a
diversified company with operations in three business segments: Petroleum
Products and Services; Engineering Services; and Energy Equipment. Prior to the
Merger, the Company operated in two business segments, the Energy Group and the
Engineering and Construction Group. Following the Merger, the Company is
organized around three business segments: Energy Services Group; Engineering and
Construction Group; and Dresser Equipment Group.
Management of the Company believes the Merger provides the Company with
the opportunity to better meet customer needs, to improve its technology, to
strengthen its product service lines, to cut costs, and to position the Company
for the future.
BUSINESS ENVIRONMENT
The Company operates in over 120 countries around the world to provide
a variety of energy services, energy equipment and engineering and construction
services to energy, industrial and governmental customers. The industries served
by the Company are highly competitive, with many substantial competitors.
Operations in some countries may be affected by unsettled political conditions,
expropriation or other governmental actions, exchange controls and currency
fluctuations. The Company believes the geographic diversification of its
business activities reduces the risk that loss of its operations in any one
country would be material to its consolidated results of operations.
The majority of the Company's revenues are derived from the sale of
services and products, including construction activities, to the energy
industry. The Company offers a comprehensive range of integrated and discrete
services and products, as well as project management for oil and natural gas
activities throughout the world. The decline in oil and gas prices in 1998
caused a decrease in the worldwide average rotary drilling rig count and sharply
reduced demand for some of the Company's products and services. In response to
weakening demand in some areas of the world, the Company has implemented plans
to reduce the number of employees in those geographic areas where activity
levels have declined, to scale back discretionary spending on capital
expenditures and to curtail discretionary travel and other expenses. The Company
has also taken steps to reduce its workforce and rationalize assets to eliminate
duplicate resources in connection with the Merger.
Oil and gas prices, global and regional economic growth rates and the
resulting demand for products created from hydrocarbons affect the spending
decisions of the Company's customers. Despite the current economic
uncertainties, over the long term the Company believes steadily rising
population and greater industrialization efforts will continue to propel global
growth, particularly in developing nations. These factors will also cause
increasing demand for oil and natural gas to supply growing needs for refined
products, petrochemicals, fertilizers, and power.
Energy Services Group. During 1998, particularly in the second half of
the year, the energy industry experienced a downturn brought about by a
combination of factors that began in late 1997. Decreased demand in Asia for
crude oil, increases in production from OPEC producers, added production
increases from Iraq and unseasonably warm winters in North America during 1997
and 1998 all contributed to the industry downturn experienced during 1998.
Throughout 1998, crude oil prices varied from $4 to $8 per barrel lower than
1997. Equally important, oil prices were less than $15 per barrel for most of
1998, particularly during the second half of the year, making many drilling
programs economically infeasible. Natural gas prices within the U.S., although
significantly lower than 1997 levels, remained above $2 per million BTU until
the third quarter of 1998. During the third quarter of 1998, natural gas prices
began a decline which, combined with additional declines in crude oil prices,
resulted in further reductions in demand for hydrocarbon exploration and
9
<PAGE>
development. These factors negatively impacted the industry and the Company.
Overall, the industry fundamentals in 1998 were significantly weaker than 1997.
Integrated business solutions, long term overseas contracts and
engineering and construction backlog benefited the Company's revenues throughout
1998 when compared to the industry fundamentals and worldwide rig counts.
Continued interest in deepwater drilling in the Gulf of Mexico and projects in
the North Sea, combined with U.S. natural gas prices above $2 per million BTU
benefited the industry during the first and second quarters of 1998. As industry
indicators began to significantly weaken in the third quarter of 1998, the
Company started implementing actions to properly align its resources to
projected industry conditions.
Although 1998 was a difficult year and 1999 will also be difficult, the
Company believes that long term industry fundamentals will prevail. Demand for
oil and natural gas worldwide should recover and grow. Over time, the
accelerating depletion of existing production and the need for technologies that
make exploration and production economically feasible in the presence of low oil
and gas prices will provide growth opportunities. The Company believes that its
customers will continue to seek opportunities to lower the overall cost of
exploring, developing and enhancing the recovery of hydrocarbons through
increased utilization of integrated solutions, application of new technology and
partnering and alliance arrangements. The Company believes that it has good
opportunities to expand its revenues and profit through greater participation in
larger projects that utilize its project management and integrated services
capabilities. However, uncertainty exists within the industry into the
foreseeable future.
Engineering and Construction Group. While the Company has seen projects
delayed and cancelled in many of the areas that it serves, the Company expects
to see demand for its engineering and construction services continue to increase
over the long term. The Company believes the key to increase its revenues and
improve profit margins in the current environment will be its ability to provide
total customer satisfaction. Today's competitive environment demands flexibility
and innovation. To bring more value to its customers, the Company must
demonstrate its ability to partner with other service and equipment suppliers
and customers on larger projects, accept more project success risk through total
project responsibility or fixed price contracts, broaden its core competencies,
acquire and fully utilize proprietary technology and manage costs. The Group has
determined it will focus on demand in the liquefied natural gas (LNG),
fertilizer, petroleum, chemical and forest products industries in the United
States and international locations. The Company also sees an expanding demand
for its government services capabilities in the United States and the United
Kingdom as governmental agencies, including local government units, continue to
expand their use of outsourcing to improve service levels and manage costs.
Dresser Equipment Group. Dresser Equipment Group's business activity is
primarily determined by activity levels within the energy industry. Products and
systems of Dresser Equipment Group include compressors, turbines, generators,
electric motors, pumps, engines and power systems, valves, instruments, meters
and pipe couplings, blowers and fuel dispensing systems. Demand for these
products is directly affected by global economic activity, which influences
demand for transportation fuels, petrochemicals, plastics, fertilizers,
chemicals and by-products of oil and gas. The conditions for sales of Dresser
Equipment Group products is highly competitive and its sales and earnings can be
affected by changes in competitive prices, fluctuations in the level of activity
in major industry areas, and general economic conditions. The group strives to
be the low cost provider in this competitive environment.
Because of the impact of economic and political conditions, and
uncertainty in many parts of the world, several initiatives are in place to
reduce capacity costs and improve operating performance. The Company believes
strong demand still exists for products and services of Dresser Equipment Group.
The key to achieving favorable operating results over the course of the year,
particularly in light of industry conditions, will rely to a great extent on the
ability of the group to leverage the customers currently served and leverage off
of the products and service offerings of other Halliburton companies to be able
to provide integrated solutions to the expanded customer base.
In the near term, activity levels remain uncertain. In the long term
the Company believes the demand for the products and systems of Dresser
Equipment Group will increase due to rising population and an expanding
industrial base.
10
<PAGE>
RESULTS OF OPERATIONS - 1998 COMPARED TO 1997 AND 1996
REVENUES
<TABLE>
<CAPTION>
Millions of dollars 1998 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Energy Services Group $ 9,009.5 $ 8,504.7 $ 6,515.4
Engineering and Construction Group 5,494.8 4,992.8 4,720.7
Dresser Equipment Group 2,848.8 2,779.0 2,710.5
- -------------------------------------------------------------------------------------
Total revenues $ 17,353.1 $ 16,276.5 $ 13,946.6
- -------------------------------------------------------------------------------------
</TABLE>
Revenues for 1998 were $17,353.1 million, an increase of 7% over 1997
revenues of $16,276.5 million and an increase of 24% over 1996 revenues of
$13,946.6 million. Approximately 65% of the Company's consolidated revenues were
derived from international activities in 1998 compared with 60% in 1997 and 59%
in 1996.
Energy Services Group revenues were $9,009.5 million for 1998, an
increase of 6% over 1997 revenues of $8,504.7 million and an increase of 38%
over 1996 revenues of $6,515.4 million. Revenues in the first half of 1998 were
higher than comparable periods of the prior two years. Revenues in the second
half of 1998 were impacted by the steep decline in activity as measured by the
worldwide average rotary rig count. The yearly average worldwide rotary rig
count fell 13% in 1998 compared to 1997 (including a third quarter comparative
decline of 21% and a fourth quarter comparative decline of 30%) as customers of
the Energy Services Group reacted to reduced prices for their products. Revenues
for pressure pumping activities in 1998 were lower than 1997 but increased
compared to 1996. The decrease in pressure pumping activities for 1998 compared
to 1997 occurred in the second half of 1998. Other product and service lines
experienced similar results in this time period. The revenue declines in 1998
compared to 1997 were more pronounced in North America, including the Gulf of
Mexico shelf, and Venezuela. Revenues from upstream oil and gas engineering
services increased in 1998 compared to 1997 and 1996, benefiting from activities
in subsea product lines and from large engineering projects. Revenues for
integrated exploration and production information systems reached record high
levels in 1998. Approximately 67% of the Energy Services Group's revenues were
derived from international activities each year in 1998, 1997 and 1996.
Engineering and Construction Group revenues were $5,494.8 million for
1998, an increase of 10% from 1997 revenues of $4,992.8 million and an increase
of 16% over 1996 revenues of $4,720.7 million. The increase in revenues in 1998
reflects LNG activities in Asia and Africa, an enhanced oil recovery project in
Africa, and a major ethylene project in Singapore as well as increased revenues
in Asia/Pacific from Kinhill, which was acquired in the third quarter of 1997.
See Note 14 to the annual consolidated financial statements for additional
information. For 1998 compared to 1997, revenues were negatively impacted by the
sale of the environmental services business in December 1997 and lower activity
levels for repair and refitting services for the British Royal Navy's fleet of
submarines and surface ships. For 1997 compared to 1996, revenues were aided by
the consolidation of Devonport Management Limited as a result of the Company's
increased ownership percentage in that subsidiary. See Note 14. Lower levels of
activity under service contracts with the U.S. Department of Defense to provide
technical and logistical support for military peacekeeping operations in Bosnia
resulted in revenue reductions of approximately $290.0 million in 1997 compared
to 1996.
Dresser Equipment Group revenues were $2,848.8 million in 1998, an
increase of 3% over 1997 revenues of $2,779.0 million, and an increase of 5%
over 1996 revenues of $2,710.5 million. The compression and pumping and flow
control product lines experienced small increases in revenues while the
measurement and power systems product lines reported a slight decline in
revenues for 1998 compared to 1997. Most of the increase in 1997 compared to
1996 came from the compressor joint venture with Ingersoll-Rand and the
measurement product lines.
11
<PAGE>
<TABLE>
<CAPTION>
OPERATING INCOME
Millions of dollars 1998 1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Energy Services Group $ 971.0 $ 1,019.4 $ 698.0
Engineering and Construction Group 237.2 219.0 134.0
Dresser Equipment Group 247.8 248.3 229.3
General corporate (79.4) (71.8) (72.3)
- --------------------------------------------------------------------------------------------------------
Operating income before special charges and credits $ 1,376.6 $ 1,414.9 $ 989.0
- --------------------------------------------------------------------------------------------------------
Special charges and credits:
Asset related $ (509.4) $ (9.7) $ (0.9)
Personnel reductions (234.7) (5.6) (41.0)
Facility consolidations (126.2) (34.0) (20.2)
Merger transaction costs (64.0) (8.6) (12.4)
Other costs and credits (45.8) 41.7 (11.3)
- --------------------------------------------------------------------------------------------------------
Total special charges and credits $ (980.1) $ (16.2) $ (85.8)
- --------------------------------------------------------------------------------------------------------
Operating income $ 396.5 $ 1,398.7 $ 903.2
- --------------------------------------------------------------------------------------------------------
</TABLE>
Operating income was $396.5 million for 1998 compared to $1,398.7
million for 1997 and $903.2 million for 1996. Excluding special charges of
$980.1 million, $16.2 million and $85.8 million during 1998, 1997 and 1996,
respectively, operating income for 1998 decreased by 3% from 1997 and increased
by 39% over 1996 as shown in the preceding table. See Note 7 to the annual
consolidated financial statements for additional information on the special
charges and credits.
Energy Services Group operating income in 1998 was $971.0 million, a
decrease of 5% from 1997 operating income of $1,019.4 million and an increase of
39% over 1996 operating income of $698.0 million. Operating margins were 10.8%
in 1998 compared with 12.0% in 1997 and 10.7% in 1996. Most of the decline in
operating margins in 1998 compared to 1997 can be attributed to declines in the
completion products and pressure pumping lines, to lower activities in North
America and Venezuela, and to additional job loss provisions recorded in the
fourth quarter of 1998. Approximately 54%, 59% and 63% of the Energy Services
Group's operating income was derived from international activities for 1998,
1997 and 1996, respectively. Operating income for pressure pumping in 1998 was
about 10% lower than 1997 as activity levels were reduced in response to lower
oil and gas prices. Other product and service lines were also impacted by
reduced activity levels with only the drilling related lines having
significantly better operating results in 1998 over 1997. Operating income in
1997 for the group benefited from increased activity levels and increased prices
charged to customers, especially for pressure pumping services in North America.
Operating income for drilling fluids increased in 1997 over 1996 due to the
growth of more technically demanding wells being drilled, particularly in the
Gulf of Mexico. Operating income for upstream oil and gas engineering activities
in 1998 was about the same as 1997 results even after providing additional
provisions for project losses in the North Sea, North Africa and Latin America
related to variation orders for ongoing projects which the Company does not feel
will be accepted by the customer due to current industry conditions. Energy
Services Group results for 1996 include $35.0 million of gain sharing revenue on
its portion of the cost savings realized on the BP Andrew alliance. The alliance
completed the project seven months ahead of the scheduled production of oil and
achieved a $125.0 million savings compared with the targeted cost. Operating
income from pipecoating activities were substantially improved in 1997 compared
to 1996 due to higher activity levels in the Far East, Middle East and the
United States.
Engineering and Construction Group operating income for 1998 of $237.2
million increased 8% over 1997 and 77% over 1996. Operating margins were 4.3% in
1998 compared with 4.4% for 1997 and 2.8% for 1996. Operating income in 1998
includes a favorable settlement of a claim on a Middle Eastern construction
project. Excluding this settlement, operating margins for 1998 were 4.0%.
Operating income and margins in 1998 were negatively affected by losses in the
fourth quarter on existing highway and paving business and for selected projects
which were impacted by the economic downturn in Asia. The Engineering and
Construction Group has not started any new significant jobs in Asia. Improvement
12
<PAGE>
in operating income in 1997 over 1996 was realized through overhead reductions,
a focus on higher margin business lines and the consolidation of Devonport
Management Limited as a result of the Company's increased ownership percentage
in that subsidiary. See Note 14 to the annual consolidated financial statements.
The 1997 operating income improvements over 1996 were aided by LNG activities
and oil recovery work in Africa together with engineering services for the
fertilizer industry in Latin America. Operating income in 1996 included a $17.1
million charge for the impairment of the Engineering and Construction Group's
investment in the Dulles Greenway toll road extension project.
Dresser Equipment Group operating income in 1998 was $247.8 million or
almost unchanged compared to 1997 operating income of $248.3 million. Operating
income for 1998 increased 8% over 1996 operating income of $229.3 million.
Operating income was negatively impacted in 1998 by $17 million of fourth
quarter merger related expenses. Operating income in 1998 for the compression
and pumping product line increased compared to 1997 due to restructuring
initiatives instituted in late 1997 and increased revenues. Operating income for
the flow control product line improved in 1998 over 1997 from cost improvements,
better product mix, and increased volume. Operating income for the measurement
product line decreased in 1998 due to weakness in the gas metering business as
gas utilities continued to work off their excess inventory. The power systems
product line operating income declined in 1998 compared to 1997 due to
customers' reduced capital spending caused by softer demand in the gas
compression and refining markets. Operating income increased in 1997 compared to
1996 primarily from the Ingersoll-Dresser Pump joint venture (profit improvement
initiatives started in prior years); Wayne fuel dispensing systems (introduction
of new technologies) and Energy Valve (improved margins and product mix).
General corporate expenses for 1998 were $79.4 million and include
expenses through the transition after the Merger for operating Dresser's
corporate offices as well as Halliburton's corporate offices. As a percent of
consolidated revenues, general corporate expenses were 0.5% in 1998 compared to
0.4% in 1997 and 0.5% in 1996.
NONOPERATING ITEMS
Interest expense was $136.8 million for 1998 compared to $111.3 million
in 1997 and $84.6 million in 1996. The increase in 1998 over 1997 is due to the
increased level of short-term borrowings outstanding during 1998. These
borrowings, which carry a lower interest rate than the Company's long-term debt,
were used for working capital, capital expenditures and acquisitions. The
increase in 1997 over 1996 is due to the issuance of debt under the Company's
medium-term note program in 1997 and a full year's interest on $300.0 million of
long-term debentures issued in August 1996 at a higher interest rate than the
previous short-term debt.
Interest income increased to $27.8 million in 1998 compared to $21.9
million in 1997 and $26.9 million in 1996. Interest income is typically a factor
of the levels of invested cash maintained by the Company and its subsidiaries.
Foreign currency gains (losses) netted to a loss of $12.4 million in
1998 compared to $0.7 million in 1997 and $19.1 million in 1996. The losses in
1998 occurred mainly in Asia/Pacific currencies. The 1996 losses were primarily
due to devaluations of the Venezuelan bolivar and costs of hedging foreign
exchange exposures of an Italian subsidiary.
Provision for income taxes was $244.4 million in 1998. The provision
for income taxes in 1998 includes a benefit of $234.1 million for special charge
items that are tax deductible. Nondeductible special charge items of $109.0
million include merger transaction costs and nondeductible goodwill which was
determined to be impaired. Excluding the special charge and applicable tax
benefits in 1998, the effective tax rate was 38.0%. The 1997 provision of $491.4
million was higher than the 1996 provision of $248.4 million due in part to
improved earnings. The effective income tax rate was 37.4% in 1997, compared
with 29.9% in 1996. The lower effective income tax rate and provision for 1996
are due to credits of $43.7 million recorded during the third quarter of 1996 to
recognize certain net operating loss carryforwards and the settlement of various
issues with the Internal Revenue Service. Excluding the tax benefits recorded in
1996, the effective income tax rate for 1996 was 35.2%. See Note 6 to the annual
consolidated financial statements.
Minority interest in net income of consolidated subsidiaries was $49.1
million in 1998 compared to $49.3 million in 1997 and $24.7 million in 1996. The
increase in 1997 over 1996 is due primarily to Dresser Equipment Group's
13
<PAGE>
ownership interests in Dresser-Rand and the Engineering and Construction Group's
ownership interests in Devonport Management Limited, which increased from
approximately 30% to 51% during March 1997.
Net income (loss) for 1998 was a loss of $14.7 million for a $0.03
diluted loss per share. In 1997 net income of $772.4 million yielded $1.77
diluted income per share while 1996 net income of $557.9 million yielded $1.29
diluted income per share.
LIQUIDITY AND CAPITAL RESOURCES
The Company ended 1998 with cash and equivalents of $202.6 million
compared with $384.1 million in 1997 and $446.0 million in 1996. To conform
Dresser's fiscal year-end to Halliburton's calendar year-end, Dresser's cash
flows are measured from December 31, 1997, rather than from the October 31, 1997
balances included on the consolidated balance sheets.
Cash flows from operating activities were $454.1 million for 1998
compared to $833.1 million for 1997 and $864.2 million for 1996. In 1998, the
primary use of cash for operating activities was to fund increased working
capital requirements.
Cash flows used in investing activities were $846.1 million for 1998,
$873.3 million for 1997 and $759.1 million for 1996. The majority of cash used
for investing activities during 1998 was for capital expenditures. Capital
expenditures in 1998 increased slightly over 1997 as the Company's continued
investment in its enterprise-wide information systems initiative offset declines
in other capital spending. Cash used in investing activities in 1997 also
includes the acquisitions of OGC of approximately $118.3 million, and Kinhill of
approximately $34.0 million, and an interest in PES (International) Limited of
approximately $33.6 million, offset by the sale of the Company's environmental
business for about $32.0 million. In 1996, investing activities included a $41.3
million expenditure for the Company's share of the purchase price of a
subsidiary acquired by the Company's former 36% owned affiliate, M-I L.L.C. Also
in 1996, several other acquisitions were made which used $32.2 million of cash.
Cash flows from financing activities provided $253.7 million in 1998
and used $20.6 million in 1997 and $148.4 million in 1996. The Company issued
$150.0 million of long-term debt under its medium-term note program in 1998.
Also in 1998, the Company had net borrowings of short-term debt of $369.3
million and proceeds from exercise of stock options of $49.1 million. Dividends
to shareholders used $254.2 million of cash in 1998. During 1997, cash was
provided by proceeds from debt issued under the Company's medium-term note
program of $300.0 million plus $3.2 million of other long-term borrowings and
proceeds from the exercise of stock options of $71.5 million. Offsetting these
inflows were payments on long-term debt of $17.7 million, net repayments on
short-term borrowings of $85.8 million, payments to reacquire common stock of
$44.1 million, and dividend payments of $250.3 million. Cash used for financing
activities during 1996 consisted primarily of dividend payments of $239.6
million and payments to reacquire common stock of $235.2 million offset by
proceeds from long-term borrowings of $295.6 million and proceeds from the
exercise of stock options of $42.6 million. The Company's combined short-term
notes payable and long-term debt was 32%, 24% and 23% of total capitalization at
the end of 1998, 1997 and 1996, respectively.
The Company has the ability to borrow additional short-term and
long-term funds if necessary. See Note 8 to the annual consolidated financial
statements regarding the Company's various short-term lines of credit, notes
payable and long-term debt.
FINANCIAL INSTRUMENT MARKET RISK
The Company is currently exposed to market risk from changes in foreign
currency exchange rates, and to a lesser extent, to changes in interest rates.
To mitigate market risk, the Company selectively hedges its foreign currency
exposure through the use of currency derivative instruments. The objective of
such hedging is to protect the Company's cash flows related to sales or
purchases of goods or services from fluctuations in currency rates. Inherent in
the use of derivative instruments are certain types of market risk: volatility
of the currency rates, time horizon of the derivative instruments, market cycles
and the type of derivative instruments used. The Company does not use derivative
instruments for trading purposes. See Note 1 to the annual consolidated
financial statements for additional information on the Company's accounting
policies on derivative instruments. See Note 15 to the annual consolidated
financial statements for additional disclosures related to derivative
instruments.
14
<PAGE>
Foreign exchange. While the Company operates in over 120 countries, the
Company hedges only foreign currencies that are highly liquid and selects
derivative instruments or a combination of instruments whose fluctuation in
value is offset by the fluctuation in value to the underlying exposure. These
hedges generally have expiration dates that do not exceed two years. Exposures
to certain currencies are generally not hedged due primarily to the lack of
available markets or cost considerations (non-traded currencies). The Company
manages its foreign exchange hedging activities through a control system which
includes monitoring of cash balances in traded currencies, analytical techniques
such as value at risk estimations, and other procedures.
Interest rates. The Company currently has exposure to interest rate
risk from its long-term debt with interest based on LIBOR for the U.K. pound
sterling (GBP) plus 0.75% which was incurred in connection with its acquisition
of the Royal Dockyard in Plymouth, England (the Dockyard Loans). This risk is
partially offset by a compensating balance of approximately one-half of the
outstanding debt amount which earns interest at a rate equal to that of the
Dockyard Loans. The compensating balance is restricted as to use by the Company
and is included in other assets on the Company's consolidated balance sheets.
See Note 8 to the annual consolidated financial statements for additional
discussion of the Dockyard Loans.
Value at risk. The Company uses a statistical model to estimate the
potential loss related to derivative instruments used to hedge the market risk
of its foreign exchange exposure. The model utilizes historical price and
volatility patterns to estimate the change in value of the derivative
instruments which could occur from adverse movements in foreign exchange rates
for a specified time period at a specified confidence interval. The model is an
undiversified calculation based on the variance-covariance statistical modeling
technique and includes all foreign exchange derivative instruments outstanding
at December 31, 1998. The resulting value at risk of $2.8 million estimates,
with a 95% confidence interval, the potential loss the Company could incur in a
one-day period from foreign exchange derivative instruments due to adverse
foreign exchange rate changes.
Interest rate exposures. The following table represents principal
amounts at December 31, 1998, and related weighted average interest rates by
year of maturity for the Company's restricted cash and long-term debt
obligations. Other notes with varying interest rates of $10.2 million as shown
in Note 8 to the annual consolidated financial statements are excluded from the
following table.
<TABLE>
<CAPTION>
Expected maturity date Fair
------------------------------------------------------------------
Millions of dollars 1999 2000 2001 2002 2003 Thereafter Total Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Restricted cash - British
pound sterling 4.1 4.1 4.1 2.6 - - 14.9 14.9
Average variable rate 6.38% 6.17% 6.04% 5.93% - - 6.22%
Long-term debt:
U.S. dollar 50.0 300.0 - 75.0 138.6 825.0 1,388.6 1,538.0
Average fixed rate 6.27% 6.25% - 6.30% 8.0% 7.58% 7.56%
British pound sterling
(Dockyard Loans) 8.1 8.1 8.1 5.1 - - 29.4 29.4
Average variable rate 6.38% 6.17% 6.04% 5.93% - - 6.22%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Weighted average variable rates are based on implied forward rates in
the yield curve at December 31, 1998. These implied forward rates should not be
viewed as predictions of actual future interest rates. Restricted cash and the
Dockyard Loans earn interest at LIBOR (GBP) plus 0.75%. Instruments that are
denominated in currencies other than the U.S. dollar reporting currency are
subject to foreign exchange rate risk as well as interest rate risk.
15
<PAGE>
1998 SPECIAL CHARGES
The third quarter of 1998 financial results include a pretax charge of
$945.1 million ($722.0 million after tax) to provide for consolidation,
restructuring and merger related expenses related to the merger with Dresser and
the industry downturn. Components of the charge include $509.4 million of asset
related writeoffs, writedowns and charges; $204.7 million for personnel
reduction costs covering approximately 8,100 employees; $121.2 million of
facility consolidation charges; $64.0 million of merger transaction costs; and
$45.8 million of other costs. During the fourth quarter, an additional charge of
$35.0 million ($24.0 million after tax) was taken to provide $30.0 million for
additional personnel reduction costs covering approximately 2,750 employees and
$5.0 million for additional facility consolidations.
Approximately 45% of the special charge of $980.1 million either has
resulted or will result in cash outflows. During 1998, cash outflows of
approximately $110.0 million pertained to special charge items, primarily
severance and merger transaction costs, while the remainder will be incurred in
1999.
The Company expects to incur additional merger related incremental
costs of between $120.0 million and $130.0 million through the end of 1999 that
do not qualify as a special charge under the accounting rules. These costs
include the relocation of personnel, inventory and equipment as part of facility
consolidation efforts; implementing a company-wide common information technology
infrastructure; merging engineering work practices; harmonizing employee benefit
programs; and developing common policies and procedures to provide best
practices. Approximately $24.0 million of such costs were incurred during the
fourth quarter of 1998. During 1999, approximately $70.0 million will be
expensed during the first and second quarters. See Note 7 to the annual
consolidated financial statements for additional information on special charges
incurred in 1998.
ENVIRONMENTAL MATTERS
The Company is involved as a potentially responsible party in remedial
activities to clean up several "Superfund" sites under applicable federal law
which imposes joint and several liability, if the harm is indivisible, on
certain persons without regard to fault, the legality of the original disposal
or ownership of the site. Although it is very difficult to quantify the
potential impact of compliance with environmental protection laws, management of
the Company believes that any liability of the Company with respect to all but
one of such sites will not have a material adverse effect on the results of
operations of the Company. See Note 10 to the annual consolidated financial
statements for additional information on the one site.
YEAR 2000 ISSUE
The Year 2000 (Y2K) issue is the risk that systems, products and
equipment utilizing date-sensitive software or computer chips with two-digit
date fields will fail to properly recognize the Year 2000. Such failures by the
Company's software and hardware or that of government entities, service
providers, suppliers and customers could result in interruptions of the
Company's business which could have a material adverse impact on the Company.
In response to the Y2K issue, the Company has implemented an
enterprise-wide Year 2000 Program designed to identify, assess and address
significant Y2K issues in the Company's key business operations, including
products and services, suppliers, business and engineering applications,
information technology systems, facilities, infrastructure and joint venture
projects.
The Year 2000 Program is a comprehensive, integrated, multi-phase
process covering information technology systems and hardware as well as
equipment and products with embedded computer chip technology. The primary
phases of the program are: (1) inventorying existing equipment and systems; (2)
assessing equipment and systems to identify those which are not Y2K ready and to
prioritize critical items; (3) remediating, repairing or replacing non-Y2K ready
equipment and systems; (4) testing to verify Y2K readiness has been achieved;
and (5) deploying and certifying.
At the end of 1998, the Company completed its inventory and assessment
of all mission critical items. The Company estimates that it will complete the
majority of its remediation phase by the end of the third quarter of 1999.
16
<PAGE>
In the fourth quarter of 1998, Landmark Graphics Corporation, a
wholly-owned subsidiary of the Company, released its Year 2000 tested version of
its integrated solutions software product.
Overall the Company estimates that it is approximately 50% complete
with its Year 2000 Program and anticipates having its products and
mission-critical systems and equipment Y2K ready during the third quarter of
1999. The balance of 1999 will be focused on deployment, certification, testing
and implementation of new and modified programs as required.
The Y2K issue is a pervasive problem for most companies due to the
interdependence of computer systems. Therefore, the Company is continually
assessing the risks surrounding this issue and its potential impact on the
Company. This includes the initial phases of business continuity planning,
audits by customers and meetings with its material customers and suppliers.
Meetings and presentations with key suppliers to date have not identified any
key suppliers who expect significant Y2K interruption of services or supplies to
the Company. Failure to address Y2K issues could result in business disruption
that could materially affect the Company's operations. In an effort to minimize
business interruptions, the Company is currently in the process of developing
contingency plans in the event circumstances prevent the Company from meeting
any portion of its current program schedule. These contingency plans are
expected to be completed by April 1999.
Through 1998, the Company has incurred approximately $22.0 million in
costs related to its Year 2000 Program. The Company estimates that prior to
January 1, 2000 it will have spent approximately $50.0 million to address the
Y2K issue. These estimates do not include the costs associated with the Company
initiatives discussed below. Costs associated with the Year 2000 Program are
being treated as period costs and expensed as incurred.
Independent of, but concurrent with, the Company's Y2K review, the
Company is installing an enterprise-wide business information system which is
scheduled to replace some of the Company's key finance, administrative and
marketing software systems by the end of 1999 and is Y2K ready. In addition, and
as a separate activity, the Company is in the process of replacing and
standardizing its desktop computing equipment and software and updating its
communications infrastructure. A third party is updating the communications
infrastructure. The replacement of desktop equipment and software is an internal
program based on the Company's common office environment initiative that has
been expanded to include Dresser. Both of these programs will be completed by
the end of 1999. All hardware and software installed as a part of these programs
are Y2K ready.
ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" (SOP 98-1). SOP 98-1 provides
guidelines for companies to capitalize or expense costs incurred to develop or
obtain internal use software. The guidelines set forth in SOP 98-1 do not differ
significantly from the Company's current accounting policy for internal use
software and therefore the Company does not expect a material impact on its
results of operations or financial position from the adoption of SOP 98-1. The
Company adopted SOP 98-1 effective January 1, 1999.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities" (SOP 98-5). SOP 98-5 requires costs of start-up activities and
organization costs to be expensed as incurred. The Company adopted SOP 98-5
effective January 1, 1999 and expects to record expense of approximately $30
million pretax or $0.04 after-tax per diluted share from the adoption of SOP
98-5 as the cumulative effect of an accounting change. Estimated annual expense
for 1998 under SOP 98-5 would not have been materially different from the amount
expensed under the current accounting treatment.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and for Hedging Activities" (SFAS 133). This standard requires
entities to recognize all derivatives on the statement of financial position as
assets or liabilities and to measure the instruments at fair value. Accounting
for gains and losses from changes in those fair values are specified in the
standard depending on the intended use of the derivative and other criteria.
SFAS 133 is effective for the Company beginning January 1, 2000. The Company is
currently evaluating SFAS 133 to identify implementation and compliance methods
and has not yet determined the effect, if any, on its results of operations or
financial position.
17
<PAGE>
FORWARD-LOOKING INFORMATION
As provided by the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, Halliburton Company cautions that the statements
in this annual report and elsewhere, which are forward-looking and which provide
other than historical information, involve risks and uncertainties that may
impact Halliburton Company's actual results of operations. While such
forward-looking information reflects Halliburton Company's best judgement based
on current information, it involves a number of risks and uncertainties and
there can be no assurance that other factors will not affect the accuracy of
such forward-looking information. While it is not possible to identify all
factors, Halliburton Company continues to face many risks and uncertainties that
could cause actual results to differ from those forward-looking statements
including:
- litigation, including, for example, asbestosis litigation and
environmental litigation;
- unsettled political conditions, war, civil unrest, currency controls
and governmental actions in the numerous countries Halliburton
Company conducts operations;
- trade restrictions and economic embargoes imposed by the United
States and other countries;
- environmental laws, including those that require emission
performance standards for new and existing facilities;
- the magnitude of governmental spending for military and logistical
support of the type provided by Halliburton Company;
- operations in countries with significant amounts of political risk,
including, without limitation, Algeria and Nigeria;
- the effects of severe weather conditions on operations, including
for example, hurricanes shutting down operations on offshore
platforms;
- the impact of prolonged mild weather conditions on the demand for
and price of oil and natural gas;
- technological and structural changes in the industries served by
Halliburton Company;
- computer software and hardware and other equipment utilizing
computer technology used by governmental entities, service
providers, vendors, customers and Halliburton Company which may be
impacted by the Y2K issue;
- integration of acquired businesses, including Dresser and its
subsidiaries, into Halliburton Company;
- the risk inherent in the use of derivative instruments of the sort
used by Halliburton Company which could cause a change in value of
the derivative instruments as a result of adverse movements in
foreign exchange rates;
- changes in the price of oil and natural gas;
- changes in the price of commodity chemicals used by Halliburton
Company;
- changes in capital spending by customers in the hydrocarbon
industry for exploration, development, production, processing,
refining and pipeline delivery networks;
- increased competition in the hiring and retention of employees in
certain areas coupled with ongoing reductions-in-force in other
areas;
- changes in capital spending by customers in the wood pulp and paper
industries for plants and equipment;
- risks that result from entering into fixed fee engineering,
procurement and construction projects of the types provided by
Halliburton Company where failure to meet schedules, cost
estimates or performance targets could result in non-reimbursable
costs which cause the project not to meet expected profit margins;
and
- changes in capital spending by governments for infrastructure
projects of the sort provided by Halliburton Company.
In addition, future trends for pricing, margins, revenues and
profitability remain difficult to predict in the industries served by
Halliburton Company.
18
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
Halliburton Company:
We have audited the accompanying consolidated balance sheets of
Halliburton Company (a Delaware corporation) and subsidiary companies as of
December 31, 1998 and 1997, and the related consolidated statements of income,
cash flows and shareholders' equity for each of the three years in the period
ended December 31, 1998. We did not audit the consolidated balance sheet of
Dresser Industries, Inc., a company acquired during 1998 in a transaction
accounted for as a pooling of interests, as of December 31, 1997, and the
related consolidated statements of income, cash flows and shareholders' equity
for each of the two years in the period ended December 31, 1997, as discussed in
Note 14. Such statements are included in the consolidated financial statements
of Halliburton Company and reflect total assets of 48% for the year ended
December 31, 1997, and total revenue of 46% and 47% for the years ended December
31, 1997 and 1996, respectively, of the related consolidated totals. These
statements were audited by other auditors whose report has been furnished to us,
and our opinion, insofar as it relates to amounts included for Dresser
Industries, Inc. is based solely upon the report of the other auditors. These
financial statements are the responsibility of Halliburton Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based upon our audits and the report of other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Halliburton Company and subsidiary
companies as of December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years ended December 31, 1998, in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
-------------------------------
ARTHUR ANDERSEN LLP
Dallas, Texas,
January 25, 1999
19
<PAGE>
RESPONSIBILITY FOR FINANCIAL REPORTING
Halliburton Company is responsible for the preparation and integrity of
its published financial statements. The financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
and, as such, include amounts based on judgments and estimates made by
management. The Company also prepared the other information included in the
annual report and is responsible for its accuracy and consistency with the
financial statements.
The financial statements have been audited by the independent
accounting firm, Arthur Andersen LLP, which was given unrestricted access to all
financial records and related data, including minutes of all meetings of
stockholders, the Board of Directors and committees of the Board.
The Company maintains a system of internal control over financial
reporting, which is intended to provide reasonable assurance to the Company's
management and Board of Directors regarding the preparation of financial
statements. The system includes a documented organizational structure and
division of responsibility, established policies and procedures, including a
code of conduct to foster a strong ethical climate which is communicated
throughout the Company, and the careful selection, training and development of
our people. Internal auditors monitor the operation of the internal control
system and report findings and recommendations to management and the Board of
Directors. Corrective actions are taken to address control deficiencies and
other opportunities for improving the system as they are identified. The Board,
operating through its Audit Committee, which is composed entirely of Directors
who are not current or former officers or employees of the Company, provides
oversight to the financial reporting process.
There are inherent limitations in the effectiveness of any system of
internal control, including the possibility of human error and the circumvention
or overriding of controls. Accordingly, even an effective internal control
system can provide only reasonable assurance with respect to financial statement
preparation. Furthermore, the effectiveness of an internal control system may
change over time.
The Company assessed its internal control system in relation to
criteria for effective internal control over financial reporting described in
"Internal Control-Integrated Framework" issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based upon that assessment, the
Company believes that, as of December 31, 1998, its system of internal control
over financial reporting met those criteria.
HALLIBURTON COMPANY
by
/s/ Richard B. Cheney /s/ Gary V. Morris
- ----------------------------- -----------------------------
Richard B. Cheney Gary V. Morris
Chief Executive Officer Exeuctive Vice President and
Chief Financial Officer
20
<PAGE>
HALLIBURTON COMPANY
Consolidated Statements of Income
(Millions of dollars except per share data)
<TABLE>
<CAPTION>
Years ended December 31
------------------------------------------------
1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Services $ 12,089.4 $ 11,256.3 $ 9,461.1
Sales 5,069.9 4,857.0 4,351.7
Equity in earnings of unconsolidated affiliates 193.8 163.2 133.8
- -----------------------------------------------------------------------------------------------------------------------------
Total revenues $ 17,353.1 $ 16,276.5 $ 13,946.6
- -----------------------------------------------------------------------------------------------------------------------------
Operating costs and expenses:
Cost of services $ 11,058.8 $ 10,163.9 $ 8,708.0
Cost of sales 4,317.6 4,032.7 3,628.3
General and administrative 600.1 665.0 621.3
Special charges and credits 980.1 16.2 85.8
- -----------------------------------------------------------------------------------------------------------------------------
Total operating costs and expenses 16,956.6 14,877.8 13,043.4
- -----------------------------------------------------------------------------------------------------------------------------
Operating income 396.5 1,398.7 903.2
Interest expense (136.8) (111.3) (84.6)
Interest income 27.8 21.9 26.9
Foreign currency losses (12.4) (0.7) (19.1)
Other nonoperating income, net 3.7 4.5 4.6
- -----------------------------------------------------------------------------------------------------------------------------
Income before income taxes and minority interest 278.8 1,313.1 831.0
Provision for income taxes (244.4) (491.4) (248.4)
Minority interest in net income of consolidated subsidiaries (49.1) (49.3) (24.7)
- -----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (14.7) $ $772.4 $ 557.9
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) per common share:
- -----------------------------------------------------------------------------------------------------------------------------
Basic $ (0.03) $ 1.79 $ 1.30
- -----------------------------------------------------------------------------------------------------------------------------
Diluted $ (0.03) $ 1.77 $ 1.29
- -----------------------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding:
Basic 438.8 431.1 429.2
Diluted 438.8 436.1 432.1
<FN>
See notes to annual financial statements.
</FN>
</TABLE>
21
<PAGE>
HALLIBURTON COMPANY
Consolidated Balance Sheets
(Millions of dollars and shares except per share data)
<TABLE>
<CAPTION>
December 31
--------------------------------
1998 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and equivalents $ 202.6 $ 384.1
Receivables:
Notes and accounts receivable (less allowance for bad debts of $76.6 and $58.6) 3,345.5 2,980.4
Unbilled work on uncompleted contracts 514.9 407.2
- --------------------------------------------------------------------------------------------------------------------
Total receivables 3,860.4 3,387.6
Inventories 1,301.8 1,299.2
Deferred income taxes, current 432.2 202.6
Other current assets 286.1 169.7
- --------------------------------------------------------------------------------------------------------------------
Total current assets 6,083.1 5,443.2
Property, plant and equipment:
At cost 6,850.1 6,646.0
Less accumulated depreciation 3,928.5 3,879.6
- --------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 2,921.6 2,766.4
Equity in and net advances to related companies 587.0 761.2
Excess of cost over net assets acquired (net of accumulated amortization
of $240.1 and $205.7) 770.2 1,024.6
Deferred income taxes, noncurrent 336.9 273.0
Other assets 413.2 433.4
- --------------------------------------------------------------------------------------------------------------------
Total assets $ 11,112.0 $ 10,701.8
- --------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Short-term notes payable and current maturities of long-term debt $ 573.5 $ 57.9
Accounts payable 1,008.5 1,132.4
Accrued employee compensation and benefits 402.2 516.1
Advance billings on uncompleted contracts 513.3 638.3
Income taxes payable 245.6 335.2
Accrued special charges 426.4 13.1
Other current liabilities 834.2 767.3
- --------------------------------------------------------------------------------------------------------------------
Total current liabilities 4,003.7 3,460.3
Long-term debt 1,369.7 1,296.9
Employee compensation and benefits 1,006.6 1,013.7
Other liabilities 500.6 450.6
Minority interest in consolidated subsidiaries 170.2 163.4
- --------------------------------------------------------------------------------------------------------------------
Total liabilities 7,050.8 6,384.9
- --------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Common shares, par value $2.50 per share - authorized 600.0 shares,
issued 445.9 and 453.7 shares 1,114.7 1,134.3
Paid-in capital in excess of par value 8.2 168.2
Deferred compensation (50.6) (44.3)
Accumulated other comprehensive income (148.8) (131.1)
Retained earnings 3,236.0 3,563.4
- --------------------------------------------------------------------------------------------------------------------
4,159.5 4,690.5
Less 5.9 and 15.8 shares treasury stock, at cost 98.3 373.6
- --------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 4,061.2 4,316.9
- --------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 11,112.0 $ 10,701.8
- --------------------------------------------------------------------------------------------------------------------
<FN>
See notes to annual financial statements.
</FN>
</TABLE>
22
<PAGE>
HALLIBURTON COMPANY
Consolidated Statements of Cash Flows
(Millions of dollars)
<TABLE>
<CAPTION>
Years ended December 31
-----------------------------------------
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (14.7) $ 772.4 $ 557.9
Adjustments to reconcile net income (loss) to net cash from operating
activities:
Depreciation and amortization 587.0 564.3 497.7
Provision (benefit) for deferred income taxes (293.4) 2.6 (13.4)
Distributions from (advances to) related companies, net of equity in
(earnings) or losses (22.5) (84.6) (57.2)
Accrued special charges 413.3 (44.6) 57.7
Other non-cash items 272.2 59.2 33.1
Other changes, net of non-cash items:
Receivables (279.9) (408.8) (363.5)
Inventories (66.3) (117.1) (147.5)
Accounts payable (45.3) (49.7) 98.8
Other working capital, net (142.5) 39.9 286.9
Other, net 46.2 99.5 (86.3)
- ----------------------------------------------------------------------------------------------------------------------------
Total cash flows from operating activities 454.1 833.1 864.2
- ----------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (914.3) (880.1) (731.1)
Sales of property, plant and equipment 100.0 180.6 64.4
Acquisitions of businesses, net of cash acquired (40.4) (161.5) (60.5)
Dispositions of businesses, net of cash disposed 7.7 37.6 21.6
Other investing activities 0.9 (49.9) (53.5)
- ----------------------------------------------------------------------------------------------------------------------------
Total cash flows from investing activities (846.1) (873.3) (759.1)
- ----------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Borrowings of long-term debt 150.0 303.2 295.6
Payments on long-term debt (26.7) (17.7) (8.2)
Net borrowings (payments) of short-term debt 369.3 (85.8) (7.3)
Payments of dividends to shareholders (254.2) (250.3) (239.6)
Proceeds from exercises of stock options 49.1 71.5 42.6
Payments to reacquire common stock (19.9) (44.1) (235.2)
Other financing activities (13.9) 2.6 3.7
- ----------------------------------------------------------------------------------------------------------------------------
Total cash flows from financing activities 253.7 (20.6) (148.4)
- ----------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (5.4) (1.1) 1.0
- ----------------------------------------------------------------------------------------------------------------------------
Decrease in cash and equivalents (143.7) (61.9) (42.3)
Cash and equivalents at beginning of year * 346.3 446.0 488.3
- ----------------------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of year $ 202.6 $ 384.1 $ 446.0
- ----------------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information: Cash payments during the
period for:
Interest $ 137.0 $ 106.1 $ 76.1
Income taxes 534.8 307.4 191.1
Non-cash investing and financing activities:
Liabilities assumed in acquisitions of businesses $ 5.4 $ 337.1 $ 39.4
Liabilities disposed of in dispositions of businesses 23.6 205.5 9.8
<FN>
* Cash balance at the beginning of 1998 does not agree to the prior year ending
cash balance in order to conform Dresser's fiscal year to Halliburton's calendar
year.
See notes to annual financial statements.
</FN>
</TABLE>
23
<PAGE>
HALLIBURTON COMPANY
Consolidated Statements of Shareholders' Equity
(Millions of dollars and shares except per share data)
<TABLE>
<CAPTION>
Years ended December 31
-----------------------------------------------------
1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common stock (number of shares)
Balance at beginning of year 453.7 221.7 221.3
Shares issued under incentive stock plans, net of forfeitures 1.1 1.3 0.3
Cancellation of treasury stock (8.9) - (0.1)
Shares issued in connection with acquisition - 8.2 -
Two-for-one common stock split - 222.5 -
Shares issued pursuant to stock warrant agreement - - 0.2
- -----------------------------------------------------------------------------------------------------------------------
Balance at end of year 445.9 453.7 221.7
- -----------------------------------------------------------------------------------------------------------------------
Common stock (dollars)
Balance at beginning of year $ 1,134.3 $ 554.3 $ 553.3
Shares issued under incentive stock plans, net of forfeitures 2.7 3.2 0.9
Cancellation of treasury stock (22.3) - (0.3)
Shares issued in connection with acquisition - 20.5 -
Two-for-one common stock split - 556.3 -
Shares issued pursuant to stock warrant agreement - - 0.4
- -----------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 1,114.7 $ 1,134.3 $ 554.3
- -----------------------------------------------------------------------------------------------------------------------
Paid-in capital in excess of par value
Balance at beginning of year $ 168.2 $ 615.1 $ 593.9
Shares issued under incentive stock plans, net of forfeitures 43.0 51.4 18.3
Cancellation of treasury stock (209.3) - (3.6)
Shares issued in connection with employee compensation plans 6.3 21.4 (1.0)
Shares issued in connection with acquisition - 36.6 -
Two-for-one common stock split - (556.3) -
Shares issued pursuant to stock warrant agreement - - 7.5
- -----------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 8.2 $ 168.2 $ 615.1
- -----------------------------------------------------------------------------------------------------------------------
Deferred compensation
Balance at beginning of year $ (44.3) $ (22.9) $ (23.9)
Current year awards, net (6.3) (21.4) 1.0
- -----------------------------------------------------------------------------------------------------------------------
Balance at end of year $ (50.6) $ (44.3) $ (22.9)
- -----------------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive income
Cumulative translation adjustment $ (141.4) $ (127.2) $ (93.9)
Pension liability adjustment (7.4) (3.9) (6.9)
- -----------------------------------------------------------------------------------------------------------------------
Balance at end of year $ (148.8) $ (131.1) $ (100.8)
- -----------------------------------------------------------------------------------------------------------------------
Cumulative translation adjustment
Balance at beginning of year $ (127.2) $ (93.9) $ (104.7)
Conforming fiscal years (14.8) - -
Sale of M-I L.L.C. 9.4 - -
Current year changes, net of tax (8.8) (33.3) 10.8
- -----------------------------------------------------------------------------------------------------------------------
Balance at end of year $ (141.4) $ (127.2) $ (93.9)
- -----------------------------------------------------------------------------------------------------------------------
<FN>
See notes to annual financial statements.
</FN>
</TABLE>
24
<PAGE>
HALLIBURTON COMPANY
Consolidated Statements of Shareholders' Equity
(continued)
(Millions of dollars and shares except per share data)
<TABLE>
<CAPTION>
Years ended December 31
-----------------------------------------------------
1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pension liability adjustment
Balance at beginning of year $ (3.9) $ (6.9) $ (7.0)
Current year adjustment (3.5) 3.0 0.1
- -----------------------------------------------------------------------------------------------------------------------
Balance at end of year $ (7.4) $ (3.9) $ (6.9)
- -----------------------------------------------------------------------------------------------------------------------
Retained earnings
Balance at beginning of year $ 3,563.4 $ 3,077.1 $ 2,758.8
Net income (loss) (14.7) 772.4 557.9
Cash dividends paid (254.2) (250.3) (239.6)
Cancellation of treasury stock (61.1) - -
Pooling of interests acquisition - (35.8) -
Conforming fiscal years 2.6 - -
- -----------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 3,236.0 $ 3,563.4 $ 3,077.1
- -----------------------------------------------------------------------------------------------------------------------
Treasury stock (number of shares)
Beginning of year 15.8 8.6 5.6
Shares issued under benefit, dividend reinvestment plan and
incentive stock plans, net (1.1) (1.5) (1.2)
Shares purchased 0.1 0.7 4.3
Cancellation of treasury stock (8.9) - (0.1)
Two-for-one common stock split - 8.0 -
- -----------------------------------------------------------------------------------------------------------------------
Balance at end of year 5.9 15.8 8.6
- -----------------------------------------------------------------------------------------------------------------------
Treasury stock (dollars)
Beginning of year $ 373.6 $ 381.4 $ 193.4
Shares issued under benefit, dividend reinvestment plan and
incentive stock plans, net (8.5) (51.9) (43.3)
Shares purchased 3.5 44.1 235.2
Cancellation of treasury stock (270.3) - (3.9)
- -----------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 98.3 $ 373.6 $ 381.4
- -----------------------------------------------------------------------------------------------------------------------
Comprehensive income
Net income (loss) $ (14.7) $ 772.4 $ 557.9
Translation rate changes, net of tax (8.8) (33.3) 10.8
Current year adjustment to minimum pension liability (3.5) 3.0 0.1
- -----------------------------------------------------------------------------------------------------------------------
Total comprehensive income $ (27.0) $ 742.1 $ 568.8
- -----------------------------------------------------------------------------------------------------------------------
<FN>
See notes to annual financial statements.
</FN>
</TABLE>
25
<PAGE>
HALLIBURTON COMPANY
Notes to Annual Financial Statements
Note 1. Significant Accounting Policies
The Company employs accounting policies that are in accordance with
generally accepted accounting principles in the United States. The preparation
of financial statements in conformity with generally accepted accounting
principles requires Company management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Ultimate results could differ from those estimates.
Basis of presentation. On September 29, 1998, the Company completed the
acquisition of Dresser Industries, Inc. (Dresser) pursuant to the Agreement and
Plan of Merger (the Merger) dated as of February 25, 1998. The Merger was
accounted for using the pooling of interests method of accounting for business
combinations. Accordingly, the Company's financial statements have been restated
to include the accounts of Dresser for all periods presented. Prior to the
Merger, Dresser had a fiscal year-end of October 31. Beginning in 1998,
Dresser's fiscal year-end of October 31 has been conformed to Halliburton's
calendar year-end. Periods through December 31, 1997 contain Dresser's
information on a fiscal year-end basis combined with Halliburton's information
on a calendar year-end basis. Dresser's operating results for November and
December of 1997 are presented within the consolidated statements of
shareholders' equity as "conforming fiscal years."
Principles of Consolidation. The consolidated financial statements
include the accounts of the Company and all majority-owned subsidiaries. All
material intercompany accounts and transactions are eliminated. Investments in
other affiliated companies in which the Company has at least 20% ownership and
does not have management control are accounted for on the equity method. Certain
prior year amounts have been reclassified to conform with the current year
presentation.
Revenues and Income Recognition. The Company recognizes revenues as
services are rendered or products are shipped. The distinction between services
and product sales is based upon the overall activity of the particular business
operation. Revenues from engineering and construction contracts are reported on
the percentage of completion method of accounting using measurements of progress
towards completion appropriate for the work performed. All known or anticipated
losses on contracts are provided for currently. Post-contract customer support
agreements are recorded as deferred revenues and recognized as revenue ratably
over the contract periods of generally one year's duration. Training and
consulting service revenues are recognized as the services are performed.
Research and Development. Research and development expenses are charged
to income as incurred. Such charges were $308.1 million in 1998, $259.2 million
in 1997 and $218.0 million in 1996.
Software Development Costs. Costs of developing software for sale are
charged to expense when incurred, as research and development, until
technological feasibility has been established for the product. Thereafter,
software development costs are capitalized until the software is ready for
general release to customers. The Company capitalized costs of $13.4 million in
1998, $14.5 million in 1997 and $12.9 million in 1996 related to software
developed for resale. Amortization expense related to these costs was $17.5
million for 1998, $15.0 million for 1997 and $12.5 million for 1996. Once the
software is ready for release, amortization of the software development costs
begins. Capitalized software development costs are amortized over periods which
do not exceed three years.
Income Per Share. Basic income per share amounts are based on the
weighted average number of common shares outstanding during the year. Diluted
income per share includes additional common shares that would have been
outstanding if potential common shares with a dilutive effect had been issued.
See Note 11 for a reconciliation of basic and diluted income per share from
continuing operations. Prior year amounts have been adjusted for the two-for-one
common stock split declared on June 9, 1997, and effected in the form of a stock
dividend paid on July 21, 1997.
26
<PAGE>
Cash Equivalents. The Company considers all highly liquid investments
with an original maturity of three months or less to be cash equivalents.
Receivables. The Company's receivables are generally not
collateralized. Notes and accounts receivable at December 31, 1998 include $33.2
million ($30.8 million at December 31, 1997) due from customers in accordance
with applicable retainage provisions of engineering and construction contracts,
which will become billable upon future deliveries or completion of such
contracts. This amount is expected to be collected during 1999. Additionally,
other noncurrent assets include $7.1 million ($7.3 million at December 31, 1997)
of such retainage which is expected to be collected in years subsequent to 1999.
Unbilled work on uncompleted contracts generally represents work currently
billable and such work is usually billed during normal billing processes in the
next month. At December 31, 1998, notes of $295.9 million ($34.4 million at
December 31, 1997) with varying interest rates are included in notes and
accounts receivable. See Note 5 for information on the note receivable generated
by the sale of M-I L.L.C. (M-I).
Inventories. Inventories are stated at the lower of cost or market.
Cost represents invoice or production cost for new items and original cost less
allowance for condition for used material returned to stock. Production cost
includes material, labor and manufacturing overhead. The cost of most
inventories is determined using either the first-in, first-out (FIFO) method or
the average cost method although the cost of U.S. manufacturing and U.S. field
service inventories is determined using the last-in, first-out (LIFO) method.
Inventories of sales items owned by foreign subsidiaries and inventories of
operating supplies and parts are generally valued at average cost.
Property, Plant and Equipment. Property, plant and equipment is
reported at cost less accumulated depreciation, which is generally provided on
the straight-line method over the estimated useful lives of the assets. Certain
assets are depreciated on accelerated methods. Accelerated depreciation methods
are also used for tax purposes, wherever permitted. Expenditures for maintenance
and repairs are expensed; expenditures for renewals and improvements are
generally capitalized. Upon sale or retirement of an asset, the related costs
and accumulated depreciation are removed from the accounts and any gain or loss
is recognized. When events or changes in circumstances indicate that assets may
be impaired, an evaluation is performed comparing the estimated future
undiscounted cash flows associated with the asset to the asset's carrying amount
to determine if a write-down to market value or discounted cash flow value is
required. The Company follows the successful efforts method of accounting for
oil and gas properties. At December 31, 1998, there were no significant oil and
gas properties in the production stage of development. The Company is
implementing an enterprise-wide information system. External direct costs of
materials and services and payroll-related costs of employees working solely on
development of the software system portion of the project are capitalized.
Capitalized costs of the project will be amortized over periods of three to ten
years beginning when the system is placed in service. Training costs and costs
to reengineer business processes are expensed as incurred.
Excess of Cost Over Net Assets Acquired. The excess of cost over net
assets acquired is amortized on a straight-line basis over periods not exceeding
40 years. Excess of cost over net assets acquired that is identified with
impaired assets, if any, will be evaluated using undiscounted future cash flows
as the basis for determining if impairment exists. To the extent impairment is
indicated to exist, an impairment loss will be recognized based on fair value.
Income Taxes. A valuation allowance is provided for deferred tax assets
if it is more likely than not these items will either expire before the Company
is able to realize their benefit, or that future deductibility is uncertain.
Deferred tax assets and liabilities are recognized for the expected future tax
consequences of events that have been realized in the financial statements or
tax returns.
Derivative Instruments. The Company primarily enters into derivative
financial transactions to hedge existing or projected exposures to changing
foreign exchange rates and from time to time enters into derivatives to hedge
exposures to interest rates or commodity prices. The Company does not enter into
derivative transactions for speculative or trading purposes. Derivative
financial instruments to hedge exposure with an indeterminable maturity date are
generally carried at fair value with the resulting gains and losses reflected in
the results of operations. Gains or losses on hedges of identifiable commitments
are deferred and recognized when the offsetting gains or losses on the related
hedged items are recognized. Deferred gains or losses for hedges which are
terminated prior to the transaction date are recognized currently. In the event
27
<PAGE>
an identifiable commitment is no longer expected to be realized, any deferred
gains or losses on hedges associated with the commitment are recognized
currently. Costs associated with entering into such contracts are presented in
other assets, while deferred gains or losses are included in other liabilities
or other assets, respectively, on the consolidated balance sheets. Recognized
gains or losses on derivatives entered into to manage foreign exchange risk are
included in foreign currency gains and losses on the consolidated statements of
income, while gains or losses on interest rate derivatives and commodity
derivatives are included in interest expense and operating income, respectively.
During the years ended December 31, 1998, 1997 and 1996, the Company did not
enter into any significant transactions to hedge interest rates or commodity
prices.
Foreign Currency Translation. Foreign entities whose functional
currency is the U.S. dollar translate monetary assets and liabilities at
year-end exchange rates and non-monetary items are translated at historical
rates. Income and expense accounts are translated at the average rates in effect
during the year, except for depreciation and cost of product sales which are
translated at historical rates. Gains or losses from changes in exchange rates
are recognized in consolidated income in the year of occurrence. Foreign
entities whose functional currency is the local currency translate net assets at
year-end rates and income and expense accounts at average exchange rates.
Adjustments resulting from these translations are reflected in the consolidated
statements of shareholders' equity titled "cumulative translation adjustment."
Note 2. Business Segment Information
The Company has three business segments. These segments are organized
around the products and services provided to the customers they serve. The
business units within each segment are evaluated on operating income, operating
margins and cash value added.
The Energy Services Group segment provides pressure pumping equipment
and services, logging and perforating, drilling systems and services, drilling
fluids systems, drill bits, specialized completion and production equipment and
services and well control. Also included in the Energy Services Group are
upstream oil and gas engineering, construction and maintenance services,
specialty pipe coating, insulation, underwater engineering services, integrated
exploration and production information systems and professional services to the
petroleum industry. The Energy Services Group has four business units:
Halliburton Energy Services, Brown & Root Energy Services, Landmark Graphics,
and Halliburton Energy Development. (In March 1999, Halliburton Energy
Development became a part of Halliburton Energy Services.) The long term
performance for these business units is linked to the long term demand for
hydrocarbons. The products and services the group provides are designed to help
discover, develop and produce hydrocarbons. The customers for this segment are
major oil companies, national oil companies and independent oil and gas
companies.
The Engineering and Construction Group segment provides engineering,
procurement, construction, project management, and facilities operation and
maintenance for hydrocarbon processing and other industrial and governmental
customers. The Engineering and Construction Group has two business units:
Kellogg-Brown & Root and Brown & Root Services. Both business units are engaged
in the delivery of engineering and construction services.
The Dresser Equipment Group segment designs, manufactures and markets
highly engineered products and systems for oil and gas producers, transporters,
processors, distributors and petroleum users throughout the world. Dresser
Equipment Group operates as one business unit.
The Company's equity in pretax income or losses of related companies is
included in revenues and operating income of the applicable segment.
Intersegment revenues included in the revenues of the other business segments
and sales between geographic areas are immaterial. General corporate assets not
included in a business segment are primarily comprised of receivables, deferred
tax assets, and certain other investments including the investment in the
Company's enterprise-wide information system.
The tables below represent the Company's adoption of Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information."
28
<PAGE>
Operations by Business Segment
<TABLE>
<CAPTION>
Years ended December 31
-----------------------------------------
Millions of dollars 1998 1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Energy Services Group $ 9,009.5 $ 8,504.7 $ 6,515.4
Engineering and Construction Group 5,494.8 4,992.8 4,720.7
Dresser Equipment Group 2,848.8 2,779.0 2,710.5
- -----------------------------------------------------------------------------------------------------
Total $ 17,353.1 $ 16,276.5 $ 13,946.6
- -----------------------------------------------------------------------------------------------------
Operating income:
Energy Services Group $ 971.0 $ 1,019.4 $ 698.0
Engineering and Construction Group 237.2 219.0 134.0
Dresser Equipment Group 247.8 248.3 229.3
Special charges and credits (980.1) (16.2) (85.8)
General corporate (79.4) (71.8) (72.3)
- -----------------------------------------------------------------------------------------------------
Total $ 396.5 $ 1,398.7 $ 903.2
- -----------------------------------------------------------------------------------------------------
Capital expenditures:
Energy Services Group $ 707.6 $ 682.9 $ 493.9
Engineering and Construction Group 33.5 61.5 105.6
Dresser Equipment Group 72.9 76.4 119.0
General corporate 100.3 59.3 12.6
- -----------------------------------------------------------------------------------------------------
Total $ 914.3 $ 880.1 $ 731.1
- -----------------------------------------------------------------------------------------------------
Depreciation and amortization:
Energy Services Group $ 405.4 $ 395.0 $ 338.5
Engineering and Construction Group 48.8 63.3 58.7
Dresser Equipment Group 86.8 98.6 92.8
General corporate 46.0 7.4 7.7
- -----------------------------------------------------------------------------------------------------
Total $ 587.0 $ 564.3 $ 497.7
- -----------------------------------------------------------------------------------------------------
Total assets:
Energy Services Group $ 6,618.1 $ 6,050.5 $ 4,999.2
Engineering and Construction Group 1,404.7 1,645.8 1,490.7
Dresser Equipment Group 1,944.2 2,115.3 2,126.8
General corporate 1,145.0 890.2 970.1
- -----------------------------------------------------------------------------------------------------
Total $ 11,112.0 $ 10,701.8 $ 9,586.8
- -----------------------------------------------------------------------------------------------------
Research and development:
Energy Services Group $ 220.0 $ 173.8 $ 150.1
Engineering and Construction Group 3.9 2.1 4.0
Dresser Equipment Group 84.2 83.3 63.9
- -----------------------------------------------------------------------------------------------------
Total $ 308.1 $ 259.2 $ 218.0
- -----------------------------------------------------------------------------------------------------
Special charges and credits:
Energy Services Group $ 721.1 $ (13.8) $ 43.1
Engineering and Construction Group 39.6 2.8 42.7
Dresser Equipment Group 21.1 27.2 -
General corporate 198.3 - -
- -----------------------------------------------------------------------------------------------------
Total $ 980.1 $ 16.2 $ 85.8
- -----------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
Operations by Geographic Area
<TABLE>
<CAPTION>
Years ended December 31
------------------------------------------
Millions of dollars 1998 1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
United States $ 6,132.2 $ 6,506.5 $ 5,730.0
United Kingdom 2,246.7 2,315.0 1,504.6
Other areas (over 120 countries) 8,974.2 7,455.0 6,712.0
- ------------------------------------------------------------------------------------------------------
Total $ 17,353.1 $ 16,276.5 $ 13,946.6
- ------------------------------------------------------------------------------------------------------
Long-lived assets:
United States $ 2,433.4 $ 2,518.9 $ 2,432.9
United Kingdom 609.9 775.0 626.9
Other areas (numerous countries) 1,055.0 982.8 956.6
- ------------------------------------------------------------------------------------------------------
Total $ 4,098.3 $ 4,276.7 $ 4,016.4
- ------------------------------------------------------------------------------------------------------
</TABLE>
Note 3. Inventories
Inventories at December 31, 1998 and 1997 are comprised of the
following:
<TABLE>
<CAPTION>
Millions of dollars 1998 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Finished products and parts $ 638.3 $ 670.9
Raw materials and supplies 250.3 213.7
Work in process 561.4 535.8
Progress payments (148.2) (121.2)
- -----------------------------------------------------------------------------------------
Total $ 1,301.8 $ 1,299.2
- -----------------------------------------------------------------------------------------
</TABLE>
Inventories on the last-in, first-out (LIFO) method were $167.9 million and
$195.9 million at December 31, 1998 and December 31, 1997, respectively. If the
average cost or FIFO methods had been in use for inventories on the LIFO basis,
total inventories would have been about $110.6 million and $100.8 million higher
than reported at December 31, 1998 and 1997, respectively.
Note 4. Property, Plant and Equipment
Property, plant and equipment at December 31, 1998 and 1997 is
comprised of the following:
<TABLE>
<CAPTION>
Millions of dollars 1998 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 142.2 $ 136.0
Buildings and property improvements 1,131.6 1,055.9
Machinery, equipment and other 5,576.3 5,454.1
- -----------------------------------------------------------------------------------------
Total $ 6,850.1 $ 6,646.0
- -----------------------------------------------------------------------------------------
</TABLE>
At December 31, 1998 and 1997, machinery, equipment and other property
includes oil and gas investments of approximately $223.7 million and $101.7
million, respectively and software developed for the Company's enterprise wide
information system of $132.7 million and $59.5 million, respectively.
Note 5. Related Companies
The Company conducts some of its operations through various joint
ventures which are in partnership, corporate and other business forms, which are
principally accounted for using the equity method.
30
<PAGE>
The larger unconsolidated entities include European Marine Contractors,
Limited (EMC), Bredero-Shaw and Ingersoll-Dresser Pump (IDP). EMC which is 50%
owned by a subsidiary of the Company and part of the Energy Services Group,
specializes in engineering, procurement and construction of marine pipelines.
Bredero-Shaw, which is 50% owned by a subsidiary of the Company and part of the
Energy Services Group, specializes in pipe coating. Effective February 29, 1996,
a subsidiary of the Company entered into an agreement to form a joint venture
with Shaw Industries Ltd. (Shaw) by contributing its Bredero Price assets and
Shaw contributing its Shaw Pipe Protection assets on a worldwide basis. During
the fourth quarter of 1997, the Company and Shaw agreed to a long-term extension
of their strategic pipe coating alliance, Bredero-Shaw. In connection with the
new agreement, Shaw agreed to pay a subsidiary of the Company $50 million over a
four-year period. This transaction resulted in a fourth quarter pretax gain of
$41.7 million which is reported in the consolidated statements of income in the
caption "special charges and credits." For balance sheet purposes, at year-end
1997 the subsidiary of the Company deconsolidated Bredero-Shaw and accounted for
its 50% interest in the joint venture as an equity investment. The subsidiary of
the Company includes its share of equity earnings in the results of operations
beginning January 1, 1998 under the equity method. IDP which is 49% owned by a
subsidiary of the Company and part of the Dresser Equipment Group, manufactures
a broad range of pump products and services.
In the second quarter of 1996, M-I, formerly a 36% owned joint venture,
purchased Anchor Drilling Fluids. The Company's share of the purchase price was
$41.3 million and is included in cash flows from other investing activities. The
Company sold its 36% ownership interest in M-I to Smith International, Inc.
(Smith) on August 31, 1998. This transaction completed Halliburton's commitment
to the U.S. Department of Justice to sell its M-I interest in connection with
its merger with Dresser. The purchase price of $265 million was paid by Smith in
the form of a non-interest bearing promissory note due April 1999. This
receivable is included in "notes and accounts receivable" on the consolidated
balance sheets. All of M-I's debt remains an obligation of M-I.
Summarized financial statements for all combined jointly-owned
operations which are not consolidated are as follows:
<TABLE>
<CAPTION>
Combined Operating Results
Millions of dollars 1998 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 5,244.0 $ 3,958.9 $ 3,505.5
- ----------------------------------------------------------------------------------------------
Operating income $ 478.3 $ 407.3 $ 325.7
- ----------------------------------------------------------------------------------------------
Net income $ 341.0 $ 316.2 $ 236.3
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Combined Financial Position
Millions of dollars 1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C>
Current assets $ 1,854.2 $ 1,779.5
Noncurrent assets 322.3 576.0
- ---------------------------------------------------------------------------
Total $ 2,176.5 $ 2,355.5
- ---------------------------------------------------------------------------
Current liabilities $ 1,074.6 $ 859.6
Noncurrent liabilities 118.2 245.3
Minority interests 3.9 8.1
Shareholders' equity 979.8 1,242.5
- ---------------------------------------------------------------------------
Total $ 2,176.5 $ 2,355.5
- ---------------------------------------------------------------------------
</TABLE>
31
<PAGE>
Note 6. Income Taxes
The components of the (provision) benefit for income taxes are:
<TABLE>
<CAPTION>
Millions of dollars 1998 1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current income taxes
Federal $ (301.8) $ (167.2) $ (82.0)
Foreign (228.5) (306.1) (169.8)
State (7.5) (15.5) (10.0)
- ------------------------------------------------------------------------------------------------
Total (537.8) (488.8) (261.8)
- ------------------------------------------------------------------------------------------------
Deferred income taxes
Federal 291.8 5.4 61.2
Foreign and state 1.6 (8.0) (47.8)
- ------------------------------------------------------------------------------------------------
Total 293.4 (2.6) 13.4
- ------------------------------------------------------------------------------------------------
Total $ (244.4) $ (491.4) $ (248.4)
- ------------------------------------------------------------------------------------------------
</TABLE>
Included in federal income taxes are foreign tax credits of $182.2
million in 1998, $154.0 million in 1997 and $109.2 million in 1996. The United
States and foreign components of income (loss) before income taxes and minority
interests are as follows:
<TABLE>
<CAPTION>
Millions of dollars 1998 1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $ (306.4) $ 736.8 $ 484.2
Foreign 585.2 576.3 346.8
- ------------------------------------------------------------------------------------------------
Total $ 278.8 $ 1,313.1 $ 831.0
- ------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
The primary components of the Company's deferred tax assets and
liabilities and the related valuation allowances are as follows:
<TABLE>
<CAPTION>
Millions of dollars 1998 1997
- ----------------------------------------------------------------------------------
<S> <C> <C>
Gross deferred tax assets
Employee benefit plans $ 314.9 $ 334.4
Special charges 135.3 -
Accrued liabilities 93.5 79.4
Insurance accruals 74.8 71.5
Construction contract accounting methods 93.0 70.6
Inventory 59.8 37.4
Intercompany profit 38.5 39.3
Net operating loss carryforwards 38.5 46.7
Intangibles 30.5 -
Foreign tax credits - 21.2
Alternative minimum tax carryforward 15.1 15.1
All other 125.7 80.1
- ----------------------------------------------------------------------------------
Total 1,019.6 795.7
- ----------------------------------------------------------------------------------
Gross deferred tax liabilities
Depreciation and amortization 85.0 124.5
Unrepatriated foreign earnings 25.5 35.6
Safe harbor leases 10.4 11.0
All other 99.6 85.0
- ----------------------------------------------------------------------------------
Total 220.5 256.1
- ----------------------------------------------------------------------------------
Valuation allowances
Net operating loss carryforwards 26.3 30.7
All other 3.7 33.3
- ----------------------------------------------------------------------------------
Total 30.0 64.0
- ----------------------------------------------------------------------------------
Net deferred income tax asset $ 769.1 $ 475.6
- ----------------------------------------------------------------------------------
</TABLE>
The Company has provided for the potential repatriation of certain
undistributed earnings of its foreign subsidiaries and considers earnings above
the amounts on which tax has been provided to be permanently reinvested. While
these additional earnings could become subject to additional tax if repatriated,
such a repatriation is not anticipated. Any additional amount of tax is not
practicable to estimate.
The Company has net operating loss carryforwards which expire as
follows: 1999 through 2003, $49.3 million; 2004 through 2008, $18.8 million;
2009 through 2010, $1.9 million. The Company also has net operating loss
carryforwards of $43.6 million with indefinite expiration dates. Reconciliations
between the actual provision for income taxes and that computed by applying the
U.S. statutory rate to income from continuing operations before income taxes and
minority interest are as follows:
33
<PAGE>
<TABLE>
<CAPTION>
Millions of dollars 1998 1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Provision computed at statutory rate $ (97.6) $ (459.6) $ (290.9)
Reductions (increases) in taxes resulting from:
Tax differentials on foreign earnings (19.8) (4.3) 14.2
State income taxes, net of federal income tax benefit (7.8) (12.0) (7.0)
Net operating losses - - 22.7
Special charges (109.0) (3.0) (3.0)
Federal income tax settlement - - 16.1
Nondeductible goodwill (12.2) (12.5) (8.9)
Other items, net 2.0 - 8.4
- ------------------------------------------------------------------------------------------------
Total $ (244.4) $ (491.4) $ (248.4)
- ------------------------------------------------------------------------------------------------
</TABLE>
The Company has received statutory notices of deficiency for the 1990
and 1991 tax years from the Internal Revenue Service (IRS) of $92.9 million and
$16.8 million, respectively, excluding any penalties or interest. The Company
believes it has meritorious defenses and does not expect that any liability
resulting from the 1990 or 1991 tax years will result in a material adverse
effect on its results of operations or financial position. In 1996, the Company
reached settlements with the IRS for certain matters including the 1989 taxable
year. As a result of the settlement for the 1989 taxable year, the Company
recognized tax benefits and net income was increased by $16.1 million in 1996.
Note 7. Special Charges and Credits
The Company has incurred various non-recurring transactions resulting
from acquisitions, profit initiatives, and industry downturns as summarized
below:
Asset Related Charges. Asset related charges include impairments and
write-offs of intangible assets and excess and/or duplicate machinery,
equipment, inventory and capitalized software. Charges also include write-offs
and lease cancellation costs related to acquired information technology
equipment replaced with the Company's standard common office equipment and exit
costs on other leased assets.
Personnel Charges. Personnel charges include severance and related
costs incurred to action announced employee reductions and personnel costs
related to change of control.
Facility Consolidation Charges. Facility consolidation charges include
costs to dispose of owned properties or exit leased facilities.
Merger Transaction Charges. Merger transaction costs include investment
banking, filing fees, legal and professional fees and other merger related
costs.
Other Charges. Other charges include eliminating duplicate agents,
contract cancellation costs and eliminating other duplicate capabilities.
34
<PAGE>
<TABLE>
<CAPTION>
Asset Facility Merger
Related Personnel Consolidation Transaction Other
Millions of dollars Charges Charges Charges Charges Charges Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1998 Charges to Expense
Business Segment
Energy Services Group $ 452.7 $ 156.7 $ 93.3 $ - $ 18.4 $ 721.1
Engineering & Construction Group 7.9 19.1 7.9 - 4.7 39.6
Dresser Equipment Group 18.1 1.4 1.6 - - 21.1
General corporate 30.7 57.5 23.4 64.0 22.7 198.3
- -----------------------------------------------------------------------------------------------------------------------
Total $ 509.4 $ 234.7 $ 126.2 $ 64.0 $ 45.8 $ 980.1
Utilized $ (442.3) $ (44.3) $ (3.4) $ (59.5) $ (4.2) $ (553.7)
- -----------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1998 $ 67.1 $ 190.4 $ 122.8 $ 4.5 $ 41.6 $ 426.4
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The third quarter of 1998 financial results include a pretax charge of
$945.1 million ($722.0 million after tax) to provide for costs associated with
the Merger and industry downturn due to declining oil and gas prices. During the
fourth quarter, an additional charge of $35.0 million ($24.0 million after tax)
was taken to provide $30.0 million for additional personnel reduction costs
covering approximately 2,750 employees within the Energy Services Group and $5.0
million for additional facility consolidations within the Energy Services Group.
As a result of the Merger, Halliburton and Dresser's completion
products operations and its formation evaluation businesses have been combined,
excluding Halliburton's logging-while-drilling (LWD) business and a portion of
its measurement-while-drilling business which were required to be disposed of in
connection with a Department of Justice consent decree. See Note 14. Based on
the change in strategic direction, the outlook for the industry, the decision to
standardize equipment product offerings and the expected loss on the disposition
of the LWD business, the Company recorded impairments based upon anticipated
future cash flows in accordance with FAS 121. This resulted in write-downs of
excess of cost over net assets acquired of $254.2 million related to directional
drilling and formation evaluation assets acquired in 1993 from Smith
International Inc., formation evaluation assets acquired in the 1988 acquisition
of Gearhart Industries, Inc., and completion products assets acquired in
conjunction with the acquisitions of Mono Pumps and AVA in 1990 and 1992,
respectively. In addition, $162.5 million of excess and duplicated machinery,
equipment and inventory related to formation evaluation and completion products
have been written down.
Additional asset related charges within the Energy Services Group
include excess and redundant equipment, software, inventory and excess of cost
over net assets acquired of $36.0 million related to other product lines which
are combinations of Halliburton and Dresser operations. The remaining asset
related charges include $26.0 million of write-downs of redundant or impaired
equipment, software and inventory in the Engineering and Construction and
Dresser Equipment Groups, plus $30.7 million for write-downs of information
technology equipment to be replaced with standard equipment and other duplicated
shared services assets applicable to all segments. The majority of the asset
related balance of $67.1 million at December 31, 1998 represents the write-downs
to fair value less disposal costs at the expected disposal date. The majority of
the balance will be utilized during the first and second quarters of 1999 in
connection with planned activities.
Personnel charges in 1998 reflect announced headcount reductions of
10,850 affecting all segments, corporate and shared service functions. In total,
approximately 75% of the reductions will occur within the Energy Services Group.
During 1998, the Company reduced employment levels, primarily operations
personnel by approximately 5,000 (approximately 3,000 within North America and
1,100 within Latin America), including 4,700 within the Energy Services Group.
The remainder will be incurred over the balance of 1999, primarily during the
first and second quarter of the year.
35
<PAGE>
As a result of the Merger and the industry downturn, the Company plans
to vacate, sell or close over 400 service, manufacturing and administrative
facilities throughout the world. Until the properties included in the facility
consolidation charges are vacated, the Company plans to continue its normal
depreciation, lease costs and operating expenses which will be charged against
the Company's results of operations. The majority of these facilities are within
the Energy Services Group. During the fourth quarter of 1998, the Company sold
or returned 33 service and administrative facilities. As of December 31, 1998,
the Company had an additional 100 vacated properties which it is in the process
of selling, subleasing or returning to the owner.
Halliburton and Dresser merger transaction costs amounted to $64.0
million. At December 31, 1998, $4.5 million in estimated merger transaction
costs remain to be paid.
Other charges of $45.8 million include the estimated contract exit
costs associated with the elimination of duplicate agents and suppliers in
various countries throughout the world. These costs will occur during 1999 in
connection with the Company's renegotiation of these contractual agreements.
At December 31, 1998, no adjustments or reversals to the remaining
accrued special charges are planned.
In the third quarter of 1997, a subsidiary of the Company sold certain
assets of its SubSea operations to Global Industries, Inc. for $102.0 million
cash. The Company recognized a loss of $9.7 million ($6.3 million after tax) on
the sale. Also in the third quarter of 1997, the Company recorded merger
transaction charges of $8.6 million (also $8.6 million after tax) for costs
incurred by the Company and NUMAR to complete the NUMAR acquisition.
In the fourth quarter of 1997, the Company recorded several
nonrecurring transactions. The Company recognized a pretax charge of $21.6
million ($14.0 million after tax) to provide $9.6 million within the Energy
Services Group and $6.4 million within the Dresser Equipment Group for various
asset related charges whose carrying value has been impaired and $5.6 million
for early retirement incentives. A subsidiary of the Company, along with its
joint venture partner Ingersoll-Rand Company, approved profit initiatives at
Dresser-Rand Company and Ingersoll-Dresser Pump Company. The Company's share of
these initiatives included facility consolidation charges of $18.0 million ($7.5
million after tax and minority interest) for the closure of a Dresser-Rand
facility in Europe, consolidation of repair and service operations and the
discontinuance of certain product lines. A subsidiary of the Company and Shaw
Industries, Ltd. agreed to a long-term extension of their strategic pipe coating
alliance. See Note 5. This transaction resulted in a pretax gain of $41.7
million.
Additionally, the Company recorded its share of personnel reduction
charges of $30.2 million recorded during the two-month period ended December 31,
1997 to reduce employment levels by approximately 1,000 at Dresser-Rand and
Ingersoll-Dresser Pump. These costs have been recorded in the consolidated
statements of shareholders' equity as part of conforming the fiscal year of
Dresser to Halliburton's calendar year. See Note 1.
During the first quarter of 1996, Landmark recorded asset related
charges of $12.2 million ($8.7 million after tax) for the write-off of
in-process research and development activities acquired in connection with the
purchase by Landmark of certain assets and the assumption of certain liabilities
of Western Atlas International, Inc. and the write-off of related redundant
assets and activities.
During the third quarter of 1996, the Company recorded special charges
of $73.6 million ($50.3 million after tax), which included $41.0 million of
personnel charges to terminate approximately 1,000 employees related to
reorganization efforts within the Engineering and Construction Group and plans
to combine various administrative support functions throughout the Company into
shared services; $20.2 million of facility charges for restructuring certain
Engineering and Construction Group businesses, provide for excess lease space
and other items; and $12.4 million for merger transaction costs incurred in
relation to the merger with Landmark.
The special charges to net income in the third quarter of 1996 were
offset by tax credits during the same quarter of $43.7 million due to the
recognition of net operating loss carryforwards and the settlement during the
quarter of various issues with the Internal Revenue Service (IRS). The Company
reached agreement with the IRS and recognized net operating loss carryforwards
of $62.5 million ($22.5 million in tax benefits) from the 1989 tax year. The net
operating loss carryforwards were utilized in the 1996 tax year. In addition,
the Company also reached agreement with the IRS on issues related to
intercompany pricing of goods and services for the tax years 1989 through 1992
and entered into an advanced pricing agreement for the tax years 1993 through
1998. As a result of these agreements with the IRS, the Company recognized tax
36
<PAGE>
benefits of $16.1 million. The Company also recognized net operating loss
carryforwards of $14.0 million ($5.1 million in tax benefits) in certain foreign
areas due to improving profitability and restructuring of foreign operations.
Note 8. Lines of Credit, Notes Payable and Long-Term Debt
Short-term notes payable and current maturities consists of:
<TABLE>
<CAPTION>
Millions of dollars 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C>
Short-term notes payable $ 515.0 $ 50.5
Current maturities of long-term debt 58.5 7.4
- ------------------------------------------------------------------------------------
Total $ 573.5 $ 57.9
- ------------------------------------------------------------------------------------
</TABLE>
At year-end 1998, the Company had committed short-term lines of credit
totaling $550.0 million available and unused, and other short-term lines of
credit totaling $315.0 million. There were no borrowings outstanding under these
facilities. The remaining short-term debt consists primarily of $462.9 million
in commercial paper with an effective interest rate of 5.30% and $52.1 million
in foreign bank loans and overdraft facilities with varying rates of interest.
Long-term debt at the end of 1998 and 1997 consists of the following:
<TABLE>
<CAPTION>
Millions of dollars 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C>
6.25% notes due June 2000 $ 300.0 $ 300.0
7.6% debentures due August 2096 300.0 300.0
8.75% debentures due February 2021 200.0 200.0
8% senior notes due April 2003 138.6 149.5
Medium-term notes due 1999 through 2027 450.0 300.0
Term loans at LIBOR (GBP) plus 0.75% payable in
semi-annual installments through March 2002 29.4 45.9
Other notes with varying interest rates 10.2 8.9
- ------------------------------------------------------------------------------------
1,428.2 1,304.3
Less current portion 58.5 7.4
- ------------------------------------------------------------------------------------
Total long-term debt $ 1,369.7 $ 1,296.9
- ------------------------------------------------------------------------------------
</TABLE>
The Company has issued notes under its medium-term note program as
follows:
<TABLE>
<CAPTION>
Amount Issue Date Due Rate Prices Yield
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 125 million 02/11/97 02/01/2027 6.75% 99.78% 6.78%
$ 50 million 05/12/97 05/12/2017 7.53% Par 7.53%
$ 50 million 07/08/97 07/08/1999 6.27% Par 6.27%
$ 75 million 08/05/97 08/05/2002 6.30% Par 6.30%
$ 150 million 11/24/98 12/01/2008 5.63% 99.97% 5.63%
-----------------------------------------------------------------------------------------------------------
</TABLE>
The Company's 8.75% debentures due February 2021 do not have sinking
fund requirements and are not redeemable prior to maturity. The medium-term
notes may not be redeemed at the option of the Company prior to maturity. There
is no sinking fund applicable to the notes. Each holder of the 6.75% medium-term
notes has the right to require the Company to repay such holder's notes, in
whole or in part, on February 1, 2007. The net proceeds from the sale of the
notes were used for general corporate purposes.
During March 1997, a subsidiary of the Company incurred $56.3 million
of term loans in connection with the acquisition of the Royal Dockyard in
Plymouth, England (the Dockyard Loans). The Dockyard Loans are denominated in
37
<PAGE>
GBP and bear interest at LIBOR (GBP) plus 0.75% payable in semi-annual
installments through March 2002. Pursuant to certain terms of the Dockyard
Loans, a subsidiary of the Company was initially required to provide a
compensating balance of $28.7 million which is restricted as to use by the
subsidiary. The compensating balance amount decreases in proportion to the
outstanding debt related to the Dockyard Loans and earns interest at a rate
equal to that of the Dockyard Loans. At December 31, 1998, the compensating
balance of $14.9 million is included in other assets in the consolidated balance
sheets.
Long-term debt matures over the next five years as follows: $58.5
million in 1999; $308.3 million in 2000; $8.3 million in 2001; $85.3 million in
2002; and $138.8 million in 2003.
Note 9. Dresser Financial Information
Dresser Industries Inc. has ceased filing periodic reports with the
Securities and Exchange Commission. Dresser's 8% senior notes (the Notes) remain
outstanding and the Notes are fully guaranteed by the Company. See Note 8. As
long as the Notes remain outstanding, summarized financial information of
Dresser will be presented in periodic reports filed by the Company on Form 10-K
and Form 10-Q. The Company has not presented separate financial statements and
other disclosures concerning Dresser because management has determined such
information is not material to holders of the Notes.
In January 1999, as part of the legal reorganization associated with
the Merger, Halliburton Delaware, Inc., a first tier holding company subsidiary,
was merged into Dresser Industries, Inc. As a result of this action, the
majority of the operating assets and activities of the combined company in 1999
will be included within the legal structure of Dresser Industries, Inc.
<TABLE>
<CAPTION>
Dresser Industries, Inc.
Financial Position December 31 October 31
- -------------------------------------------------------------------------------------------------
Millions of dollars 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets $ 2,417.2 $ 2,471.6
Noncurrent assets 2,613.7 2,627.2
- -------------------------------------------------------------------------------------------------
Total $ 5,030.9 $ 5,098.8
- -------------------------------------------------------------------------------------------------
Current liabilities $ 1,388.6 $ 1,687.4
Noncurrent liabilities 1,544.4 1,535.5
Minority interest 153.5 143.7
Shareholders' equity 1,944.4 1,732.2
- -------------------------------------------------------------------------------------------------
Total $ 5,030.9 $ 5,098.8
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Twelve months ended
Dresser Industries, Inc. -----------------------------------------------------------
Operating Results December 31 October 31 October 31
- ----------------------------------------------------------------------------------------------------------------------
Millions of dollars 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 8,135.7 $ 7,457.9 $ 6,561.5
- ----------------------------------------------------------------------------------------------------------------------
Operating income $ 677.1 $ 600.6 $ 485.3
- ----------------------------------------------------------------------------------------------------------------------
Net income $ 343.8 $ 318.0 $ 257.5
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 10. Commitments and Contingencies
Leases. At year end 1998, the Company and its subsidiaries were
obligated under noncancelable operating leases, expiring on various dates
through 2021, principally for the use of land, offices, equipment, field
facilities, and warehouses. Aggregate rentals charged to operations for such
leases totaled $207.1 million in 1998, $202.8 million in 1997 and $177.8 million
in 1996. Future aggregate rentals on noncancelable operating leases are as
follows: 1999, $147.3 million; 2000, $121.0 million; 2001, $96.6 million; 2002,
$83.1 million; 2003, $60.9 million; and thereafter, $150.7 million.
38
<PAGE>
Asbestosis Litigation. Since 1976, Dresser and its former divisions or
subsidiaries have been involved in litigation resulting from allegations that
third parties had sustained injuries and damage from the inhalation of asbestos
fibers contained in certain products manufactured by Dresser and its former
divisions or subsidiaries or companies acquired by Dresser.
Over the last 20 years approximately 183,000 claims have been filed
against Dresser and its former divisions or subsidiaries. Claims continue to be
filed with 29,400 new claims filed in 1998. Dresser and its former divisions or
subsidiaries have entered into agreements with insurance carriers which cover,
in whole or in part, indemnity payments, legal fees and expenses for certain
categories of claims. Dresser and its former divisions or subsidiaries are in
negotiation with carriers over coverage for the remaining categories of claims.
Because these agreements are governed by exposure dates, payment type and the
product involved, the covered amount varies by individual claim. In addition,
lawsuits are pending against several carriers seeking to recover additional
amounts related to these claims.
Since 1976, Dresser and its former divisions and subsidiaries have
settled or disposed of 120,000 claims for a gross cost of approximately $89.1
million with insurance carriers paying all but $37.0 million. Provision has been
made for the estimated exposure, based on historical experience and expected
recoveries from insurance carriers, related to the 63,400 claims which were open
at the end of 1998 including 14,000 for which settlements are pending.
Management has no reason to believe that the insurance carriers will not be able
to meet their share of future obligations under the agreements.
Pursuant to an agreement entered into at the time of the spin-off,
Global Industrial Technologies, Inc. ("Global" formerly INDRESCO, Inc.) assumed
liability for asbestos related claims filed against Dresser after July 31, 1992
relating to refractory products manufactured or marketed by the Harbison-Walker
Refractories Division of Dresser Industries, Inc. These asbestos claims are
subject to certain agreements with insurance carriers that cover expense and
indemnity payments. Global now disputes that it assumed responsibility for any
of such asbestos claims based on negligence. Global also now asserts certain
other claims relating to the insurance coverage responding to asbestos claims.
In order to resolve these assertions, Global has invoked the dispute resolution
provisions of the 1992 agreement, which require binding arbitration. On February
19, 1999 Dresser filed suit in the Delaware Chancery Court seeking an injunction
to restrain such arbitration as being barred by the Delaware statute of
limitations. The Company believes that these new assertions by Global are
without merit and intends to vigorously defend itself against them.
Management recognizes the uncertainties of litigation and the
possibility that a series of adverse rulings could materially impact operating
results. However, based upon Dresser's historical experience with similar
claims, the time elapsed since Dresser and its former divisions or subsidiaries
discontinued sale of products containing asbestos, and management's
understanding of the facts and circumstances that gave rise to such claims,
management believes that the pending asbestos claims will be resolved without
material effect on Halliburton's financial position or results of operations.
Environmental. The Company is involved through its subsidiaries as a
potential responsible party (PRP) in remedial activities to clean up various
"Superfund" sites under applicable federal law which imposes joint and several
liability, if the harm is indivisible, on certain persons without regard to
fault, the legality of the original disposal, or ownership of the site. Although
it is very difficult to quantify the potential impact of compliance with
environmental protection laws, management of the Company believes that any
liability of the Company with respect to all but one of such sites will not have
a material adverse effect on the results of operations of the Company.
With respect to a site in Jasper County, Missouri (Jasper County
Superfund Site), sufficient information that would enable management to quantify
the Company's potential liability has not been developed and management believes
the process of determining the nature and extent of remediation at this site and
the total costs thereof will be lengthy. Brown & Root, Inc., now Kellogg Brown &
Root, Inc. (KBR), a subsidiary of the Company, has been named as a PRP with
respect to the Jasper County Superfund Site by the Environmental Protection
Agency (EPA). The Jasper County Superfund Site includes areas of mining activity
that occurred from the 1800s through the mid 1950s in the southwestern portion
of Missouri. The site contains lead and zinc mine tailings produced from mining
activities. KBR is one of nine participating PRPs that have agreed to perform a
Remedial Investigation/Feasibility Study (RI/FS), which, due to various delays,
is not expected to be completed until late 1999. Although the entire Jasper
39
<PAGE>
County Superfund Site comprises 237 square miles as listed on the National
Priorities List, in the RI/FS scope of work, the EPA has only identified seven
areas, or subsites, within this area that need to be studied and then possibly
remediated by the PRPs. Additionally, the Administrative Order on Consent for
the RI/FS only requires KBR to perform RI/FS work at one of the subsites within
the site, the Neck/Alba subsite, which only comprises 3.95 square miles. KBR's
share of the cost of such a study is not expected to be material. In addition to
the Superfund issues, the State of Missouri has indicated that it may pursue
natural resource damage claims against the PRPs. At the present time KBR cannot
determine the extent of its liability, if any, for remediation costs or natural
resource damages on any reasonably practicable basis.
General Litigation. The purchasers of Dresser's former hand tool
division sued Dresser for fraud in connection with the October 1983 transaction.
In May 1994, the jury returned a verdict awarding the plaintiffs $4.0 million in
compensatory damages and $50.0 million in punitive damages. On October 13, 1994,
the Court ordered a reduction of damages from $54.0 to $12.0 million. On October
15, 1996, the Court of Appeals issued its decision reversing the trial court's
decision as to compensatory and punitive damages and remanding the case for a
new trial on damages. On remand, the trial court ordered that the new trial
contemplated by the appellate decision be limited to compensatory damages only,
despite the express statement that punitive damages were also reversed, and
decided that the court would review the original punitive damages verdict after
the retrial on compensatory damages.
As of October, 1998 the trial was held on compensatory damages and
concluded with a jury award of $1. Following that, a hearing was held in
January, at which the judge reduced the punitive damage award from $50 million
to $650,000. The sum of $650,001 was paid during the first week of February
1999, and this case is now concluded.
Merger. In connection with the Merger, Dresser and its directors have
been named as defendants in three lawsuits filed in late February of 1998 and
early March of 1998 in the Delaware Court of Chancery. The lawsuits each purport
to be a class action filed on behalf of Dresser's stockholders and allege that
the consideration to be paid to Dresser's stockholders in the Merger is
inadequate and does not reflect the true value of Dresser. The complaints also
each allege that the directors of Dresser have breached their fiduciary duties
in approving the Merger. One of the actions further alleges self-dealing on the
part of the individual defendants and asserts that the directors are obliged to
conduct an auction to assure that stockholders receive the maximum realizable
value for their shares. All three actions seek preliminary and permanent
injunctive relief as well as damages. On June 10, 1998 the court issued an order
consolidating the three lawsuits which requires the plaintiffs to file an
amended consolidated complaint "as soon as practicable." To date, plaintiffs
have not filed an amended complaint. The Company believes that the lawsuits are
without merit and intends to defend the lawsuits vigorously.
Other. The Company and its subsidiaries are parties to various other
legal proceedings. Although the ultimate dispositions of such proceedings are
not presently determinable, in the opinion of the Company any liability that may
ensue will not be material in relation to the consolidated financial position
and results of operations of the Company.
40
<PAGE>
Note 11. Income Per Share
<TABLE>
<CAPTION>
Millions of dollars and shares
except per share data 1998 1997 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss) $ (14.7) $ 772.4 $ 557.9
- -----------------------------------------------------------------------------------------
Basic weighted average shares 438.8 431.1 429.2
Effect of common stock equivalents - 5.0 2.9
- -----------------------------------------------------------------------------------------
Diluted weighted average shares 438.8 436.1 432.1
- -----------------------------------------------------------------------------------------
Income (loss) per common share:
Basic $ (0.03) $ 1.79 $ 1.30
- -----------------------------------------------------------------------------------------
Diluted $ (0.03) $ 1.77 $ 1.29
- -----------------------------------------------------------------------------------------
</TABLE>
Basic income per share amounts are 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. Diluted earnings per share
for 1998 excludes 3.3 million potential common shares which were antidilutive
for earnings per share purposes. Also excluded from the computation of diluted
earnings per share are options to purchase 1.4 million shares of common stock in
1998; 1.1 million shares in 1997; and 2.6 million shares in 1996. These options
were outstanding during these respective years, but were excluded because the
option exercise price was greater than the average market price of the common
shares.
Note 12. Common Stock
On June 25, 1998, the Company's shareholders voted to increase the
Company's number of authorized shares from 400.0 million to 600.0 million.
On May 20, 1997, the Company's shareholders voted to increase the
Company's number of authorized shares from 200.0 million shares to 400.0 million
shares. On June 9, 1997, the Company's Board of Directors approved a two-for-one
stock split effected in the form of a stock dividend distributed on July 21,
1997 to shareholders of record on June 26, 1997. The par value of the Company's
common stock of $2.50 per share remained unchanged. As a result of the stock
split, $556.3 million was transferred from paid-in capital in excess of par
value to common stock. Historical share and per share amounts presented on the
supplemental consolidated statements of income and in the discussion below
concerning stock options and restricted stock have been restated to reflect the
stock split.
The Company's 1993 Stock and Long-Term Incentive Plan (1993 Plan)
provides for the grant of any or all of the following types of awards: (1) stock
options, including incentive stock options and non-qualified stock options; (2)
stock appreciation rights, in tandem with stock options or freestanding; (3)
restricted stock; (4) performance share awards; and (5) stock value equivalent
awards. Under the terms of the 1993 Plan as amended, 27 million shares of the
Company's Common Stock have been reserved for issuance to key employees. At
December 31, 1998, 14.6 million shares were available for future grants under
the 1993 Plan.
In connection with the acquisitions of Dresser, Landmark Graphics
Corporation (Landmark) and NUMAR Corporation (NUMAR) (see Note 14), outstanding
stock options under the stock option plans maintained by Dresser, Landmark and
NUMAR were assumed by the Company. Stock option transactions summarized below
include amounts for the 1993 Plan, the Dresser plans using the acquisition
exchange rate of 1 share for each Dresser share, the Landmark plans using the
acquisition exchange rate of 1.148 shares for each Landmark share, and the NUMAR
plans using the acquisition exchange rate of .9664 shares for each NUMAR share.
The period from December 1997 to December 1998 includes Dresser's activities
from its fiscal year-end of October 1997 to December 1997 in order to conform
Dresser's fiscal year-end to Halliburton's calendar year-end.
41
<PAGE>
<TABLE>
<CAPTION>
Exercise Weighted Average
Number of Price per Exercise Price
Stock Options Shares Share per Share
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at December 31, 1995 12,289,650 $ 2.90 - 29.73 $ 18.53
- ---------------------------------------------------------------------------------------------------
Granted 4,295,409 14.48 - 29.57 27.49
Exercised (2,722,828) 2.90 - 23.88 16.72
Forfeited (445,660) 8.71 - 28.09 18.81
- ---------------------------------------------------------------------------------------------------
Outstanding at December 31, 1996 13,416,571 3.49 - 29.73 21.77
- ---------------------------------------------------------------------------------------------------
Options assumed in acquisition 854,050 3.10 - 22.12 12.22
Granted 2,194,972 30.69 - 61.50 46.18
Exercised (3,684,923) 3.10 - 29.56 17.95
Forfeited (395,833) 9.15 - 39.88 22.69
- ---------------------------------------------------------------------------------------------------
Outstanding at December 31, 1997 12,384,837 3.10 - 61.50 26.55
- ---------------------------------------------------------------------------------------------------
Granted 4,273,368 26.19 - 46.50 33.07
Exercised (2,435,393) 3.10 - 37.88 20.84
Forfeited (397,610) 5.40 - 54.50 33.64
- ---------------------------------------------------------------------------------------------------
Outstanding at December 31, 1998 13,825,202 $ 3.10 - 61.50 $ 29.37
- ---------------------------------------------------------------------------------------------------
</TABLE>
Options outstanding at December 31, 1998 are composed of the following:
<TABLE>
<CAPTION>
Outstanding Exercisable
------------------------------------------------ --------------------------------
Weighted
Number of Average Weighted Number of Weighted
Shares at Remaining Average Shares at Average
Range of December 31, Contractual Exercise December 31, Exercise
Exercise Prices 1998 Life Price 1998 Price
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 3.10 - 14.38 354,189 3.81 $ 10.36 354,189 $ 10.36
14.48 - 18.13 1,806,304 6.12 16.68 1,660,940 16.71
18.24 - 29.19 5,519,919 7.88 25.28 2,943,534 23.11
29.56 - 61.50 6,144,790 8.30 37.87 2,885,151 35.46
- -----------------------------------------------------------------------------------------------------------
$ 3.10 - 61.50 13,825,202 7.73 $ 29.37 7,843,814 $ 25.72
- -----------------------------------------------------------------------------------------------------------
</TABLE>
There were 6.9 million options exercisable with a weighted average
exercise price of $21.17 at December 31, 1997, and 6.5 million options
exercisable with a weighted average exercise price of $18.57 at December 31,
1996.
All stock options under the 1993 Plan, including options granted to
employees of Dresser, Landmark and NUMAR since the acquisition of such
companies, are granted at the fair market value of the Common Stock at the grant
date. Landmark, prior to its acquisition by the Company, had provisions in its
plans that allowed Landmark to set option exercise prices at a defined
percentage below fair market value.
The fair value of options at the date of grant was estimated using the
Black-Scholes option pricing model. The weighted average assumptions and
resulting fair values of options granted are as follows:
42
<PAGE>
<TABLE>
<CAPTION>
Assumptions Weighted Average
---------------------------------------------------------------------
Risk-Free Expected Expected Expected Fair Value of
Interest Rate Dividend Yield Life (in years) Volatility Options Granted
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 4.3 - 5.3% 1.2 - 2.7% 5 - 6.5 20.1 - 38.0% $ 11.63
1997 6.0 - 6.4% 1.0 - 2.7% 5 - 6.5 22.8 - 43.3% $ 17.29
1996 5.8 - 5.9% 1.6 - 2.7% 5 - 6.5 23.1 - 39.7% $ 9.44
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Stock options generally expire ten years from the grant date. Stock
options vest over a three-year period, with one-third of the shares becoming
exercisable on each of the first, second and third anniversaries of the grant
date.
The Company accounts for its option plans in accordance with Accounting
Principles Board Opinion No. 25, under which no compensation cost has been
recognized for stock option awards. Had compensation cost for the Company's
stock option programs been determined consistent with Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
123), the Company's pro forma net income (loss) for 1998, 1997 and 1996 would
have been $(42.6) million, $750.3 million and $547.1 million, respectively,
resulting in diluted earnings (loss) per share of $(0.10), $1.72 and $1.27,
respectively.
Restricted shares awarded under the 1993 Plan for 1998, 1997 and 1996
were 414,510; 515,650; and 363,800, respectively. The shares awarded are net of
forfeitures of 136,540; 34,900; and 34,600 shares in 1998, 1997 and 1996,
respectively. The weighted average fair market value per share at the date of
grant of shares granted in 1998, 1997 and 1996 was $34.77, $45.29 and $28.24,
respectively.
The Company's Restricted Stock Plan for Non-Employee Directors
(Restricted Stock Plan) allows for each non-employee director to receive an
annual award of 400 restricted shares of Common Stock as a part of compensation.
The Company reserved 100,000 shares of Common Stock for issuance to non-employee
directors. The Company issued 3,200; 3,200 and 3,600 restricted shares in 1998,
1997 and 1996, respectively, under this plan. At December 31, 1998, 20,400
shares have been issued to non-employee directors under this plan. The weighted
average fair market value per share at the date of grant of shares granted in
1998, 1997 and 1996 was $36.31, $46.06 and $26.57, respectively.
The Company's Employees' Restricted Stock Plan was established for
employees who are not officers, for which 200,000 shares of Common Stock have
been reserved. At December 31, 1998, 170,300 shares (net of 26,700 shares
forfeited) have been issued. Forfeitures were 1,900; 14,600 and 8,400 in 1998,
1997 and 1996, respectively, and no further grants are being made under this
plan.
Under the terms of the Company's Career Executive Incentive Stock Plan,
15 million shares of the Company's Common Stock were reserved for issuance to
officers and key employees at a purchase price not to exceed par value of $2.50
per share. At December 31, 1998, 11.7 million shares (net of 2.2 million shares
forfeited) have been issued under the plan. No further grants will be made under
the Career Executive Incentive Stock Plan.
Restricted shares issued under the 1993 Plan, Restricted Stock Plan,
Employees' Restricted Stock Plan and the Career Executive Incentive Stock Plan
are limited as to sale or disposition with such restrictions lapsing
periodically over an extended period of time not exceeding ten years. The fair
market value of the stock, on the date of issuance, is being amortized and
charged to income (with similar credits to paid-in capital in excess of par
value) generally over the average period during which the restrictions lapse.
Compensation costs recognized in income for 1998, 1997 and 1996 were $7.6
million, $7.1 million and $6.9 million, respectively. At December 31, 1998, the
unamortized amount is $50.6 million.
Note 13. Series A Junior Participating Preferred Stock
The Company has previously declared a dividend of one preferred stock
purchase right (a Right) on each outstanding share of Common Stock. This
dividend is also applicable to each share of Halliburton Common Stock that was
issued subsequent to adoption of the Rights Agreement entered into with
ChaseMellon Shareholder Services, L.L.C. (the Rights Agent). Each Right entitles
its holder to buy one two-hundredth of a share of the Company's Series A Junior
43
<PAGE>
Participating Preferred Stock, without par value, at an exercise price of $75.
These Rights are subject to certain antidilution adjustments, which have been
set out in the Rights Agreement entered into with the Rights Agent. The Rights
do not have any voting rights and are not entitled to dividends.
The Rights become exercisable in certain limited circumstances
involving a potential business combination. After the Rights become exercisable,
each Right will entitle its holder to an amount of Common Stock of the Company,
or in certain circumstances, securities of the acquirer, having in the
aggregate, a market value equal to two times the exercise price of the Right.
The Rights are redeemable at the Company's option at any time before they become
exercisable. The Rights expire on December 15, 2005. No event during 1998 made
the Rights exercisable.
Note 14. Acquisitions and Dispositions
Dresser Merger. On September 29, 1998 the Company completed the
acquisition of Dresser Industries, Inc. (the Merger), by converting the
outstanding Dresser common stock into an aggregate of approximately 176 million
shares of Common Stock of the Company. The Company has also reserved
approximately 7.3 million shares of common stock for outstanding Dresser stock
options and other employee and directors plans. The Merger qualified as a
tax-free exchange to Dresser's shareholders for U.S. federal income tax purposes
and was accounted for using the pooling of interests method of accounting for
business combinations. Accordingly, the Company's financial statements have been
restated to include the results of Dresser for all periods presented. Beginning
in 1998, Dresser's year-end of October 31 has been conformed to Halliburton's
calendar year-end. Periods through December 1997 contain Dresser's information
on a fiscal year-end basis combined with Halliburton's information on a calendar
year-end basis. For the two months ended December 31, 1997, Dresser had revenues
of $1,110.2 million, operating income of $53.2 million, and net income of $35.8
million. Operating income for the two-month period includes a pretax special
charge of $30.2 million ($12.0 million after tax and minority interest) related
to Dresser's share of profit improvement initiatives at the Dresser-Rand and
Ingersoll-Dresser Pump joint ventures.
Results for the two-month period have been included in retained
earnings, and dividends of $33.2 million paid in December 1997 have been
deducted from retained earnings in the consolidated statements of shareholders'
equity at December 31, 1998 as conforming fiscal years. The change to Dresser's
cumulative translation adjustment account for the period between October 31,
1997 and December 31, 1997 of $14.8 million is also included in the consolidated
statements of shareholders' equity as conforming fiscal years. There were no
material transactions between Halliburton and Dresser prior to the Merger.
Combined and separate companies results of Halliburton and Dresser for
the periods preceding the merger are as follows:
<TABLE>
<CAPTION>
Nine Months
Ended Years ended
September 30 December 31
--------------------------------------------------
Millions of dollars 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Halliburton $ 7,044.5 $ 8,818.6 $ 7,385.1
Dresser 6,019.5 7,457.9 6,561.5
- ---------------------------------------------------------------------------------------------------------------
Combined $ 13,064.0 $ 16,276.5 $ 13,946.6
- ---------------------------------------------------------------------------------------------------------------
Net income (loss):
Halliburton $ 359.3 $ 454.4 $ 300.4
Dresser 282.3 318.0 257.5
1998 Special charge, net of tax (722.0) - -
- ---------------------------------------------------------------------------------------------------------------
Combined $ (80.4) $ 772.4 $ 557.9
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
LWD Divestiture. In January 1999, in accordance with the consent decree
Halliburton entered into with the U.S. Department of Justice on September 29,
1998, an agreement was reached with W-H Energy Services, Inc. (W-H) for the sale
44
<PAGE>
of Halliburton's logging-while-drilling (LWD) and related measurement-while-
drilling (MWD) business known as PathFinder and currently a part of the Energy
Services Group.
Completion of the sale of the PathFinder business was approved by the
Department of Justice on March 3, 1999. The Company expects to incur a loss on
the sale which is expected to be completed in March 1999. Halliburton will
provide separate LWD services through its Sperry Sun business unit, which was
acquired as part of the merger with Dresser and is now a part of Halliburton
Energy Services. In addition, Halliburton will continue to provide sonic LWD
services using its existing technologies, which it will share with PathFinder.
M-I L.L.C. Drilling Divestiture. In August 1998, the Company sold its
36% interest in M-I L.L.C. (M-I) with no significant effect on net income for
the year. M-I was previously a part of the Energy Services Group. See Note 5.
Acquisition of Devonport Royal Dockyard. During March 1997, the
Devonport management consortium, Devonport Management Limited (DML), which is
51% owned by a subsidiary of the Company, completed the acquisition of Devonport
Royal Dockyard plc, which owns and operates the Government of the United
Kingdom's Royal Dockyard in Plymouth, England, for approximately $64.9 million.
Concurrent with the acquisition of the Royal Dockyard, the Company's ownership
interest in DML increased from about 30% to 51% and DML borrowed $56.3 million
under term loans. The dockyard principally provides repair and refitting
services for the British Royal Navy's fleet of submarines and surface ships. DML
is a part of the Engineering and Construction Group.
Acquisition of OGC International and Kinhill. During April 1997, the
Company completed its acquisition of the outstanding common stock of OGC
International plc (OGC) for approximately $118.3 million. OGC is engaged in
providing a variety of engineering, operations and maintenance services,
primarily to the North Sea oil and gas production industry and is a part of the
Energy Services Group.
During July 1997, the Company acquired all of the outstanding common
stock and convertible debentures of Kinhill Holdings Limited (Kinhill) for
approximately $34 million. Kinhill, headquartered in Australia, provides
engineering in mining and minerals processing, petroleum and chemicals, water
and wastewater, transportation and commercial and civil infrastructure. Kinhill
markets its services primarily in Australia, Indonesia, Thailand, Singapore,
India and the Philippines. Kinhill is a part of the Engineering and Construction
Group.
In 1997, the Company recorded approximately $99.1 million excess of
cost over net assets acquired primarily related to the purchase acquisitions of
OGC and Kinhill.
Acquisition of NUMAR. On September 30, 1997, the Company completed its
acquisition of NUMAR through the merger of a subsidiary of the Company with and
into NUMAR, the conversion of the outstanding NUMAR common stock into an
aggregate of approximately 8.2 million shares of common stock of the Company and
the assumption by the Company of the outstanding NUMAR stock options (for the
exercise of which the Company has reserved an aggregate of approximately 0.9
million shares of common stock of the Company). The merger qualified as a
tax-free exchange and was accounted for using the pooling of interests method of
accounting for business combinations. The Company has not restated its financial
statements to include NUMAR's historical operating results because they were not
material to the Company.
NUMAR's assets and liabilities on September 30, 1997 were included in
the Company's accounts of the same date, resulting in an increase in net assets
of $21.3 million. Headquartered in Malvern, Pennsylvania, NUMAR designs,
manufactures and markets the Magnetic Resonance Imaging Logging (MRIL(R)) tool
which utilizes magnetic resonance imaging technology to evaluate subsurface rock
formations in newly drilled oil and gas wells. NUMAR is a part of the Energy
Services Group.
SubSea Asset Sale. In June 1997, a subsidiary of the Company sold
certain assets of its SubSea operations to Global Industries, Ltd. for $102.0
million and recognized a loss of $6.3 million (net of tax of $3.4 million) on
the sale. SubSea is a part of the Energy Services Group.
Environmental Services Divestiture. On December 31, 1997, a subsidiary
of the Company sold its environmental services business to Tetra Tech, Inc. for
approximately $32 million. The sale was prompted by the Company's desire to
divest non-core businesses and had no significant effect on the net income for
the year. The environmental services business was previously a part of the
Engineering and Construction Group.
Landmark Graphics. In October 1996, the Company completed its
acquisition of Landmark through the merger of Landmark with and into a
subsidiary of the Company, the conversion of the outstanding Landmark common
45
<PAGE>
stock into an aggregate of approximately 20.4 million shares of common stock of
the Company (after giving effect to the Company's two-for-one stock split) and
the assumption by the Company of the outstanding Landmark stock options. The
merger qualified as a tax-free exchange and was accounted for using the pooling
of interests method of accounting for business combinations. The Company's
financial statements have been restated to include the results of Landmark for
all periods presented prior to the date of completion. Landmark is a part of the
Energy Services Group.
Prior to its acquisition by Halliburton, Landmark had a fiscal year-end
of June 30. Landmark's results have been restated to conform with Halliburton
Company's calendar year-end. Combined and separate results of Halliburton and
Landmark for the periods preceding the merger are as follows:
<TABLE>
<CAPTION>
Nine Months
Ended
--------------------
Millions of dollars September 30, 1996
- ---------------------------------------------------------------------
<S> <C>
Revenues:
Halliburton $ 5,251.5
Landmark 143.9
- ---------------------------------------------------------------------
Combined $ 5,395.4
- ---------------------------------------------------------------------
Net income:
Halliburton $ 201.2
Landmark (8.4)
- ---------------------------------------------------------------------
Combined $ 192.8
- ---------------------------------------------------------------------
</TABLE>
The Company acquired other businesses in 1998, 1997 and 1996 for $42.0
million, $3.6 million and $32.2 million, respectively. These businesses did not
have a significant effect on revenues or earnings.
Note 15. Financial Instruments and Risk Management
Foreign Exchange Risk. Techniques in managing foreign exchange risk
include, but are not limited to, foreign currency borrowing and investing and
the use of currency derivative instruments. The Company selectively hedges
significant exposures to potential foreign exchange losses considering current
market conditions, future operating activities and the cost of hedging the
exposure in relation to the perceived risk of loss. The purpose of the Company's
foreign currency hedging activities is to protect the Company from the risk that
the eventual dollar cash flows resulting from the sale and purchase of products
in foreign currencies will be adversely affected by changes in exchange rates.
The Company does not hold or issue derivative financial instruments for trading
or speculative purposes.
The Company hedges its currency exposure through the use of currency
derivative instruments. Such contracts generally have an expiration date of two
years or less. Forward exchange contracts (commitments to buy or sell a
specified amount of a foreign currency at a specified price and time) are
generally used to hedge identifiable foreign currency commitments. Losses of
$1.4 million for identifiable foreign currency commitments were deferred at
December 31, 1998. Forward exchange contracts and foreign exchange option
contracts (which convey the right, but not the obligation, to sell or buy a
specified amount of foreign currency at a specified price) are generally used to
hedge foreign currency commitments with an indeterminable maturity date. None of
the forward or option contracts are exchange traded.
While hedging instruments are subject to fluctuations in value, such
fluctuations are generally offset by the value of the underlying exposures being
hedged. The use of some contracts may limit the Company's ability to benefit
from favorable fluctuations in foreign exchange rates. The notional amounts of
open forward contracts and options were $595.9 million and $697.2 million at
year-end 1998 and 1997, respectively. The notional amounts of the Company's
foreign exchange contracts do not generally represent amounts exchanged by the
parties, and thus, are not a measure of the exposure of the Company or of the
46
<PAGE>
cash requirements relating to these contracts. The amounts exchanged are
calculated by reference to the notional amounts and by other terms of the
derivatives, such as exchange rates. The Company actively monitors its foreign
currency exposure and adjusts the amounts hedged as appropriate.
Exposures to certain currencies are generally not hedged due primarily
to the lack of available markets or cost considerations (non-traded currencies).
The Company attempts to manage its working capital position to minimize foreign
currency commitments in non-traded currencies and recognizes that pricing for
the services and products offered in such countries should cover the cost of
exchange rate devaluations. The Company has historically incurred transaction
losses in non-traded currencies.
Credit Risk. Financial instruments that potentially subject the Company
to concentrations of credit risk are primarily cash equivalents, investments and
trade receivables. It is the Company's practice to place its cash equivalents
and investments in high quality securities with various investment institutions.
The Company derives the majority of its revenues from sales and services to,
including engineering and construction for, the energy industry. Within the
energy industry, trade receivables are generated from a broad and diverse group
of customers. There are concentrations of receivables in the United States and
the United Kingdom. The Company maintains an allowance for losses based upon the
expected collectibility of all trade accounts receivable.
There are no significant concentrations of credit risk with any
individual counterparty or groups of counterparties related to the Company's
derivative contracts. Counterparties are selected by the Company based on
creditworthiness, which the Company continually monitors, and on the
counterparties' ability to perform their obligations under the terms of the
transactions. The Company does not expect any counterparties to fail to meet
their obligations under these contracts given their high credit ratings and, as
such, considers the credit risk associated with its derivative contracts to be
minimal.
Fair Value of Financial Instruments. The estimated fair value of
long-term debt at year-end 1998 and 1997 was $1,577.6 million and $1,380.8
million, respectively, as compared to the carrying amount of $1,428.2 million at
year-end 1998 and $1,304.3 million at year-end 1997. The fair value of fixed
rate long-term debt is based on quoted market prices for those or similar
instruments. The carrying amount of variable rate long-term debt and restricted
cash (see Note 8) approximates fair value because such instruments reflect
market changes to interest rates. The carrying amount of short-term financial
instruments (cash and equivalents, receivables, short-term notes payable and
accounts payable) as reflected in the consolidated balance sheets approximates
fair value due to the short maturities of these instruments. The fair value of
currency derivative instruments which generally approximates their carrying
amount based upon third party quotes was $4.4 million receivable and $4.7
million payable at December 31, 1998.
Note 16. Retirement Plans
The Company and its subsidiaries have various plans which cover a
significant number of their employees. These plans include defined contribution
plans, which provide retirement contributions in return for services rendered,
provide an individual account for each participant and have terms that specify
how contributions to the participant's account are to be determined rather than
the amount of pension benefits the participant is to receive. Contributions to
these plans are based on pre-tax income and/or discretionary amounts determined
on an annual basis. The Company's expense for the defined contribution plans
totaled $151.8 million, $213.2 million, and $156.0 million in 1998, 1997 and
1996. Other retirement plans include defined benefit plans, which define an
amount of pension benefit to be provided, usually as a function of age, years of
service or compensation. These plans are funded to operate on an actuarially
sound basis. Plan assets are primarily invested in cash, short-term investments,
real estate, equity and fixed income securities of entities domiciled in the
country of the plan's operation.
47
<PAGE>
<TABLE>
<CAPTION>
1998 1997
----------------------------------- ----------------------------------
Millions of dollars U.S. International U.S. International
- ----------------------------------------------------------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year $ 377.6 $ 1,569.9 $ 386.6 $ 1,361.8
Service cost 5.4 57.3 8.1 44.6
Interest cost 27.3 111.2 29.1 102.7
Plan participants' contributions - 14.0 - 12.7
Effect of business combinations - 20.7 - -
Amendments 13.6 - (16.6) -
Settlements/curtailments (2.3) (9.2) - (1.9)
Currency fluctuations - (1.7) - (1.6)
Actuarial gain/(loss) 37.8 (5.2) 1.9 88.0
Benefits paid (29.1) (41.2) (31.5) (36.4)
- ----------------------------------------------------------------------------------- ----------------------------------
Benefit obligation at end of year $ 430.3 $ 1,715.8 $ 377.6 $ 1,569.9
- ----------------------------------------------------------------------------------- ----------------------------------
Change in plan assets
Fair value of plan assets at beginning of year $ 421.4 $ 1,775.4 $ 351.0 $ 1,617.6
Actual return on plan assets 38.8 28.4 81.8 158.6
Employer contribution 17.4 25.2 20.1 25.5
Settlements (3.0) - - (1.9)
Plan participants' contributions - 14.0 - 12.7
Effect of business combinations - 20.7 - -
Currency fluctuations - (5.1) - (0.7)
Benefits paid (29.1) (41.2) (31.5) (36.4)
- ----------------------------------------------------------------------------------- ----------------------------------
Fair value of plan assets at end of year $ 445.5 $ 1,817.4 $ 421.4 $ 1,775.4
- ----------------------------------------------------------------------------------- ----------------------------------
Funded status $ 15.2 $ 101.6 $ 43.8 $ 205.5
Unrecognized transition obligation 3.0 (8.1) 0.9 (10.2)
Unrecognized actuarial (gain)/loss 5.1 (59.2) (34.9) (162.7)
Unrecognized prior service cost 1.1 1.5 (17.0) 4.1
- ----------------------------------------------------------------------------------- ----------------------------------
Net amount recognized $ 24.4 $ 35.8 $ (7.2) $ 36.7
- ----------------------------------------------------------------------------------- ----------------------------------
</TABLE>
The Company recognized an additional minimum pension liability for
underfunded defined benefit plans. The additional minimum liability is equal to
the excess of the accumulated benefit obligation over plan assets and accrued
liabilities. A corresponding amount is recognized as either an intangible asset
or a reduction of shareholders' equity.
<TABLE>
<CAPTION>
1998 1997
----------------------------------- ----------------------------------
Millions of dollars U.S. International U.S. International
- ----------------------------------------------------------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Amounts recognized in the consolidated
balance sheets consist of:
Prepaid benefit cost $ 30.9 $ 67.4 $ 21.2 $ 73.7
Accrued benefit liability (33.7) (33.1) (38.2) (38.3)
Intangible asset 17.0 0.4 4.4 0.7
Deferred tax asset 3.7 0.2 1.9 0.2
Accumulated other comprehensive income 6.5 0.9 3.5 0.4
- ----------------------------------------------------------------------------------- ----------------------------------
Net amount recognized $ 24.4 $ 35.8 $ (7.2) $ 36.7
- ----------------------------------------------------------------------------------- ----------------------------------
</TABLE>
48
<PAGE>
Assumed long-term rates of return on plan assets, discount rates for
estimating benefit obligations and rates of compensation increases vary for the
different plans according to the local economic conditions. The rates used are
as follows:
<TABLE>
<CAPTION>
Weighted-average assumptions as of December 31 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected return on plan assets:
United States plans 8.5% to 9.0% 8.5% to 9.0% 8.0% to 9.0%
International plans 7.0% to 11.0% 7.0% to 13.5% 7.0% to 13.5%
Discount rate:
United States plans 7.25% to 8.0% 7.25% to 8.0% 7.0% to 8.0%
International plans 2.0% to 12.5% 7.0% to 12.5% 7.0% to 12.5%
Rate of compensation increase:
United States plans 4.5% to 5.0% 4.0% to 5.5% 4.0% to 5.5%
International plans 2.0% to 11.0% 4.0% to 11.0% 4.0% to 11.0%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1998 1997
-----------------------------------------------------------------------
Millions of dollars U.S. International U.S. International
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Components of net periodic benefit cost
Service cost $ 5.4 $ 57.3 $ 8.1 $ 44.6
Interest cost 27.3 111.2 29.1 102.7
Expected return on plan assets (30.0) (123.0) (31.4) (127.6)
Transition amount 0.6 (1.9) (0.7) (1.8)
Amortization of prior service cost (4.0) (7.1) (1.1) (7.1)
Settlements/curtailments loss/(gain) (3.9) (2.1) 0.4 -
Recognized actuarial (gain)/loss 0.2 0.1 (0.5) (1.8)
- -----------------------------------------------------------------------------------------------------------------------
Net periodic benefit cost $ (4.4) $ 34.5 $ 3.9 $ 9.0
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
In 1996 the pension plans had net service cost of $31.3 million; net
interest cost of $73.5 million; net actual return on plan assets of ($109.8
million); and net amortization and deferral of $10.0 million, resulting in net
periodic pension cost of $5 million.
The projected benefit obligation, accumulated benefit obligation, and
fair value of plan assets for the pension plans with accumulated benefit
obligations in excess of plan assets were $201 million, $193 million, and $123
million, respectively, as of December 31, 1998, and $103 million, $97 million,
and $51 million, respectively, as of December 31, 1997.
Postretirement Medical Plan. The Company offers postretirement medical
plans to certain eligible employees. In some plans the Company's liability is
limited to a fixed contribution amount for each participant or dependent. The
plan participants share the total cost for all benefits provided above the fixed
Company contribution and participants' contributions are adjusted as required to
cover benefit payments. The Company has made no commitment to adjust the amount
of its contributions; therefore, the computed accumulated postretirement benefit
obligation amount is not affected by the expected future healthcare cost
inflation rate.
Other postretirement medical plans are contributory but the Company
generally absorbs the majority of the costs. In these plans the Company may
elect to adjust the amount of its contributions. As a result the computed
accumulated postretirement benefit obligation amount is affected by the expected
future healthcare cost inflation rate. These plans have assumed healthcare
trend rates (weighted based on the current year benefit obligation) for 1998 of
7% which are expected to decline to 5% by 2002.
During 1997, the Company adopted amendments to eliminate certain
postretirement medical benefit programs. These amendments resulted in a
curtailment gain of $11.2 million.
49
<PAGE>
<TABLE>
<CAPTION>
Millions of dollars 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year $ 373.0 $ 394.6
Service cost 3.9 4.5
Interest cost 28.4 29.3
Plan participants' contributions 12.0 13.8
Amendments (4.4) 3.0
Settlements/curtailments (6.3) -
Actuarial gain/(loss) 36.8 (30.1)
Benefits paid (40.3) (42.1)
- -----------------------------------------------------------------------------------------------------
Benefit obligation at end of year $ 403.1 $ 373.0
- -----------------------------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at beginning of year $ - $ -
Employer contribution 28.3 28.3
Plan participants' contributions 12.0 13.8
Benefits paid (40.3) (42.1)
- -----------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year $ - $ -
- -----------------------------------------------------------------------------------------------------
Funded status $ (403.1) $ (373.0)
Unrecognized actuarial (gain)/loss (66.0) (98.7)
Unrecognized prior service cost (5.4) (6.3)
Unamortized gains from plan amendments (140.2) (155.5)
- -----------------------------------------------------------------------------------------------------
Net amount recognized $ (614.7) $ (633.5)
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Millions of dollars 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Amounts recognized in the consolidated
balance sheets consist of:
Accrued benefit liability $ (614.7) $ (633.5)
- -----------------------------------------------------------------------------------------------------
Net amount recognized $ (614.7) $ (633.5)
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Weighted-average assumptions as of December 31 1998 1997
- ----------------------------------------------------------------------------------------------------- -
<S> <C> <C>
Discount rate 7.0% to 8.0% 7.25% to 8.0%
Expected return on plan assets N/A N/A
Rate of compensation increase 5.0% 5.0%
</TABLE>
<TABLE>
<CAPTION>
Millions of dollars 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Components of net periodic benefit cost
Service cost $ 3.9 $ 4.5
Interest cost 28.4 29.3
Amortization of prior service cost (10.3) (10.2)
Settlements/curtailments loss/(gain) - (11.2)
Recognized actuarial (gain)/loss (7.8) (8.8)
- -----------------------------------------------------------------------------------------------------
Net periodic benefit cost $ 14.2 $ 3.6
- -----------------------------------------------------------------------------------------------------
</TABLE>
50
<PAGE>
In 1996 the postretirement medical plans had net service cost of $4.7
million; net interest cost of $30.9 million; and net amortization and deferral
of ($20.4 million), resulting in net periodic postretirement medical cost of
$15.2 million.
Assumed healthcare cost trend rates have a significant effect on the
amounts reported for the total of the healthcare plans. A one-percentage-point
change in assumed healthcare cost trend rates would have the following effects:
<TABLE>
<CAPTION>
1-Percentage-Point 1-Percentage-Point
Millions of dollars Increase Decrease
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Effect on total of service and interest cost components $ 2.7 $ (2.5)
Effect on the postretirement benefit obligation 28.5 (26.9)
- -------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
HALLIBURTON COMPANY
Selected Financial Data(a)
Millions of dollars and shares except per share and employee data
<TABLE>
<CAPTION>
Years ended December 31
--------------------------------------------------------------
1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating results
Net revenues
Energy Services Group $ 9,009.5 $ 8,504.7 $ 6,515.4 $ 5,307.7
Engineering and Construction Group 5,494.8 4,992.8 4,720.7 3,736.5
Dresser Equipment Group 2,848.8 2,779.0 2,710.5 2,467.4
- -----------------------------------------------------------------------------------------------------------------
Total revenues $ 17,353.1 $ 16,276.5 $ 13,946.6 $ 11,511.6
- -----------------------------------------------------------------------------------------------------------------
Operating income
Energy Services Group $ 971.0 $ 1,019.4 $ 698.0 $ 544.5
Engineering and Construction Group 237.2 219.0 134.0 96.6
Dresser Equipment Group 247.8 248.3 229.3 200.7
Special charges and credits (b) (980.1) (16.2) (85.8) (8.4)
General corporate (79.4) (71.8) (72.3) (70.8)
- -----------------------------------------------------------------------------------------------------------------
Total operating income (b) 396.5 1,398.7 903.2 762.6
Nonoperating income (expense), net (117.7) (85.6) (72.2) (32.6)
- -----------------------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes and minority interest 278.8 1,313.1 831.0 730.0
Provision for income taxes (d) (244.4) (491.4) (248.4) (247.0)
Minority interest in net income of
consolidated subsidiaries (49.1) (49.3) (24.7) (20.7)
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations $ (14.7) $ 772.4 $ 557.9 $ 462.3
- -----------------------------------------------------------------------------------------------------------------
Basic income (loss) per common share
Continuing operations $ (0.03) $ 1.79 $ 1.30 $ 1.07
Net income (loss) (0.03) 1.79 1.30 0.88
Diluted income (loss) per share
Continuing operations (0.03) 1.77 1.29 1.07
Net income (loss) (0.03) 1.77 1.29 0.88
Cash dividends per share (e), (f) 0.50 0.50 0.50 0.50
Return on average shareholders' equity (0.35%) 19.17% 15.25% 10.43%
- -----------------------------------------------------------------------------------------------------------------
Financial position
Net working capital $ 2,079.4 $ 1,982.9 $ 1,501.0 $ 1,476.7
Total assets 11,112.0 10,701.8 9,586.8 8,569.4
Property, plant and equipment, net 2,921.6 2,766.4 2,554.0 2,285.0
Long-term debt (including current maturities) 1,428.2 1,304.3 958.0 666.8
Shareholders' equity 4,061.2 4,316.9 3,741.4 3,577.0
Total capitalization 6,004.4 5,671.7 4,830.1 4,377.9
Shareholders' equity per share (e) 9.23 9.86 8.78 8.29
Average common shares outstanding (basic) (e) 438.8 431.1 429.2 431.1
Average common shares outstanding (diluted) (e) 438.8 436.1 432.1 432.3
- -----------------------------------------------------------------------------------------------------------------
Other financial data
Cash flows from operating activities $ 454.1 $ 833.1 $ 864.2 $ 1,094.6
Capital expenditures 914.3 880.1 731.1 591.5
Long-term borrowings (repayments), net 123.3 285.5 287.4 (482.2)
Depreciation and amortization expense 587.0 564.3 497.7 466.4
Payroll and employee benefits 5,880.1 5,478.9 4,674.3 4,188.0
Number of employees (g) 107,800 102,000 93,000 89,800
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
HALLIBURTON COMPANY
Selected Financial Data (a)
Millions of dollars and shares except per share and employee data
<TABLE>
<CAPTION>
Years ended December 31
----------------------------------------------------------------------------
1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating results
Net revenues
Energy Services Group $ 4,977.5 $ 5,470.5 $ 5,038.6 $ 5,155.5 $ 4,894.5
Engineering and Construction Group 3,562.3 3,674.9 4,409.6 4,721.2 4,596.8
Dresser Equipment Group 2,452.0 2,281.6 1,660.1 1,760.3 1,622.4
- --------------------------------------------------------------------------------------------------------------------------
Total revenues $ 10,991.8 $ 11,427.0 $ 11,108.3 $ 11,637.0 $ 11,113.7
- --------------------------------------------------------------------------------------------------------------------------
Operating income
Energy Services Group $ 405.8 $ 413.8 $ 303.3 $ 377.8 $ 473.0
Engineering and Construction Group 71.0 76.0 32.2 47.9 50.9
Dresser Equipment Group 198.1 208.4 168.5 163.7 155.1
Special charges and credits (b) (24.6) (426.9) (342.9) (144.7) -
General corporate (56.2) (63.5) (58.3) (56.2) (48.9)
- --------------------------------------------------------------------------------------------------------------------------
Total operating income (b) 594.1 207.8 102.8 388.5 630.1
Nonoperating income (expense), net (c) 323.1 (63.5) (60.7) (20.5) 11.9
- --------------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes and minority interest 917.2 144.3 42.1 368.0 642.0
Provision for income taxes (346.9) (95.8) (78.3) (182.5) (269.4)
Minority interest in net income of
consolidated subsidiaries (33.1) (42.8) (8.6) (18.5) (16.6)
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations $ 537.2 $ 5.7 $ (44.8) $ 167.0 $ 356.0
- --------------------------------------------------------------------------------------------------------------------------
Basic income (loss) per common share
Continuing operations $ 1.25 $ 0.01 $ (0.11) $ 0.41 $ 0.89
Net income (loss) 1.26 (0.04) (1.18) 0.45 1.11
Diluted income (loss) per share
Continuing operations 1.24 0.01 (0.11) 0.41 0.89
Net income (loss) 1.26 (0.04) (1.18) 0.45 1.11
Cash dividends per share (e), (f) 0.50 0.50 0.50 0.50 0.50
Return on average shareholders' equity 15.47% (0.45%) (12.75%) 4.15% 10.29%
- --------------------------------------------------------------------------------------------------------------------------
Financial position
Net working capital $ 2,196.7 $ 1,562.9 $ 1,423.0 $ 1,775.1 $ 1,905.5
Total assets 8,521.0 8,764.2 8,087.2 8,265.5 7,813.0
Property, plant and equipment, net 2,047.0 2,154.7 2,128.2 1,891.7 1,766.9
Long-term debt (including current maturities) 1,119.8 1,130.9 873.3 928.1 611.7
Shareholders' equity 3,722.5 3,295.7 3,276.6 4,314.8 4,426.0
Total capitalization 4,905.9 4,748.1 4,179.5 5,266.8 5,063.2
Shareholders' equity per share (e), (f) 8.63 7.70 7.99 10.61 11.03
Average common shares outstanding (basic) (e) 430.6 421.9 408.4 405.4 397.8
Average common shares outstanding (diluted) (e) 431.5 422.2 408.7 405.7 398.1
- --------------------------------------------------------------------------------------------------------------------------
Other financial data
Cash flows from operating activities $ 793.1 $ 468.0 $ 624.9 $ 595.2 $ 437.7
Capital expenditures 432.1 463.5 457.5 633.6 494.6
Long-term borrowings (repayments), net (120.8) 192.4 (187.4) 459.5 83.1
Depreciation and amortization expense 487.6 671.6 516.1 440.7 375.5
Payroll and employee benefits 4,222.3 4,428.9 4,590.3 4,660.8 4,415.4
Number of employees (g) 86,500 90,500 96,400 104,500 109,700
- --------------------------------------------------------------------------------------------------------------------------
53
<PAGE>
<FN>
(a) Prior year information presented has been restated for the Merger. Beginning
in 1998, Dresser's year-end of October 31 has been conformed to Halliburton's
calendar year-end. Periods through December 1997 contain Dresser's information
on a fiscal year-end basis combined with Halliburton's information on a calendar
year-end basis.
(b) Operating income includes the following special charges and credits:
1998 - $980.1 million: asset related charges ($509.4 million), personnel
reductions ($234.7 million), facility consolidations ($126.2 million),
merger transaction costs ($64.0 million), and other related costs ($45.8
million).
1997 - $16.2 million: acquisition costs ($8.6 million), restructuring of
joint ventures ($18.0 million), write-downs on impaired assets and early
retirement incentives ($21.6 million), losses from the sale of assets ($9.7
million), and gain on extension of joint venture ($41.7 million).
1996 - $85.8 million: merger costs ($12.4 million), restructuring, merger
and severance costs ($62.1 million), and write-off of acquired in-process
research and development costs ($11.3 million).
1995 - $8.4 million: restructuring costs ($4.7 million) and write-off of
acquired in-process research and development costs ($3.7 million).
1994 - $24.6 million: merger costs ($27.3 million), restructuring costs
($6.2 million), litigation ($9.5 million), and litigation and insurance
recoveries ($18.4 million).
1993 - $426.9 million: loss on sale of business ($321.8 million), merger
costs ($31.0 million), restructuring ($13.2 million), litigation ($65.0
million), and gain on curtailment of medical plan ($4.1 million).
1992 - $342.9 million: merger costs ($272.9 million) and restructuring and
severance ($70.0 million).
1991 - $144.7 million: restructuring ($123.4 million) and loss on sale of
business ($21.3 million).
(c) Nonoperating income in 1994 includes a gain of $275.7 million from the sale
of an interest in Western Atlas International, Inc. and a gain of $102.0 million
from the sale of the Company's natural gas compression business.
(d) Provision for income taxes in 1996 includes tax benefits of $43.7 million
due to the recognition of net operating loss carryforwards and the settlement of
various issues with the Internal Revenue Service.
(e) Weighted average shares, cash dividends paid per share and shareholders'
equity per share have been restated to reflect the two-for-one common stock
split declared on June 9, 1997, and effected in the form of a stock dividend
paid on July 21, 1997.
(f) Represents Halliburton Company amounts prior to the merger with Dresser.
(g) Does not include employees of 50% or less owned affiliated companies.
</FN>
</TABLE>
54
<PAGE>
HALLIBURTON COMPANY
Quarterly Data and Market Price Information
(Unaudited)
(Millions of dollars except per share data)
<TABLE>
<CAPTION>
Quarter
--------------------------------------------------------
First Second Third Fourth Year
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 (1)
Revenues $ 4,254.8 $ 4,585.2 $ 4,224.0 $ 4,289.1 $ 17,353.1
Operating income (loss) 361.1 436.1 (577.5) 176.8 396.5
Net income (loss) (7), (8) 203.4 243.2 (527.0) 65.7 (14.7)
Earnings per share:
Basic net income (loss) per share (7), (8) 0.46 0.55 (1.20) 0.15 (0.03)
Diluted net income (loss) per share (7), (8) 0.46 0.55 (1.20) 0.15 (0.03)
Cash dividends paid per share (3) 0.125 0.125 0.125 0.125 0.50
Common stock prices (3), (4)
High 52.44 56.63 45.00 38.56 56.63
Low 42.38 42.06 26.25 26.19 26.19
- ---------------------------------------------------------------------------------------------------------------------
1997 (1)
Revenues $ 3,602.0 $ 4,002.4 $ 4,177.0 $ 4,495.1 $ 16,276.5
Operating income (5), (6) 242.5 321.6 372.2 462.4 1,398.7
Net income (5), (6) 135.1 176.7 202.6 258.0 772.4
Earnings per share: (2)
Basic net income per share (5), (6) 0.32 0.41 0.47 0.59 1.79
Diluted net income per share (5), (6) 0.31 0.41 0.47 0.58 1.77
Cash dividends paid per share (3) 0.125 0.125 0.125 0.125 0.50
Common stock prices (2), (3), (4)
High 36.69 41.00 52.88 62.69 62.69
Low 30.00 32.06 42.00 47.25 30.00
- ---------------------------------------------------------------------------------------------------------------------
<FN>
(1) Amounts for revenues, operating income, net income, and earnings per share
have been restated to reflect the merger with Dresser which was accounted
for using the pooling of interests method of accounting for business
combinations.
(2) Amounts presented reflect the two-for-one common stock split declared on
June 9, 1997, and effected in the form of a stock dividend paid on July 21,
1997.
(3) Represents Halliburton Company amounts prior to the merger with Dresser.
(4) New York Stock Exchange - composite transactions high and low closing
stock price.
(5) Includes pretax special charge $18.3 million ($14.9 million after tax or
$0.03 per diluted share) in the third quarter of 1997.
(6) Includes pretax special charge net gain of $2.1 million ($5.6 million after
tax and minority interest or $0.01 per diluted share) in the fourth quarter
of 1997.
(7) Includes pretax special charge of $945.1 million ($722.0 million after tax
or $1.64 per diluted share) in the third quarter of 1998.
(8) Includes pretax special charge of $35.0 million ($24.0 million after tax or
$0.05 per diluted share) million in the fourth quarter of 1998.
</FN>
</TABLE>
55
<PAGE>
PART III
Item 10. Directors and Executive Officers of Registrant.
The information required for the directors of the Registrant is
incorporated by reference to the Halliburton Company Proxy Statement dated March
25, 1999, under the caption "Election of Directors." The information required
for the executive officers of the Registrant is included under Part I on pages
5 and 6 of this Annual Report.
Item 11. Executive Compensation.
This information is incorporated by reference to the Halliburton
Company Proxy Statement dated March 25, 1999, under the captions "Compensation
Committee Report on Executive Compensation," "Comparison of Five-Year Cumulative
Total Return," "Summary Compensation Table," "Option Grants in Last Fiscal
Year," "Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Values," "Retirement Plans," "Employment Contracts and Termination of
Employment and Change-in-Control Arrangements" and "Directors' Compensation,
Restricted Stock Plan and Retirement Plan."
Item 12(a). Security Ownership of Certain Beneficial Owners and Management.
This information is incorporated by reference to the Halliburton
Company Proxy Statement dated March 25, 1999, under the caption "Stock Ownership
of Certain Beneficial Owners and Management."
Item 12(b). Security Ownership of Management.
This information is incorporated by reference to the Halliburton
Company Proxy Statement dated March 25, 1999, under the caption "Stock Ownership
of Certain Beneficial Owners and Management."
Item 12(c). Changes in Control.
Not applicable.
Item 13. Certain Relationships and Related Transactions.
This information is incorporated by reference to the Halliburton
Company Proxy Statement dated March 25, 1999, under the caption "Certain
Relationships and Related Transactions."
56
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. Financial Statements:
The report of Arthur Andersen LLP, Independent Public Accountants,
and the financial statements of the Company as required by Part II,
Item 8, are included on pages 19 through 51 of this Annual Report.
See index on page 8.
2. Financial Statement Schedules: Page No.
Report on supplemental schedule of Arthur Andersen LLP 65
Schedule II - Valuation and qualifying accounts for
the three years ended December 31, 1998 66
Note: All schedules not filed herein for which provision is made
under rules of Regulation S-X have been omitted as not applicable
or not required or the information required therein has been
included in the notes to financial statements.
3. Exhibits:
Exhibit
Number Exhibits
3.1 Restated Certificate of Incorporation of the Company filed
with the Secretary of State of Delaware on July 23, 1998
(incorporated by reference to Exhibit 3(a) to the
Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1998).
3.2 By-laws of the Company, as amended and restated effective
September 29, 1998 (incorporated by reference to Exhibit 3
to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1998).
4.1 Subordinated Indenture dated as of January 2, 1991 between
Halliburton Company, now known as Halliburton Energy
Services, Inc. (the "Predecessor") and Texas Commerce Bank
National Association, as trustee (incorporated by
reference to Exhibit 4(c) to the Predecessor's
Registration Statement on Form S-3 (File No. 33-38394)
originally filed with the Securities and Exchange
Commission on December 21, 1990), as supplemented and
amended by the First Supplemental Indenture dated as of
December 12, 1996 among the Predecessor, the Company and
the Trustee (incorporated by reference to Exhibit 4.3 of
the Company's Registration Statement on Form 8-B dated
December 12, 1996, File No. 1-03492).
4.2 Form of debt security of 8.75% Debentures due February 12,
2021 (incorporated by reference to Exhibit 4(a) to the
Predecessor's Form 8-K dated as of February 20, 1991).
4.3 Senior Indenture dated as of January 2, 1991 between the
Predecessor and Texas Commerce Bank National Association,
as trustee (incorporated by reference to Exhibit 4(b) to
the Predecessor's Registration Statement on Form S-3 (File
No. 33-38394) originally filed with the Securities and
Exchange Commission on December 21, 1990), as supplemented
57
<PAGE>
and amended by the First Supplemental Indenture dated as
of December 12, 1996 among the Predecessor, the Company
and the Trustee (incorporated by reference to Exhibit 4.1
of the Company's Registration Statement on Form 8-B dated
December 12, 1996, File No. 1-03492).
4.4 Resolutions of the Predecessor's Board of Directors
adopted at a meeting held on February 11, 1991 and of the
special pricing committee of the Board of Directors of the
predecessor adopted at a meeting held on February 11, 1991
and the special pricing committee's consent in lieu of
meeting dated February 12, 1991 (incorporated by reference
to Exhibit 4(c) to the Predecessor's Form 8-K dated as of
February 20, 1991).
4.5 Form of debt security of 6.75% Notes due February 1, 2027
(incorporated by reference to Exhibit 4.1 to the Company's
Form 8-K dated as of February 11, 1997).
4.6 Second Senior Indenture dated as of December 1, 1996
between the Predecessor and Texas Commerce Bank National
Association, as trustee, as supplemented and amended by
the First Supplemental Indenture dated as of December 5,
1996 between the Predecessor and the trustee and the
Second Supplemental Indenture dated as of December 12,
1996 among the Predecessor, the Company and the Trustee
(incorporated by reference to Exhibit 4.2 of the Company's
Registration Statement on Form 8-B dated December 12,
1996, File No. 1-03492).
* 4.7 Third Supplemental Indenture dated as of August 1, 1997
between the Company and Texas Commerce Bank National
Association, as Trustee, to the Second Senior Indenture
dated as of December 1, 1996.
* 4.8 Fourth Supplemental Indenture dated as of September 29,
1998 between the Company and Chase Bank of Texas, National
Association (formerly Texas Commerce Bank National
Association), as Trustee, to the Second Senior Indenture
dated as of December 1, 1996.
4.9 Resolutions of the Company's Board of Directors adopted by
unanimous consent dated December 5, 1996 (incorporated by
reference to Exhibit 4(g) of the Company's Annual Report
on Form 10-K for the year ended December 31, 1996).
* 4.10 Resolutions of the Company's Board of Directors adopted at
a special meeting held on September 28, 1998.
4.11 Restated Rights Agreement dated as of December 1, 1996
between the Company and ChaseMellon Shareholder Services,
L.L.C. (incorporated by reference to Exhibit 4.4 of the
Company's Registration Statement on Form 8-B dated
December 12, 1996, File No. 1-03492).
4.12 Copies of instruments that define the rights of holders of
miscellaneous long-term notes of the Company and its
subsidiaries, totaling $39.6 million in the aggregate at
December 31, 1998, have not been filed with the
Commission. The Company agrees herewith to furnish copies
of such instruments upon request.
4.13 Form of debt security of 7.53% Notes due May 12, 2017
(incorporated by reference to Exhibit 4.4 to the Company's
Form 10-Q for the quarterly period ended March 31, 1997).
58
<PAGE>
4.14 Form of debt security of 6.27% Notes due July 8, 1999
(incorporated by reference to Exhibit 4.1 to the Company's
Form 8-K dated as of July 8, 1997).
4.15 Form of debt security of 6.30% Notes due August 5, 2002
(incorporated by reference to Exhibit 4.1 to the Company's
Form 8-K dated as of August 5, 1997).
4.16 Form of debt security of 5.63% Notes due December 1, 2008
(incorporated by reference to Exhibit 4.1 to the Company's
Form 8-K dated as of November 24, 1998).
4.17 Form of Indenture, between Dresser Industries, Inc.
("Dresser") and NationsBank of Texas, N.A., as Trustee,
for unsecured debentures, notes and other evidences of
indebtedness (incorporated by reference to Exhibit 4.1 to
Dresser's Registration Statement on Form S-3, Registration
No. 33-59562).
4.18 Form of Indenture, between Baroid Corporation and Texas
Commerce Bank National Association, as trustee, for 8%
Senior Notes due 2003 (incorporated by reference to
Exhibit 4.01 to the Registration Statement on Form S-3,
Registration No. 33-60174), as supplemented and amended by
Form of Supplemental Indenture, between Dresser, Baroid
Corporation and Texas Commerce Bank N.A. as Trustee, for
8% Guaranteed Senior Notes due 2003 (incorporated by
reference to Exhibit 4.3 to Registration Statement on Form
S-4 filed by Baroid Corporation, Registration No.
33-53077).
* 4.19 Second Supplemental Indenture dated October 30, 1997
between Dresser and Texas Commerce Bank National
Association, as Trustee, for 8% Senior Notes due 2003.
* 4.20 Third Supplemental Indenture dated September 29, 1998
between Dresser, the Company, as Guarantor, and Chase Bank
of Texas, National Association, as Trustee, for 8% Senior
Notes due 2003.
4.21 Form of Indenture, between Dresser and Texas Commerce Bank
National Association, as Trustee, for 7.60% Debentures due
2096 (incorporated by reference to Exhibit 4 to the
Registration Statement on Form S-3 as amended,
Registration No. 333-01303), as supplemented and amended
by Form of Supplemental Indenture, between Dresser and
Texas Commerce Bank National Association, Trustee, for
7.60% Debentures due 2096 (incorporated by reference to
Exhibit 4.1 to Dresser's Form 8-K filed on August 9,
1996).
10.1 Halliburton Company Career Executive Incentive Stock Plan
as amended November 15, 1990 (incorporated by reference to
Exhibit 10(a) to the Predecessor's Annual Report on Form
10-K for the year ended December 31, 1992).
10.2 Retirement Plan for the Directors of Halliburton Company
adopted and effective January 1, 1990 (incorporated by
reference to Exhibit 10(c) to the Predecessor's Annual
Report on Form 10-K for the year ended December 31, 1992).
10.3 Halliburton Company Directors' Deferred Compensation Plan
as amended and restated effective May 1, 1994
(incorporated by reference to Exhibit 10(c) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1996).
* 10.4 Halliburton Company 1993 Stock and Long-Term Incentive
Plan, as amended and restated February 19, 1998.
59
<PAGE>
10.5 Halliburton Company Restricted Stock Plan for Non-Employee
Directors (incorporated by reference to Appendix B of the
Predecessor's proxy statement dated March 23, 1993).
10.6 Halliburton Elective Deferral Plan, as amended and
restated effective January 1, 1998 (incorporated by
reference to Exhibit 10(a) to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June
30, 1998).
10.7 Employment agreement (incorporated by reference to Exhibit
10 to the Predecessor's Form 10-Q for the quarterly period
ended September 30, 1995).
* 10.8 Halliburton Company Senior Executives' Deferred
Compensation Plan, as amended and restated effective
January 1, 1999.
10.9 Halliburton Company Annual Performance Pay Plan, as
amended and restated effective January 1, 1997
(incorporated by reference to Exhibit 10(k) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1996).
10.10 Employment agreement (incorporated by reference to Exhibit
10(n) to the Predecessor's Form 10-K for the year ended
December 31, 1995).
10.11 Halliburton Company 1993 Stock and Long-Term Incentive
Plan, as amended and restated February 19, 1998
(incorporated by reference to Exhibit 10(n) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1997).
10.12 Agreement and Plan of Merger, dated as of February 25,
1998, by and among the Company, Halliburton N.C., Inc. and
Dresser (incorporated by reference to Exhibit C to the
Company's Schedule 13D filed on March 9, 1998).
10.13 Stock Option Agreement, dated as of February 25, 1998, by
and between the Company and Dresser (incorporated by
reference to Exhibit B to the Company's Schedule 13D filed
on March 9, 1998).
10.14 Employment agreement and amendment thereto (incorporated
by reference to Exhibit 10(a) to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended
September 30, 1998).
10.15 Employment agreement and amendment thereto (incorporated
by reference to Exhibit 10(b) to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended
September 30, 1998).
* 10.16 Employment agreement.
* 10.17 Employment agreement.
* 10.18 Employment agreement.
* 10.19 Employment agreement.
* 10.20 Early retirement agreement.
60
<PAGE>
* 10.21 Early retirement agreement.
10.22 Dresser Industries, Inc. Deferred Compensation Plan
(incorporated by reference to Exhibit A to Dresser's Proxy
Statement dated February 11, 1966, filed pursuant to
Regulation 14A, File No. 1-4003).
10.23 Dresser Industries, Inc. 1982 Stock Option Plan
(incorporated by reference to Exhibit A to Dresser's Proxy
Statement dated February 12, 1982, filed pursuant to
Regulation 14A, File No. 1-4003).
10.24 ERISA Excess Benefit Plan for Dresser Industries, Inc. as
amended and restated effective June 1, 1995 (incorporated
by reference to Exhibit 10.7 to Dresser's Form 10-K for
the year ended October 31, 1995).
10.25 ERISA Compensation Limit Benefit Plan for Dresser
Industries, Inc., as amended and restated effective June
1, 1995 (incorporated by reference to Exhibit 10.8 to
Dresser's Form 10-K for the year ended October 31, 1995).
10.26 Supplemental Executive Retirement Plan of Dresser
Industries, Inc., as amended and restated effective
January 1, 1998 (incorporated by reference to Exhibit 10.9
to Dresser's Form 10-K for the period ended October 31,
1997).
10.27 Stock Based Compensation Arrangement of Non-Employee
Directors (incorporated by reference to Exhibit 4.4 to
Dresser's Registration Statement on Form S-8, Registration
No. 333-40829).
10.28 Dresser Industries, Inc. Deferred Compensation Plan for
Non-employee Directors, as restated and amended effective
November 1, 1997 (incorporated by reference to Exhibit
4.5 to Dresser's Registration Statement on Form S-8,
Registration No. 333-40829).
10.29 Dresser Industries, Inc. 1989 Restricted Incentive Stock
Plan (incorporated by reference to Exhibit A to Dresser's
Proxy Statement dated February 10, 1989, filed pursuant to
Regulation 14A, File No. 1-4003).
10.30 Long-Term Performance Plan for Selected Employees of The
M. W. Kellogg Company (incorporated by reference to
Exhibit 10(r) to Dresser's Form 10-K for the year ended
October 31, 1991).
10.31 Dresser Industries, Inc. 1992 Stock Compensation Plan
(incorporated by reference to Exhibit A to Dresser's Proxy
Statement dated February 7, 1992, filed pursuant to
Regulation 14A, File No. 1-4003).
10.32 Amendments No. 1 and 2 to Dresser Industries, Inc. 1992
Stock Compensation Plan (incorporated by reference to
Exhibit A to Dresser's Proxy Statement dated February 6,
1995, filed pursuant to Regulation 14A, File No. 1-4003).
10.33 Dresser Industries, Inc. 1995 Executive Incentive
Compensation Plan (incorporated by reference to Exhibit B
to Dresser's Proxy Statement dated February 6, 1995, filed
pursuant to Regulation 14A, File No. 1-4003).
61
<PAGE>
10.34 Special 1997 Restricted Incentive Stock Grant
(incorporated by reference to Exhibit 10.26 to Dresser's
Form 10-K for the year ended October 31, 1996).
10.35 Form of Executive Life Insurance Agreement (individual as
beneficiary) (incorporated by reference to Exhibit 10.22
to Dresser's Form 10-K for the period ended October 31,
1997).
10.36 Form of Executive Life Insurance Agreement (trust as
beneficiary) (incorporated by reference to Exhibit 10.23
to Dresser's Form 10-K for the period ended October 31,
1997).
10.37 Amendment No. 3 to the Dresser Industries, Inc. 1992 Stock
compensation Plan (incorporated by reference to Exhibit
10.25 to Dresser's Form 10-K for the period ended October
31, 1997).
10.38 The Dresser Industries, Inc. 1998 Executive Incentive
Compensation Plan (incorporated by reference to Exhibit B
to Dresser's Proxy Statement dated February 10, 1998,
filed pursuant to Regulation 14A, File No. 1-4003).
10.39 Form of Waiver of Rights Under the Dresser Industries,
Inc. Long-Term Incentive and Retention Plan (incorporated
by reference to Exhibit 10.5 to Dresser's Form 10-Q for
the period ended January 31, 1998).
10.40 Amendment No. 1 to the Supplemental Executive Retirement
Plan of Dresser Industries, Inc. (incorporated by
reference to Exhibit 10.1 to Dresser's Form 10-Q for the
period ended April 30, 1998).
* 21 Subsidiaries of the Registrant.
* 23.1 Consent of Arthur Andersen LLP.
* 23.2 Consent of PricewaterhouseCoopers LLP.
24.1 Powers of attorney for the following directors signed in
February, 1997 (incorporated by reference to Exhibit 24 to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1996):
Anne L. Armstrong
Richard B. Cheney
Lord Clitheroe
Robert L. Crandall
W. R. Howell
Delano E. Lewis
C. J. Silas
Richard J. Stegemeier
24.2 Power of attorney signed in December 1997 for Charles J.
DiBona (incorporated by reference to Exhibit 24(b) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1997).
62
<PAGE>
* 24.3 Powers of attorney for the following directors signed in
October, 1998:
William E. Bradford
Lawrence S. Eagleburger
Ray L. Hunt
J. Landis Martin
Jay A. Precourt
* 27 Financial data schedule for the Registrant (filed
electronically).
* 99.1 Report of independent accountants, PriceWaterhouseCoopers
LLP.
* Filed with this Form 10-K
- --------------------------------------------------------------------------------
(b) Reports on Form 8-K:
During the fourth quarter of 1998:
A Current Report on Form 8-K dated September 29, 1998, was filed reporting on
Item 5. Other Events, regarding a press release dated September 29, 1998
announcing the completion of the Merger between the Company and Dresser
Industries, Inc.
A Current Report on Form 8-K dated September 29, 1998, was filed reporting on
Item 2. Acquisition or Disposition of Assets, regarding the acquisition of
Dresser Industries, Inc., pursuant to the plan of merger dated as of February
25, 1998.
A Current Report on Form 8-K/A dated September 29, 1998, was filed reporting on
Item 2. Acquisition or Disposition of Assets, regarding the acquisition of
Dresser Industries, Inc., and included supplemental financial statements for
Halliburton Company for the three years ended December 31, 1997 and six months
ended June 30, 1998.
A Current Report on Form 8-K dated October 29, 1998, was filed reporting on Item
5. Other Events, regarding a press release dated October 29, 1998, announcing
third quarter earnings.
A Current Report on Form 8-K dated October 30, 1998, was filed reporting on Item
5. Other Events, regarding a press release dated October 30, 1998 announcing
the fourth quarter dividend.
A Current Report on Form 8-K dated November 19, 1998, was filed reporting on
Item 5. Other Events, regarding a press release dated November 19, 1998
announcing Halliburton Company $150 million notes offering.
A Current Report on Form 8-K dated November 24, 1998, was filed reporting on
Item 5. Other Events, regarding the $150 million notes offering and the filing
of the final copy of the Terms Agreement and the form of Note.
A Current Report on Form 8-K dated November 30, 1998, was filed reporting on
Item 5. Other Events, regarding a press release dated November 30, 1998
announcing Dresser Industries, Inc. Change of Control Offer to purchase all
outstanding and guaranteed senior notes of Baroid Corporation.
63
<PAGE>
(b) Reports on Form 8-K (continued):
A Current Report on Form 8-K dated December 28, 1998, was filed reporting on
Item 5. Other Events, regarding a press release dated December 28, 1998
announcing a $35 million pretax special charge in the 1998 fourth quarter to
provide for reduction of personnel.
During the first quarter of 1999 to date:
A Current Report on Form 8-K dated January 22, 1999, was filed reporting on Item
5. Other Events, regarding a press release dated January 22, 1999 announcing
that the Company has entered into an agreement with W-H Energy Services, Inc.
for the sale of the Company's logging-while-drilling (LWD) and related
measurement-while-drilling (MWD) business.
A Current Report on Form 8-K dated January 25, 1999, was filed reporting on Item
5. Other Events, regarding a press release dated January 25, 1999 announcing
fourth quarter earnings.
A Current Report on Form 8-K dated February 18, 1999, was filed reporting on
Item 5. Other Events, regarding a press release dated February 18, 1999
announcing declaration of the first quarter dividend.
64
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULE
To Halliburton Company:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in this Form 10-K, and
have issued our report thereon dated January 25, 1999. Our audits were made for
the purpose of forming an opinion on those statements taken as a whole. The
supplemental schedule (Schedule II) is the responsibility of Halliburton
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/ Arthur Andersen LLP
------------------------------
ARTHUR ANDERSEN LLP
Dallas, Texas,
January 25, 1999
65
<PAGE>
HALLIBURTON COMPANY
Schedule II - Valuation and Qualifying Accounts
(Millions of Dollars)
<TABLE>
<CAPTION>
Additions
------------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other Deductions End of
Descriptions of Period Expenses Accounts (A) Period
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1998:
Deducted from accounts and notes receivable:
Allowance for bad debts $ 58.6 $ 26.5 $ - $ (8.5) $ 76.6
- --------------------------------------------------------------------------------------------------------------------------
Accrued special charges $ 13.1 $ 1,010.3 (B) $ - $ (597.0) $ 426.4
- --------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1997:
Deducted from accounts and notes receivable:
Allowance for bad debts $ 65.3 $ 13.7 $ - $ (20.4) $ 58.6
- --------------------------------------------------------------------------------------------------------------------------
Accrued special charges $ 57.7 $ 16.2 $ - $ (60.8) $ 13.1
- --------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1996:
Deducted from accounts and notes receivable:
Allowance for bad debts $ 62.7 $ 15.8 $ - $ (13.2) $ 65.3
- --------------------------------------------------- ------------ ---------------- ------------- ------------- ------------
Accrued special charges $ 0.0 $ 85.8 $ - $ (28.1) $ 57.7
- --------------------------------------------------- ------------ ---------------- ------------- ------------- ------------
<FN>
(A) Receivable write-offs and reclassifications, net of recoveries.
(B) Includes $980.1 million during the calendar year ended December 31, 1998
and $30.2 million during Dresser's two-month period ended December 31,
1997. See Note 14.
</FN>
</TABLE>
66
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on this 22nd day of March,
1999.
HALLIBURTON COMPANY
By /s/ Richard B. Cheney
------------------------------------
Richard B. Cheney
Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons in the capacities indicated on
this 22nd day of March, 1999.
Signature Title
- ------------ -----------
/s/ Richard B. Cheney Chief Executive Officer and Director
- -------------------------------
Richard B. Cheney
/s/ Gary V. Morris Executive Vice President and
- ------------------------------- Chief Financial Officer
Gary V. Morris
/s/ R. Charles Muchmore, Jr. Vice President and Controller and
- ------------------------------- Principal Accounting Officer
R. Charles Muchmore, Jr.
67
<PAGE>
Signature Title
- ------------ -----------
* ANNE L. ARMSTRONG Director
- -------------------------------
Anne L. Armstrong
* WILLIAM E. BRADFORD Chairman of the Board and Director
- -------------------------------
William E. Bradford
* LORD CLITHEROE Director
- -------------------------------
Lord Clitheroe
*ROBERT L. CRANDALL Director
- -------------------------------
Robert L. Crandall
* CHARLES J. DIBONA Director
- -------------------------------
Charles J. DiBona
* LAWRENCE S. EAGLEBURGER Director
- -------------------------------
Lawrence S. Eagleburger
* W. R. HOWELL Director
- -------------------------------
W. R. Howell
* RAY L. HUNT Director
- -------------------------------
Ray L. Hunt
*DELANO E. LEWIS Director
- -------------------------------
Delano E. Lewis
* J. LANDIS MARTIN Director
- -------------------------------
J. Landis Martin
* JAY A. PRECOURT Director
- -------------------------------
Jay A. Precourt
* C. J. SILAS Director
- -------------------------------
C. J. Silas
* RICHARD J. STEGEMEIER Director
- -------------------------------
Richard J. Stegemeier
* /s/ SUSAN S. KEITH
- ----------------------------------------
Susan S. Keith, Attorney-in-fact
68
THIRD SUPPLEMENTAL INDENTURE
Dated as of August 1, 1997
between
HALLIBURTON COMPANY
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
as Trustee
(Second Senior Indenture)
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1 Definitions............................................. 1
ARTICLE II
AMENDMENTS
Section 2.1 Amendment of Section 2.1 of the
First Supplemental Indenture............................ 2
ARTICLE III
MISCELLANEOUS
Section 3.1 Counterparts............................................ 2
Section 3.2 Effect of Headings. .................................. 2
Section 3.3 Provisions for the Sole Benefit of Parties and Holders.. 2
<PAGE>
THIRD SUPPLEMENTAL INDENTURE
This Third Supplemental Indenture dated as of August 1, 1997 is between
Halliburton Company, a Delaware corporation ("Halliburton"), and Texas Commerce
Bank National Association, a national banking association, as Trustee, and
amends and supplements that certain Second Senior Indenture dated December 1,
1996 between Halliburton and the Trustee (the "Second Senior Indenture"), as
heretofore amended and supplemented by the First Supplemental Indenture dated as
of December 5, 1996 between Halliburton and the Trustee (the "First Supplemental
Indenture") and the Second Supplemental Indenture dated as of December 12, 1996
among Halliburton, Halliburton Hold Co., a Delaware corporation (the "Issuer"),
and the Trustee (the "Second Supplemental Indenture")(the Second Senior
Indenture, as heretofore amended and supplemented, being herein called the
"Indenture").
RECITALS:
Pursuant to the Second Senior Indenture, as amended and supplemented by
the First Supplemental Indenture, Halliburton, as the predecessor of the Issuer,
proposed to offer, sell and issue from time to time, at an aggregate initial
offering price of up to $300,000,000, certain notes of its series of medium-term
notes due nine months or more from date of issue.
For that purpose, Halliburton, as the predecessor of the Issuer, by
means of the First Supplemental Indenture, established such series of
medium-term notes and certain terms and provisions thereof that were different
from, or in addition to, those provided in the Second Senior Indenture and
acknowledged that the remaining terms and provisions of such medium-term notes
would be established pursuant to the provisions of Section 2.3 of the Second
Senior Indenture.
Since that time, the Issuer has offered, sold and issued various
medium-term notes of such series for an aggregate initial offering price of
approximately $300,000,000, and, consequently, the Issuer has determined to
increase the aggregate size of such series of medium-term notes due nine months
or more from date of issue, thereby making available additional notes of such
series for offering, sale and issuance.
NOW, THEREFORE, in consideration of the premises, the covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged by the parties hereto, the parties hereto
covenant and agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Capitalized terms used but not defined
herein are defined in the Indenture, including without limitation the First
Supplemental Indenture, and are used herein with the definitions ascribed to
them therein.
<PAGE>
ARTICLE II
AMENDMENTS
Section 2.1 Amendment of Section 2.1 of the First Supplemental
Indenture. Section 2.1 of the First Supplemental Indenture, as contained in the
Indenture, is hereby amended so as to be and read in its entirety as follows:
Section 2.1 Establishment of Series. Pursuant to the
provisions of Section 2.3 of the Indenture, there is hereby established
a series of Securities designated generally as the Medium-Term Notes
Due Nine Months or More From Date of Issue, Series A, that may be sold
and issued from time to time, at an aggregate initial offering price of
up to U. S. $500,000,000 (the "Notes"), subject to reduction by the
aggregate initial offering price of any other Securities that may be
theretofore sold and issued by the Issuer pursuant to the terms of the
Indenture. Forms of a Fixed Rate Note and a Floating Rate Note,
excluding in each case terms and provisions to be included therein
pursuant to a Note Terms Certificate, are attached hereto as Exhibits
B-1 and B-2, respectively, and by this reference incorporated herein.
ARTICLE III
MISCELLANEOUS
Section 3.1 Counterparts. This Third Supplemental Indenture may be
executed in any number of counterparts, each of which shall be deemed an
original, but all of which shall together constitute but one and the same
instrument.
Section 3.2 Effect of Headings. The Article and Section headings
herein and in the Table of Contents are for convenience only and shall not
affect the construction hereof.
Section 3.3 Provisions for the Sole Benefit of Parties and Holders.
Nothing in the Indenture, as supplemented, amended and modified by this Third
Supplemental Indenture, or in the Notes, expressed or implied, shall give or be
construed to give to any person, firm or corporation, other than the parties
hereto and their successors and the Holders, any legal or equitable right,
remedy or claim under the Indenture, as so supplemented, amended and modified,
or under any covenant or provision herein contained, all such covenants and
provisions being for the sole benefit of the parties hereto and their successors
and of the Holders.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be duly executed and the appropriate corporate seals
to be hereunto affixed and attested, all as of the 1st day of August, 1997.
HALLIBURTON COMPANY
By: /s/ Lester L. Coleman
-------------------------------
Title: Executive Vice President
and General Counsel
Attest:
/s/ Susan S. Keith
- --------------------------------------
Title: Vice President and Secretary
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By:
-------------------------------
Title:
FOURTH SUPPLEMENTAL INDENTURE
Dated as of September 29, 1998
between
HALLIBURTON COMPANY
and
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
(Formerly Texas Commerce Bank National Association)
as Trustee
(Second Senior Indenture)
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1 General. 2
Section 1.2 Administrative Procedures. 2
Section 1.3 Amortizing Notes. 2
Section 1.4 Book-Entry Notes. 2
Section 1.5 Business Day. 2
Section 1.6 Certificated Notes. 2
Section 1.7 Conversion Date. 2
Section 1.8 Depositary. 2
Section 1.9 Designated LIBOR Currency. 2
Section 1.10 Discount Notes. 2
Section 1.11 ECU. 2
Section 1.12 Exchange Rate Agent. 3
Section 1.13 Fixed Rate Notes. 3
Section 1.14 Floating Rate Notes. 3
Section 1.15 Foreign Currency Notes. 3
Section 1.16 Indenture. 3
Section 1.17 Indexed Notes. 3
Section 1.18 Interest Rate Bases; Related Terms. 3
Section 1.19 Issuing and Paying Agent. 5
Section 1.20 London Business Day. 5
Section 1.21 Market Exchange Rate. 5
Section 1.22 Maturity Date. 5
Section 1.23 Note Terms Certificate. 5
Section 1.24 Notes. 5
Section 1.25 Principal Financial Center. 5
Section 1.26 Record Date. 6
Section 1.27 Redemption/Repayment Terms. 6
Section 1.28 Series A Notes. 6
Section 1.29 Specified Currency. 6
Section 1.30 Stated Maturity Date. 7
Section 1.31 U.S. Currency Notes. 7
ARTICLE II
GENERAL PROVISIONS
Section 2.1 Establishment of Series. 7
Section 2.2 Authentication and Issuance. 7
Section 2.3 Denominations. 9
Section 2.4 Maturities 9
Section 2.5 Currency. 9
<PAGE>
Section 2.6 Registration. 12
Section 2.7 Payments of Principal, Premium and Interest. 12
Section 2.8 Interest in General. 13
Section 2.9 Interest on Fixed Rate Notes. 14
Section 2.10 Interest on Floating Rate Notes. 14
Section 2.11 Redemption at the Option of the Issuer. 16
Section 2.12 Repayment at the Option of the Holder. 16
Section 2.13 Additional Event of Default. 17
ARTICLE III
MISCELLANEOUS
Section 3.1 Counterparts. 17
Section 3.2 Effect of Headings. 17
Section 3.3 Provisions for the Sole Benefit
of Parties and Holders. 17
Section 3.4 Governing Law. 17
-ii-
<PAGE>
FOURTH SUPPLEMENTAL INDENTURE
This Fourth Supplemental Indenture dated as of September 29, 1998 is
between Halliburton Company, a Delaware corporation (the "Issuer"), and Chase
Bank of Texas, National Association (formerly Texas Commerce Bank National
Association), a national banking association, as Trustee (the "Trustee"), and
amends and supplements that certain Second Senior Indenture dated as of December
1, 1996 between the Issuer and the Trustee (the "Second Senior Indenture"), as
heretofore amended and supplemented by the First Supplemental Indenture dated as
of December 5, 1996 between the predecessor of the Issuer (the "Predecessor")
and the Trustee (the "First Supplemental Indenture"), the Second Supplemental
Indenture dated as of December 12, 1996 among the Predecessor, the Issuer and
the Trustee (the "Second Supplemental Indenture"), and the Third Supplemental
Indenture dated as of August 1, 1997 between the Issuer and the Trustee (the
"Third Supplemental Indenture").
RECITALS:
In December 1996, the Predecessor, through execution and delivery of
the First Supplemental Indenture, authorized a series of Medium-Term Notes Due
Nine Months or More From Date of Issue, Series A (the "Series A Notes"), to be
offered, sold and issued from time to time at an aggregate initial offering
price of up to $300,000,000.
On December 12, 1996, the Issuer, through execution and delivery of the
Second Supplemental Indenture, assumed all the obligations of the Predecessor
under the Second Senior Indenture, as theretofore amended and supplemented.
Having theretofore sold Series A Notes at an aggregate initial offering
price of $300,000,000, on August 1, 1997 the Issuer, through execution and
delivery of the Third Supplemental Indenture, authorized an increase in the
Series A Notes such that Series A Notes could be offered, sold and issued from
time to time at an aggregate initial offering price of up to $500,000,000.
The Issuer now proposes to offer, sell and issue from time to time, at
an aggregate initial offering price of up to $600,000,000, certain notes of an
additional series of medium-term notes due nine months or more from date of
issue.
For that purpose, the Issuer proposes, by means of this Fourth
Supplemental Indenture, to establish such additional series of medium-term notes
and certain terms and provisions thereof that are different from, or in addition
to, those applicable to the Series A Notes and to acknowledge that the remaining
terms and provisions of such medium-term notes will be established pursuant to
the provisions of Section 2.3 of the Indenture.
NOW, THEREFORE, in consideration of the premises, the covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged by the parties hereto, the parties hereto
covenant and agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.1 General. Capitalized terms used but not defined herein
are defined in the Indenture and are used herein with the definitions ascribed
to them therein.
Section 1.2 Administrative Procedures. The term "Administrative
Procedures" shall have the meaning ascribed to such term in Section 2.2 of this
Fourth Supplemental Indenture.
Section 1.3 Amortizing Notes. The term "Amortizing Notes" shall have
the meaning ascribed to such term in Exhibit A hereto.
Section 1.4 Book-Entry Notes. The term "Book-Entry Notes" shall have
the meaning ascribed to such term in Section 2.6 of this Fourth Supplemental
Indenture.
Section 1.5 Business Day. For purposes of the Notes only, the term
"Business Day" shall mean any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions are authorized
or required by law, regulation or executive order to close in The City of New
York; provided, however, that, with respect to Foreign Currency Notes, such day
is also not a day on which banking institutions are authorized or required by
law, regulation or executive order to close in the Principal Financial Center of
the country issuing the Specified Currency (unless the Specified Currency is
ECU, in which case such day is also not a day that appears as an ECU
non-settlement day on the display designated as "ISDE" on the Reuter Monitor
Money Rates Service (or is not a day designated as an ECU non-settlement day by
the ECU Banking Association) or, if ECU non-settlement days do not appear on
that page (and are not so designated), a day that is not a day on which payments
in ECU cannot be settled in the international interbank market); provided,
further, that, with respect to Notes as to which LIBOR is an applicable Interest
Rate Basis, such day is also a London Business Day.
Section 1.6Certificated Notes. The term "Certificated Notes" shall have
the meaning ascribed to such term in Section 2.6 of this Fourth Supplemental
Indenture.
Section 1.7 Conversion Date. The term "Conversion Date" shall have the
meaning ascribed to such term in Section 2.5(g) of this Fourth Supplemental
Indenture.
Section 1.8 Depositary. The term "Depositary" shall have the meaning
ascribed to such term in Section 1.1 of the Second Senior Indenture.
Section 1.9 Designated LIBOR Currency. The term "Designated LIBOR
Currency" shall mean the currency or composite currency specified in the
applicable Note Terms Certificate as to which LIBOR shall be calculated or, if
<PAGE>
no such currency or composite currency is specified in the applicable Note Terms
Certificate, United States dollars.
Section 1.10 Discounted Notes. The term "Discount Notes" shall have
the meaning ascribed to such term in Exhibit A hereto.
Section 1.11 ECU. The term "ECU" shall mean European Currency Units.
Section 1.12 Exchange Rate Agent. The term "Exchange Rate Agent" shall
have the meaning ascribed to such term in Section 2.5 of this Fourth
Supplemental Indenture.
Secton 1.13 Fixed Rate Notes. The term "Fixed Rate Notes" shall have
the meaning ascribed to such term in Section 2.2 of this Fourth Supplemental
Indenture.
Section 1.14 Floating Rate Notes. The term "Floating Rate Notes" shall
have the meaning ascribed to such term in Section 2.2 of this Fourth
Supplemental Indenture.
Section 1.15 Foreign Currency Notes. The term "Foreign Currency Note"
shall have the meaning ascribed to such term in Section 2.3 of this Fourth
Supplemental Indenture.
Section 1.16 Indenture. The term "Indenture" shall mean the Second
Senior Indenture dated as of December 1, 1996 between the Issuer and the
Trustee, as heretofore and hereby amended and supplemented.
Secton 1.17 Indexed Notes. The term "Indexed Notes" shall have the meaning
ascribed to such term in Exhibit A hereto.
Section 1.18 Interest Rate Bases; Related Terms. The rate of
interest of a Floating Rate Note shall be determined by reference to one or
more of the CD Rate, the CMT Rate, the Commercial Paper Rate, the Eleventh
District Cost of Funds Rate, the Federal Funds Rate, LIBOR, the Prime Rate and
the Treasury Rate or such other interest rate basis as may be specified in the
Note Terms Certificate (each, an "Interest Rate Basis"). Each of the following
terms is defined in Exhibit A attached hereto and by this reference incorporated
herein: the "CD Rate," the "CMT Rate," the "Commercial Paper Rate," the
"Eleventh District Cost of Funds Rate," the "Federal Funds Rate," "LIBOR,"
the "Prime Rate," and the "Treasury Rate," as well as each of the defined terms
used in such definitions. In addition:
(a) The term "Calculation Agent" shall mean an agent appointed
from time to time by the Issuer for the purpose of determining the
rates of interest in effect from time to time with respect to one or
more issues of Notes and calculating the amount of interest payable
from time to time with respect thereto. Unless otherwise specified in
the Note Terms Certificate with respect to an issue of Notes, the
Calculation Agent shall be the Trustee or, at the election of the
Trustee, The Chase Manhattan Bank, an affiliate of the Trustee.
<PAGE>
(b) The term "Calculation Date," as it pertains to any
Interest Determination Date, shall, unless otherwise specified in the
applicable Note Terms Certificate, mean the earlier of (i) the tenth
calendar day after such Interest Determination Date or, if such day is
not a Business Day, the next succeeding Business Day or (ii) the
Business Day immediately preceding the applicable Interest Payment Date
or the Maturity Date, as the case may be.
(c) The term "Composite Quotations" shall have the meaning
ascribed to such term in the definition of CD Rate set forth in Exhibit
A hereto.
(d) The term "Index" shall have the meaning ascribed to such
term in the definition of the Eleventh District Cost of Funds set forth
in Exhibit A hereto.
(e) The term "Index Maturity" shall mean the period to
maturity of the instrument or obligation with respect to which the
related Interest Rate Basis or Bases will be calculated.
(f) The term "Initial Interest Rate" shall have the meaning
ascribed to such term in Section 2.10 of this Fourth Supplemental
Indenture.
(g) The term "Initial Interest Reset Date" shall have the
meaning ascribed to such term in Section 2.10 of this Fourth
Supplemental Indenture.
(h) The term "Interest Determination Date" shall mean, (i)
with respect to the CD Rate, the CMT Rate, the Commercial Paper Rate,
the Federal Funds Rate and the Prime Rate, the second Business Day
immediately preceding the applicable Interest Reset Date; (ii) with
respect to the Eleventh District Cost of Funds Rate, the last Business
Day of the month immediately preceding the applicable Interest Reset
Date on which the Federal Home Loan Bank of San Francisco publishes the
Index; (iii) with respect to LIBOR, the second London Business Day
immediately preceding the applicable Interest Reset Date; and (iv),
with respect to the Treasury Rate, the day in the week in which the
Interest Reset Date occurs on which Treasury Bills are normally
auctioned (except that, if the auction is held on the Friday of the
immediately preceding week, the Interest Determination Date shall be
that Friday but if the Interest Determination Date would otherwise fall
on an Interest Reset Date, then such Interest Reset Date shall be
postponed to the next succeeding Business Day). The Interest
Determination Date pertaining to a Floating Rate Note the interest rate
of which is determined by reference to two or more Interest Rate Bases
shall be the second Business Day next preceding the Interest Reset Date
for such Floating Rate Note on which each Interest Rate Basis is
determinable. Each Interest Rate Basis shall be determined as of the
Interest Determination Date, and the applicable interest rate shall
take effect on the applicable Interest Reset Date.
<PAGE>
(i) The term "Interest Payment Date" shall have the meanings
ascribed to such term in Sections 2.9 and 2.10 of this Fourth
Supplemental Indenture.
(j) The term "Interest Period" shall have the meaning ascribed
to such term in Section 2.8(b) of this Fourth Supplemental Indenture.
(k) The term "Interest Reset Date" shall mean the date or
dates specified in the applicable Note Terms Certificate on which the
rate of interest on a Floating Rate Note will be reset.
(l) The term "Interest Reset Period" shall mean the period,
whether daily, weekly, monthly, quarterly, semiannual, annual or
another specified period, between Interest Reset Dates relating to a
Floating Rate Note, as specified in the applicable Note Terms
Certificate.
(m) The term "Maximum Interest Rate" shall have meaning
ascribed to such term in Section 2.10 of this Fourth Supplemental
Indenture.
(n) The term "Minimum Interest Rate" shall have meaning
ascribed to such term in Section 2.10 of this Fourth Supplemental
Indenture.
(o) The term "Money Market Yield" shall have the meaning
ascribed to such term in the definition of Commercial Paper Rate set
forth in Exhibit A hereto.
(p) The term "Spread" shall mean the number of basis points to
be added to or subtracted from the related Interest Rate Basis or Bases
applicable to a Floating Rate Note.
(q) The term "Spread Multiplier" shall mean the percentage of
the related Interest Rate Basis or Bases applicable to a Floating Rate
Note by which such Interest Rate Basis or Bases shall be multiplied to
determine the applicable interest rate on such Floating Rate Note.
(r) The term "Statistical Release H.15" shall have the meaning
ascribed to such term in the definition of CD Rate set forth in Exhibit
A hereto.
Section 1.19 Issuing and Paying Agent. The term "Issuing and Paying
Agent" shall have the meanings ascribed to such term in Section 2.2 of this
Fourth Supplemental Indenture.
Section 1.20 London Business Day. The term "London Business Day"
shall mean (i) if the currency (including composite currencies) specified in
the applicable Note Terms Certificate as the currency (the "Index Currency") for
which LIBOR is calculated is other than ECU, any day on which dealings in such
Index Currency are transacted in the London interbank market or (ii), if the
<PAGE>
Index Currency is ECU, any day that does not appear as an ECU non-settlement day
on the display designated as "ISDE" on the Reuter Monitor Money Rates Service
(or a day so designated by the ECU Banking Association) or, if ECU
non-settlement days do not appear on that page (and are not so designated), is
not a day on which payments in ECU cannot be settled in the international
interbank market; provided, however, that, if no such currency or composite
currency is specified in the applicable Note Terms Certificate, the Index
Currency shall be U.S. dollars.
Section 1.21 Market Exchange Rate. The term "Market Exchange Rate"
shall mean, for a Specified Currency other than United States dollars, the
noon buying rate in The City of New York for cable transfers for such Specified
Currency as certified for customs purposes (or, if not so certified, as
otherwise determined) by the Federal Reserve Bank of New York.
Section 1.22 Maturity Date. The term "Maturity Date" shall have the
meaning ascribed to such term in Section 2.4 of this Fourth Supplemental
Indenture.
Section 1.23 Note Terms Certificate. The term "Note Terms Certificate"
shall have the meaning ascribed to such term in Section 2.2 of this Fourth
Supplemental Indenture.
Section 1.24 Notes. The term "Notes" shall have the meaning ascribed
to such term in Section 2.1 of this Fourth Supplemental Indenture.
Section 1.25 Principal Financial Center. The term "Principal
Financial Center" shall mean (i) the capital city of the country issuing a
Specified Currency (unless the Specified Currency is ECU, in which case it
shall mean Brussels) or (ii) the capital city of the country to which the
Designated LIBOR Currency relates (or, in the case of the ECU, Luxembourg),
as applicable, except that, in the case of (i) or (ii) above, with respect to
United States dollars, Australian dollars, Canadian dollars, Deutsche marks,
Dutch guilders, Italian lire and Swiss francs, the Principal Financial Center
shall be The City of New York, Sydney, Toronto, Frankfurt, Amsterdam, Milan
(solely in the case of the Specified Currency) and Zurich, respectively.
Section 1.26 Record Date. The term "Record Date" shall, unless
otherwise specified in the applicable Note Terms Certificate, mean the fifteenth
calendar day (whether or not a Business Day) immediately preceding the related
Interest Payment Date with respect to any Note.
Section 1.27 Redemption/Repayment Terms.
(a) The term "Initial Redemption Date" shall mean the date set
forth on the face of a Note that is the first date on which a Note that
is subject to redemption prior to its Stated Maturity Date at the
option of the Issuer may be redeemed.
<PAGE>
(b) The term "Redemption Price" shall mean, with respect to a
Note that is redeemable prior to its Stated Maturity Date at the option
of the Issuer, an amount equal to the Initial Redemption Percentage
specified in the applicable Note Terms Certificate, as adjusted by any
applicable Annual Redemption Percentage Reduction, if applicable,
multiplied by the unpaid principal amount to be redeemed.
(c) The term "Initial Redemption Percentage" shall mean, with
respect to a Note that is redeemable prior to its Stated Maturity Date
at the option of the Issuer, the percentage specified in the applicable
Note Terms Certificate, which Initial Redemption Percentage shall
decline at each anniversary of the Initial Redemption Date by an amount
equal to the applicable Annual Redemption Percentage Reduction, if any,
until the Redemption Price is equal to 100% of the unpaid principal
amount to be redeemed.
(d) The term "Annual Redemption Percentage Reduction" shall
mean the percentage specified as such in the applicable Note Terms
Certificate.
(e) The term "Optional Repayment Date" shall mean the date set
forth on the face of a Note that is the first date on which a Note that
is subject to repayment prior to its Stated Maturity Date at the option
of the Holder may be repaid.
Section 1.28 Series A Notes. The term "Series A Notes" shall have the
meaning ascribed to such term in the recitals to this Fourth Supplemental
Indenture.
Section 1.29 Specified Currency. The term "Specified Currency" shall
have the meaning ascribed to such term in Section 2.5(a) of this Fourth
Supplemental Indenture.
Section 1.30 Stated Maturity Date. The term "Stated Maturity Date"
shall have the meaning ascribed to such term in Section 2.2 of this Fourth
Supplemental Indenture.
Sectin 1.31 U.S. Currency Notes. The term "U.S. Currency Note" shall
have the meaning ascribed to such term in Section 2.3 of this Fourth
Supplemental Indenture.
ARTICLE II
GENERAL PROVISIONS
Section 2.1 Establishment of Series. Pursuant to the provisions of
Section 2.3 of the Indenture, there is hereby established a series of
Securities designated generally as the Medium-Term Notes Due Nine Months or More
From Date of Issue, Series B, that may be sold and issued from time to time,
at an aggregate initial offering price of up to U. S. $600,000,000 (the
"Notes"), subject to reduction by the aggregate initial offering price of any
other Securities (not including any Series A Notes) that may be theretofore
sold and issued by the Issuer pursuant to the terms of the Indenture. Forms of
<PAGE>
a Fixed Rate Note and a Floating Rate Note, excluding in each case terms and
provisions to be included therein pursuant to a Note Terms Certificate, are
attached hereto as Exhibits B-1 and B-2, respectively, and by this reference
incorporated herein.
Section 2.2 Authentication and Issuance. The Notes may be
authenticated and issued in one or more issues or tranches of Notes of like
tenor and terms. The entire series of Notes shall be deemed to be subject to a
periodic offering; the procedures for authentication and delivery of one or more
issues or tranches of Notes subject to such periodic offering to which reference
is made in Section 2.4 of the Indenture are set forth in the Administrative
Procedures (the "Administrative Procedures") authorized and adopted by the
Board of Directors of the Issuer and attached hereto as Exhibit C; and The Chase
Manhattan Bank, an affiliate of the Trustee (the "Issuing and Paying Agent"),
upon compliance by the Issuer with the requirements of Section 2.4 of the
Indenture, shall authenticate and deliver Notes in accordance with the
Administrative Procedures. To the extent that the terms of any such issue or
tranche are not set forth in the Indenture, as supplemented and amended by this
Fourth Supplemental Indenture, they shall be established by means of an
Officer's Certificate delivered to the Issuing and Paying Agent pursuant to
Section 2.3 of the Indenture (a "Note Terms Certificate"). In accordance with
the procedures set forth in the Indenture and the Administrative Procedures, and
to the extent the following terms and provisions are set forth in a Note Terms
Certificate:
(a) Each Note shall be dated a date determined in accordance
with the Administrative Procedures, which date may vary among the
Notes;
(b) each Note shall mature on a day nine months or more from
its date of issue (its "Stated Maturity Date") determined in accordance
with the Administrative Procedures, which Stated Maturity Date may vary
among the Notes;
(c) each Note shall bear interest, if any, at a fixed rate (a
"Fixed Rate Note") or at a floating rate (a "Floating Rate Note"), and
the interest rate for a Fixed Rate Note or the Interest Rate Basis for
determining the floating interest rate for a Floating Rate Note shall
be established in accordance with the Administrative Procedures, which
interest rate or Interest Rate Basis may vary among the Notes;
(d) interest on each Fixed Rate Note and each Floating Rate
Note shall accrue from its date of issue;
(e) the floating interest rate on each Floating Rate Note
shall be reset on such date or dates as shall be established in
accordance with the Administrative Procedures, which date or dates may
vary among the Notes; and
<PAGE>
(f) interest on each Note shall be payable in arrears on the
date or dates specified therein and determined in accordance with the
Administrative Procedures, which date or dates may vary among the
Notes.
In addition, the following terms and provisions, to the extent
applicable to an issue or tranche of Notes, shall be set forth in a Note Terms
Certificate applicable to such issue or tranche of Notes:
(g) the Specified Currency with respect to such Notes;
(h) the price (expressed as a percentage of the aggregate
principal amount thereof) at which such Notes are to be issued and
sold;
(i) the date on which the Notes are to be issued;
(j) the date on which such Notes are to mature;
(k) whether such Notes are Fixed Rate Notes or Floating Rate
Notes;
(l) if such Notes are Fixed Rate Notes, whether such Notes are
Amortizing Notes;
(m) if such Notes are Fixed Rate Notes, the rate per annum at
which such Notes are to bear interest, if any, and the applicable
Interest Payment Date or Dates;
(n) if such Notes are Floating Rate Notes, whether such
Floating Rate Notes are "Regular Floating Rate Notes", "Floating
Rate/Fixed Rate Notes" or "Inverse Floating Rate Notes" and, to the
extent applicable, certain terms with respect to the Floating Rate
Notes, including the Fixed Rate Commencement Date, Fixed Interest Rate,
Interest Rate Basis or Bases, Initial Interest Rate, Initial Interest
Reset Date, Interest Reset Dates, Interest Payment Dates, Index
Maturity, Maximum Interest Rate, Minimum Interest Rate, Spread and
Spread Multiplier and any other terms relating to the particular method
of calculating the interest rate for such Notes; if one or more of the
applicable Interest Rate Bases is LIBOR or the CMT Rate, the applicable
Note Terms Certificate will also specify the Designated LIBOR Page or
the Designated CMT Maturity Index and Designated CMT Telerate Page,
respectively;
(o) whether such Notes are Original Issue Discount Notes and,
if so, the yield to Stated Maturity;
(p) whether such Notes may be redeemed at the option of the
Issuer or repaid at the option of the Holders prior to Stated Maturity
and, if so, the provisions relating to such redemption or repayment;
<PAGE>
(q) whether such Notes will be issued initially as Book-Entry
Notes or Certificated Notes; and
(r) any other terms of such Notes that are not inconsistent
with the provisions of the Indenture.
Section 2.3 Denominations. Unless otherwise specified in an applicable
Note Terms Certificate, U.S. Currency Notes denominated in U.S. dollars ("U.S.
Currency Notes") will be issuable in denominations of $1,000 and integral
multiples thereof. Notes denominated in a Specified Currency other than U.S.
dollars ("Foreign Currency Notes") will be issued in authorized denominations
that are equivalent, at the Market Exchange Rate on the first Business Day in
The City of New York and the country issuing such currency next preceding the
date on which the Issuer accepts the offer to purchase such Foreign Currency
Note, to $100,000 (rounded down to an integral multiple of 10,000 units of such
Specified Currency) and integral multiples of 10,000 units of such Specified
Currency in excess thereof.
Section 2.4 Maturities. Each Note will mature on its Stated Maturity
Date, unless the principal thereof (or any installment of principal thereof)
becomes due and payable prior to such Stated Maturity Date, whether by the
declaration of acceleration of maturity, notice of redemption at the option of
the Issuer, notice of the Holder's option to elect repayment or otherwise (the
Stated Maturity Date or such prior date, as the case may be, being referred to
herein as the "Maturity Date" with respect to the principal of such Note
repayable on such date).
Section 2.5 Currency.
(a) Each U.S. Currency Note shall be denominated in U.S.
dollars and each Foreign Currency Note shall be denominated in such
other currency or composite currency units (a "Specified Currency") as
may be provided in the applicable Note Terms Certificate. Payments of
principal, premium, if any, and interest on all Notes shall be made in
U.S. dollars, except that payments of principal of, premium, if any,
and interest on Foreign Currency Notes shall be made in the Specified
Currency at the option of the Holders thereof under the procedures
described below unless the Specified Currency is not available due to
the imposition of exchange controls or other circumstances beyond the
control of the Issuer, as described below.
(b) Unless otherwise specified in the applicable Note Terms
Certificate, Foreign Currency Notes shall not be offered or sold in, or
to residents of, the country issuing the applicable Specified Currency.
(c) In the case of a Foreign Currency Note, the Issuer shall
(unless otherwise provided in the applicable Note Terms Certificate)
appoint an agent (the "Exchange Rate Agent") to determine the exchange
rate for converting all payments in respect of such Foreign Currency
Note into U.S. dollars in the manner described in subsection (d) of
<PAGE>
this Section. Notwithstanding the foregoing, the Holder of a Foreign
Currency Note may (if the applicable Note Terms Certificate so
indicates) elect to receive all such payments in the Specified Currency
by delivery of a written request to the Issuing and Paying Agent at its
corporate office in accordance with subsection (e) of this Section.
(d) In the case of a Foreign Currency Note, unless the Holder
shall elect otherwise, payment in respect of such a Foreign Currency
Note shall be made in U.S. dollars on the basis of the exchange rate as
determined by the Exchange Rate Agent. The exchange rate shall be based
on the highest bid quotation for U.S. dollars received by the Exchange
Rate Agent at approximately 11:00 A.M., New York City time, on the
second Business Day preceding the applicable payment date (or, if no
such rate is quoted on such date, the last date on which such rate was
quoted), from three recognized foreign exchange dealers in The City of
New York selected by the Exchange Rate Agent and approved by the Issuer
(one of which may be the Exchange Rate Agent). Each such bid quotation
shall relate to the purchase by the quoting dealer, for settlement on
such payment date, of the aggregate amount of the Specified Currency
payable on such payment date in respect of all Foreign Currency Notes
denominated in such Specified Currency and shall include a commitment
by the dealer to execute a contract on that basis. All currency
exchange costs shall be borne by the Holders of such Foreign Currency
Notes by deductions from such payments. If three such bid quotations
are not available on the second Business Day preceding the applicable
payment date, payments shall be made in the Specified Currency, unless
such Specified Currency is unavailable due to the imposition of
exchange controls or other circumstances beyond the Issuer's control,
in which case payment will be made as described in subsection (g)
below.
(e) Unless otherwise specified in the applicable Note Terms
Certificate, a Holder of a Foreign Currency Note may subsequent to the
issuance thereof request that future payments be converted or not be
converted, as the case may be, to U.S. dollars by transmitting a
written request for such payments to the corporate office of the
Issuing and Paying Agent on or prior to the Record Date or at least 15
calendar days prior to the Maturity Date. Such request shall include
appropriate payment instructions and shall be in writing delivered by
hand, mail, cable, telex or facsimile transmission. A Holder of a
Foreign Currency Note may elect to receive all future payments of
principal, premium, if any, and interest in either the Specified
Currency or in U.S. dollars, as specified in the written request, and
need not file a separate election for each payment. Such election shall
remain in effect until revoked by written notice to the Issuing and
Paying Agent, but written notice of any such revocation must be
received by the Issuing and Paying Agent on or prior to the Record Date
or at least 15 calendar days prior to the Maturity Date.
(f) In the case of a Foreign Currency Note in respect of which
payment is to be made in U.S. Dollars, the Issuer shall deposit with
<PAGE>
the Issuing and Paying Agent the total amount of any principal, premium
and interest due on such Foreign Currency Note on the applicable
payment date an amount in U.S. dollars determined in accordance with
subsection (d) of this section in funds available for use by the
Issuing and Paying Agent no later than 10:00 a.m., New York City time,
on such applicable payment date. In the case of a Foreign Currency Note
in respect of which payment is to be made in a Specified Currency other
than U.S. Dollars, the Issuer shall pay to the Exchange Rate Agent an
amount in U.S. Dollars sufficient to purchase such Specified Currency
in an amount equal to the principal, premium or interest due on such
Foreign Currency Note on the applicable payment date with irrevocable
instructions to the Exchange Rate Agent to purchase such amount of such
Specified Currency and to deposit with the Issuing and Paying Agent for
the account of the Issuer such amount of such Specified Currency in
funds available for use by the Issuing and Paying Agent no later than
10:00 a.m., New York City time, on such applicable payment date. Any
currency exchange costs incurred by the Exchange Rate Agent or the
Issuing and Paying Agent in delivering payments in a Specified Currency
other than U.S. Dollars to the Holder of a Foreign Currency Note shall
be borne by the Holder of such Foreign Currency Note by a deduction
from such payment.
(g) In order for a Holder of a Foreign Currency Note, either
by the terms of the Note or pursuant to an election of such Holder, to
receive payments of principal, premium, if any, and interest in a
Specified Currency other than U.S. dollars by wire transfer, such
Holder must designate an appropriate account with a bank located in the
country of the Specified Currency (or, with respect to Foreign Currency
Notes denominated in ECUs, Brussels) or other jurisdiction acceptable
to the Issuer and the Trustee. Such designation shall be made by filing
the appropriate information with the corporate office of the Issuing
and Paying Agent on or prior to the Record Date or at least 15 calendar
days prior to the Maturity Date. The Issuing and Paying Agent shall,
subject to applicable laws and regulations and until it receives notice
to the contrary, make such payment and all succeeding payments to such
Holder of Foreign Currency Notes by wire transfer to the designated
account. In the case of payment of principal, premium, if any, and
interest due on the Maturity Date, however, the Foreign Currency Note
must be presented to the Issuing and Paying Agent in time for the
Issuing and Paying Agent to make such payments in such funds in
accordance with its normal procedures. If a payment cannot be made by
wire transfer because the required information has not been received by
such Issuing and Paying Agent on or before the requisite date or for
any other reason, the Issuing and Paying Agent shall mail a notice to
the Holder at its registered address requesting a designation pursuant
to which such wire transfer can be made and such payment will be made
within 15 calendar days after receipt of such designation by the
Issuing and Paying Agent. Any tax, assessment or governmental charge
imposed upon such payments shall be borne by the Holders of Book-Entry
Notes in respect of which such payments are made.
<PAGE>
(h) If the Specified Currency (other than a composite currency
unit) for a Foreign Currency Note is not available at the time of any
payment due thereunder as a result of the imposition of exchange
controls or other circumstances beyond the control of the Issuer, the
Issuer may satisfy its obligations to Holders of such Foreign Currency
Notes by making such payment in U.S. dollars on the basis of the Market
Exchange Rate on the last date such Specified Currency was available
(the "Conversion Date"). Any payment made under such circumstances in
U.S. dollars where the required payment is in other than U.S. dollars
shall not constitute an Event of Default under the Indenture or Section
2.13 of this Fourth Supplemental Indenture.
(i) If payment in respect of a Foreign Currency Note is
required to be made in a Specified Currency that is a composite
currency unit and such composite currency unit is unavailable due to
the imposition of exchange controls or other circumstances beyond the
Issuer's control, then the Issuer may make all payments in respect of
such Foreign Currency Note in U.S. dollars until such composite
currency unit is again available. The amount of each payment in U.S.
dollars will be computed on the basis of the equivalent of the
composite currency unit in U.S. dollars, which shall be determined by
the Company or the Exchange Rate Agent on the following basis: The
component currencies of the currency unit for this purpose (the
"Component Currencies" or, individually, a "Component Currency") shall
be the currency amounts that were components of the currency unit as of
the Conversion Date for such currency unit. The equivalent of the
currency unit in U.S. dollars shall be calculated by aggregating the
U.S. dollar equivalents of the Component Currencies. The U.S. dollar
equivalent of each of the Component Currencies shall be determined by
the Company or the Exchange Rate Agent on the basis of the Market
Exchange Rate for each such Component Currency that is available as of
the third Business Day prior to the date on which the relevant payment
is due and for each such Component Currency that is unavailable, if
any, as of the Conversion Date for such Component Currency.
(j) If the official unit of any Component Currency is altered
by way of combination or subdivision, the number of units of that
currency as a Component Currency shall be divided or multiplied in the
same proportion. If two or more Component Currencies are consolidated
into a single currency, the amounts of those currencies as Component
Currencies shall be replaced by an amount in such single currency equal
to the sum of the amounts of the consolidated Component Currencies
expressed in such single currency. If any Component Currency is divided
into two or more currencies, the amount of the original Component
Currency will be replaced by the amounts of such two or more
currencies, the sum of which shall be equal to the amount of the
original Component Currency.
(k) All determinations referenced above made by the Issuer or
its agent (including the Exchange Rate Agent) shall be at its sole
discretion and shall, in the absence of manifest error, be conclusive
for all purposes and binding on the Holders of Foreign Currency Notes.
<PAGE>
(l) The Issuer shall indemnify the Holder of any Note against
any loss incurred by such Holder as a result of any judgment or order
being given or made for the payment of any amount due under such Note
in a currency or composite currency (the "Judgment Currency") other
than the Specified Currency and as a result of any variation between
(i) the rate of exchange at which the Specified Currency amount is
converted into the Judgment Currency for the purpose of such judgment
or order and (ii) the rate of exchange at which the Holder of such
Notes, on the date of payment of such judgment or order, is able to
purchase the Specified Currency with the amount of the Judgment
Currency actually received by such Holder, as the case may be.
Section 2.6 Registration. Each Note shall be issued in book entry
form eligible for deposit in the book-entry system maintained by a Depositary
(a "Book-Entry Note") represented by one or more fully registered Global
Securities or in fully registered form (a "Certificated Note").
Section 2.7 Payments of Principal, Premium and Interest.
(a) In the case of Book-Entry Notes, payments of principal
thereof, and premium, if any, and interest, if any, thereon shall be
made by the Issuer through the Issuing and Paying Agent to the
Depositary. In the case of Certificated Notes, payments of principal
and premium, if any, due on any Maturity Date shall be made in
immediately available funds upon presentation and surrender thereof
(and, in the case of any repayment on an Optional Repayment Date, as
hereinafter defined, upon submission of a duly completed election form
in accordance with the provisions hereinafter described) at the office
or agency maintained by the Issuer for such purpose in the Borough of
Manhattan, The City of New York.
(b) Payments of interest, if any, due on the Maturity Date of
a Certificated Note shall be made to the person to whom payment of the
principal thereof and premium, if any, thereon shall be made. Payments
of interest, if any, due on a Certificated Note on any Interest Payment
Date, other than any Maturity Date, shall be made by check mailed to
the address of the Holder entitled thereto as such address shall appear
in the Security Register of the Issuer. A Holder of at least
$10,000,000 (or, if the Specified Currency is other than U.S. dollars,
the equivalent thereof in such Specified Currency) in aggregate
principal amount of Certificated Notes (whether having identical or
different terms and provisions) shall be entitled to receive interest
payments, if any, on any Interest Payment Date, other than any Maturity
Date, by wire transfer of immediately available funds if appropriate
wire transfer instructions have been received in writing by the Issuing
and Paying Agent or other paying agent not less than 15 days prior to
such Interest Payment Date. Any such wire transfer instructions
received by the Issuing and Paying Agent or other paying agent shall
remain in effect until revoked by such Holder.
<PAGE>
(c) Unless otherwise specified in the applicable Note Terms
Certificate, if the Specified Currency is other than U.S. dollars, a
beneficial owner of the related global security or securities that
elects to receive payments of principal, premium, if any, and/or
interest, if any, in the Specified Currency must notify the participant
through which it owns its interest on or prior to the applicable Record
Date or at least fifteen calendar days prior to the Maturity Date, as
the case may be, of such beneficial owner's election. Such participant
must notify the Depositary of such election on or prior to the third
Business Day after such Record Date or at least twelve calendar days
prior to the Maturity Date, as the case may be, and the Depository
shall notify the Issuing and Paying Agent of such election on or prior
to the fifth Business Day after such Record Date or at least ten
calendar days prior to the Maturity Date, as the case may be. Upon
receipt by the Issuing and Paying Agent of complete instructions from
the beneficial owner through the participant and the Depositary on or
prior to such dates and receipt by the Issuing and Paying Agent from
the Issuer of the necessary funds in such Specified Currency, the
Issuing and Paying Agent shall make such payments to such beneficial
owner in the Specified Currency.
(d) If the Maturity Date of a Floating Rate Note shall fall on
a day that is not a Business Day, the required payment of principal,
premium, if any, and interest shall be made on the next succeeding
Business Day as if made on the date such payment was due, and no
interest shall accrue on such payment for the period from and after the
Maturity Date to the date of such payment on the next succeeding
Business Day.
(e) If any Interest Payment Date or the Maturity Date of a
Fixed Rate Note falls on a day that is not a Business Day, the required
payment of principal, premium, if any, or interest will be made on the
next succeeding Business Day as if made on the date such payment was
due, and no interest will accrue on such payment for the period from
and after such Interest Payment Date or the Maturity Date, as the case
may be, to the date of such payment on the next succeeding Business
Day.
Section 2.8 Interest in General. Unless otherwise specified in an
applicable Note Terms Certificate:
(a) Each interest-bearing Note shall bear interest from the
date of its issue at the rate per annum, in the case of a Fixed Rate
Note, or pursuant to the interest rate formula, in the case of a
Floating Rate Note, in each case as specified in the Note;
(b) Interest payments in respect of Fixed Rate Notes and
Floating Rate Notes shall be made in an amount equal to the interest
accrued from and including the immediately preceding Interest Payment
Date in respect of which interest has been paid or duly made available
for payment (or from and including the date of issue, if no interest
<PAGE>
has been paid or duly made available for payment) to but excluding the
applicable Interest Payment Date or the Maturity Date, as the case may
be (each, an "Interest Period"); and
(c) The first payment of interest on any such Note originally
issued between a Record Date and the related Interest Payment Date
shall be made on the Interest Payment Date immediately following the
next succeeding Record Date to the Holder on such next succeeding
Record Date.
Section 2.9 Interest on Fixed Rate Notes. Interest on Fixed Rate Notes
will be payable on March 31 and September 30 of each year or on such other date
or dates specified in the applicable Note Terms Certificate (each, an "Interest
Payment Date" with respect to Fixed Rate Notes) and on the Maturity Date with
respect to all or part of the principal thereof; unless otherwise specified in
the applicable Note Terms Certificate, interest on Fixed Rate Notes shall be
computed on the basis of a 360-day year of twelve 30-day months;
Section 2.10 Interest on Floating Rate Notes. Interest on Floating
Rate Notes shall be payable on the date or dates specified in the applicable
Note Terms Certificate and shall be determined as follows:
(a) Any Floating Rate Note (a "Regular Floating Rate Note"),
other than a Floating Rate/Fixed Rate Note, an Inverse Floating Rate
Note or a Note that is subject to an Addendum or to "Other/Additional
Provisions," shall, except as otherwise provided in the applicable Note
Terms Certificate, bear interest at the rate determined by reference to
the applicable Interest Rate Basis or Bases plus or minus the
applicable Spread, if any, multiplied by the applicable Spread
Multiplier, if any. Commencing on the initial Interest Reset Date for
such Note (the "Initial Interest Reset Date"), the rate at which
interest on such Regular Floating Rate Note shall be payable shall be
reset as of each Interest Reset Date.
(b) In the case of a Floating Rate Note, the Interest Reset
Period and the Interest Reset Dates shall be as provided in the
applicable Note Terms Certificate. Unless otherwise provided in the
applicable Note Terms Certificate, the Interest Reset Dates shall be,
in the case of Floating Rate Notes that reset: (i) daily, each Business
Day; (ii) weekly, the Wednesday of each week (with the exception of
weekly reset Floating Rate Notes as to which the Treasury Rate is an
applicable Interest Rate Basis, which will reset on Tuesday of each
week, except as set forth in the definition of "Interest Determination
Date"); (iii) monthly, the third Wednesday of each month (with the
exception of monthly Floating Rate Notes as to which the Eleventh
District Cost of Funds Rate is an applicable Interest Rate Basis, which
will reset on the first calendar day of the month); (iv) quarterly, the
third Wednesday of March, June, September and December of each year;
(v) semiannually, the third Wednesday of the two months specified in
the applicable Note Terms Certificate; and (vi) annually, the third
Wednesday of the month specified in the applicable Note Terms
Certificate.
<PAGE>
(c) If a Note is designated as a Floating Rate/Fixed Rate
Note, such Note shall, except as otherwise provided in the applicable
Note Terms Certificate, bear interest at the rate determined by
reference to the applicable Interest Rate Basis or Bases plus or minus
the applicable Spread, if any, multiplied by the applicable Spread
Multiplier, if any. Commencing on the Initial Interest Reset Date, the
rate at which interest on such Floating Rate/Fixed Rate Note shall be
payable shall be reset as of each Interest Reset Date; provided,
however, that the interest rate in effect for the period commencing on
the date specified in the applicable Note Terms Certificate (the "Fixed
Rate Commencement Date") to the Maturity Date shall be the Fixed
Interest Rate, if such rate is specified in the Note Terms Certificate
or, if no such Fixed Interest Rate is specified, the interest rate in
effect thereon on the day immediately preceding the Fixed Rate
Commencement Date. The rate of interest on Floating Rate/Fixed Rate
Notes will not reset after the applicable Fixed Rate Commencement Date.
(d) If a Note is designated as an Inverse Floating Rate Note,
such Note shall, except as otherwise provided in the applicable Note
Terms Certificate, bear interest at the Fixed Interest Rate minus the
rate determined by reference to the applicable Interest Rate Basis or
Bases plus or minus the applicable Spread, if any, multiplied by the
applicable Spread Multiplier, if any; provided, however, that, unless
otherwise specified in the applicable Note Terms Certificate, the
interest rate thereon shall not be less than zero. Commencing on the
Initial Interest Reset Date, the rate at which interest on such Inverse
Floating Rate Note shall be payable shall be reset as of each Interest
Reset Date.
The foregoing provisions of this Section 2.10 are subject to the
proviso that, in each case, the interest rate in effect for the period, if any,
from the date of issue to the Initial Interest Reset Date shall be the initial
interest rate of such Note (the "Initial Interest Rate"). Except as provided in
any applicable Note Terms Certificate, interest will be payable, in the case of
Floating Rate Notes that reset: (i) daily, weekly or monthly, on the third
Wednesday of each month or on the third Wednesday of March, June, September or
December of each year, as specified in the applicable Note Terms Certificate;
(ii) quarterly, on the third Wednesday of March, June, September or December of
each year; (iii) semiannually, on the third Wednesday of the two months of each
year specified in the applicable Note Terms Certificate; and (iv) annually, on
the third Wednesday of the month of each year specified in the applicable Note
Terms Certificate (each an "Interest Payment Date") and, in each case, on the
Maturity Date. If any Interest Payment Date other than the Maturity Date for any
Floating Rate Note would otherwise be a day that is not a Business Day, such
Interest Payment Date shall be postponed to the next succeeding Business Day,
except that, in the case of a Floating Rate Note as to which LIBOR is an
applicable Interest Rate Basis and such Business Day falls in the next
succeeding calendar month, such Interest Payment Date shall be the immediately
preceding Business Day. If any Interest Reset Date for any Floating Rate Note
would otherwise be a day that is not a Business Day, such Interest Reset Date
shall be postponed to the next succeeding Business Day, except that in the case
of a Floating Rate Note as to which LIBOR is an applicable Interest Rate Basis
<PAGE>
and such Business Day falls in the next succeeding calendar month, such Interest
Reset Date shall be the immediately preceding Business Day. Notwithstanding the
foregoing, a Floating Rate Note may also have either or both of the following: a
maximum interest rate, or ceiling, that may accrue during any Interest Period (a
"Maximum Interest Rate") and a minimum interest rate, or floor, that may accrue
during any Interest Period (a "Minimum Interest Rate"). In addition to any
Maximum Interest Rate that may apply to a Floating Rate Note, the interest rate
on Floating Rate Notes will in no event be higher than the maximum rate
permitted by New York law, as the same may be modified by United States law.
Interest accrued on a Floating Rate Note shall be calculated by multiplying its
principal amount by an accrued interest factor. Such accrued interest factor
shall be computed by adding the interest factor calculated for each day in the
applicable Interest Period. Unless otherwise provided in the applicable Note
Terms Certificate, the interest factor for each such day shall be computed by
dividing the interest rate applicable to such day by 360, in the case of
Floating Rate Notes for which an applicable Interest Rate Basis is the CD Rate,
the Commercial Paper Rate, the Eleventh District Cost of Funds Rate, the Federal
Funds Rate, LIBOR or the Prime Rate, or by the actual number of days in the year
in the case of Floating Rate Notes for which an applicable Interest Rate Basis
is the CMT Rate or the Treasury Rate. Unless otherwise specified in the
applicable Note Terms Certificate, if the interest rate is to be calculated with
reference to two or more Interest Rate Bases, such interest rate shall be
calculated in each Interest Period in the same manner as if only the applicable
Interest Rate Basis specified in the applicable Note Terms Certificate applied.
Section 2.11 Redemption at the Option of the Issuer. To the extent an
applicable Note Terms Certificate provides for an Initial Redemption Date, Notes
shall be redeemable on any date on and after such Initial Redemption Date but
prior to their Stated Maturity Date in whole or in part at the option of the
Issuer in accordance with the provisions of Article Twelve of the Indenture;
provided, however, that any partial redemption of Notes shall be in increments
of $1,000 or any other integral multiple of an authorized denomination
specified in the applicable Note Terms Certificate and that any remaining
principal amount thereof shall be at least $1,000 or the minimum denomination
applicable thereto. Any such redemption shall be at the applicable Redemption
Price, together with unpaid interest accrued to the date of redemption.
The Issuer may at any time purchase Notes at any price or prices in the open
market or otherwise. Notes so purchased by the Issuer may, at the discretion
of the Issuer, be held, resold or surrendered to the Issuing and Paying Agent
for cancellation.
Section 2.12 Repayment at the Option of the Holder. To the extent an
applicable Note Terms Certificate provides for one or more Optional Repayment
Dates, Notes shall be subject to repayment at the option of the Holders thereof
on any such Optional Repayment Date in whole or in part; provided, however, that
any partial repayment of Notes shall be in increments of $1,000 or any other
integral multiple of an authorized denomination specified in the applicable Note
Terms Certificate and that any remaining principal amount thereof shall be at
least $1,000 or the minimum denomination applicable thereto. Any such repayment
shall be at a repayment price of 100% of the unpaid principal amount to be
<PAGE>
repaid on such Optional Repayment Date, together with unpaid interest accrued to
the date of repayment. For any Note to be repaid on an Optional Repayment Date,
such Note must be received, together with the form thereon entitled "Option to
Elect Repayment" duly completed, by the Issuing and Paying Agent not more than
60 nor less than 30 calendar days prior to the date of repayment. Exercise of
such repayment option by the Holder will be irrevocable. The Issuer shall
comply with any applicable requirements of Section 14(e) of the Securities
Exchange Act of 1934, as amended, and the rules promulgated thereunder, and any
other securities laws or regulations in connection with any such repayment.
Section 2.13 Additional Event of Default. Pursuant to subsection (g)
of Section 5.1 of Article Five of the Second Senior Indenture, the following
event shall constitute an Event of Default with respect to the Notes:
Except as otherwise provided in this Fourth Supplemental Indenture, a
failure to make any payment of the principal of, premium, if any, or
interest in the Specified Currency in which such payment is required to
be made.
ARTICLE III
MISCELLANEOUS
Section 3.1 Counterparts. This Fourth Supplemental Indenture may be
executed in any number of counterparts, each of which shall be deemed an
original, but all of which shall together constitute but one and the same
instrument.
Section 3.2 Effect of Headings. The Article and Section headings
herein and in the Table of Contents are for convenience only and shall not
affect the construction hereof.
Secton 3.3 Provisions for the Sole Benefit of Parties and Holders.
Nothing in the Indenture or in the Notes, expressed or implied, shall give or
be construed to give to any person, firm or corporation, other than the parties
hereto and their successors and the Holders, any legal or equitable right,
remedy or claim under the Indenture or under any covenant or provision contained
therein, all such covenants and provisions being for the sole benefit of the
parties hereto and their successors and of the Holders.
Section 3.4 Governing Law. The Notes will be governed by and
construed in accordance with the laws of the State of New York without reference
to the conflicts of laws principles of such body of laws.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Supplemental Indenture to be duly executed and the appropriate corporate seals
to be hereunto affixed and attested, all as of the 29th day of September, 1998.
HALLIBURTON COMPANY
By: /s/ Susan S. Keith
-----------------------------------
Title: Vice President and Secretary
Attest:
/s/ John M. Allen
- -----------------------------
Title: Assistant Secretary
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION
(formerly Texas Commerce Bank
National Association)
By: /s/ Michael A. Scrivner
-----------------------------------
Title: Vice President
<PAGE>
Exhibit A
INTEREST RATE DEFINITIONS
Unless otherwise specified in the applicable Note Terms Certificate,
the Calculation Agent shall determine each Interest Rate Basis in accordance
with the following provisions.
CD Rate. Unless otherwise specified in the applicable Note Terms
Certificate, "CD Rate" means, with respect to any Interest Determination Date
relating to a Floating Rate Note for which the interest rate is determined with
reference to the CD Rate, the rate on such Interest Determination Date for
negotiable United States dollar certificates of deposit having the Index
Maturity specified in the applicable Note Terms Certificate as published by the
Board of Governors of the Federal Reserve System in "Statistical Release H.
15(519), Selected Interest Rates" or any successor publication ("Statistical
Release H.15") under the heading "CDS (Secondary Market)," or, if not published
by 3:00 P.M., New York City time, on the related Calculation Date, the rate on
such Interest Determination Date for negotiable United States dollar
certificates of deposit of the Index Maturity specified in the applicable Note
Terms Certificate as published by the Federal Reserve Bank of New York in its
daily statistical release "Composite 3:30 P.M. Quotations for U.S. Government
Securities" or any successor publication ("Composite Quotations") under the
heading "Certificates of Deposit." If such rate is not published in either
Statistical Release H.15 or Composite Quotations by 3:00 P.M., New York City
time, on the related Calculation Date, then the CD Rate on such Interest
Determination Date shall be calculated by the Calculation Agent as the
arithmetic mean of the secondary market offered rates as of 10:00 A.M., New York
City time, on such Interest Determination Date, of three leading nonbank dealers
in negotiable United States dollar certificates of deposit in The City of New
York (which may include the Agents or their affiliates) selected by the
Calculation Agent for negotiable United States dollar certificates of deposit of
major United States money center banks with a remaining maturity closest to the
Index Maturity specified in the applicable Note Terms Certificate in an amount
that is representative for a single transaction in that market at that time;
provided, however, that, if the dealers so selected by the Calculation Agent are
not then quoting such securities, the CD Rate determined as of such Interest
Determination Date shall be the CD Rate in effect immediately prior to such
Interest Determination Date.
CMT Rate. Unless otherwise specified in the applicable Note Terms
Certificate, "CMT Rate" means, with respect to any Interest Determination Date
relating to a Floating Rate Note for which the interest rate is determined with
reference to the CMT Rate, the rate displayed on the Designated CMT Telerate
Page under the caption "... Treasury Constant Maturities... Federal Reserve
Board Release H.15... Mondays Approximately 3:45 P.M.," under the column for the
Designated CMT Index Maturity for (i), if the Designated CMT Telerate Page is
7055, the rate on such Interest Determination Date and (ii), if the Designated
CMT Telerate Page is 7052, the weekly or monthly average, as specified in the
applicable Note Terms Certificate, for the week or the month, as applicable,
<PAGE>
ended immediately preceding the week or the month, as applicable, in which the
related Interest Determination Date falls. If such rate is no longer displayed
on the relevant page or is not displayed by 3:00 P.M., New York City time, on
the related Calculation Date, then the CMT Rate for such Interest Determination
Date shall be the treasury constant maturity rate for the Designated CMT Index
Maturity for such Interest Determination Date as published in Statistical
Release H.15. If such rate is no longer published or is not published by 3:00
P.M., New York City time, on the related Calculation Date, then the CMT Rate for
such Interest Determination Date shall be the treasury constant maturity rate
for the Designated CMT Index Maturity (or such other United States Treasury rate
for the Designated CMT Index Maturity) for such Interest Determination Date as
may then be published by either the Board of Governors of the Federal Reserve
System or the United States Department of the Treasury and as the Calculation
Agent determines to be comparable to the rate formerly displayed on the
Designated CMT Telerate Page and published in Statistical Release H.15. If such
information is not provided by 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate on such Interest Determination Date shall be
calculated by the Calculation Agent as a yield to maturity, based on the
arithmetic mean of the secondary market closing offer prices as of approximately
3:30 P.M., New York City time, on such Interest Determination Date reported,
according to their written records, by three leading United States government
securities dealers in The City of New York (which may include the Agents or
their affiliates) (each, a "Reference Dealer") selected by the Calculation Agent
(from five such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for the most recently issued direct noncallable fixed rate obligations
of the United States ("Treasury Notes") with an original maturity of
approximately the Designated CMT Index Maturity and a remaining term to maturity
of not less than such Designated CMT Index Maturity minus one year. If the
Calculation Agent is unable to obtain three such Treasury Note quotations, the
CMT Rate on such Interest Determination Date shall be calculated by the
Calculation Agent as a yield to maturity based on the arithmetic mean of the
secondary market offered rates as of approximately 3:30 P.M., New York City
time, on such Interest Determination Date of three Reference Dealers in The City
of New York (from five such Reference Dealers selected by the Calculation Agent
and eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for Treasury Notes with an original maturity of the number of years
that is the next highest to the Designated CMT Index Maturity and a remaining
term to maturity closest to the Designated CMT Index Maturity and in an amount
of at least $100 million. If only three or four (and not five) of such Reference
Dealers are then quoting such securities, then the CMT Rate shall be based on
the arithmetic mean of the offered rates obtained and neither the highest nor
the lowest of such quotes shall be eliminated; provided, however, that, if fewer
than three Reference Dealers so selected by the Calculation Agent are then
quoting such securities, the CMT Rate determined as of such Interest
Determination Date shall be the CMT Rate in effect on such Interest
Determination Date. If two Treasury Notes with an original maturity as described
in the second preceding sentence have remaining terms to maturity equally close
<PAGE>
to the Designated CMT Index Maturity, the Calculation Agent shall obtain
quotations for the Treasury Note with the shorter remaining term to maturity.
"Designated CMT Telerate Page" means the display on the Dow Jones
Telerate Service (or any successor service) on the page specified in the
applicable Note Terms Certificate (or any other page as may replace such page on
such service) for the purpose of displaying Treasury Constant Maturities as
reported in Statistical Release H.15. If no such page is specified in the
applicable Note Terms Certificate, the Designated CMT Telerate Page shall be
7052 for the most recent week.
"Designated CMT Index Maturity" means the original period to maturity
of the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in the applicable Note Terms Certificate with respect to which the CMT
Rate will be calculated or, if no such maturity is specified in the applicable
Note Terms Certificate, 2 years.
Commercial Paper Rate. Unless otherwise specified in the applicable
Note Terms Certificate, "Commercial Paper Rate" means, with respect to any
Interest Determination Date relating to a Floating Rate Note for which the
interest rate is determined with reference to the Commercial Paper Rate, the
Money Market Yield (as hereinafter defined) on such date of the rate for
commercial paper having the Index Maturity specified in the applicable Note
Terms Certificate as published in Statistical Release H.15 under the heading
"Commercial Paper-Nonfinancial." If such rate is not published by 3:00 P.M., New
York City time, on the related Calculation Date, then the Commercial Paper Rate
on such Interest Determination Date shall be the Money Market Yield of the rate
for commercial paper having the Index Maturity specified in the applicable Note
Terms Certificate as published in Composite Quotations under the heading
"Commercial Paper-Nonfinancial" (with an Index Maturity of one month or three
months being deemed to be equivalent to an Index Maturity of 30 days or 90 days,
respectively). If such rate is not yet published in either Statistical Release
H.15 or Composite Quotations by 3:00 P.M., New York City time, on the related
Calculation Date, then the Commercial Paper Rate on such Interest Determination
Date shall be calculated by the Calculation Agent as the Money Market Yield of
the arithmetic mean of the offered rates at approximately 11:00 A.M., New York
City time, on such Interest Determination Date of three leading dealers of
commercial paper in The City of New York (which may include the Agents or their
affiliates) selected by the Calculation Agent for commercial paper having the
Index Maturity specified in the applicable Note Terms Certificate placed for an
industrial issuer whose bond rating is "Aa," or the equivalent, from a
nationally recognized statistical rating organization; provided, however, that,
if the dealers so selected by the Calculation Agent are not quoting such
securities, the Commercial Paper Rate determined as of such Interest
Determination Date will be the Commercial Paper Rate in effect immediately prior
to such Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage)
calculated in accordance with the following formula:
<PAGE>
Money Market Yield = D x 360 x 100
-------------------
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the applicable Interest Reset Period.
Eleventh District Cost of Funds Rate. Unless otherwise specified in the
applicable Note Terms Certificate, "Eleventh District Cost of Funds Rate" means,
with respect to any Interest Determination Date relating to a Floating Rate Note
for which the interest rate is determined with reference to the Eleventh
District Cost of Funds Rate, the rate equal to the monthly weighted average cost
of funds for the calendar month immediately preceding the month in which such
Interest Determination Date falls, as set forth under the caption "11th
District" on Telerate Page 7058 as of 11:00 A.M., San Francisco time, on such
Interest Determination Date. If such rate does not appear on Telerate Page 7058
on such Interest Determination Date, then the Eleventh District Cost of Funds
Rate on such Interest Determination Date shall be the monthly weighted average
cost of funds paid by member institutions of the Eleventh Federal Home Loan Bank
District that was most recently announced (the "Index") by the Federal Home Loan
Bank ("FHLB") of San Francisco as such cost of funds for the calendar month
immediately preceding such Interest Determination Date. If the FHLB of San
Francisco fails, on or prior to such Interest Determination Date, to announce
the Index for the immediately preceding calendar month, the Eleventh District
Cost of Funds Rate determined as of such Interest Determination Date will be the
Eleventh District Cost of Funds Rate in effect immediately prior to such
Interest Determination Date.
Federal Funds Rate. Unless otherwise specified in the applicable Note
Terms Certificate, "Federal Funds Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Federal Funds Rate, the rate on such date
for United States dollar federal funds as published in Statistical Release H.15
under the heading "Federal Funds (Effective)" or, if not published by 3:00 P.M.,
New York City time, on the related Calculation Date, the rate on such Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate." If such rate is not published in either
Statistical Release H.15 or Composite Quotations by 3:00 P.M., New York City
time, on the related Calculation Date, then the Federal Funds Rate on such
Interest Determination Date shall be calculated by the Calculation Agent as the
arithmetic mean of the rates for the last transaction in overnight United States
dollar federal funds arranged by three leading brokers of federal funds
transactions in The City of New York (which may include the Agents or their
affiliates) selected by the Calculation Agent prior to 9:00 A.M., New York City
time, on such Interest Determination Date; provided, however, that, if the
brokers so selected by the Calculation Agent are not then quoting such
securities, the Federal Funds Rate determined as of such Interest Determination
Date shall be the Federal Funds Rate in effect immediately prior to such
Interest Determination Date.
<PAGE>
LIBOR. Unless otherwise specified in the applicable Note Terms
Certificate, "LIBOR" means the rate determined in accordance with the following
provisions:
(i) With respect to any Interest Determination Date relating
to a Floating Rate Note for which the interest rate is determined with
reference to LIBOR, LIBOR will be either: (a) if "LIBOR Reuters" is
specified in the applicable Note Terms Certificate, the arithmetic mean
of the offered rates (unless the Designated LIBOR Page by its terms
provides only for a single rate, in which case such single rate shall
be used) for deposits in United States dollars having the Index
Maturity specified in such Note Terms Certificate, commencing on the
applicable Interest Reset Date, that appear on the Designated LIBOR
Page as of 11:00 A.M., London time, on such Interest Determination
Date, or (b) if "LIBOR Telerate" is specified in the applicable Note
Terms Certificate or if neither "LIBOR Reuters" nor "LIBOR Telerate" is
specified in the applicable Note Terms Certificate as the method for
calculating LIBOR, the rate for deposits in United States dollars
having the Index Maturity specified in such Note Terms Certificate,
commencing on such Interest Reset Date, that appears on the Designated
LIBOR Page as of 11:00 A.M., London time, on such Interest
Determination Date. If fewer than two such offered rates so appear,
LIBOR on such Interest Determination Date shall be determined in
accordance with the provisions described in clause (ii) below.
(ii) With respect to any Interest Determination Date on which
fewer than two offered rates appear on the Designated LIBOR Page as
specified in clause (i) above, LIBOR will be the arithmetic mean of the
quotations for deposits in United States dollars for the period of the
Index Maturity specified in the applicable Note Terms Certificate,
commencing on the applicable Interest Reset Date, offered to prime
banks in the London interbank market by the principal London offices of
four major reference banks (which may include affiliates of the Agents)
in the London interbank market, as selected by the Calculation Agent,
at approximately 11:00 A.M., London time, on such Interest
Determination Date and in a principal amount that is representative for
a single transaction in United States dollars in such market at such
time. If fewer than two such quotations are so provided, then LIBOR on
such Interest Determination Date shall be the arithmetic mean of the
rates quoted at approximately 11:00 A.M., in London, England, on such
Interest Determination Date by three major reference banks (which may
include affiliates of the Agents) in London, England, selected by the
Calculation Agent for loans in United States dollars to leading
European banks, having the Index Maturity specified in the applicable
Note Terms Certificate and in a principal amount that is representative
for a single transaction in United States dollars in such market at
such time; provided, however, that, if the banks so selected by the
Calculation Agent are not then quoting such securities, LIBOR
determined as of such Interest Determination Date shall be LIBOR in
effect immediately prior to such Interest Determination Date.
<PAGE>
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in
the applicable Note Terms Certificate, the display on the Reuter Monitor Money
Rates Service (or any successor service) on the page specified in each Note
Terms Certificate (or any other page as may replace such page on such service)
for the purpose of displaying the London interbank rates of major banks for
United States dollars, or (b) if "LIBOR Telerate" is specified in the applicable
Note Terms Certificate or neither "LIBOR Reuters" nor "LIBOR Telerate" is
specified in the applicable Note Terms Certificate as the method for calculating
LIBOR, the display on the Dow Jones Telerate Service (or any successor service)
on the page specified in such Note Terms Certificate (or any other page as may
replace such page on such service) for the purpose of displaying the London
interbank rates of major banks for United States dollars.
Prime Rate. Unless otherwise specified in the applicable Note Terms
Certificate, "Prime Rate" means, with respect to any Interest Determination Date
relating to a Floating Rate Note for which the interest rate is determined with
reference to the Prime Rate, the rate on such date as such rate is published in
Statistical Release H.15 under the heading "Bank Prime Loan." If such rate is
not published prior to 3:00 P.M., New York City time, on the related Calculation
Date, then the Prime Rate shall be the arithmetic mean of the rates of interest
publicly announced by each bank that appears on the Reuters Screen USPRIME1 Page
(as hereinafter defined) as such bank's prime rate or base lending rate as in
effect for such Interest Determination Date. If fewer than four such rates
appear on the Reuters Screen USPRIME1 Page for such Interest Determination Date,
then the Prime Rate on such Interest Determination Date shall be the arithmetic
mean of the prime rates or base lending rates quoted on the basis of the actual
number of days in the year divided by a 360-day year as of the close of business
on such Interest Determination Date by four major money center banks (which may
include affiliates of the Agents) in The City of New York selected by the
Calculation Agent. If fewer than four such quotations are so provided, then the
Prime Rate on such Interest Determination Date shall be the arithmetic mean of
four prime rates quoted on the basis of the actual number of days in the year
divided by a 360-day year as of the close of business on such Interest
Determination Date as furnished in The City of New York by the major money
center banks, if any, that have provided such quotations and by substitute banks
or trust companies (which may include affiliates of the Agents) selected by the
Calculation Agent to provide such rate or rates in order to obtain four such
prime rate quotations, provided that such substitute banks or trust companies
are organized and doing business under the laws of the United States, or any
State thereof, each having total equity capital of at least $500 million and
being subject to supervision or examination by Federal or State authority;
provided, however, that, if the banks or trust companies so selected by the
Calculation Agent are not then quoting such securities, the Prime Rate
determined as of such Interest Determination Date shall be the Prime Rate in
effect immediately prior to such Interest Determination Date.
"Reuters Screen USPRIME1 Page" means the display on the Reuter Monitor
Money Rates Service (or any successor service) on the "USPRIME1" page (or such
other page as may replace the USPRIME1 page on such service) for the purpose of
displaying prime rates or base lending rates of major United States banks.
<PAGE>
Treasury Rate. Unless otherwise specified in the applicable Note Terms
Certificate, "Treasury Rate" means, with respect to any Interest Determination
Date relating to a Floating Rate Note for which the interest rate is determined
by reference to the Treasury Rate, the rate from the auction held on such
Interest Determination Date (the "Auction") of direct obligations of the United
States ("Treasury Bills") having the Index Maturity specified in the applicable
Note Terms Certificate, as such rate is published in Statistical Release H.15
under the heading "Treasury Bills-auction average (investment)" or, if not
published by 3:00 P.M., New York City time, on the related Calculation Date, the
auction average rate of such Treasury Bills (expressed as a bond equivalent on
the basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis) as otherwise announced by the United States Department of the Treasury.
If the results of the Auction of Treasury Bills having the Index Maturity
specified in the applicable Note Terms Certificate are not reported as provided
by 3:00 P.M., New York City time, on the related Calculation Date or if no such
Auction is held, then the Treasury Rate will be calculated by the Calculation
Agent as a yield to maturity (expressed as a bond equivalent on the basis of a
year of 365 or 366 days, as applicable, and applied on a daily basis) of the
arithmetic mean of the secondary market bid rates, as of approximately 3:30
P.M., New York City time, on such Interest Determination Date, of three leading
United States government securities dealers (which may include the Agents or
their affiliates) selected by the Calculation Agent, for the issue of Treasury
Bills with a remaining maturity closest to the Index Maturity specified in the
applicable Note Terms Certificate; provided, however, that, if the dealers so
selected by the Calculation Agent are not then quoting such securities, the
Treasury Rate determined as of such Interest Determination Date will be the
Treasury Rate in effect immediately prior to such Interest Determination Date.
Other/Additional Provisions; Addendum
Any provisions with respect to the Notes, including the specification
and determination of one or more Interest Rate Bases, the calculation of the
interest rate applicable to a Floating Rate Note, the Interest Payment Dates,
the Stated Maturity Date, any redemption or repayment provisions or any other
term relating thereto, may be modified and/or supplemented as specified under
"Other/Additional Provisions" on the face thereof or in an Addendum relating
thereto, if so specified on the face thereof and described in the applicable
Note Terms Certificate.
<PAGE>
Discount Notes
The Issuer may offer Notes ("Discount Notes") from time to time that
have an Issue Price (as specified in the applicable Note Terms Certificate) that
is less than 100% of the principal amount thereof (i.e., par) by more than a
percentage equal to the product of 0.25% and the number of full years to the
Stated Maturity Date. Discount Notes may not bear any interest currently or may
bear interest at a rate that is below market rates at the time of issuance. The
difference between the Issue Price of a Discount Note and par is referred to
herein as the "Discount." In the event of redemption, repayment or acceleration
of maturity of a Discount Note, the amount payable to the Holder of such
Discount Note shall be equal to the sum of (i) the Issue Price (increased by any
accruals of Discount) and, in the event of any redemption of such Discount Note,
multiplied by the Initial Redemption Percentage (as adjusted by any applicable
Annual Redemption Percentage Reduction) and (ii) unpaid interest, if any,
accrued thereon to the date of such redemption, repayment or acceleration of
maturity, as the case may be.
Unless otherwise specified in the applicable Note Terms Certificate,
for purposes of determining the amount of Discount that has accrued as of any
date on which a redemption, repayment or acceleration of maturity occurs for a
Discount Note, such Discount shall be accrued using a constant yield method. The
constant yield shall be calculated using a 30-day month, 360-day year
convention, a compounding period that, except for the Initial Period (as
hereinafter defined), corresponds to the shortest period between Interest
Payment Dates for the applicable Discount Note (with ratable accruals within a
compounding period), a coupon rate equal to the initial coupon rate applicable
to such Discount Note and an assumption that the maturity of such Discount Note
will not be accelerated. If, in the case of an interest bearing Discount Note,
the period from the date of issue to the initial Interest Payment Date for a
Discount Note (the "Initial Period") is shorter than the compounding period for
such Discount Note, a proportionate amount of the yield for an entire
compounding period shall be accrued. If, in such case, the Initial Period is
longer than the compounding period, then such period shall be divided into a
regular compounding period and a short period with the short period being
treated as provided in the preceding sentence. The accrual of the applicable
Discount may differ from the accrual of original issue discount for purposes of
the Internal Revenue Code of 1986, as amended (the "Code"), certain Discount
Notes may not be treated as having original issue discount within the meaning of
the Code, and Notes other than Discount Notes may be treated as issued with
original issue discount for federal income tax purposes.
<PAGE>
Indexed Notes
The Issuer may from time to time offer Notes ("Indexed Notes") with the
amount of principal, premium or interest payable in respect thereof to be
determined by reference to the price or prices of specified commodities or
stocks or to other items, in each case as specified in the applicable Note Terms
Certificate. In certain cases, Holders of Indexed Notes may receive a principal
payment on the Maturity Date that is greater than or less than the principal
amount of such Indexed Notes depending upon the relative value on the Maturity
Date of the specified indexed item. Information as to the method for determining
the amount of principal, premium, if any, or interest, if any, payable in
respect of Indexed Notes, certain historical information with respect to the
specified indexed items and any material U.S. tax considerations associated with
an investment in Indexed Notes shall be specified in the applicable Note Terms
Certificate.
Amortizing Notes
The Issuer may from time to time offer Notes ("Amortizing Notes") with
the amount of principal thereof and interest thereon payable in installments
over the term of such Notes. Unless otherwise specified in the applicable Note
Terms Certificate, interest on each Amortizing Note will be computed on the
basis of a 360-day year of twelve 30-day months. Payments with respect to
Amortizing Notes will be applied first to interest due and payable thereon and
then to the reduction of the unpaid principal amount thereof. Further
information concerning additional terms and provisions of Amortizing Notes will
be specified in the applicable Note Terms Certificate, including a table setting
forth repayment information for such Amortizing Notes.
RESOLUTIONS OF THE
BOARD OF DIRECTORS OF
HALLIBURTON COMPANY
EFFECTIVE SEPTEMBER 28, 1998
WHEREAS, the Board of Directors of the Company has heretofore
authorized the offering from time to time, at an aggregate initial
offering price of up to $500,000,000, of Medium-Term Notes Due Nine
Months or More From Date of Issue, Series A (the "Series A Notes"), and
the Company has registered the offering, sale and delivery of the
Series A Notes pursuant to the Securities Act of 1933, as amended,
pursuant to a Registration Statement on Form S-3 (the "First
Registration Statement") filed with the Securities and Exchange
Commission (the "Commission"); and
WHEREAS, to date Series A Notes, offered by the Company at an
aggregate initial offering price of $300,000,000, have been issued and
sold by the Company under the First Registration Statement; and
WHEREAS, the Board of Directors of the Company has determined
that the requirements of the Company for long term debt capital may
exceed $200,000,000, the amount of Series A Notes remaining available
for sale and that, therefore, it is in the best interest of the Company
to establish an additional Medium Term Notes Program; and
WHEREAS, pursuant to resolutions theretofore adopted by the
Board of Directors of the Company, the Company filed a Registration
Statement on Form S-3 (the "Second Registration Statement") on August
1, 1997 relating to the offering from time to time, at an aggregate
initial offering price of up to $600,000,000, of senior and
subordinated debt securities of the Company, none of which has yet been
offered or sold; and
WHEREAS, subject to certain limitations, this Board of
Directors deems it appropriate to delegate its authority to certain
officers of the Company in connection with the Series B Notes (as
hereinafter defined) that are not originally offered at one time,
including the authority to fix the terms of such Series B Notes; and
WHEREAS, terms used in the following resolutions (and not
otherwise defined therein) are defined in the Second Senior Indenture
dated as of December 1,1996, among the predecessor of the Company and
Texas Commerce Bank National Association (now Chase Bank of Texas, N.
A. and herein called the "Trustee") as the same has heretofore been and
may hereafter be amended or supplemented (the "Second Senior
Indenture");
<PAGE>
NOW, THEREFORE, BE IT:
RESOLVED, that this Board of Directors does hereby authorize
the issuance under the Second Senior Indenture of a series of
securities with terms, in addition to the terms provided in the Second
Senior Indenture with respect to Securities of a series issued
thereunder, as follows:
(i) The title of the Securities is "Medium-Term Notes Due
Nine Months or More From Date of Issue, Series B" (the "Series B
Notes").
(ii) The Series B Notes are limited in aggregate principal
amount to the amount that may be sold at an aggregate initial offering
price of up to $600,000,000, subject to reduction by the aggregate
initial offering price of Securities other than the Series A Notes and
the Series B Notes sold pursuant to the Second Senior Indenture or the
Subordinated Indenture (as defined in the Second Registration
Statement). Subject to the foregoing, the aggregate principal amount of
the Series B Notes to be issued and sold from time to time shall be as
(i) determined on behalf of the Company by the Chief Executive Officer,
the President and Chief Operating Officer, any Executive Vice
President, the Vice President and Treasurer or the Vice President and
Secretary (each an "Authorized Officer") and (ii) set forth in a
written request to the Trustee for authentication (an "Authentication
Request") signed by an Authorized Officer or any Vice President, any
Assistant Treasurer, the Controller, or any other officer or employee
of the Company designated in writing by any two Authorized Officers
(each of the foregoing, a "Designated Person").
(iii) The Series B Notes may be issued only as Senior Notes.
The Series B Notes will rank equally with all other unsecured and
unsubordinated indebtedness of the Company. The Series B Notes may also
be issued as original issue discount notes ("OID Notes") and may be
issued as Global Securities. They may also be issued with the amount of
principal (and premium, if any) and/or any interest payable in respect
thereof to be determined with reference to the price or prices of
specified commodities or stocks or other price or exchange rate
("Indexed Notes").
(iv) Any interest on the Series B Notes will be payable
generally to the person in whose name a Note is registered at the close
of business on the Regular Record Date next preceding the Interest
Payment Date; provided, however, that interest payable at maturity will
be payable to the person to whom principal shall be payable.
(v) The date on which the principal of each of the Series B
Notes is payable shall be any day nine months or later from its date of
issue, as determined on behalf of the Company from time to time by an
Authorized Officer and set forth in an Authentication Request.
<PAGE>
(vi) Each Note, other than an OID Note, will bear interest
at either: a fixed rate (a "Fixed Rate Note") or a variable rate
determined by reference to an interest rate formula (a "Floating Rate
Note").
(vii) Unless otherwise indicated in the Pricing Supplement,
the Regular Record Date for any Floating Rate Note shall be the date 15
calendar days before each Interest Payment Date whether or not such
date shall be a Business Day and the Interest Payment Dates for any
Fixed Rate Note shall be March 31 and September 30 of each year.
(viii) Unless otherwise determined on behalf of the Company by
an Authorized Officer and set forth in an Authentication Request,
payments of principal of, premium, if any, and interest on the Series B
Notes shall be at the corporate trust office maintained by the Trustee,
as paying agent, in The City of New York, or such other office or
agency as may be designated by the Company; provided, however, that at
the option of the Company payment of interest (other than interest at
maturity) may be made by check mailed to the address of the Person
entitled thereto at such address as shall appear in the Security
Register; and provided, further, that payment of the principal of,
premium, if any, and interest due on any Note which is a Book-Entry
Note will be made in immediately available funds at such corporate
trust office or such other office or agency.
(ix) If so specified in the applicable Pricing Supplement,
the Series B Notes will be repayable by the Company in whole or from
time to time in part at the option of the Holders thereof on the
optional repayment dates ("Optional Repayment Dates") specified in such
Pricing Supplement.
(x) The right, if any, of the Company to redeem each of the
Series B Notes, in whole or in part, at its option and the period or
periods within which, the price or prices at which and the terms and
conditions upon which such Note may be so redeemed shall be as
established on behalf of the Company by an Authorized Officer and set
forth in the applicable Pricing Supplement.
(xi) The Series B Notes may be denominated in U.S. dollars or
in such other currency or composite currency unit (a "Specified
Currency") as indicated in the applicable Pricing Supplement, and,
unless otherwise specified in the applicable Pricing Supplement,
payments of principal of, premium, if any, and interest on the Series B
Notes may be made only in U.S. dollars. If so specified in the
applicable Pricing Supplement, payments of principal of, premium, if
any, and interest on the Series B Notes denominated in other than U.S.
dollars will be made in the Specified Currency at the option of the
Holders thereof.
(xii) Unless otherwise determined on behalf of the Company by
an Authorized Officer and set forth in an Authentication Request, the
Series B Notes (other than Global Notes representing Book-Entry Notes)
denominated in U.S. dollars ("U.S. Currency Notes") will be issued only
in fully registered form in minimum denominations of $1,000 and
integral multiples thereof. Notes denominated in a Specified Currency
other than U.S. dollars ("Foreign Currency Notes") will be issued in
<PAGE>
authorized denominations that are equivalent, at the 11:00 a.m. buying
rate in the City of New York for cable transfers in such Specified
Currency as certified for customs purposes by the Federal Reserve Bank
of New York (the "Market Exchange Agent") on the first Business Day in
the City of New York and the country issuing such currency next
preceding the date on which the Company accepts the offer to purchase
such Foreign Currency Note, to $100,000 (rounded down to an integral
multiple of 10,000 units of such Specified Currency) and integral
multiples of 10,000 units of such Specified Currency in excess thereof.
(xiii) Any legends to be stamped or imprinted on all or a
portion of the Series B Notes, and the terms and conditions upon which
any legends may be removed, shall be as set forth in the form of Series
B Notes.
(xiv) If agreed by the initial purchaser and on behalf of the
Company by an Authorized Officer and set forth in an Authentication
Request, any of the Series B Notes shall be issued upon original
issuance as Book-Entry Notes. The Depository with respect to Book-Entry
Notes shall be The Depository Trust Company. Any such Book-Entry Note
may be exchanged for Series B Notes registered in the name of a Holder
other than the Depository or its nominee only if (i) the Depository
notifies the Company that it is unwilling or unable to continue as
Depository or the Depository ceases to be a clearing agency registered
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (ii) the Company in its sole discretion instructs the Trustee
that such Book-Entry Note shall be so exchangeable or (iii) there shall
have occurred and be continuing an Event of Default with respect to
such Book-Entry Note.
(xv) The provisions of Sections 10.1(B) and 10.1(C) of the
Second Senior Indenture relating to defeasance and discharge prior to
maturity are applicable to the Series B Notes; and further
RESOLVED, that the form, terms and provisions of the Third
Supplemental Indenture to be dated as of August 1,1997 between the
Company and the Trustee relating to the Series A Notes and the form,
terms and provisions of the Fourth Supplemental Indenture to be dated
as of September 30, 1998 between the Company and the Trustee relating
to the Series B Notes, each in the form presented to this meeting and
supplementing and amending the Second Senior Indenture, be and they
hereby are authorized and approved; and further
RESOLVED, that the Authorized Officers be and they hereby are
authorized, for, in the name and on behalf of the Company, to execute,
acknowledge and deliver the Third Supplemental Indenture and the Fourth
Supplemental Indenture with such changes therein as the Authorized
Officers executing the same shall approve, such approval to be
conclusively evidenced by such officers' execution and delivery
thereof; and further
<PAGE>
RESOLVED, that the Authorized Officers be and they hereby are
authorized for, in the name and on behalf of the Company, to enter into
a distribution agreement for the Series B Notes (the "Distribution
Agreement") with an investment banking firm or firms or broker-dealer
or broker-dealers as an agent or agents (the "Note Agents") that
authorizes, among other things, (i) the Note Agents to use their
reasonable efforts to solicit purchases of the Series B Notes, (ii) the
purchase of the Series B Notes by the Note Agents acting as principal
or (iii) a firm underwriting of the sale of the Series B Notes by the
Note Agents, such Distribution Agreement to be in such form as may be
approved by an Authorized Officer, such approval to be conclusively
evidenced by such officer's execution and delivery thereof; and further
RESOLVED, that any Authorized Officer is authorized to select
one or more investment banking firms or broker-dealers ("Additional
Agents") in addition to the Note Agents to perform any or all of the
duties and obligations specified in the preceding resolution, upon
written agreement in such form as may be approved by an Authorized
Officer, with such Authorized Officer's approval to be conclusively
evidenced by his execution and delivery thereof; and further
RESOLVED, that notwithstanding the provisions of the preceding
resolutions relating to the execution of a Distribution Agreement and
the appointment of one or more Note Agents and Additional Agents, the
Company reserves the right:
(i) on its own behalf; to sell the Series B Notes directly
from time to time, in which event no commissions will be owed or paid
in connection therewith;
(ii) to sell the Series B Notes through any member or
members of a group comprised of one or more Note Agents and any
Additional Agents to the exclusion of any other Note Agents or
Additional Agents and in such event no commission or other remuneration
shall be owed to the latter Note Agents or Additional Agents; and
(iii) to accept or reject offers to purchase Series B Notes,
in whole or in part; and further
RESOLVED, that prior to sale of the Series B Notes, from time
to time and subject to the terms of the preceding resolutions, any duly
Authorized Officer shall on behalf of the Company have the authority to
determine:
(i) the aggregate principal amount and maturities of the
Series B Notes to be offered and the initial offering price of the
Series B Notes;
(ii) whether such Series B Notes are to be Fixed Rate Notes,
Floating Rate Notes or OID Notes (including zero coupon obligations)
and, if interest bearing, appropriate Interest Record Dates and
Interest Payment Dates and, if OID Notes, appropriate discount rates
with respect thereto;
<PAGE>
(iii) whether the Series B Notes are to be Indexed Notes or
Amortizing Notes;
(iv) whether the Series B Notes are to be subject to
redemption at the option of the Company and the terms thereof; if
subject to redemption;
(v) whether the Series B Notes will be subject to repayment
by the Company at the option of the Holders thereof prior to the
stated maturity of the Series B Notes, and the terms thereof,
including, without limitation, designating Optional Repayment Dates;
(vi) the amount of any discounts, allowances or commissions
to be paid or allowed to the Note Agents and to any Additional Agents;
and
(vii) any other terms of the Series B Notes and of the
offering and sale thereof that are not inconsistent with this and the
preceding resolutions;
and thereafter to cause an appropriate Prospectus Supplement and
appropriate Pricing Supplements to the Prospectus contained in the
Second Registration Statement to be prepared, filed with the Commission
and delivered to investors and one or more Authentication Requests to
be delivered to the Trustee for action in keeping therewith.
DRESSER INDUSTRIES, INC.
(Issuer and Guarantor)
AND
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
(Trustee)
Second Supplemental Indenture
Dated as of October 30, 1997
8% Guaranteed Senior Notes due 2003
<PAGE>
SECOND SUPPLEMENTAL INDENTURE dated as of October 30, 1997, by and
between DRESSER INDUSTRIES, INC. ("Successor"), a corporation incorporated and
existing under the laws of the State of Delaware and TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, (the "Trustee"), a national banking association.
RECITALS
A. Baroid Corporation (the "Company"), a corporation incorporated and existing
under the laws of the State of Delaware, has heretofore executed and delivered
to the Trustee a certain Indenture dated as of April 22, 1993, as supplemented
as of August 4, 1994, (the Indenture, as supplemented herein called the
"Indenture") providing for the issue of $150,000,000 principal amount of its 8%
Guaranteed Senior Notes due 2003 (the "Securities"). All terms used in this
Second Supplemental Indenture which are defined in the Indenture and not defined
herein shall have the same meanings assigned to them in the Indenture.
B. Pursuant to the Certificate and Articles of Dissolution and Plan of
Dissolution dated as of October 30, 1997, by the Company and the Successor, the
Company was dissolved and its assets distributed to Successor, and Successor
assumed all the Company's liabilities and obligations as of that date (the
"Dissolution") pursuant to the laws of Delaware.
C. Section 4.01 of the Indenture provides that in the event that the Company
shall sell, assign, transfer or lease all or substantially all of its assets to
a successor company, the successor company shall expressly assume by
supplemental indenture all the obligations of the Company under the Securities
and the Indenture.
D. Section 8.01 of the Indenture provides that a supplemental indenture may be
entered into by the Company and the Trustee without the consent of any Holders
to comply with Article 4.
E. The Company has furnished the Trustee with an Officers' Certificate stating
that the Dissolution and this Second Supplemental Indenture comply with clauses
(1) through (3) of Article 4 of the Indenture.
AGREEMENT
NOW THEREFORE, for and in consideration of the foregoing premises, the
parties hereto do hereby mutually covenant and agree as follows:
SECTION 1. The Successor hereby expressly assumes, from and after the
consummation of the Dissolution, all the obligations and liabilities of the
Company under the Securities and the Indenture.
<PAGE>
SECTION 2. The Successor shall, from and after the consummation of the
Dissolution, by virtue of the aforesaid assumption and the delivery of this
Second Supplemental Indenture, succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture with the same
effect as if the Successor had been named as the Company in the Indenture.
SECTION 3. Pursuant to Section 9.02 of the Indenture, any notice or
communication provided or permitted by the Indenture to be made upon, given or
furnished to, or filed with the Company shall be addressed to Dresser
Industries, Inc. at P.O. Box 718, Dallas, Texas 75221, Attention: Treasurer.
SECTION 4. In case any provision in this Second Supplemental Indenture
shall be invalid, illegal or unenforeceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired hereby.
SECTION 5. This Second Supplemental Indenture supplements the Indenture
and shall be a part and subject to all the terms thereof. Except as supplemented
hereby, the Indenture shall continue in full force and effect.
SECTION 6. This Second Supplemental Indenture shall be construed in
accordance with and governed by the laws of the State of New York.
SECTION 7. This Second Supplemental Indenture may be executed in one or
more counterparts each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instruments.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed as of the 30th day of October, 1997.
DRESSER INDUSTRIES, INC.
Attest:
/s/ George H. Juetten
--------------------------------
/s/ Rebecca R. Morris By: George H. Juetten
- ------------------------- Senior Vice President and
Secretary Chief Financial Officer
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
/s/ Letha Glover
--------------------------------
By: Letha Glover
Assistant Vice President and
Trust Officer
THIRD SUPPLEMENTAL INDENTURE
dated as of September 29, 1998
among
DRESSER INDUSTRIES, INC.
(as Issuer and Guarantor),
HALLIBURTON COMPANY,
(as Guarantor)
and
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
(as Trustee)
(Baroid Note Indenture)
<PAGE>
This Third Supplemental Indenture dated as of September 29, 1998 is
among Dresser Industries, Inc., a corporation incorporated and existing under
the laws of the State of Delaware ("Dresser"), Halliburton Company, a
corporation incorporated and existing under the laws of the State of Delaware
(the "Guarantor"), and Chase Bank of Texas, National Association (formerly Texas
Commerce Bank National Association), a national banking association, as trustee
(the "Trustee").
RECITALS:
Baroid Corporation, a corporation incorporated under the laws of the
State of Delaware ("Baroid"), duly authorized the creation of its 8% Senior
Notes due 2003 (the "Securities") and the execution and delivery of the
Indenture dated as of April 22, 1993 between Baroid and the Trustee (the
"Original Indenture") and issued the Securities pursuant to the Original
Indenture.
Following the acquisition of Baroid by Dresser, Baroid, Dresser and the
Trustee, thereunto duly authorized, entered into a Supplemental Indenture dated
as of August 4, 1994 (the "First Supplemental Indenture") pursuant to which,
among other things, Dresser fully and unconditionally guaranteed the payment of
the principal, premium, if any, and interest on the Securities and the
performance of Baroid's obligations under the Original Indenture.
On October 30, 1997, Baroid was liquidated through distribution of its
assets to and assumption of its liabilities by Dresser and was dissolved through
the filing of a Certificate of Dissolution with the Secretary of State of
Delaware.
As of October 30, 1997, Dresser and the Trustee, thereunto duly
authorized, entered into a Second Supplemental Indenture (the "Second
Supplemental Indenture") pursuant to which Dresser assumed and succeeded to all
of Baroid's obligations under the Original Indenture, as theretofore
supplemented.
On September 29, 1998, a wholly owned subsidiary of the Guarantor
merged with and into Dresser as a result of which Dresser, as the surviving
corporation, became a wholly owned subsidiary of the Guarantor.
The Guarantor has duly authorized the full and unconditional guarantee
of the Securities on the terms hereinafter set forth and has duly authorized the
execution and delivery of this Third Supplemental Indenture.
Each of Dresser and the Trustee has duly authorized the execution and
delivery of this Third Supplemental Indenture.
NOW, THEREFORE, in consideration of the premises, the covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged by the parties hereto, the parties hereto
covenant and agree as follows:
<PAGE>
ARTICLE I.
Section 1.01. Definitions. As used hereinafter:
(a) the term "Indenture" shall mean the Indenture as
supplemented by the First, Second and Third Supplemental Indentures.
(b) the term "Guarantor" shall mean Halliburton Company, a
Delaware corporation, and its successors and assigns.
Section 1.02. Other capitalized terms used but not defined herein are
defined in the Original Indenture or the First or Second Supplemental Indenture
and are used herein with the meanings ascribed to them therein.
ARTICLE II.
Section 2.01. Amendment of Article 10. Article 10 of the Original
Indenture, as supplemented by the First Supplemental Indenture and the Second
Supplemental Indenture, is hereby amended so as to be and read in its entirety
as follows:
ARTICLE 10
GUARANTEE OF SECURITIES
SECTION 10.01 Guarantee. The Guarantor for consideration
received unconditionally and irrevocably guarantees to each
Securityholder (i) the due and punctual payment of the principal of,
premium, if any, and interest on such Security when and as the same
shall become due and payable, whether at Stated Maturity, as a result
of redemption, upon exercise by the Holder of the repurchase option
upon a Change of Control, by acceleration or otherwise; (ii) the due
and punctual payment of interest on overdue principal of and interest
on the Securities, to the extent lawful; (iii) the due and punctual
performance of all other obligations under this Indenture to the
Securityholders or the Trustee in accordance with the terms of such
Security and of this Indenture; and (iv) in the case of any extension
of time of payment or renewal of any Securities or any such other
obligations, that the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, at
Stated Maturity, at redemption, upon exercise by the Holder of the
repurchase option upon a Change of Control, by acceleration or
otherwise, to be paid by such Guarantor. In all respects, the Guarantor
hereby agrees that its obligations hereunder shall be absolute and
unconditional, irrespective of, and shall be unaffected by, any
invalidity, irregularity or unenforceability of any such Security or
any other Article of this Indenture, any failure to enforce or
exercise, or delay in enforcing or exercising, any right, power or
privilege or any of the other provisions of such Security or this
Indenture, any waiver, modification or indulgence granted to the
Company with respect thereto by the Securityholders or the Trustee, or
any other circumstances which may otherwise constitute a legal or
equitable discharge of a surety or guarantor. This Guarantee is a
guarantee of payment and not of collection. The Guarantor waives
diligence, presentment, filing of claims with a court in the event of
<PAGE>
merger or bankruptcy of the Company, any right to require a proceeding
or demand first against the Company, the benefit of discussion, protest
or notice with respect to any such Security or the indebtedness
represented thereby and all other demands whatsoever, and covenants
that this Guarantee will not be discharged as to any Security except by
payment in full of the amount of principal thereof, premium, if any,
and interest thereon and as provided by this Indenture. The Guarantor
further agrees that, as between Guarantor, on the one hand, and the
Securityholders and the Trustee, on the other hand, (i) the maturity of
the obligations guaranteed hereby may be accelerated as provided in
Article 5 hereof for the purposes of this Guarantee, notwithstanding
any stay, injunction or other prohibition preventing such acceleration
in respect of the obligations guaranteed hereby, and (ii) in the event
of any acceleration of such obligations as provided in Article 5
hereof, such obligations (whether or not due and payable) shall
forthwith become due and payable by the Guarantor for the purpose of
this Guarantee. In addition, without limiting the foregoing provisions,
upon the effectiveness of an acceleration under Article 5, the Trustee
shall promptly make a demand for payment on the Securities under the
Guarantee provided for in this Article 10 and not discharged; provided
that the failure by the Trustee to make any such demand shall not
impair or otherwise affect the obligations of the Guarantor.
The Guarantee set forth in this Section 10.01 shall not be
valid or become obligatory for any purpose with respect to any Security
unless the certificate of authentication shall have been signed by the
Trustee.
The obligations of Guarantor pursuant to this Guarantee shall
continue to be effective or automatically reinstated, as the case may
be, if at any time payment of obligations under this Indenture is
rescinded or otherwise must be restored or returned upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of
the Company or the Guarantor or for any reason, all as though such
payment had not been made.
The Guarantor shall be subrogated to all rights of the
Securityholders and the Trustee under the Securities and the Indenture;
provided, however, that the Guarantor shall not be entitled to any
payments arising out of such subrogation right until the principal of,
premium, if any, and interest on all Securities shall have been
irrevocably paid in full in accordance with the terms of such
Securities, the Indenture and the Guarantee.
To the extent that any right, power or authority is available
under this Indenture to the Trustee or any Securityholder to enforce
the provisions of the Securities, the Trustee and each Securityholder
shall have all such rights, powers and authority, not inconsistent with
the express provisions of this Guarantee, necessary to enforce the
provisions of this Guarantee. Each and every default to which this
Guarantee applies shall give rise to a separate cause of action
hereunder, and separate suits may be brought hereunder as each cause of
action arises. No remedy conferred upon or reserved to the Trustee or
any Securityholder is intended to be exclusive of any other remedy or
remedies, but each and every remedy shall be cumulative and shall be in
addition to every other remedy given under this Guarantee either now or
hereafter existing at law or in equity.
<PAGE>
SECTION 10.02 Obligations of Guarantor Unconditional. Nothing
contained in this Article 10 or elsewhere in this Indenture or in any
Security is intended to or shall impair, as between Guarantor, on one
hand, and the Trustee and the Securityholders, on the other, the
obligation of Guarantor, which is absolute and unconditional, to pay to
the Securityholders and the Trustee the principal of, premium, if any,
and interest on the Securities as and when the same shall become due
and payable in accordance with the provisions of this Guarantee, nor
shall anything herein or therein prevent the Trustee or any
Securityholder from exercising all remedies otherwise permitted by
applicable law upon an Event of Default under this Indenture.
SECTION 10.03 Execution of Guarantee. To evidence its
guarantee to the Securityholders and the Trustee, the Guarantor hereby
agrees to execute a notation relating to the guarantee on each Security
authenticated and made available after the date of the Third
Supplemental Indenture for delivery by the Trustee. Such notation may
take the form of the Guaranty attached to the Third Supplemental
Indenture as Annex A. The Guarantor hereby agrees that its Guarantee
set forth in Section 10.01 shall remain in full force and effect
notwithstanding any failure to endorse on each Security a notation of
such Guarantee.
ARTICLE III.
Section 3.01. Effectiveness. This Third Supplemental Indenture shall,
upon execution and delivery hereof by all the parties hereto, become effective
as of the date hereof. From and after the effectiveness of this Third
Supplemental Indenture, the Indenture, as hereby supplemented, amended and
modified, shall remain in full force and effect.
Section 3.02. References. Each reference in the Indenture or this Third
Supplemental Indenture to any article, section, term or provision of the
Indenture shall mean and be deemed to refer to such article, section, term or
provision of the Indenture, as modified by this Third Supplemental Indenture,
except where the context otherwise indicates.
Section 3.03. Benefit. All the covenants, provisions, stipulations and
agreements contained in this Third Supplemental Indenture are and shall be for
the sole and exclusive benefit of the parties hereto, their successors and
assigns, and of the holders and registered owners from time to time of the
Securities issued and outstanding from time to time under the Indenture.
Section 3.04. Counterparts. This Third Supplemental Indenture may be
executed in any number of counterparts, each of which shall be deemed an
original and all of which taken together shall be deemed to be a single
instrument.
Section 3.05. Governing Law. This Third Supplemental Indenture shall be
deemed to be a contract under the laws of the State of New York, and for all
purposes shall be construed in accordance with the laws of such state without
regard to principles of conflicts of laws, except as may otherwise be required
by mandatory provisions of law.
<PAGE>
Section 3.06. Headings. The Article and Section headings herein are
for convenience only and shall not affect the construction hereof.
IN WITNESS WHEREOF, the said Halliburton Company, Dresser Industries,
Inc. and Chase Bank of Texas, National Association have each caused this Third
Supplemental Indenture to be executed in its corporate name by the officer whose
name is subscribed below, thereunto duly authorized, and its corporate seal to
be hereunto affixed and, in the cases of Halliburton Company and Dresser
Industries, Inc., attested by its Secretary or Assistant Secretary, all as of
the day and year first above written.
HALLIBURTON COMPANY
By /s/ Lester L. Coleman
-----------------------------
Attest: Name: Lester L. Coleman
Title: Executive Vice President
and General Counsel
By /s/ John M. Allen
--------------------------
Name: John M. Allen
Title: Assistant Secretary
DRESSER INDUSTRIES, INC.
By /s/ Lester L. Coleman
------------------------------
Name: Lester L. Coleman
Attest: Title: Senior Vice President
By /s/ John M. Allen
--------------------------
Name: John M. Allen
Title: Assistant Secretary
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION
By /s/ Letha Glover
------------------------------
Name: Letha Glover
Title: Assistant Vice President and
Trust Officer
<PAGE>
ANNEX A
GUARANTEE
Halliburton Company (the "Guarantor") has, pursuant to the within
mentioned Indenture, unconditionally guaranteed that (a) the principal of,
premium, if any, and interest on the Securities, if lawful, and all other
obligations of the Company to the Holders or the Trustee will be paid in full or
performed, all in accordance with the terms hereof and set forth in the
Indenture, and (b) in the case of any extension of time of payment or renewal of
any Securities or any such other obligations, the same will be promptly paid in
full when due or performed in accordance with the terms of the extension or
renewal, at Stated Maturity, at redemption, by acceleration or otherwise. The
Guarantee will be binding upon the Guarantor and its successors and assigns and
will inure to the benefit of the successors and assigns of the Trustee and the
Holders and, in the event of any transfer or assignment of rights by any Holder
or the Trustee, the rights and privileges conferred upon that party will
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions contained in the Indenture. The Guarantee
will not be valid or obligatory for any purpose with respect to a Security
unless the certificate of authentication on the Security has been signed by the
Trustee.
HALLIBURTON COMPANY
By: /s/ Lester L. Coleman
-----------------------------
Lester L. Coleman
Executive Vice President and
General Counsel
HALLIBURTON COMPANY
1993 STOCK AND LONG-TERM INCENTIVE PLAN
As Amended and Restated February 19, 1998
I. PURPOSE
The purpose of the Halliburton Company 1993 Stock and Long-Term Incentive
Plan (the "Plan") is to provide a means whereby Halliburton Company, a Delaware
corporation (the "Company"), and its Subsidiaries may attract able persons to
enter the employ of the Company and to provide a means whereby those key
employees upon whom the responsibilities of the successful administration and
management of the Company rest, and whose present and potential contributions to
the welfare of the Company are of importance, can acquire and maintain stock
ownership, thereby strengthening their concern for the long-term welfare of the
Company and their desire to remain in its employ. A further purpose of the Plan
is to provide such key employees with additional incentive and reward
opportunities designed to enhance the profitable growth of the Company over the
long term. Accordingly, the Plan provides for granting Incentive Stock Options,
options which do not constitute Incentive Stock Options, Stock Appreciation
Rights, Restricted Stock Awards, Performance Share Awards, Stock Value
Equivalent Awards, or any combination of the foregoing, as is best suited to the
circumstances of the particular employee as provided herein.
II. DEFINITIONS
The following definitions shall be applicable throughout the Plan unless
specifically modified by any paragraph:
(a) "Award" means, individually or collectively, any Option, Stock
Appreciation Right, Restricted Stock Award, Performance Share Award or
Stock Value Equivalent Award.
(b) "Board" means the Board of Directors of Halliburton Company.
(c) "Change of Control Value" means, for the purposes of Clause (B) of
Paragraph (e) of Article XII and Clause (B) of Paragraph (f) of Article
XII, the amount determined in Clause (i), (ii) or (iii), whichever is
applicable, as follows: (i) the per share price offered to stockholders of
the Company in any merger, consolidation, sale of assets or dissolution
transaction, (ii) the per share price offered to stockholders of the
Company in any tender offer or exchange offer whereby a Corporate Change
takes place or (iii) if a Corporate Change occurs other than as described
in Clause (i) or Clause (ii), the fair market value per share determined by
the Committee as of the date determined by the Committee to be the date of
cancellation and surrender of an Option or Stock Appreciation Right. If the
consideration offered to stockholders of the Company in any transaction
described in this Paragraph or Paragraphs (e) and (f) of Article XII
consists of anything other than cash, the Committee shall determine the
fair cash equivalent of the portion of the consideration offered which is
other than cash.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any section of the Code shall be deemed to include
any amendments or successor provisions to such section and any regulations
under such section.
(e) "Committee" means the committee selected by the Board to
administer the Plan in accordance with Paragraph (a) of Article IV of the
Plan.
(f) "Common Stock" means the common stock' par value $2.50 per share,
of Halliburton Company.
(g) "Company" means Halliburton Company.
A-1
<PAGE>
(h) "Corporate Change" means one of the following events: (i) the
merger, consolidation or other reorganization of the Company in which the
outstanding Common Stock is converted into or exchanged for a different
class of securities of the Company, a class of securities of any other
issuer (except a direct or indirect wholly owned subsidiary of the
Company), cash or other property; (ii) the sale, lease or exchange of all
or substantially all of the assets of the Company to any other corporation
or entity (except a direct or indirect wholly owned subsidiary of the
Company); (iii) the adoption by the stockholders of the Company of a plan
of liquidation and dissolution; (iv) the acquisition (other than any
acquisition pursuant to any other clause of this definition) by any person
or entity, including without limitation a "group" as contemplated by
Section 13(d)(3) of the Exchange Act, of beneficial ownership, as
contemplated by such Section, of more than twenty percent (based on voting
power) of the Company's outstanding capital stock; or (v) as a result of or
in connection with a contested election of directors, the persons who were
directors of the Company before such election shall cease to constitute a
majority of the Board.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means, as of any specified date, the closing
price of the Common Stock on the New York Stock Exchange (or, if the Common
Stock is not then listed on such exchange, such other national securities
exchange on which the Common Stock is then listed) on that date, or if no
prices are reported on that date, on the last preceding date on which such
prices of the Common Stock are so reported. If the Common Stock is not then
listed on any national securities exchange but is traded over the counter
at the time a determination of its Fair Market Value is required to be made
hereunder, its Fair Market Value shall be deemed to be equal to the average
between the reported high and low sales prices of Common Stock on the most
recent date on which Common Stock was publicly traded. If the Common Stock
is not publicly traded at the time a determination of its value is required
to be made hereunder, the determination of its Fair Market Value shall be
made by the Committee in such manner as it deems appropriate.
(k) "Holder" means an employee of the Company who has been granted an
Award.
(l) "Immediate Family" means, with respect to a particular Holder, the
Holder's spouse, children and grandchildren (including adopted and step
children and grandchildren).
(m) "Incentive Stock Option" means an Option within the meaning of
section 422 of the Code.
(n) "Option" means an Award granted under Article VII of the Plan and
include both Incentive Stock Options to purchase Common Stock and
Options which do not constitute Incentive Stock Options to purchase
Common Stock.
(o) "Option Agreement" means a written agreement between the Company
and an employee with respect to an Option.
(p) "Optionee" means an employee who has been granted an Option.
(q) "Parent Corporation" shall have the meaning set forth in section
424(e) of the Code.
(r) "Performance Share Award" means an Award granted under Article X
of the Plan.
(s) "Plan" means the Halliburton Company 1993 Stock and Long-Term
Incentive Plan.
(t) "Restricted Stock Award" means an Award granted under Article IX
of the Plan.
(u) "Rule 16b-3" means Rule 16b-3 of the general Rules and
Regulation of the Securities and Exchange Commission under the Exchange
Act, as such rule is currently in effect or as hereafter modified or
amended.
(v) "Spread" means, in the case of a Stock Appreciation Right, an
amount equal to the excess, if any, of the Fair Market Value of a share of
Common Stock on the date such right is exercised over the exercise price of
such Stock Appreciation Right.
(w) "Stock Appreciation Right" means an Award granted under Article
VIII of the Plan.
(x) "Stock Appreciation Rights Agreement" means a written agreement
between the Company and an employee with respect to an Award of Stock
Appreciation Rights.
A-2
<PAGE>
(y) "Stock Value Equivalent Award" means an Award granted under
Article XI of the Plan.
(z) "Subsidiary" means a company (whether a corporation, partnership,
joint venture or other form of entity) in which the Company or a
corporation in which the Company owns a majority of the shares of capital
stock, directly or indirectly, owns a greater than twenty percent equity
interest, except that with respect to the issuance of Incentive Stock
Options the term "Subsidiary" shall have the same meaning as the term
"subsidiary corporation" as defined in section 424(f) of the Code.
III. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be effective upon the date of its adoption by the Board,
provided the Plan is approved by the stockholders of the Company within twelve
months thereafter and on or prior to the date of the first annual meeting of
stockholders of the Company held subsequent to the acquisition of an equity
security by a Holder hereunder for which exemption is claimed under Rule 16b-3.
Notwithstanding any provision of the Plan or in any Option Agreement or Stock
Appreciation Rights Agreement, no Option or Stock Appreciation Right shall be
exercisable prior to such stockholder approval. No further Awards may be granted
under the Plan after ten years from the date the Plan is adopted by the Board.
Subject to the provisions of Article XIII, the Plan shall remain in effect until
all Options and Stock Appreciation Rights granted under the Plan have been
exercised or expired by reason of lapse of time, all restrictions imposed upon
Restricted Stock Awards have lapsed and all Performance Share Awards and Stock
Value Equivalent Awards have been satisfied.
IV. ADMINISTRATION
(a) Composition of Committee. The Plan shall be administered by a committee
which shall be (i) appointed by the Board and (ii) constituted so as to permit
the Plan to comply with Rule 16b-3 and regulations promulgated under section
162(m) of the Code.
(b) Powers. The Committee shall have authority, in its discretion, to
determine which employees of the Company and its Subsidiaries shall receive an
Award, the time or times when such Award shall be made, whether an Incentive
Stock Option, nonqualified Option or Stock Appreciation Right shall be granted,
the number of shares of Common Stock which may be issued under each Option,
Stock Appreciation Right and Restricted Stock Award, and the value of each
Performance Share Award and Stock Value Equivalent Award. In making such
determinations the Committee may take into account the nature of the services
rendered by the respective employees, their present and potential contribution
to the Company's success and such other factors as the Committee in its
discretion shall deem relevant.
(c) Additional Powers. The Committee shall have such additional powers as
are delegated to it by the other provisions of the Plan. Subject to the express
provisions of the Plan, the Committee is authorized to construe the Plan and the
respective agreements executed thereunder, to prescribe such rules and
regulations relating to the Plan as it may deem advisable to carry out the Plan,
and to determine the terms, restrictions and provisions of each Award, including
such terms, restrictions and provisions as shall be requisite in the judgment of
the Committee to cause designated Options to qualify as Incentive Stock Options,
and to make all other determinations necessary or advisable for administering
the Plan. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in any agreement relating to an Award in the manner
and to the extent the Committee shall deem expedient to carry the Award into
effect. The determinations of the Committee on the matters referred to in this
Article IV shall be conclusive.
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V. GRANT OF OPTIONS, STOCK APPRECIATION RIGHTS, RESTRICTED STOCK
AWARDS, PERFORMANCE SHARE AWARDS AND STOCK VALUE EQUIVALENT
AWARDS; SHARES SUBJECT TO THE PLAN
(a) Award Limits. The Committee may from time to time grant Awards to
one or more employees determined by it to be eligible for participation in
the Plan in accordance with the provisions of Article VI. The aggregate
number of shares of Common Stock that may be issued under the Plan shall
not exceed 27,000,000 shares, of which no more than 4,000,000 may be issued
in the form of Restricted Stock Awards and no more than 4,000,000 may be
issued pursuant to Performance Share Awards. Notwithstanding anything
contained herein to the contrary, the number of Option shares or Stock
Appreciation Rights, singly or in combination, granted to any employee in
any one calendar year shall not in the aggregate exceed 500,000. Any of
such shares which remain unissued and which are not subject to outstanding
Options or Awards at the termination of the Plan shall cease to be subject
to the Plan, but, until termination of the Plan, the Company shall at all
times reserve a sufficient number of shares to meet the requirements of the
Plan. Shares shall be deemed to have been issued under the Plan only to the
extent actually issued and delivered pursuant to an Award. To the extent
that an Award lapses or the rights of its Holder terminate or the Award is
paid in cash, any shares of Common Stock subject to such Award shall again
be available for the grant of an Award. The aggregate number of shares
which may be issued under the Plan shall be subject to adjustment in the
same manner as provided in Article XII with respect to shares of Common
Stock subject to Options then outstanding. Separate stock certificates
shall be issued by the Company for those shares acquired pursuant to the
exercise of an Incentive Stock Option and for those shares acquired
pursuant to the exercise of any Option which does not constitute an
Incentive Stock Option.
(b) Stock Offered. The stock to be offered pursuant to the grant of
an Award may be authorized but unissued Common Stock or Common Stock
previously issued and reacquired by the Company.
VI. ELIGIBILITY
Awards made pursuant to the Plan may be granted only to individuals who, at
the time of grant, are key employees of the Company or any Parent Corporation or
Subsidiary of the Company. Awards may not be granted to any director of the
Company who is not an employee of the Company or to any member of the Committee.
An Award made pursuant to the Plan may be granted on more than one occasion to
the same person, and such Award may include an Incentive Stock Option, an Option
which is not an Incentive Stock Option, an Award of Stock Appreciation Rights, a
Restricted Stock Award, a Performance Share Award, a Stock Value Equivalent
Award or any combination thereof. Each Award shall be evidenced by a written
instrument duly executed by or on behalf of the Company.
VII. STOCK OPTIONS
(a) Stock Option Agreement. Each Option shall be evidenced by an Option
Agreement between the Company and the Optionee which shall contain such terms
and conditions as may be approved by the Committee. The terms and conditions of
the respective Option Agreements need not be identical. Specifically, an Option
Agreement may provide for the payment of the option price, in whole or in part,
by the delivery of a number of shares of Common Stock (plus cash if necessary)
having a Fair Market Value equal to such option price. Each Option Agreement
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shall provide that the Option may not be exercised earlier than six months from
the date of grant and shall specify the effect of termination of employment on
the exercisability of the Option.
(b) Option Period. The term of each Option shall be as specified by the
Committee at the date of grant; provided that, in no case, shall the term of an
Option exceed ten years.
(c) Limitations on Exercise of Option. An Option shall be exercisable in
whole or in such installments and at such times as determined by the Committee.
(d) Special Limitations on Incentive Stock Options. To the extent that the
aggregate Fair Market Value (determined at the time the respective Incentive
Stock Option is granted) of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by an individual during any calendar
year under all incentive stock option plans of the Company and its Parent
Corporation and Subsidiaries exceeds $100,000, such excess Incentive Stock
Options shall be treated as Options which do not constitute Incentive Stock
Options. The Committee shall determine, in accordance with applicable provisions
of the Code, Treasury Regulations and other administrative pronouncements, which
of an Optionee's Incentive Stock Option will not constitute Incentive Stock
Options because of such limitation and shall notify the Optionee of such
determination as soon as practicable after such determination. No Incentive
Stock Option shall be granted to an individual if, at the time the Option is
granted, such individual owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of its Parent
Corporation or a Subsidiary, within the meaning of section 422(b)(6) of the
Code, unless (i) at the time such Option is granted the option price is at least
110% of the Fair Market Value of the Common Stock subject to the Option and (ii)
such Option by its terms is not exercisable after the expiration of five years
from the date of grant.
(e) Option Price. The purchase price of Common Stock issued under each
Option shall be determined by the Committee, but such purchase price shall not
be less than the Fair Market Value of Common Stock subject to the Option on the
date the Option is granted.
(f) Options and Rights in Substitution for Stock Options Granted by Other
Corporations. Options and Stock Appreciation Rights may be granted under the
Plan from time to time in substitution for stock options held by employees of
corporations who become, or who became prior to the effective date of the Plan,
key employees of the Company or of any Subsidiary as a result of a merger or
consolidation of the employing corporation with the Company or such Subsidiary,
or the acquisition by the Company or a Subsidiary of all or a portion of the
assets of the employing corporation, or the acquisition by the Company or a
Subsidiary of stock of the employing corporation with the result that such
employing corporation becomes a Subsidiary.
VIII. STOCK APPRECIATION RIGHTS
(a) Stock Appreciation Rights. A Stock Appreciation Right is the right to
receive an amount equal to the Spread with respect to a share of Common Stock
upon the exercise of such Stock Appreciation Right. Stock Appreciation Rights
may be granted in connection with the grant of an Option, in which case the
Option Agreement will provide that exercise of Stock Appreciation Rights will
result in the surrender of the right to purchase the shares under the Option as
to which the Stock Appreciation Rights were exercised. Alternatively, Stock
Appreciation Rights may be granted independently of Options in which case each
Award of Stock Appreciation Rights shall be evidenced by a Stock Appreciation
Rights Agreement between the Company and the Holder which shall contain such
terms and conditions as may be approved by the Committee. The terms and
conditions of the respective Stock Appreciation Rights Agreements need not be
identical. The Spread with respect to a Stock Appreciation Right may be payable
either in cash, shares of Common Stock with a Fair Market Value equal to the
Spread or in a combination of cash and shares of Common Stock. With respect to
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stock Appreciation Rights that are subject to Section 16 of the Exchange Act,
however, the Committee shall, except as provided in Paragraphs (e) and (f) of
Article XII, retain sole discretion (i) to determine the form in which payment
of the Stock Appreciation Right will be made (i.e., cash, securities or any
combination thereof) or (ii) to approve an election by a Holder to receive cash
in full or partial settlement of Stock Appreciation Rights. Upon the exercise of
any Stock Appreciation Rights granted hereunder, the number of shares reserved
for issuance under the Plan shall be reduced only to the extent that shares of
Common Stock are actually issued in connection with the exercise of such Right.
Each Stock Appreciation Rights Agreement shall provide that the Stock
Appreciation Rights may not be exercised earlier than six months from the date
of grant and shall specify the effect of termination of employment on the
exercisability of the Stock Appreciation Rights.
(b) Exercise Price. The exercise price of each Stock Appreciation Right
shall be determined by the Committee, but such exercise price shall not be less
than the Fair Market Value of a share of Common Stock on the date the Stock
Appreciation Right is granted.
(c) Exercise Period. The term of each Stock Appreciation Right shall be as
specified by the Committee at the date of grant; provided that, in no case,
shall the term of a Stock Appreciation Right exceed ten years.
(d) Limitations on Exercise of Stock Appreciation Right. A Stock
Appreciation Right shall be exercisable in whole or in such installments and at
such times as determined by the Committee.
IX. RESTRICTED STOCK AWARDS
(a) Restricted Period To Be Established by the Committee. At the time a
Restricted Stock Award is made, the Committee shall establish a period of time
(the "Restriction Period") applicable to such Award; provided, however, that,
except as set forth below and as permitted by Paragraph (b) of this Article IX,
such Restriction Period shall not be less than three (3) years from the date of
grant (the "Minimum Criteria"). An award which provides for the lapse of
restrictions on shares applicable to such Award in equal annual installments
over a period of at least three (3) years from the date of grant shall be deemed
to meet the Minimum Criteria. The foregoing notwithstanding, with respect to
Restricted Stock Awards of up to an aggregate 550,000 shares (subject to
adjustment as set forth in Article XII), the Minimum Criteria shall not apply
and the Committee may establish such lesser Restriction Periods applicable to
such Awards as it shall determine in its discretion. Subject to the foregoing,
each Restricted Stock Award may have a different Restriction Period, in the
discretion of the Committee. The Restriction Period applicable to a particular
Restricted Stock Award shall not be changed except as permitted by Paragraph (b)
of this Article or by Article XII.
(b) Other Terms and Conditions. Common Stock awarded pursuant to a
Restricted Stock Award shall be represented by a stock certificate registered in
the name of the Holder of such Restricted Stock Award or, at the option of the
Company, in the name of a nominee of the Company. The Holder shall have the
right to receive dividends during the Restriction Period, to vote the Common
Stock subject thereto and to enjoy all other stockholder rights, except that (i)
the Holder shall not be entitled to possession of the stock certificate until
the Restriction Period shall have expired, (ii) the Company shall retain custody
of the stock during the Restriction Period, (iii) the Holder may not sell,
transfer, pledge, exchange, hypothecate or otherwise dispose of the stock during
the Restriction Period and (iv) a breach of the terms and conditions established
by the Committee pursuant to the Restricted Stock Award shall cause a forfeiture
of the Restricted Stock Award. At the time of such Award, the Committee may, in
its sole discretion, prescribe additional terms, conditions or restrictions
relating to Restricted Stock Awards, including, but not limited to, rules
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pertaining to the termination of employment (by retirement, disability, death or
otherwise) of a Holder prior to expiration of the Restriction Period.
(c) Payment for Restricted Stock. A Holder shall not be required to make
any payment for Common Stock received pursuant to a Restricted Stock Award,
except to the extent otherwise required by law and except that the Committee
may, in its discretion, charge the Holder an amount in cash not in excess of the
par value of the shares of Common Stock issued under the Plan to the Holder.
(d) Miscellaneous. Nothing in this Article shall prohibit the exchange of
shares issued under the Plan (whether or not then subject to a Restricted Stock
Award) pursuant to a plan of reorganization for stock or securities in the
Company or another corporation a party to the reorganization, but the stock or
securities so received for shares then subject to the restrictions of a
Restricted Stock Award shall become subject to the restrictions of such
Restricted Stock Award. Any shares of stock received as a result of a stock
split or stock dividend with respect to shares then subject to a Restricted
Stock Award shall also become subject to the restrictions of the Restricted
Stock Award.
X. PERFORMANCE SHARE AWARDS
(a) Performance Period. The Committee shall establish, with respect to and
at the time of each Performance Share Award, a performance period over which the
performance applicable to the Performance Share Award of the Holder shall be
measured.
(b) Performance Share Awards. Each Performance Share Award may have a
maximum value established by the Committee at the time of such Award.
(c) Performance Measures. A Performance Share Award may be awarded to an
employee contingent upon future performance of the employee, the Company or any
Subsidiary, division or department thereof by or in which he is employed during
the performance period, the Fair Market Value of Common Stock or the increase
thereof during the performance period, combinations thereof, or such other
provisions as the Committee may determine to be appropriate. The Committee shall
establish the performance measures applicable to such performance prior to the
beginning of the performance period but subject to such later revisions as the
Committee shall deem appropriate to reflect significant, unforeseen events or
changes.
(d) Awards Criteria. In determining the value of Performance Share Awards,
the Committee may take into account an employee's responsibility level,
performance, potential, other Awards and such other considerations as it deems
appropriate.
(e) Payment. Following the end of the performance period, the Holder of a
Performance Share Award shall be entitled to receive payment of an amount, not
exceeding the maximum value of the Performance Share Award, if any, based on the
achievement of the performance measures for such performance period, as
determined by the Committee in its sole discretion. Payment of a Performance
Share Award (i) may be made in cash, Common Stock or a combination thereof, as
determined by the Committee in its sole discretion, (ii) shall be made in a lump
sum or in installments as prescribed by the Committee in its sole discretion and
(iii) to the extent applicable, shall be based on the Fair Market Value of the
Common Stock on the payment date. If a payment of cash is to be made on a
deferred basis, the Committee shall establish whether interest shall be
credited, the rate thereof and any other terms and conditions applicable
thereto.
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(f) Termination of Employment. The Committee shall determine the effect of
termination of employment during the performance period on an employee's
Performance Share Award.
XI. STOCK VALUE EQUIVALENT AWARDS
(a) Stock Value Equivalent Awards. Stock Value Equivalent Awards are
rights to receive an amount equal to the Fair Market Value of shares of Common
Stock or rights to receive an amount equal to any appreciation or increase in
the Fair Market Value of Common Stock over a specified period of time, which
vest over a period of time as established by the Committee, without payment of
any amounts by the Holder thereof (except to the extent otherwise required
by law) or satisfaction of any performance criteria or objectives. Each Stock
Value Equivalent Award may have a maximum value established by the Committee at
the time of such Award.
(b) Award Period. The Committee shall establish, with respect to and at the
time of each Stock Value Equivalent Award, a period over which the Award shall
vest with respect to the Holder.
(c) Awards Criteria. In determining the value of Stock Value Equivalent
Awards, the Committee may take into account an employee's responsibility level,
performance, potential, other Awards and such other considerations as it deems
appropriate.
(d) Payment. Following the end of the determined period for a Stock Value
Equivalent Award, the Holder of a Stock Value Equivalent Award shall be entitled
to receive payment of an amount, not exceeding the maximum value of the Stock
Value Equivalent Award, if any, based on the then vested value of the Award.
Payment of a Stock Value Equivalent Award (i) shall be made in cash, (ii) shall
be made in a lump sum or in installments as prescribed by the Committee in its
sole discretion and (iii) shall be based on the Fair Market Value of the Common
Stock on the payment date. Cash dividend equivalents may be paid during, or may
be accumulated and paid at the end of, the determined period with respect to a
Stock Value Equivalent Award, as determined by the Committee. If payment of cash
is to be made on a deferred basis, the Committee shall establish whether
interest shall be credited, the rate thereof and any other terms and conditions
applicable thereto.
(e) Termination of Employment. The Committee shall determine the effect of
termination of employment during the applicable vesting period on an employee's
Stock Value Equivalent Award.
XII. RECAPITALIZATION OR REORGANIZATION
(a) Except as hereinafter otherwise provided, in the event of any
recapitalization, reorganization, merger, consolidation, combination, exchange,
stock dividend, stock split, extraordinary dividend or divestiture (including a
spin-off) or any other change in the corporate structure or shares of Common
Stock occurring after the date of the grant of an Award, the Committee may, in
its discretion, make such adjustment as to the number and price of shares of
Common Stock or other consideration subject to such Awards as the Committee
shall deem appropriate in order to prevent dilution or enlargement of rights of
the Holders.
(b) The existence of the Plan and the Awards granted hereunder shall not
affect in any way the right or power of the Board or the stockholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
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other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of debt or equity securities having any
priority or preference with respect to or affecting Common Stock or the rights
thereof, the dissolution or liquidation of the Company or any sale, lease,
exchange or other disposition of all or any part of its assets or business or
any other corporate act or proceeding.
(c) The shares with respect to which Options may be granted are shares of
Common Stock as presently constituted, but if, and whenever, prior to the
expiration of an Option theretofore granted, the Company shall effect a
subdivision or consolidation of shares of Common Stock or the payment of a stock
dividend on Common Stock without receipt of consideration by the Company, the
number of shares of Common Stock with respect to which such Option may
thereafter be exercised (i) in the event of an increase in the number of
outstanding shares shall be proportionately increased, and the purchase price
per share shall be proportionately reduced, and (ii) in the event of a reduction
in the number of outstanding shares shall be proportionately reduced, and the
purchase price per share shall be proportionately increased.
(d) If the Company recapitalizes or otherwise changes its capital
structure, thereafter upon any exercise of an Option theretofore granted the
Optionee shall be entitled to purchase under such Option, in lieu of the number
of shares of Common Stock as to which such Option shall then be exercisable, the
number and class of shares of stock and securities and the cash and other
property to which the Optionee would have been entitled pursuant to the terms of
the recapitalization if, immediately prior to such recapitalization, the
Optionee had been the holder of record of the number of shares of Common Stock
then covered by such Option.
(e) In the event of a Corporate Change, then no later than (i) two business
days prior to any Corporate Change referenced in Clause (i), (ii), (iii) or (v)
of the definition thereof or (ii) ten business days after any Corporate Change
referenced in Clause (iv) of the definition thereof, the Committee, acting in
its sole discretion without the consent or approval of any Optionee, shall act
to effect one or more of the following alternatives with respect to outstanding
Options which acts may vary among individual Optionees, may vary among Options
held by individual Optionees and, with respect to acts taken pursuant to Clause
(i) above, may be contingent upon effectuation of the Corporate Change: (A)
accelerate the time at which Options then outstanding may be exercised so that
such Options may be exercised in full for a limited period of time on or before
a specified date (before or after such Corporate Change) fixed by the Committee,
after which specified date all unexercised Options and all rights of Optionees
thereunder shall terminate, (B) require the mandatory surrender to the Company
by selected Optionees of some or all of the outstanding Options held by such
Optionees (irrespective of whether such Options are then exercisable under the
provisions of the Plan) as of a date (before or after such Corporate Change)
specified by the Committee, in which event the Committee shall thereupon cancel
such Options and pay to each Optionee an amount of cash per share equal to the
excess, if any, of the Change of Control Value of the shares subject to such
Option over the exercise price(s) under such Options for such shares, (C) make
such adjustments to Options then outstanding as the Committee deems appropriate
to reflect such Corporate Change (provided, however, that the Committee may
determine in its sole discretion that no adjustment is necessary to Options then
outstanding) or (D) provide that thereafter upon any exercise of an Option
theretofore granted the Optionee shall be entitled to purchase under such
Option, in lieu of the number of shares of Common Stock as to which such Option
shall then be exercisable, the number and class of shares of stock or other
securities or property (including, without limitation, cash) to which the
Optionee would have been entitled pursuant to the terms of the agreement of
merger, consolidation or sale of assets or plan of liquidation and dissolution
if, immediately prior to such merger, consolidation or sale of assets or any
distribution in Liquidation and dissolution of the Company, the Optionee had
been the holder of record of the number of shares of Common Stock then covered
by such Option.
(f) In the event of a Corporate Change, then no later than (i) two business
days prior to any Corporate Change referenced in Clause (i), (ii), (iii) or (v)
of the definition thereof or (ii) ten business days after any Corporate Change
referenced in Clause (iv) of the definition thereof, the Committee, acting in
its sole discretion without the consent or approval of any Holder of a Stock
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Appreciation Right, shall act to effect one or more of the following
alternatives with respect to outstanding Stock Appreciation Rights which acts
may vary among individual Holders, may vary among Stock Appreciation Rights held
by individual Holders and, with respect to acts taken pursuant to Clause (ii)
above, may be contingent upon effectuation of the Corporate Change (A)
accelerate the time at which Stock Appreciation Rights then outstanding may be
exercised so that such Stock Appreciation Rights may be exercised in full for a
limited period of time on or before a specified date (before or after such
Corporate Change) fixed by the Committee, after which specified date all
unexercised Stock Appreciation Rights and all rights of Holders thereunder shall
terminate, (B) require the mandatory surrender to the Company by selected
Holders of Stock Appreciation Rights of some or all of the outstanding Stock
Appreciation Rights held by such Holders (irrespective of whether such Stock
Appreciation Rights are then exercisable under the provisions of the Plan) as of
a date (before or after such Corporate Change) specified by the Committee, in
which event the Committee shall thereupon cancel such Stock Appreciation Rights
and pay to each Holder an amount of cash equal to the Spread with respect to
such Stock Appreciation Rights with the Fair Market Value of the Common Stock at
such time to be deemed to be the Change of Control Value or (C) make such
adjustments to Stock Appreciation Rights then outstanding as the Committee deems
appropriate to reflect such Corporate Change (provided, however, that the
Committee may determine in its sole discretion that no adjustment is necessary
to Stock Appreciation Rights then outstanding).
(g) Except as hereinbefore expressly provided, the issuance by the Company
of shares of stock of any class or securities convertible into shares of stock
of any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
shares of Common Stock subject to Options or Stock Appreciation Rights
theretofore granted, the purchase price per share of Common Stock subject to
Options or the calculation of the Spread with respect to Stock Appreciation
Rights.
(h) The provisions of the Plan or the Award agreements to the contrary
notwithstanding, with respect to any Restricted Stock Awards outstanding at the
time a Corporate Change occurs, the Committee may, in its discretion, provide
(i) for full vesting of all Common Stock awarded to the Holders pursuant to such
Restricted Stock Awards as of the date of such Corporate Change and (ii) that
all restrictions applicable to such Restricted Stock Award shall terminate as of
such date.
(i) The provisions of the Plan or the Award agreements to the contrary
notwithstanding, with respect to any Performance Share Awards which have been
approved but which are unpaid at the time a Corporate Change occurs, the
Committee may, in its discretion, provide (i) for full vesting of such Awards as
of the date of such Corporate Change, (ii) for payment of the then value of such
Awards as soon as administratively feasible following the Corporate Change, with
the value of such Awards to be based, to the extent applicable, on the Change of
Control Value of the Common Stock, (iii) that any provisions in Awards regarding
forfeiture of unpaid Awards shall not be applicable from and after a Corporate
Change with respect to Awards made prior to such Corporate Change and (iv) that
all performance measures applicable to unpaid Awards at the time of a Corporate
Change shall be deemed to have been satisfied in full during the performance
period upon the occurrence of such Corporate Change.
(j) The provisions of the Plan or the Award agreements to the contrary
notwithstanding, with respect to any Stock Value Equivalent Awards which have
been approved but which are unpaid at the time a Corporate Change occurs, the
Committee may, in its discretion, provide (i) for full vesting of such Awards as
of the date of such Corporate Change and (ii) for payment of the then value of
such Awards as soon as administratively feasible following the Corporate Change
with the value of such Awards to be based on the Change of Control Value of the
Common Stock.
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XIII. AMENDMENT OR TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan or alter or amend the
Plan or any part thereof from time to time; provided that no change in any Award
theretofore granted may be made which would impair the rights of the Holder
without the consent of the Holder, and provided, further, that the Board may
not, without approval of the stockholders, amend the Plan:
(a) to increase the aggregate number of shares which may be issued
pursuant to the provisions of the Plan on exercise or surrender of
Options or Stock Appreciation Rights or pursuant to Restricted Stock
Awards or Performance Share Awards, except as provided in Article XII;
(b) to change the minimum Option price;
(c) to change the class of employees eligible to receive Awards or
increase materially the benefits accruing to employees under the Plan;
(d) to extend the maximum period during which Awards may be granted
under the Plan;
(e) to modify materially the requirements as to eligibility for
participation in the Plan; or
(f) to decrease any authority granted to the Committee hereunder in
contravention of Rule 16b-3.
XIV. OTHER
(a) No Right To An Award. Neither the adoption of the Plan nor any action
of the Board or of the Committee shall be deemed to give an employee any right
to be granted an Option, a Stock Appreciation Right, a right to a Restricted
Stock Award or a right to a Performance Share Award or Stock Value Equivalent
Award or any other rights hereunder except as may be evidenced by an Award or by
an Option Agreement duly executed on behalf of the Company, and then only to the
extent of and on the terms and conditions expressly set forth therein. The Plan
shall be unfunded. The Company shall not be required to establish any special or
separate fund or to make any other segregation of funds or assets to assure the
payment of any Award.
(b) No Employment Rights Conferred. Nothing contained in the Plan or in any
Award made hereunder shall (i) confer upon any employee any right with respect
to continuation of employment with the Company or any Subsidiary or (ii)
interfere in any way with the right of the Company or any Subsidiary to
terminate his or her employment at any time.
(c) Other Laws; Withholding. The Company shall not be obligated to Issue
any Common Stock pursuant to any Award granted under the Plan at any time when
the offering of the shares covered by such Award has not been registered under
the Securities Act of 1933 and such other state and federal laws, rules or
regulations as the Company or the Committee deems applicable and, in the opinion
of legal counsel for the Company, there is no exemption from the registration
requirements of such laws, rules or regulations available for the issuance and
sale of such shares. No fractional shares of Common Stock shall be delivered,
nor shall any cash in lieu of fractional shares be paid. The Company shall have
the right to deduct in connection with all Awards any taxes required by law to
be withheld and to require any payments necessary to enable it to satisfy its
withholding obligations. The Committee may permit the Holder of an Award to
elect to surrender, or authorize the Company to withhold, shares of Common Stock
(valued at their Fair Market Value on the date of surrender or withholding of
such shares) in satisfaction of the Company's withholding obligation, subject to
such restrictions as the Committee deems necessary to satisfy the requirements
of Rule 16b-3.
(d) No Restriction on Corporate Action. Nothing contained in the Plan shall
be construed to prevent the Company or any Subsidiary from taking any corporate
action which is deemed by the Company or such Subsidiary to be appropriate or in
its best interest, whether or not such action would have an adverse effect on
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the Plan or any Award made under the Plan. No employee, beneficiary or other
person shall have any claim against the Company or any Subsidiary as a result of
any such action.
(e) Restrictions on Transfer. An Award shall not be transferable otherwise
than by will or the laws of descent and distribution or pursuant to a "qualified
domestic relations order" as defined by the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, and shall be exercisable
during the lifetime of the Holder only by such Holder, the Holder's guardian or
legal representative, a transferee under a qualified domestic relations order or
a transferee as described below; provided, however, that the Committee shall
have the authority, in its discretion, to grant (or to sanction by way of
amendment to an existing grant) Options (other than Incentive Stock Options)
which may be transferred by the Holder for no consideration to or for the
benefit of the Holder's Immediate Family, to a trust solely for the benefit of
the Holder and his Immediate Family, or to a partnership or limited liability
company whose only partners or shareholders are the Holder and members of his
Immediate Family, in which case the Option Agreement shall so state. A transfer
of an Option pursuant to this paragraph (e) shall be subject to such rules and
procedures as the Committee may establish. In the event an Option is transferred
as contemplated in this paragraph (e), (i) such Option may not be subsequently
transferred by the transferee except by will or the laws of descent and
distribution, and (ii) such Option shall continue to be governed by and subject
to the terms and limitations of the Plan and the relevant Option Agreement and
the transferee shall be entitled to the same rights as the Holder under Articles
XII and XIII hereof as if no transfer had taken place.
The Option Agreement, Stock Appreciation Rights Agreement or other written
instrument evidencing an Award shall specify the effect of the death of the
Holder on the Award.
(f) Rule 16b-3. It is intended that the Plan and any grant of an Award made
to a person subject to Section 16 of the Exchange Act meet all of the
requirements of Rule 16b-3. If any provision of the Plan or any such Award would
disqualify the Plan or such Award under, or would otherwise not comply with,
Rule 16b-3, such provision or Award shall be construed or deemed amended to
conform to Rule 16b-3.
(g) Governing Law. This Plan shall be construed in accordance with the laws
of the State of Texas, except to the extent that it implicates matters which are
the subject of the General Corporation Law of the State of Delaware which
matters shall be governed by the latter law.
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HALLIBURTON COMPANY
SENIOR EXECUTIVES'
DEFERRED COMPENSATION PLAN
AS AMENDED AND RESTATED
EFFECTIVE JANUARY 1, 1999
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<TABLE>
TABLE OF CONTENTS
<CAPTION>
<S> <C> <C>
ARTICLE I: PURPOSE OF THE PLAN........................... I-1
ARTICLE II: DEFINITIONS................................... II-1
ARTICLE III: ADMINISTRATION OF THE PLAN.................... III-1
ARTICLE IV: ALLOCATIONS UNDER THE PLAN,
PARTICIPATION IN THE PLAN AND
SELECTION FOR AWARDS.......................... IV-1
ARTICLE V: NON-ASSIGNABILITY OF AWARDS................... V-1
ARTICLE VI: VESTING....................................... VI-1
ARTICLE VII: DISTRIBUTION OF AWARDS........................ VII-1
ARTICLE VIII: NATURE OF PLAN................................ VIII-1
ARTICLE IX: FUNDING OF OBLIGATION......................... IX-1
ARTICLE X: AMENDMENT OR TERMINATION OF PLAN.............. X-1
ARTICLE XI: GENERAL PROVISIONS............................ XI-1
ARTICLE XII: EFFECTIVE DATE................................ XII-1
</TABLE>
(1)
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HALLIBURTON COMPANY
SENIOR EXECUTIVES'
DEFERRED COMPENSATION PLAN
Halliburton Company, having heretofore established the Halliburton
Company Senior Executives' Deferred Compensation Plan, pursuant to the
provisions of Article X of said Plan, hereby amends and restates said Plan to be
effective in accordance with the provisions of Article XII hereof.
(2)
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ARTICLE I
Purpose of the Plan
The purpose of the Halliburton Company Senior Executives' Deferred
Compensation Plan is to promote growth of the Company, provide an additional
means of attracting and holding qualified, competent executives and provide
supplemental retirement benefits for the Participants.
I-1
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ARTICLE II
Definitions
(A) "Account(s)" shall mean a Participant's Deferred Compensation
Account, ERISA Restoration Account, and/or Mandatory Deferral Account, including
amounts credited thereto.
(B) "Administrative Committee" shall mean the administrative committee
appointed by the Compensation Committee to administer the Plan.
(C) "Allocation Year" shall mean the calendar year for which an
allocation is made to a Participant's Account pursuant to Article IV.
(D) "Board of Directors" shall mean the Board of Directors of the
Company.
(E) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(F) "Compensation Committee" shall mean the Compensation Committee of
the Board of Directors.
(F1)"Compensation Limited Participant" shall mean an Employee whose
compensation from the Employer for an Allocation Year is in excess of the limit
set forth in Section 401(a)(17) of the Code for such Allocation Year.
(G) "Company" shall mean Halliburton Company.
(H) "Deferred Compensation Account" shall mean an individual account
for each Participant on the books of such Participant's Employer to which is
credited amounts allocated for the benefit of such Participant pursuant to the
provisions of Article IV, Paragraph (E).
(I) "Employee" shall mean any employee of the Employer. The term does
not include independent contractors or persons who are retained by an Employer
as consultants only.
(J) "Employer" shall mean the Company and any Subsidiary designated as
an Employer in accordance with the provisions of Article III of the Plan.
(J1)"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
(K) "ERISA Restoration Account" shall mean an individual account for
each Participant on the books of such Participant's Employer to which is
credited amounts allocated for the benefit of such Participant pursuant to the
provisions of Article IV, Paragraphs (G), (G1) and (G2). Such amount shall
include amounts allocated to a Participant's "Excess Benefit Account" prior to
January 1, 1995.
II-1
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(L) "Excess Remuneration Account" shall mean an individual account for
each Participant on the books of such Participant's Employer to which is
credited amounts allocated for the benefit of such Participant pursuant to the
provisions of Article IV, Paragraph (H).
(M) "Participant" shall mean a Compensation Limited Participant or a
Senior Executive Participant.
(M1)"Pension Equalizer Contribution" shall have the meaning set forth
in the Halliburton Retirement and Savings Plan.
(N) "Plan" shall mean the Halliburton Company Senior Executives'
Deferred Compensation Plan, as amended and restated January 1, 1996, and as the
same may thereafter be amended from time to time.
(N1) "Senior Executive" shall mean an Employee who is a senior
executive, including an officer, of an Employer (whether or not he is also a
director thereof), who is employed by an Employer on a full-time basis, who is
compensated for such employment by a regular salary and who, in the opinion of
the Compensation Committee, is one of the key personnel of an Employer in a
position to contribute materially to its continued growth and development and to
its future financial success.
(N2) "Senior Executive Participant" shall mean a Senior Executive who
is selected as a Senior Executive Participant for an Allocation Year pursuant to
Article IV, Paragraph (A).
(O) "Subsidiary" shall mean at any given time, any other corporation of
which an aggregate of 80% or more of the outstanding voting stock is owned of
record or beneficially, directly or indirectly, by the Company or any other of
its Subsidiaries or both.
(P) "Termination of Service" shall mean severance from employment with
an Employer for any reason other than a transfer between Employers.
(Q) "Trust" shall mean any trust created pursuant to the provisions of
Article IX.
(R) "Trust Agreement" shall mean the agreement establishing the Trust.
(S) "Trustee" shall mean the trustee of the Trust.
(T) "Trust Fund" shall mean assets under the Trust as may exist from
time to time.
II-2
<PAGE>
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
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
III-1
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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 under the Plan or to
vote in any case in which his individual right to claim any benefit under the
Plan is particularly involved. In any case in which an Administrative Committee
member is so disqualified to act and the remaining members cannot agree, the
Compensation Committee shall appoint a temporary substitute member to exercise
all the powers of the disqualified member concerning the matter in which he is
disqualified.
III-2
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ARTICLE IV
Allocations Under the Plan,
Participation in the Plan and Selection for Awards
(A) Only Employees shall be eligible to be Participants in the Plan.
The Compensation Committee shall be the sole judge of who shall be eligible to
be a Senior Executive Participant for any Allocation Year. The selection of a
Senior Executive to be a Senior Executive Participant for a particular
Allocation Year shall not constitute him a Senior Executive Participant for
another Allocation Year unless he is selected to be a Senior Executive
Participant for such other Allocation Year by the Compensation Committee.
Eligibility to participate as a Compensation Limited Participant for an
Allocation Year shall be based on an Employee's compensation for such Allocation
Year. An Employee may be both a Senior Executive Participant and a Compensation
Limited Participant for the same Allocation Year.
(B) Each Allocation Year the Compensation Committee shall, in its sole
discretion, determine what amounts shall be available for allocation to the
Accounts of the Senior Executive Participants pursuant to Paragraph (E) below.
(C) No award shall be made to any person while he is a voting member
of the Compensation Committee.
(D) The Compensation Committee from time to time may adopt, amend or
revoke such regulations and rules as it may deem advisable for its own purposes
to guide in determining which of the Employees it shall deem to be Senior
Executive Participants for a particular Allocation Year and the method and
manner of payment thereof to the Senior Executive Participants.
(E) The Compensation Committee, during the Allocation Year involved or
during the next succeeding Allocation Year, shall determine which eligible
Employees it shall designate as Senior Executive Participants for such
Allocation Year and the amounts allocated to each Senior Executive Participant
for such Allocation Year. In making its determination, the Compensation
Committee shall consider such factors as the Compensation Committee may in its
sole discretion deem material. The Compensation Committee, in its sole
discretion, may notify an Employee at any time during a particular Allocation
Year or in the Allocation Year following the Allocation Year for which the award
is made that he has been selected as a Senior Executive Participant for all or
part of such Allocation Year, and may determine and notify him of the amount
which shall be allocated to him for such Allocation Year. The decision of the
Compensation Committee in selecting an Employee to be a Senior Executive
Participant or in making any allocation to him shall be final and conclusive,
and nothing herein shall be deemed to give any Employee or his legal
representatives or assigns any right to be a Senior Executive Participant for
such Allocation Year or to be allocated any amount except to the extent of the
amount, if any, allocated to a Senior Executive Participant for a particular
Allocation Year, but at all times subject to the provisions of the Plan.
IV-1
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(F) An Employee whose Service is Terminated during the Allocation Year
and who, on the date of Termination of Service, was eligible to be a Senior
Executive Participant may be selected as a Senior Executive Participant for such
part of the Allocation Year prior to his Termination and be granted such award
with respect to his services during such part of the Allocation Year as the
Compensation Committee, in its sole discretion and under any rules it may
promulgate, may determine.
(G) The Administrative Committee shall allocate to the credit of each
Compensation Limited Participant for each Allocation Year an amount equal to the
reduction in such Compensation Limited Participant's allocations of Employer
discretionary contributions and forfeitures under qualified defined contribution
plans sponsored by the Employers for such Allocation Year by reason of the
application of Section 401(a)(17) of the Code. In addition, for each Allocation
Year during which each such Compensation Limited Participant has made the
maximum elective contributions under qualified defined contribution plans
sponsored by the Employers pursuant to Section 402(g) of the Code, the
Administrative Committee shall allocate to the credit of each such Participant
under the Plan an amount equal to 4% of such Participant's compensation (as such
term is defined in the applicable qualified defined contribution plan) in excess
of the compensation limit under Section 401(a)(17) of the Code for such
Allocation Year.
(G1) The Administrative Committee shall determine for each
Allocation Year which Senior Executive Participants' allocations of Employer
discretionary contributions, Employer 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 415 of
the Code, and shall allocate to the credit of each such Senior Executive
Participant under the Plan an amount equal to the amount of such reductions
applicable to such Senior Executive Participant; provided, that the total amount
allocated to the credit of a Senior Executive Participant under this Paragraph
and Paragraph (G) above shall not exceed the total reduction in such Senior
Executive Participant's allocations of Employer discretionary contributions,
Employer matching contributions and forfeitures for such Allocation Year under
qualified defined contribution plans sponsored by the Employers by reason of the
application of both Section 401(a)(17) and Section 415 of the Code.
(G2) The Administrative Committee shall determine for each
Allocation Year which Senior Executive Participants' allocations of Employer
discretionary contributions, Pension Equalizer Contributions and forfeitures
under qualified defined contribution plans sponsored by the Employers have been
reduced for such Allocation Year by reason of elective deferrals under the
Halliburton Elective Deferral Plan (determined as if Section 401(a)(17) and
Section 415 did not apply to such qualified defined contribution plans), and
shall allocate to the credit of each such Senior Executive Participant under the
Plan an amount equal to the amount of such reductions applicable to such Senior
Executive Participant.
(H) The Compensation Committee may, in its discretion, allocate to the
credit of a Senior Executive Participant under the Plan all or any part of any
remuneration payable by the Employer to such Senior Executive 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 Senior Executive Participant.
IV-2
<PAGE>
(I) Allocations to Participants under the Plan shall be made by
crediting their respective Accounts on the books of their Employers as of the
last day of the Allocation Year, except that an allocation under Paragraph (H)
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 (H). Allocations under Paragraph (E) above shall be credited to the
Participants' Deferred Compensation Accounts, allocations under Paragraphs (G),
(G1) and (G2) above shall be credited to the Participants' ERISA Restoration
Accounts and allocations under Paragraph (H) above shall be credited to the
Participants' Excess Remuneration Account. Accounts of Participants shall also
be credited with interest as of the last day of each Allocation Year, at the
rate set forth in Paragraph (J) below, on the average monthly credit balance of
the Account being calculated by using the balance of each Account on the first
day of each month. Prior to Termination of Service, the annual interest shall
accumulate as a part of the Account balance. After Termination of Service, the
annual interest for such Allocation Year may be paid as more particularly set
forth hereinafter.
(J) Interest shall be credited on amounts allocated to Participants'
Deferred Compensation Accounts at the rate of 5% per annum for periods prior to
Termination of Service. Interest shall be credited on amounts allocated to
Participants' ERISA Restoration Accounts and Excess Remuneration Accounts, and
on amounts allocated to Participants' Deferred Compensation Accounts for periods
subsequent to Termination of Service, at the rate of 10% per annum.
IV-3
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ARTICLE V
Non-Assignability of Awards
No Participant shall have any right to commute, encumber, pledge,
transfer or otherwise dispose of or alienate any present or future right or
expectancy which he or she may have at any time to receive payments of any
allocations made to such Participant, all such allocations being expressly
hereby made non-assignable and non-transferable; provided, however, that nothing
in this Article shall prevent transfer (A) by will, (B) by the applicable laws
of descent and distribution or (C) pursuant to an order that satisfies the
requirements for a "qualified domestic relations order" as such term is defined
in section 206(d)(3)(B) of the ERISA and section 414(p)(1)(A) of the Code,
including an order that requires distributions to an alternate payee prior to a
Participant's "earliest retirement age" as such term is defined in section
206(d)(3)(E)(ii) of the ERISA and section 414(p)(4)(B) of the Code. Attempts to
transfer or assign by a Participant (other than in accordance with the preceding
sentence) shall, in the sole discretion of the Compensation Committee after
consideration of such facts as it deems pertinent, be grounds for terminating
any rights of such Participant to any awards allocated to but not previously
paid over to such Participant.
V-1
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ARTICLE VI
Vesting
All amounts credited to a Participant's Accounts shall be fully vested
and not subject to forfeiture for any reason except as provided in Article V.
VI-1
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ARTICLE VII
Distribution of Awards
(A) Upon Termination of Service of a Participant, the Administrative
Committee (i) shall certify to the Trustee or the treasurer of the Employer, as
applicable, the amount credited to each of the Participant's Accounts on the
books of each Employer for which the Participant was employed at a time when he
earned an award hereunder, (ii) shall determine whether the payment of the
amount credited to each of the Participant's Accounts under the Plan is to be
paid directly by the applicable Employer, from the Trust Fund, if any, or by a
combination of such sources (except to the extent the provisions of the Trust
Agreement, if any, specify payment from the Trust Fund) and (iii) shall
determine and certify to the Trustee or the treasurer of the Employer, as
applicable, the method of payment of the amount credited to each of a
Participant's Accounts, selected by the Administrative Committee from among the
following alternatives:
(1) A single lump sum payment upon Termination of Service;
(2) A payment of one-half of the Participant's balance upon
Termination of Service, with payment of the additional one-half to be
made on or before the last day of a period of one year following
Termination; or
(3) Payment in monthly installments over a period not to
exceed ten years with such payments to commence upon Termination of
Service.
The above notwithstanding, if the total amount credited to the Participant's
Accounts upon Termination of Service is less than $50,000, such amount shall
always be paid in a single lump sum payment upon Termination of Service.
(B) The Trustee or the treasurer of the Employer, as applicable, shall
thereafter make payments of awards in the manner and at the times so designated,
subject, however, to all of the other terms and conditions of this Plan and the
Trust Agreement, if any. This Plan shall be deemed to authorize the payment of
all or any portion of a Participant's award from the Trust Fund to the extent
such payment is required by the provisions of the Trust Agreement, if any.
(C) Interest on the second half of a payment under Paragraph (A)(2)
above shall be paid with the final payment, while interest on payments under
Paragraph (A)(3) above may be paid at each year end or may be paid as a part of
a level monthly payment computed by the Administrative Committee through the use
of such tables as the Administrative Committee shall select from time to time
for such purpose.
(D) If a Participant shall die while in the service of an Employer, or
after Termination of Service and prior to the time when all amounts payable to
him under the Plan have been paid to him, any remaining amounts payable to the
Participant hereunder shall be payable to the estate of the Participant. The
Administrative Committee shall cause the Trustee or the treasurer of the
VII-1
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Employer, as applicable, to pay to the estate of the Participant all of the
awards then standing to his credit in a lump sum or in such other form of
payment consistent with the alternative methods of payment set forth above as
the Administrative Committee shall determine after considering such facts and
circumstances relating to the Participant and his estate as it deems pertinent.
(E) If the Plan is terminated pursuant to the provisions of Article X,
the Compensation Committee may, at its election and in its sole discretion,
cause the Trustee or the treasurer of the Employer, as applicable, to pay to all
Participants all of the awards then standing to their credit in the form of lump
sum payments.
VII-2
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ARTICLE VIII
Nature of Plan
This Plan constitutes a mere promise by the Employers to make benefit
payments in the future and Participants have the status of general unsecured
creditors of the Employers. Further, the adoption of this Plan and any setting
aside of amounts by the Employers with which to discharge their obligations
hereunder shall not be deemed to create a trust; legal and equitable title to
any funds so set aside shall remain in the Employers, and any recipient of
benefits hereunder shall have no security or other interest in such funds. Any
and all funds so set aside shall remain subject to the claims of the general
creditors of the Employers, present and future. This provision shall not require
the Employers to set aside any funds, but the Employers may set aside such funds
if they choose to do so.
VIII-1
<PAGE>
ARTICLE IX
Funding of Obligation
Article VIII above to the contrary notwithstanding, the Employers may
fund all or part of their obligations hereunder by transferring assets to a
trust if the provisions of the trust agreement creating the Trust require the
use of the Trust's assets to satisfy claims of an Employer's general unsecured
creditors in the event of such Employer's insolvency and provide that no
Participant shall at any time have a prior claim to such assets. Any transfers
of assets to a trust may be made by each Employer individually or by the Company
on behalf of all Employers. The assets of the Trust shall not be deemed to be
assets of this Plan.
IX-1
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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 Accounts or be retroactive in
effect to the prejudice of any Participant and the interest rate applicable to
amounts credited to Participants' Accounts for periods subsequent to Termination
of Service shall not be reduced below 6% per annum.
X-1
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ARTICLE XI
General Provisions
(A) No Participant shall have any preference over the general creditors
of an Employer in the event of such Employer's insolvency.
(B) Nothing contained herein shall be construed to give any person the
right to be retained in the employ of an Employer or to interfere with the right
of an Employer to terminate the employment of any person at any time.
(C) If the Administrative Committee receives evidence satisfactory to
it that any person entitled to receive a payment hereunder is, at the time the
benefit is payable, physically, mentally or legally incompetent to receive such
payment and to give a valid receipt therefor, and that an individual or
institution is then maintaining or has custody of such person and that no
guardian, committee or other representative of the estate of such person has
been duly appointed, the Administrative Committee may direct that such payment
thereof be paid to such individual or institution maintaining or having custody
of such person, and the receipt of such individual or institution shall be valid
and a complete discharge for the payment of such benefit.
(D) Payments to be made hereunder may, at the written request of the
Participant, be made to a bank account designated by such Participant, provided
that deposits to the credit of such Participant in any bank or trust company
shall be deemed payment into his hands.
(E) Wherever any words are used herein in the masculine, feminine or
neuter gender, they shall be construed as though they were also used in another
gender in all cases where they would so apply, and whenever any words are used
herein in the singular or plural form, they shall be construed as though they
were also used in the other form in all cases where they would so apply.
(F) THIS PLAN SHALL BE CONSTRUED AND ENFORCED UNDER THE LAWS OF THE
STATE OF TEXAS EXCEPT TO THE EXTENT PREEMPTED BY FEDERAL LAW.
XI-1
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ARTICLE XII
Effective Date
This amendment and restatement of the Plan shall be effective from and
after January 1, 1999 and shall continue in force during subsequent years unless
amended or revoked by action of the Compensation Committee.
XII-1
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement"), is entered into by
and between Halliburton Company ("Employer"), a Delaware corporation and Lester
L. Coleman, ("Employee"), to be effective on September 29, 1998 (the "Effective
Date").
W I T N E S S E T H:
WHEREAS, Employee is currently employed by Employer; and
WHEREAS, Employer is desirous of continuing the employment of Employee
after the Effective Date pursuant to the terms and conditions and for the
consideration set forth in this Agreement, and Employee is desirous of
continuing in 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 General Counsel 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 Employer 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
<PAGE>
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 which might
involve a possible conflict of interest without first obtaining approval in
accordance with Employer'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
$450,000 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
Employer'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
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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") 10,000 shares of
Employer's common stock subject to restrictions.
2.4. 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.
2.5. 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 Employer'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.
2.6. Except as otherwise provided in Section 2.2 hereof, 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.
2.7. 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.
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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 notice to Employee, or by Employee upon thirty (30) days' notice
to Employer, for any or no reason.
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 Employer'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 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
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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 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 of Employer except
for those which may be payable pursuant to the terms of Employer'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 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, all shares of Halliburton
common stock previously granted to Employee under the Halliburton
Company Career Executive Incentive Stock Plan, the 1993 Plan,
and any similar plan adopted by Employer in the future, which at
the date of termination of employment are subject to restrictions
(the "Restricted Shares") will be treated in a manner consistent
with Employer's past practices for treatment of Restricted Shares
held by executives whose employment was involuntarily terminated
by Employer for reasons other than Cause, which, in most
instances, have been to forfeit the Restricted Shares and pay to
such executive 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); although in some cases, Employer has,
in lieu of, or in combination with, the foregoing and in its
discretion, caused the forfeiture restrictions with respect to
all or a portion of the Restricted Shares to lapse and provided
for the retention of such shares by such executive.
(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' 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 plans for years prior to the year of
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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 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
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 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'
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Retirement Income Security Act of 1974, as amended) maintained by Employer,
except that Employee shall not be entitled to any severance benefits pursuant to
any severance plan or program of the Employer.
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
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
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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 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 Employer or in which Employer or
has a 50% or more equity interest.
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 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, 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.
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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.
5.7. This Agreement shall be binding upon and inure to the benefit of
Employer, to the extent herein provided and any other person, association, or
entity which may hereafter acquire or succeed to all or substantially all of the
business or assets of Employer 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. Except for any stock option and restricted stock agreements and
any agreements pertaining to intellectual property or confidential information
of Employer, which agreements remain in full force and effect, 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
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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: President and Chief Operating Officer
EMPLOYEE
/s/ Lester L. Coleman
--------------------------------
Lester L. Coleman
10
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement"), is entered into by
and between Halliburton Energy Services, Inc. ("Employer"), Halliburton Company,
a Delaware corporation ("Halliburton"), and David A. Reamer, ("Employee"), to be
effective on September 29, 1998 (the "Effective Date").
W I T N E S S E T H:
WHEREAS, Employee is currently employed by Employer; and
WHEREAS, Employer is desirous of continuing the employment of Employee
after the Effective Date pursuant to the terms and conditions and for the
consideration set forth in this Agreement, and Employee is desirous of
continuing in 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, Halliburton 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 Senior Vice President - Shared Services Division 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 or Employer 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 Halliburton or any of its affiliated subsidiaries and divisions,
including Employer (collectively, the "Halliburton Entities" or, individually, a
"Halliburton Entity"), or requires any significant portion of Employee's
<PAGE>
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 Halliburton'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 which 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
$325,000 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
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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 Halliburton shall grant to Employee under the Halliburton
Company 1993 Stock and Long-Term Incentive Plan (the "1993 Plan") 7,500 shares
of Halliburton's common stock subject to restrictions.
2.4. 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.
2.5. 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.
2.6. Except as otherwise provided in Section 2.2 hereof, neither
Halliburton nor Employer shall 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.
2.7. 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.
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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 notice to Employee, or by Employee upon thirty (30) days'
notice to Employer, for any or no reason.
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 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 notice of such breach to Employee
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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
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 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, all shares of
Halliburton common stock previously granted to Employee under
the Halliburton Company Career Executive Incentive Stock Plan,
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") will be
treated in a manner consistent with Halliburton's past
practices for treatment of Restricted Shares held by
executives whose employment was involuntarily terminated by a
Halliburton Entity for reasons other than Cause, which, in
most instances, have been to forfeit the Restricted Shares
and pay to such executive 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); although in some cases,
Halliburton has, in lieu of, or in combination with, the
foregoing and in its discretion, caused the forfeiture
restrictions with respect to all or a portion of the
Restricted Shares to lapse and provided for the retention of
such shares by such executive.
(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.
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(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
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
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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
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
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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 Employer or
Halliburton or in which Employer or Halliburton or has a 50% or more equity
interest.
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.
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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.
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
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. Except for any stock option and restricted stock agreements
and any agreements pertaining to intellectual property or confidential
information of Employer or Halliburton, as the case may be, which agreements
remain in full force and effect, 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,
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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, Halliburton and Employee have duly
executed this Agreement in multiple originals to be effective on the Effective
Date.
HALLIBURTON ENERGY SERVICES, INC.
By: /s/ David J. Lesar
----------------------------------
Name: David J. Lesar
Title: President and Chief Executive Officer
HALLIBURTON COMPANY
By: /s/ David J. Lesar
----------------------------------
Name: David J. Lesar
Title: President and Chief Operating Officer
EMPLOYEE
/s/ David A. Reamer
-------------------------------------
David A. Reamer
10
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement"), is entered into by
and between Halliburton Company ("Employer"), a Delaware corporation and Lewis
W. Powers, ("Employee"), to be effective on September 29, 1998 (the "Effective
Date").
W I T N E S S E T H:
WHEREAS, Employee is currently employed by Employer; and
WHEREAS, Employer is desirous of continuing the employment of Employee
after the Effective Date pursuant to the terms and conditions and for the
consideration set forth in this Agreement, and Employee is desirous of
continuing in 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
Senior Vice President - Strategic Account Management 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 Employer 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
<PAGE>
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 which might
involve a possible conflict of interest without first obtaining approval in
accordance with Employer'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
$325,000 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
Employer'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
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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") 10,000 shares of
Employer's common stock subject to restrictions.
2.4. 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.
2.5. 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 Employer'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.
2.6. Except as otherwise provided in Section 2.2 hereof, 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.
2.7. 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.
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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 notice to Employee, or by Employee upon thirty (30) days' notice
to Employer, for any or no reason.
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 Employer'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 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
notice of such breach to Employee by Employer. Determination
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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 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 of Employer except
for those which may be payable pursuant to the terms of Employer'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 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, all shares of
Halliburton common stock previously granted to Employee under
the Halliburton Company Career Executive Incentive Stock Plan,
the 1993 Plan, and any similar plan adopted by Employer in the
future, which at the date of termination of employment are
subject to restrictions (the "Restricted Shares") will be
treated in a manner consistent with Employer's past practices
for treatment of Restricted Shares held by executives whose
employment was involuntarily terminated by Employer for
reasons other than Cause, which, in most instances, have
been to forfeit the Restricted Shares and pay to such
executive 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); although in some cases, Employer
has, in lieu of, or in combination with, the foregoing and
in its discretion, caused the forfeiture restrictions with
respect to all or a portion of the Restricted Shares to lapse
and provided for the retention of such shares by such
executive.
(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 plans for years prior to the year of
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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 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
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 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'
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Retirement Income Security Act of 1974, as amended) maintained by Employer,
except that Employee shall not be entitled to any severance benefits pursuant to
any severance plan or program of the Employer.
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
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
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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 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 Employer or in which Employer
or has a 50% or more equity interest.
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 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, 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.
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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.
5.7. This Agreement shall be binding upon and inure to the benefit
of Employer, to the extent herein provided and any other person, association, or
entity which may hereafter acquire or succeed to all or substantially all of the
business or assets of Employer 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. Except for any stock option and restricted stock agreements
and any agreements pertaining to intellectual property or confidential
information of Employer, which agreements remain in full force and effect, 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
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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: President and Chief Operating Officer
EMPLOYEE
/s/ Lewis W. Powers
-----------------------------
Lewis W. Powers
10
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement"), is entered into by
and between Halliburton Company ("Employer"), a Delaware corporation and Gary V.
Morris, ("Employee"), to be effective on September 29, 1998 (the "Effective
Date").
W I T N E S S E T H:
WHEREAS, Employee is currently employed by Employer; and
WHEREAS, Employer is desirous of continuing the employment of Employee
after the Effective Date pursuant to the terms and conditions and for the
consideration set forth in this Agreement, and Employee is desirous of
continuing in 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 similar 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 Employer 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
<PAGE>
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 which might
involve a possible conflict of interest without first obtaining approval in
accordance with Employer'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
$450,000 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
Employer'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
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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") 15,000 shares of
Employer's common stock subject to restrictions.
2.4. 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.
2.5. 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 Employer'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.
2.6. Except as otherwise provided in Section 2.2 hereof, 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.
2.7. 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.
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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 notice to Employee, or by Employee upon thirty (30) days' notice
to Employer, for any or no reason.
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 Employer'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 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 notice of such breach to Employee
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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 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 of Employer except
for those which may be payable pursuant to the terms of Employer'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, all shares of
Halliburton common stock previously granted to Employee under
the Halliburton Company Career Executive Incentive Stock Plan,
the 1993 Plan, and any similar plan adopted by Employer in the
future, which at the date of termination of employment are
subject to restrictions (the "Restricted Shares") will be
treated in a manner consistent with Employer's past practices
for treatment of Restricted Shares held by executives whose
employment was involuntarily terminated by Employer for
reasons other than Cause, which, in most instances, have been
to forfeit the Restricted Shares and pay to such executive 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); although in some cases, Employer has, in lieu of,
or in combination with, the foregoing and in its discretion,
caused the forfeiture restrictions with respect to all or a
portion of the Restricted Shares to lapse and provided for the
retention of such shares by such executive.
(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.
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(iii) Employee shall be entitled to any individual bonuses or
individual incentive compensation not yet paid but payable
under Employer'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 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
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 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
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under any employee benefit plan (as such term is defined in the Employees'
Retirement Income Security Act of 1974, as amended) maintained by Employer,
except that Employee shall not be entitled to any severance benefits pursuant to
any severance plan or program of the Employer.
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
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
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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 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 Employer or in which Employer or
has a 50% or more equity interest.
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 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, 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.
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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.
5.7. This Agreement shall be binding upon and inure to the benefit of
Employer, to the extent herein provided and any other person, association, or
entity which may hereafter acquire or succeed to all or substantially all of the
business or assets of Employer 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. Except for any stock option and restricted stock agreements and
any agreements pertaining to intellectual property or confidential information
of Employer, which agreements remain in full force and effect, 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
9
<PAGE>
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: President and Chief Operating Officer
EMPLOYEE
/s/ Gary V. Morris
----------------------------------------
Gary V. Morris
10
September 29, 1998
Mr. Ken R. LeSuer
Vice Chairman
Halliburton Company
2500 Halliburton Center
5151 San Felipe
Houston, Texas 77056
Dear Ken:
You have announced your intention to take early retirement from the
employ of the Company effective January 1, 1999. We appreciate your almost 40
years of loyal and dedicated service to the Company. I especially appreciate the
advice and support you have given to me over the past three years since I joined
the Company.
Our discussions have included the terms of your continued employment
prior to your retirement, the performance by you of certain consulting services
following your retirement and your forbearance from taking certain actions, all
as more particularly set forth below. As used in succeeding paragraphs of this
agreement, the "Company" means Halliburton Company and its affiliates. It is our
mutual understanding that the terms of agreement are as hereinafter set forth.
I
CONTINUED EMPLOYMENT; EARLY RETIREMENT
A. Position and Salary; Retirement. During the period from the date of
your execution of this agreement (the "Effective Date") through the closing date
(the "Closing Date") of the merger transaction with Dresser Industries, Inc. you
will continue to be employed as Vice Chairman of the Company and will continue
as a member of the Executive Committee of the Company. Effective on the Closing
Date, you will voluntarily resign as an officer of the Company and from all
other positions, posts, offices and assignments with the Company or any of the
Company's affiliates (including, but not limited to, your service as a member of
the Executive Committee and as a Trustee of the Halliburton Foundation, Inc.),
except for those which the Chief Executive Officer of the Company specifically
requests your service thereon to continue, but in no case after January 1, 1999.
Following the Closing Date, you will be provided with an office located on the
25th floor of Halliburton Center and you will vacate your current office within
10 business days after being informed of the location of your new office. During
the period beginning with the Closing Date through January 1, 1999, you will
continue to be employed as an employee of the Company, on which latter date your
employment will terminate. Your salary during the period from the Effective Date
<PAGE>
2
hereof through January 1, 1999 (the "Employment Period") will continue at the
present rate per month, payable twice monthly following performance of service.
You will also be paid your accrued vacation through December 31, 1998. All such
payments shall be less customary withholding for taxes and applicable
deductions, and shall be subject to any elections under the Halliburton Elective
Deferral Plan (the "Elective Deferral Plan"). You acknowledge that the payments
made pursuant to this paragraph A and paragraph C below of this Section I are in
full satisfaction of all wages, benefits and other compensation owed by the
Company and its affiliates for your employment or service to your retirement
date.
Since your employment during 1999 will be limited to one day, you agree
to waive any right you may have for vacation pay for 1999 and not to assert any
claim with respect thereto. You further understand and agree that you will not
be designated as a participant in the Performance Pay Plan (as defined below) or
the Deferred Compensation Plan (as defined below) for the 1999 plan year.
As of the close of business on January 1, 1999, you will take early
retirement as an employee of the Company and promptly thereafter vacate your
office space at Halliburton Center in Houston.
B. Senior Executives' Deferred Compensation Plan. On December 31, 1998
your Deferred Compensation Account ("SERP Account") in the Senior Executives'
Deferred Compensation Plan (the "Deferred Compensation Plan") will be credited
with $625,000 in supplemental retirement benefits for the 1998 plan year. The
applicable accounts under such Plan will also be credited for such period with
amounts equal to (i) reductions in contributions to which you would be entitled
under the Halliburton Profit Sharing and Savings Plan by reason of the
limitations imposed under the Internal Revenue Code or by reason of elective
deferrals under the Elective Deferral Plan, ("ERISA Offset Account") and (ii)
interest earned on account balances in accordance with the provisions of such
Plan. Upon approval of the administrative committee appointed to administer the
Deferred Compensation Plan, you will receive the amounts in your accounts in
monthly installments over a 10-year period commencing after the 1998 allocations
to your SERP and ERISA Offset Accounts have been made.
C. Annual Performance Pay Plan. You will receive the amount of any
Reward that may be payable under the Halliburton Annual Performance Pay Plan
("Performance Pay Plan") for the 1998 Plan Year, such Reward to be paid in
accordance with the applicable provisions of such Plan. You will also receive
the unpaid amounts of any Rewards for prior Plan Years which will be paid as
provided under the Plan. Such payments will be subject to any elections under
the Elective Deferral Plan and customary withholding for taxes.
D. Vesting of Restricted Stock. Effective with your retirement and on
such date, restrictions on shares of Common Stock issued to you under the
Halliburton Company Career Executive Incentive Stock Plan and the Halliburton
Company 1993 Stock and Long-Term Incentive Plan (the "1993 Plan") which have not
theretofore lapsed will lapse in their entirety.
E. Vesting of Stock Options. Your stock options granted under the 1993
Plan will vest in accordance with the terms of your respective stock option
agreements.
<PAGE>
3
F. Retiree Medical Plan. Following your retirement, you will be
eligible to participate in the Halliburton Retiree Medical Plan under the same
terms and conditions as other Company early retirees.
G. Other Benefit Programs. Payments, benefits or accruals set forth in
paragraphs A through F above are in addition to any payments, benefits or
accruals to which you may be entitled under the Halliburton Profit Sharing and
Savings Plan, the Halliburton Retirement Plan, the Elective Deferral Plan and
any welfare benefit plans in accordance with their respective terms.
II
CONSULTING SERVICES FOR THE COMPANY AND ITS AFFILIATES
A. Consultation and Business Promotion. During the period beginning
January 2, 1999 and ending December 31, 2000 ("Consulting Period"), you will be
retained as a consultant to the Company and its affiliates. You will, during the
Consulting Period, fulfill all of your prior customer commitments and, as
reasonably requested by the Chief Executive Officer of the Company, aid in
business promotion, cooperate in customer entertainment, assist with respect to
special problems or projects and consult with and advise the Chief Executive
Officer of the Company or other members of management of the Company and its
business units in your particular areas of expertise. In assisting the Company
and the aforesaid units, you will not be required to devote more than one-third
of your time thereto, although travel outside Texas may be required. Your status
while performing duties hereunder will be that of an independent contractor and
not that of a Company employee.
B. Furtherance of Company Interests. During the Consulting Period, you
will use your best efforts to enhance the image of the Company, its business
units and their respective managements (provided that such efforts, when
combined with the services specified in paragraph A of this Section II do not
require you to devote more than one-third of your time thereto) and to refrain
from taking any action or making any statements inconsistent therewith.
C. Entering Into Competition and Conflicts of Interest. Without the
prior written approval of the Chief Executive Officer of the Company, you will
not, during the Consulting Period, accept payment from, be employed by, become
an officer, director, partner, principal, employee or consultant to or have a
substantial equity ownership in, any corporation, partnership or business in
competition with the Company or any of its affiliated companies. Once granted,
any such approval may be subsequently withdrawn if (i) it is determined by the
Chief Executive Officer of the Company, in his sole discretion, that the nature
of your relationship with such competitor is in conflict with the Company's or
any of its affiliates' interests; (ii) you are notified in writing of such
determination and (iii) you do not immediately following receipt of such notice
terminate your relationship with such competitor. Upon withdrawal of such
approval, the Company's obligation to pay consulting fees as set forth in
paragraph E below will terminate. Because of the nature and scope of your duties
with the Company during your employment, we have agreed that it is necessary and
<PAGE>
4
reasonable for the prohibition set forth in the first sentence of this paragraph
to be applied nationwide. After the end of the Consulting Period, you may engage
in the prohibited activities described in this paragraph to the extent that such
activities are consistent with your remaining obligations under paragraph D of
Section II of this agreement. The purchase by you, directly or indirectly, for
investment of the publicly traded stock of a competitor of the Company or any of
its affiliates representing not more than one percent (1%) of the total
outstanding stock of such competitor or the holding thereof will not be deemed
to constitute the acquisition or holding of a substantial equity ownership in
such competitor for the purposes of this paragraph.
D. Confidential Information. You will not at any time after your
retirement, without prior written approval of the Chief Executive Officer of the
Company, disclose to any unauthorized person or competitor any confidential
information or confidential knowledge as to the business and affairs of the
Company or any of its affiliates which you have received during the course of
your employment with the Company or which you may receive in the course of
consulting or advising hereunder.
E. Consulting Fees. In consideration of the foregoing but expressly
subject to the provisions of paragraph F below, during the Consulting Period,
you will receive consulting fees in monthly payments of $20,834 on the last
business day in the month for which payment is to be made.
F. Conditions Precedent to Payment of Consulting Fees; Death.
Notwithstanding anything to the contrary contained in this agreement, payment of
consulting fees pursuant to paragraph E of this Section will be made only if the
conditions set forth in paragraphs A, B, C and D of this Section are fully
satisfied at the time the payment is payable. Should you become disabled and,
therefore, be unable to devote up to one-third of your time to the performance
of consulting services as you may be required to perform pursuant to paragraph A
of this Section and such disability shall continue for a three-month period, the
Company's obligation to pay consulting fees as set forth in paragraph E of this
Section will terminate at the end of such three-month period.
If during the Consulting Period, you should die, any amounts of
consulting fees then unpaid for any period of time prior to your death, will be
paid to your estate or personal representative, plus the amount of any unpaid
expenses.
G. Participation in Other Benefit Programs. Payments to be received
pursuant to Paragraph E of this Section II are in addition to any payments which
you may be receiving or which you are entitled to receive under the Deferred
Compensation Plan, the Halliburton Profit Sharing and Savings Plan, the
Halliburton Retirement Plan, the Elective Deferral Plan and the Performance Pay
Plan.
H. Office Space, Secretarial Support, Expenses, Etc. During the
Consulting Period and expressly contingent on your not being in breach of any
of the conditions specified in paragraphs A, B, C and D of this Section II, you
will be entitled to:
1. Office space and part-time secretarial support in Company
owned or leased office space as may be mutually agreeable
to you and the Company or, failing
<PAGE>
5
mutual agreement at any time as to Company owned or leased
space, $1,750 per month (prorated as appropriate) as an
allowance for rental office space and part-time secretarial
support.
2. Office furnishings and equipment (including computer equipment
for access to the Company's network).
3. Reimbursement for reasonable and necessary travel,
entertainment and office expenses which you incur in
performance of the duties specified in paragraph A of this
Section promptly following your submission to the Company of
an appropriately documented expense claim.
III
RELEASE
A. Representation. You represent, warrant and agree that you have not
filed any claims, appeals, complaints, charges or lawsuits against the Company,
its affiliates or any of their respective employees, officers, directors,
shareholders, agents and representatives (collectively, the "Halliburton
Parties") with any governmental agency or court and that you will not file or
permit to be filed or accept benefit from any claim, complaint or petition filed
with any court by you or on your behalf at any time hereafter; provided,
however, this shall not limit you from filing an action for the sole purpose of
enforcing your rights under this agreement. Further, you represent and warrant
that no other person or entity has any interest in, or assignment of, any claims
or causes of action you may have against any Halliburton Party and which you now
release in their entirety.
B. Release. You agree to release, acquit and discharge and do hereby
release, acquit and discharge the Company, its affiliates, and all Halliburton
Parties, collectively and individually, from any and all claims and from any and
all causes of action, of any kind or character, whether now known or not known,
you may have against any of them, including, but not limited to, (i) any claim
for benefits, compensation, remuneration, salary, or wages, and the costs,
damages and expenses related thereto; and (ii) all claims or causes of action
arising from your employment, termination of employment, or any alleged
discriminatory employment practices, including but not limited to any and all
claims or causes of action arising under the Age Discrimination in Employment
Act, as amended ("ADEA"), 29 U.S.C. ss. 621, et seq. and any and all claims or
causes of action arising under any other federal, state or local laws pertaining
to discrimination in employment or equal employment opportunity; except that the
parties agree that your release, acquittal and discharge shall not relieve the
Company from its obligations under this agreement. This release also applies to
any claims or causes of action of the types specified in clauses (i) and (ii)
above which are brought by any person or agency or class action under which you
may have a right or benefit.
C. Further Release. In recognition that your employment will continue
through January 1, 1999, you agree to execute and deliver on your retirement
date a separate release containing language substantially similar to that set
forth in Paragraph B of this Section, in order to release any claim that
may arise during the Employment Period.
<PAGE>
6
IV
GENERAL PROVISIONS
A. Non-assignability. This agreement shall be binding upon and inure to
the benefit of the respective successors in interests of the parties hereto.
Notwithstanding the foregoing, the rights to receive payments hereunder pursuant
to Section II hereof are hereby expressly declared to be personal,
non-assignable and non-transferable except by will or intestacy, and in the
event of any attempted assignment or transfer of any such rights contrary to the
provisions hereof, the Company will have no further liability for payments with
respect thereto hereunder.
B. Injunctive and Other Relief. You recognize that the services to be
rendered hereunder are unique and that in the event of your breach of the
conditions to be performed by you under paragraphs A and B of Section II hereof
or in the event that you take such actions as are prohibited hereunder in
paragraphs C and D of such Section, the Company will be entitled, if it so
elects, to institute and prosecute proceedings in any court of competent
jurisdiction, in law or in equity, to obtain damages for any breach of this
agreement or to enforce the specific performance thereof or to enjoin you from
taking the actions prohibited in paragraphs C and D of Section II hereof.
C. Governing Law and Amendment. This letter contains the entire
agreement between the parties and will be governed under the laws of the State
of Texas. It may not be amended orally, but only by agreement in writing signed
by each of the parties.
If you agree that the above constitutes our understanding relating to
your employment during the Employment Period and the performance of consulting
services during the Consulting Period, please so indicate by dating and signing
both duplicate originals of this letter and return one duplicate original to me.
Very truly yours,
/s/ Dick Cheney
ACCEPTED AND AGREED TO:
/s/ Ken R. LeSuer
- ----------------------------
Ken R. LeSuer
Dated: October 20, 1998
----------------------
September 29, 1998
Mr. Dale P. Jones
Vice Chairman
Halliburton Company
500 North Akard Street
3600 Lincoln Plaza
Dallas, TX 75201
Dear Dale:
You have announced your intention to take early retirement from the
employ of the Company on October 2, 1998 and to resign as a Director of the
Company on the earlier of October 2, 1998 or the effective date of the Dresser
merger. We appreciate your more than 33 years of loyal and dedicated service to
the Company. I especially appreciate the counsel and support you have given to
me over the past three years since I joined the Company.
Our discussions have included the terms of certain consulting services
to be performed by you following your retirement and your forbearance from
taking certain actions, all as more particularly set forth below. As used in
succeeding paragraphs of this agreement, the "Company" means Halliburton
Company. It is our mutual understanding that the terms of agreement are as
hereinafter set forth.
I
EARLY RETIREMENT
A. Retirement. On October 2, 1998, you will retire from the service of
the Company and will voluntarily resign as an officer of the Company and from
all other positions, posts, offices and assignments with the Company or any of
the Company's affiliates, including, but not limited to, your service as a
member of the Executive Committee and as a Trustee of the Halliburton
Foundation, Inc. You will also voluntarily resign as a member of the Company's
Board of Directors on the earlier to occur of October 2, 1998 or the closing
date of the merger transaction with Dresser Industries, Inc.
Your salary will continue through your retirement date at the present
rate per month, payable twice monthly following performance of service. You will
also be paid your accrued vacation through such date. All such payments shall be
less customary withholding for taxes and applicable deductions, and shall be
subject to any elections under the Halliburton Elective Deferral Plan (the
<PAGE>
2
"Elective Deferral Plan"). You agree that, within 5 business days after your
retirement date, you will vacate your office space at 3600 Lincoln Plaza.
B. Senior Executives' Deferred Compensation Plan. On December 31, 1998
your Deferred Compensation Account ("SERP Account") in the Senior Executives'
Deferred Compensation Plan (the "Deferred Compensation Plan") will be credited
with $500,000 in supplemental retirement benefits for the 1998 plan year. The
applicable accounts under such Plan will also be credited for such period with
amounts equal to (i) reductions in contributions to which you would be entitled
under the Halliburton Profit Sharing and Savings Plan by reason of the
limitations imposed under the Internal Revenue Code or by reason of elective
deferrals under the Elective Deferral Plan, ("ERISA Offset Account") and (ii)
interest earned on account balances in accordance with the provisions of such
Plan. Upon approval of the administrative committee appointed to administer the
Deferred Compensation Plan, you will receive the amounts in your accounts in
monthly installments over a 24-month period commencing after the 1998
allocations to your SERP and ERISA Offset Accounts have been made.
C. Annual Performance Pay Plan. The amount of any Reward earned under
the Halliburton Annual Performance Pay Plan ("Performance Pay Plan") for the
1998 Plan Year shall be prorated through the date of your retirement and paid in
accordance with the applicable provisions of such Plan. Any adjustments made by
the Compensation Committee of Directors to the performance goals previously
established by such Committee for the 1998 Plan Year will be applicable to the
calculation of your Reward for such Plan Year. You will also receive the unpaid
amounts of any Rewards for prior Plan Years which will be paid as provided under
the Plan. Such payments will be subject to any elections under the Elective
Deferral Plan and customary withholding for taxes.
D. Vesting of Restricted Stock. Effective with your retirement and on
such date, restrictions on shares of Common Stock issued to you under the
Halliburton Company Career Executive Incentive Stock Plan and the Halliburton
Company 1993 Stock and Long-Term Incentive Plan (the "1993 Plan") which have not
theretofore lapsed will lapse in their entirety.
E. Vesting of Stock Options. Your stock options granted under the 1993
Plan will vest in accordance with the terms of your respective stock option
agreements. To the extent that, after the date of your retirement, the
Compensation Committee of Directors approves any changes to outstanding stock
options applicable to your stock option grants such option grants will be
amended to reflect any such changes or, if amendment thereof is not legally or
administratively feasible, you will receive a cash payment in an amount
reasonably determined to be the present value of such change as it relates to
your outstanding stock options.
F. Retiree Medical Plan. You will be eligible to participate in the
Halliburton Retiree Medical Plan under the same terms and conditions as other
Company early retirees.
G. Other Benefit Programs. Payments, benefits or accruals set forth
in paragraphs A through F above are in addition to any payments, benefits or
<PAGE>
3
accruals to which you may be entitled under the Halliburton Profit Sharing
and Savings Plan, the Halliburton Retirement Plan, the Elective Deferral Plan
and any welfare benefit plans in accordance with their respective terms.
II
CONSULTING SERVICES FOR THE COMPANY AND ITS AFFILIATES
A. Consultation and Business Promotion. During the period beginning
October 2, 1998 through September 30, 2000 ("Consulting Period"), you will be
retained as a consultant to the Company and its affiliates. You will, during the
Consulting Period, fulfill all of your prior customer commitments and, as
reasonably requested by the Chief Executive Officer of the Company, aid in
business promotion, cooperate in customer entertainment, assist with respect to
special problems or projects and consult with and advise the Chief Executive
Officer of the Company or other members of management of the Company and its
business units in your particular areas of expertise. In assisting the Company
and the aforesaid units, you will not be required to devote more than one-third
of your time thereto, although travel outside Texas may be required. Your status
while performing duties hereunder will be that of an independent contractor and
not that of a Company employee.
B. Furtherance of Company Interests. During the Consulting Period, you
will use your best efforts to enhance the image of the Company, its business
units and their respective managements (provided that such efforts, when
combined with the services specified in paragraph A of this Section II do not
require you to devote more than one-third of your time thereto) and to refrain
from taking any action or making any statements inconsistent therewith.
C. Entering Into Competition and Conflicts of Interest. Without the
prior written approval of the Chief Executive Officer of the Company, you will
not, during the Consulting Period, accept payment from, be employed by, become
an officer, director, partner, principal, employee or consultant to or have a
substantial equity ownership in, any corporation, partnership or business in
competition with the Company or any of its affiliated companies. Once granted,
any such approval may be subsequently withdrawn if (i) it is determined by the
Chief Executive Officer of the Company, in his sole discretion, that the nature
of your relationship with such competitor is in conflict with the Company's or
any of its affiliates' interests; (ii) you are notified in writing of such
determination and (iii) you do not immediately following receipt of such notice
terminate your relationship with such competitor. Upon withdrawal of such
approval, the Company's obligation to pay consulting fees as set forth in
paragraph E below will terminate. Because of the nature and scope of your duties
with the Company during your employment, we have agreed that it is necessary and
reasonable for the prohibition set forth in the first sentence of this paragraph
to be applied nationwide. After the end of the Consulting Period, you may engage
in the prohibited activities described in this paragraph to the extent that such
activities are consistent with your remaining obligations under paragraph D of
Section II of this agreement. The purchase by you, directly or indirectly, for
investment of the publicly traded stock of a competitor of the Company or any of
its affiliates representing not more than one percent (1%) of the total
outstanding stock of such competitor or the holding thereof will not be deemed
<PAGE>
4
to constitute the acquisition or holding of a substantial equity ownership in
such competitor for the purposes of this paragraph.
D. Confidential Information. You will not at any time after your
retirement, without prior written approval of the Chief Executive Officer of the
Company, disclose to any unauthorized person or competitor any confidential
information or confidential knowledge as to the business and affairs of the
Company or any of its affiliates which you have received during the course of
your employment with the Company or which you may receive in the course of
consulting or advising hereunder.
E. Consulting Fees. In consideration of the foregoing but expressly
subject to the provisions of paragraph F below, during the Consulting Period,
you will receive consulting fees in monthly payments of $20,834 on the last
business day in the month for which payment is to be made.
F. Conditions Precedent to Payment of Consulting Fees; Death.
Notwithstanding anything to the contrary contained in this agreement, payment of
consulting fees pursuant to paragraph E of this Section will be made only if the
conditions set forth in paragraphs A, B, C and D of this Section are fully
satisfied at the time the payment is payable. Should you become disabled and,
therefore, be unable to devote up to one-third of your time to the performance
of consulting services as you may be required to perform pursuant to paragraph A
of this Section and such disability shall continue for a three-month period, the
Company's obligation to pay consulting fees as set forth in paragraph E of this
Section will terminate at the end of such three-month period.
If during the Consulting Period, you should die, any amounts of
consulting fees then unpaid for any period of time prior to your death, will be
paid to your estate or personal representative, plus the amount of any unpaid
expenses.
G. Participation in Other Benefit Programs. Payments to be received
pursuant to Paragraph E of this Section II are in addition to any payments which
you may be receiving or which you are entitled to receive under the Deferred
Compensation Plan, the Halliburton Profit Sharing and Savings Plan, the
Halliburton Retirement Plan, the Elective Deferral Plan and the Performance Pay
Plan.
H. Office Space, Secretarial Support, Club Memberships, Expenses, Etc.
During the Consulting Period and expressly contingent on your not being in
breach of any of the conditions specified in paragraphs A, B, C and D of this
Section II, you will be entitled to:
1. $1,750 per month as an allowance for office space and part-time
secretarial support.
2. Office furnishings and equipment (including computer equipment
for access to the Company's network).
3. Retention, at the Company's expense, of memberships in the
Dallas Country Club and the Dallas Petroleum Club.
<PAGE>
5
4. During each 12-month period, one customer trip to the Company's
facilities at Duck Key, Florida, and one hunting trip for
Company customers.
5. Reimbursement for reasonable and necessary travel,
entertainment and office expenses which you incur in
performance of the duties specified in paragraph A of this
Section promptly following your submission to the Company of an
appropriately documented expense claim.
III
RELEASE
A. Representation. You represent, warrant and agree that you have not
filed any claims, appeals, complaints, charges or lawsuits against the Company,
its affiliates or any of their respective employees, officers, directors,
shareholders, agents and representatives (collectively, the "Halliburton
Parties") with any governmental agency or court and that you will not file or
permit to be filed or accept benefit from any claim, complaint or petition filed
with any court by you or on your behalf at any time hereafter; provided,
however, this shall not limit you from filing an action for the sole purpose of
enforcing your rights under this agreement. Further, you represent and warrant
that no other person or entity has any interest in, or assignment of, any claims
or causes of action you may have against any Halliburton Party and which you now
release in their entirety.
B. Release. You agree to release, acquit and discharge and do hereby
release, acquit and discharge the Company, its affiliates, and all Halliburton
Parties, collectively and individually, from any and all claims and from any and
all causes of action, of any kind or character, whether now known or not known,
you may have against any of them, including, but not limited to, (i) any claim
for benefits, compensation, remuneration, salary, or wages, and the costs,
damages and expenses related thereto; and (ii) all claims or causes of action
arising from your employment, termination of employment, or any alleged
discriminatory employment practices, including but not limited to any and all
claims or causes of action arising under the Age Discrimination in Employment
Act, as amended ("ADEA"), 29 U.S.C. ss. 621, et seq. and any and all claims or
causes of action arising under any other federal, state or local laws pertaining
to discrimination in employment or equal employment opportunity; except that the
parties agree that your release, acquittal and discharge shall not relieve the
Company from its obligations under this agreement. This release also applies to
any claims or causes of action of the types specified in clauses (i) and (ii)
above which are brought by any person or agency or class action under which you
may have a right or benefit.
IV
GENERAL PROVISIONS
A. Non-assignability. This agreement shall be binding upon and inure to
the benefit of the respective successors in interests of the parties hereto.
<PAGE>
6
Notwithstanding the foregoing, the rights to receive payments hereunder pursuant
to Section II hereof are hereby expressly declared to be personal,
non-assignable and non-transferable except by will or intestacy, and in the
event of any attempted assignment or transfer of any such rights contrary to the
provisions hereof, the Company will have no further liability for payments with
respect thereto hereunder.
B. Injunctive and Other Relief. You recognize that the services to be
rendered hereunder are unique and that in the event of your breach of the
conditions to be performed by you under paragraphs A and B of Section II hereof
or in the event that you take such actions as are prohibited hereunder in
paragraphs C and D of such Section, the Company will be entitled, if it so
elects, to institute and prosecute proceedings in any court of competent
jurisdiction, in law or in equity, to obtain damages for any breach of this
agreement or to enforce the specific performance thereof or to enjoin you from
taking the actions prohibited in paragraphs C and D of Section II hereof.
C. Governing Law and Amendment. This letter contains the entire
agreement between the parties and will be governed under the laws of the State
of Texas. It may not be amended orally, but only by agreement in writing signed
by each of the parties.
If you agree that the above constitutes our understanding relating to
your retirement and the performance of consulting services during the Consulting
Period, please so indicate by dating and signing both duplicate originals of
this letter and return one duplicate original to me.
Very truly yours,
/s/ Dick Cheney
ACCEPTED AND AGREED TO:
/s/ Dale P. Jones
- --------------------------
Dale P. Jones
Dated: 9/29/98
--------------------
Exhibit 21
HALLIBURTON COMPANY
SUBSIDIARIES OF THE REGISTRANT
DECEMBER 31, 1998
<TABLE>
<CAPTION>
STATE OR
OWNERSHIP COUNTRY OF
NAME OF COMPANY PERCENTAGE INCORPORATION
<S> <C> <C>
2W Underwater Contractors Limited 100.0 United Kingdom
American Thai Barite Limited 100.0 Thailand
AOC Australia Pty. Ltd. 100.0 Australia
AOC International Limited 100.0 United Kingdom
AOC Wood Contractors Limited 50.0 United Kingdom
Asian Marine Contractors Limited 100.0 Mauritius
Atlantic Minerals and Products Corporation 100.0 Florida
AVA (U.K.) Limited 100.0 England
AVA S.A.R.L. 100.0. France
Avalon Financial Services, Ltd. 100.0 Cayman Islands
Axelson Pump Company 100.0 Delaware
Axelson, Inc. 100.0 Delaware
Baroid (Far East) Pte. Ltd. 100.0 Singapore
Baroid Caribbean Limited 50.0 Cayman Islands
Baroid Corporation 100.0 England
Baroid Corporation of Canada Ltd. 100.0 Canada
Baroid de Venezuela, S.A. 99.73 Venezuela
Baroid Equipment, Inc. 100.0 California
Baroid GmbH 100.0 Germany
Baroid International Inc. 100.0 Delaware
Baroid International Trading Corporation 100.0 Delaware
Baroid Limited 100.0 England
Baroid Middle East, Inc. 100.0 Delaware
Baroid Nigeria, Inc. 100.0 Delaware
Baroid of Nigeria Limited 60.0 Nigeria
Baroid Sales Export Corporation 100.0 Delaware
Baroid Technology, Inc. 100.0 Delaware
Basin Surveys, Inc. 100.0 West Virginia
Breswater Marine Contracting BV 100.0 Netherlands
Brown & Root (Overseas) Limited 100.0 United Kingdom
Brown & Root AOC Limited 100.0 United Kingdom
Brown & Root Condor SPA 49.0 Algeria
Brown & Root Ealing Technical Services Limited 100.0 United Kingdom
Brown & Root Energy Services A/S 100.0 Norway
Brown & Root Energy Services Pty. Ltd. 100.0 Australia
Brown & Root Far East Engineers Pte. Ltd. 100.0 Delaware
Brown & Root Highlands Fabricators Limited 100.0 United Kingdom
Brown & Root Holdings, Inc. 100.0 Delaware
Brown & Root International, Inc. 100.0 Delaware
21-1
<PAGE>
Exhibit 21
HALLIBURTON COMPANY
SUBSIDIARIES OF THE REGISTRANT
DECEMBER 31, 1998
STATE OR
OWNERSHIP COUNTRY OF
NAME OF COMPANY PERCENTAGE INCORPORATION
Brown & Root International, Inc. 100.0 Panama
Brown & Root Limited 100.0 United Kingdom
Brown & Root McDermott Fabricators 50.0 United Kingdom
Brown & Root NA Limited 50.0 British Virgin Islands
Brown & Root Projects Limited 100.0 United Kingdom
Brown & Root Pty Limited 100.0 Australia
Brown & Root Saudi Limited Co. 49.0 Saudi Arabia
Brown & Root Services Corporation 100.0 Delaware
Brown & Root Technical Services, Inc. 100.0 Delaware
Brown & Root Technology Limited 100.0 United Kingdom
Brown & Root, Inc. 100.0 Delaware
Canadian Baroid Sales Ltd. 100.0 Canada
CEBO International B.V. 50.0 Netherlands
Compania Transandina de Exportacion, Inc. 100.0 Delaware
Conkel, S. de R.L. de C.V. 100.0 Mexico
Dawson Group Pty. Ltd. 100.0 Australia
DB Stratabit GmbH 100.0 Germany
DB Stratabit Limited 100.0 Scotland
DB Stratabit Pte. Ltd. 100.0 Singapore
DB Stratabit S. A. R. L. 100.0 Tunisia
DB Stratabit S.A. 100.0 Belgium
DBS - Tunisie 100.0 Tunisia
Devonport Royal Dockyard Limited 51.0 United Kingdom
Dorhold Limited 51.0 United Kingdom
Dressbi, L.L.C. 100.0 Texas
Dresser (Algeria), Inc. 100.0 Delaware
Dresser (Holdings) Limited 100.0 England
Dresser Acquisitions Limited 100.0 England
Dresser AG 100.0 Liechtenstein
Dresser Anstalt 100.0 Liechtenstein
Dresser Argentina S.A. 100.0 Argentina
Dresser AS 100.0 Norway
Dresser Australia Pty. Ltd. 100.0 Australia
Dresser B.V. 100.0 Netherlands
Dresser Canada, Inc. 100.0 Canada
Dresser Caspian, Inc. 100.0 Delaware
Dresser Corporation 100.0 Nevada
Dresser de Venezuela, C.A. 100.0 Venezuela
Dresser Europe S.A. 100.0 Belgium
21-2
<PAGE>
Exhibit 21
HALLIBURTON COMPANY
SUBSIDIARIES OF THE REGISTRANT
DECEMBER 31, 1998
STATE OR
OWNERSHIP COUNTRY OF
NAME OF COMPANY PERCENTAGE INCORPORATION
Dresser Far East, Inc. 100.0 Delaware
Dresser Foreign Sales Corporation Limited 100.0 Guam
Dresser Group Pension Trustee Limited 100.0 England
Dresser Holding, Inc. 100.0 Delaware
Dresser Holmes Limited 100.0 England
Dresser Industria e Comercio Ltda. 100.0 Brazil
Dresser Industrial Products B.V. 100.0 Netherlands
Dresser International Sales Corporation 100.0 Delaware
Dresser International, Ltd. 100.0 Delaware
Dresser Investments N.V. 100.0 Netherlands Antilles
Dresser Ireland Finance Company 100.0 Ireland
Dresser Italia S.p.A. 100.0 Italy
Dresser Japan Ltd. 100.0 Japan
Dresser Kellogg Energy Services Limited 100.0 England
Dresser Kellogg Energy Services, Inc. 100.0 Delaware
Dresser Korea, Inc. 100.0 Korea
Dresser Minerals International, Inc. 100.0 Texas
Dresser Netherlands B.V. 100.0 Netherlands
Dresser Oil Tools, Inc. 100.0 Delaware
Dresser Oilfield Gabon S.a.r.L. 100.0 Gabon
Dresser Oilfield Operations (Nigeria) Limited 100.0 Nigeria
Dresser Oilfield Operations (Nigeria), Inc. 100.0 Delaware
Dresser Oilfield Services B.V. 100.0 Netherlands
Dresser Oilfield Services, Inc. 100.0 Delaware
Dresser Polska Sp. z o. o 100.0 Poland
Dresser Produits Industriels 100.0 France
Dresser Russia, Inc. 100.0 Delaware
Dresser Services, Inc. 100.0 Delaware
Dresser Singapore Pte. Ltd. 100.0 Singapore
Dresser South Africa (Pty.) Ltd. 100.0 South Africa
Dresser U.K. Limited 100.0 England
Dresser U.K. Pensions Limited 100.0 England
Dresser Wayne AB 100.0 Sweden
Dresser-Nagano, Inc. 71.04 Delaware
Dresser-Rand (Nigeria) Ltd. 60.0 Nigeria
Dresser-Rand (U.K.) Ltd. 100.0 England
Dresser-Rand A/S 100.0 Norway
Dresser-Rand B.V. 100.0 Netherlands
Dresser-Rand Canada, Inc. 51.0 Canada
21-3
<PAGE>
Exhibit 21
HALLIBURTON COMPANY
SUBSIDIARIES OF THE REGISTRANT
DECEMBER 31, 1998
STATE OR
OWNERSHIP COUNTRY OF
NAME OF COMPANY PERCENTAGE INCORPORATION
Dresser-Rand Company (Partnership) 51.0 New York
Dresser-Rand Compression Services, S.A. 100.0 Switzerland
Dresser-Rand de Venezuela S.A. 100.0 Venezuela
Dresser-Rand GmbH 100.0 Germany
Dresser-Rand Holding Company 100.0 Delaware
Dresser-Rand International B.V. 100.0 Netherlands
Dresser-Rand Italia S.r.L. 100.0 Italy
Dresser-Rand Japan Ltd. 100.0 Japan
Dresser-Rand Overseas Sales Company 100.0 Delaware
Dresser-Rand Power, Inc. 100.0 Delaware
Dresser-Rand S.A. 100.0 France
Dresser-Rand Sales Company, S.A. 100.0 Switzerland
Dresser-Rand Services B.V. 100.0 Netherlands
DRSS Company (Partnership) 100.0 New York
European Marine Contractors Limited 50.0 United Kingdom
Fann Instrument Company 100.0 Delaware
G&H Management Company 100.0 Delaware
GAZDMD Avtomatika 100.0 Russia
GeoGraphix, Inc. 100.0 Colorado
Granherne (Holdings) Ltd. 100.0 England
Granherne Information Systems Limited 100.0 England
Granherne International (Holdings) Ltd. 100.0 England
Granherne International Limited 100.0 England
Granherne Limited 100.0 England
Grove Foreign Sales Corporation 100.0 Barbados
Halliburton (Proprietary) Limited 100.0 South Africa
Halliburton A/S 100.0 Norway
Halliburton Affiliates Corporation 100.0 Delaware
Halliburton Argentina SA 100.0 Argentina
Halliburton Australia Pty. Ltd. 100.0 Australia
Halliburton BV 100.0 Netherlands
Halliburton Canada Inc. 100.0 Canada
Halliburton Company Germany GmbH 100.0 Germany
Halliburton de Mexico, SA de CV 100.0 Mexico
Halliburton Delaware, Inc. 100.0 Delaware
Halliburton Denmark A/S 100.0 Denmark
Halliburton Energy Services Nigeria Limited 80.0 Nigeria
Halliburton Energy Services, Inc. 100.0 Delaware
Halliburton Equipment Company SAE 75.0 Egypt
21-4
<PAGE>
Exhibit 21
HALLIBURTON COMPANY
SUBSIDIARIES OF THE REGISTRANT
DECEMBER 31, 1998
STATE OR
OWNERSHIP COUNTRY OF
NAME OF COMPANY PERCENTAGE INCORPORATION
Halliburton Global, Ltd. 100.0 Cayman Islands
Halliburton Holdings Limited 100.0 United Kingdom
Halliburton Holdings, Inc. 100.0 Delaware
Halliburton International, Inc. 100.0 Delaware
Halliburton Italiana SpA 100.0 Italy
Halliburton Latin America SA 100.0 Panama
Halliburton Limited 100.0 United Kingdom
Halliburton Manufacturing and Services Limited 100.0 United Kingdom
Halliburton Norway, Inc. 100.0 Delaware
Halliburton NUS Corporation 100.0 Delaware
Halliburton Offshore Services, Inc. 100.0 Delaware
Halliburton Overseas Limited 100.0 Cayman Islands
Halliburton Products & Services Limited 100.0 Cayman Islands
Halliburton SAS 100.0 France
Halliburton Servicos Ltda. 100.0 Brazil
Halliburton Singapore Pte. Ltd. 100.0 Singapore
Halliburton Trinidad Limited 100.0 Trinidad
Halliburton West Africa Ltd. 100.0 Delaware
Halliburton Worldwide Limited 100.0 Cayman Islands
HBR Energy, Inc. 100.0 Delaware
Howard Humphreys & Partners Limited 100.0 United Kingdom
Howard Humphreys Group Limited 100.0 United Kingdom
Hunting-Brae Limited 31.0 United Kingdom
Intercontinental Services Limited 100.0 Virgin Islands
International Administrative Services, Ltd. 100.0 Cayman Islands
K.R.S.A. Limited 100.0 England
KCI Constructors, Inc. 100.0 Delaware
Kellogg (Malaysia) Sdn. Bhd. 100.0 Malaysia
Kellogg Algeria, Inc. 100.0 Delaware
Kellogg Cardon, C.A. 100.0 Venezuela
Kellogg China, Inc. 100.0 Delaware
Kellogg Construction Limited 100.0 England
Kellogg Development Corporation 100.0 Delaware
Kellogg Far East, Inc. 100.0 Delaware
Kellogg Foreign Sales Corporation 100.0 Barbados
Kellogg Holland B.V. 100.0 Netherlands
Kellogg India Limited 100.0 Delaware
Kellogg Indonesia, Inc. 100.0 Delaware
Kellogg International Corporation 100.0 Delaware
21-5
<PAGE>
Exhibit 21
HALLIBURTON COMPANY
SUBSIDIARIES OF THE REGISTRANT
DECEMBER 31, 1998
STATE OR
OWNERSHIP COUNTRY OF
NAME OF COMPANY PERCENTAGE INCORPORATION
Kellogg International Services Corporation 100.0 Delaware
Kellogg International Services Limited 100.0 Cayman Islands
Kellogg Iran, Inc. 100.0 Delaware
Kellogg ISL Limited 100.0 Cayman Islands
Kellogg Italy, Inc. 100.0 Delaware
Kellogg Korea, Inc. 100.0 Delaware
Kellogg Malaysia, Inc. 100.0 Delaware
Kellogg Mexico, Inc. 100.0 Delaware
Kellogg Middle East Limited 100.0 Delaware
Kellogg Middle East Services, Inc. 100.0 Delaware
Kellogg Nigeria, Inc. 100.0 Delaware
Kellogg Offshore Limited 100.0 England
Kellogg Overseas Construction Corporation 100.0 Delaware
Kellogg Overseas Corporation 100.0 Delaware
Kellogg Overseas Services Corporation 100.0 Panama
Kellogg Pan American Corporation 100.0 Delaware
Kellogg Pan American, C.A. 100.0 Venezuela
Kellogg Plant Services Limited 100.0 England
Kellogg Plant Services, Inc. 100.0 Delaware
Kellogg Rust Services, Inc. 100.0 Delaware
Kellogg Rust Synfuels, Inc. 100.0 Delaware
Kellogg Saudi Arabia Limited 100.0 Delaware
Kellogg Services, Inc. 100.0 Delaware
KESA Limited 100.0 England
Kinhill Holdings Pty. Ltd. 100.0 Australia
KPA, S.A. de C.V. 100.0 Mexico
KRW Energy Systems, Inc. 80.0 Delaware
Kuwait Kellogg Ltd. 100.0 Delaware
Landmark America Latina, SA 100.0 Delaware
Landmark EAME, Limited 100.0 United Kingdom
Landmark Graphics Corporation 100.0 Delaware
Landmark Graphics Europe/Africa, Inc. 100.0 Delaware
Landmark Graphics International, Inc. 100.0 Texas
Landmark Sales Corporation 100.0 Barbados
Laurel Financial Services BV 100.0 Netherlands
M. W. Kellogg Company Limited 100.0 Canada
M. W. Kellogg Constructors, Inc. 100.0 Delaware
M. W. Kellogg Holdings, Inc. 100.0 Delaware
M. W. Kellogg Technology Company 100.0 Delaware
21-6
<PAGE>
Exhibit 21
HALLIBURTON COMPANY
SUBSIDIARIES OF THE REGISTRANT
DECEMBER 31, 1998
STATE OR
OWNERSHIP COUNTRY OF
NAME OF COMPANY PERCENTAGE INCORPORATION
M. W. Kellogg-Delaware, Inc. 100.0 Delaware
M.W. Kellogg (Eastern Hemisphere) Limited 100.0 England
M.W. Kellogg (Pensions) Limited_ 100.0 England
M.W. Kellogg Group Limited 100.0 England
M.W. Kellogg International Limited 100.0 England
M.W. Kellogg Limited 100.0 England
Malaysian Barite Sdn. Bhd. 100.0 Malaysia
Management Logistics, Inc. 100.0 Delaware
Masoneilan (S.E.A.) Private Limited 100.0 Singapore
Masoneilan HP + HP GmbH 100.0 Germany
Masoneilan Interacional, S.A. de C.V. 100.0 Mexico
Masoneilan International, Inc. 100.0 Delaware
Masoneilan S.A. 100.0 Spain
Middle East Technologies, Inc. 100.0 Delaware
MIHC, Inc. 100.0 Delaware
Mono Group 100.0 Scotland
Mono Pumps (Australia) Pty. Limited 100.0 Australia
Mono Pumps (Manufacturing) Limited 100.0 England
Mono Pumps Limited 100.0 England
Monoflo, Inc. 100.0 Delaware
MWKL Field Services Limited 100.0 Cayman Islands
MWKL Middle East Limited 100.0 England
NMR Corporation 100.0 Delaware
Norsk Modifikajon og Vedikehold Service AS 100.0 Norway
North Sea Assets Limited 100.0 Scotland
NUMAR Corporation 100.0 Pennsylvania
NUMAR Oilfield Services, Inc. 100.0 Pennsylvania
OGC International 100.0 United Kingdom
Overseas Marine Leasing Company 100.0 Delaware
Petroleum Information & Equipment Services
Pte. Ltd. 100.0 Singapore
Property and Casualty Insurance Ltd. - U.S. 100.0 Vermont
Property and Casualty Insurance, Limited 100.0 Bermuda
PT Gema Sembrown 45.0 Indonesia
PT Halliburton Drilling Systems Indonesia 80.0 Indonesia
PT Halliburton Indonesia 80.0 Indonesia
PT Halliburton Logging Services Indonesia 80.0 Indonesia
Pullman Incorporated Capital Corporation 100.0 Delaware
Pullman Kellogg Plant Services Algeria, Inc. 100.0 Delaware
21-7
<PAGE>
Exhibit 21
HALLIBURTON COMPANY
SUBSIDIARIES OF THE REGISTRANT
DECEMBER 31, 1998
STATE OR
OWNERSHIP COUNTRY OF
NAME OF COMPANY PERCENTAGE INCORPORATION
Quimicas do Brazil Limitada 100.0 Brazil
Rockwater Holdings Limited 100.0 United Kingdom
Rockwater Limited 100.0 United Kingdom
Rockwater Offshore Contractors 2 BV 100.0 Netherlands
Rockwater, Inc. 100.0 Delaware
Seaforth Maritime Limited 100.0 United Kingdom
Security DBS B.V. 100.0 Netherlands
Servicios Halliburton de Venezuela, SA 100.0 Delaware
Societe Kellogg 100.0 Delaware
Southwest Industries, Inc. 100.0 Delaware
Sperry-Sun (U.K.) Limited 100.0 England
Sperry-Sun International, Inc. 100.0 Delaware
Sperry-Sun Saudia Company Limited 75.0 (3) Saudi Arabia
Studebaker-Worthngton (U.K.) Limited 100.0 England
Sub Sea International, Inc. 100.0 Delaware
Sub Sea Offshore (Holdings) Limited 100.0 England
Sub Sea Offshore Limited 100.0 England
Sub Sea Offshore Pte. Ltd. 100.0 Singapore
Symington Wayne Overseas, Ltd. 100.0 Canada
T. K. Valve Holdings 100.0 England
The M. W. Kellogg Company 100.0 Delaware
TK Valve Limited 100.0 England
TSKJ Nigeria, Limited 100.0 Nigeria
Turbodyne Electric Power Corporation 100.0 Delaware
Wellstream International, Inc. 100.0 Delaware
Wellstream, Inc. 100.0 Delaware
Wheatley Pump Incorporated 100.0 Delaware
Worthington-Simpson Ltd. 100.0 England
<FN>
(1) Each of the subsidiaries named conducts its business under its corporate
name and, in a few instances, under a shortened form of its corporate
name.
(2) The names of approximately 270 subsidiaries have been omitted since the
unnamed subsidiaries considered in the aggregate would not constitute a
significant subsidiary as defined by Item 601(b)(21).
(3) Shares held in trust by NL Industries, Inc.
</FN>
</TABLE>
21-8
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports dated January 25, 1999, included in this Form 10-K into the Company's
previously filed registration statement on Form S-3 (No. 33-65772).
/s/ Arthur Andersen LLP
------------------------------
ARTHUR ANDERSEN LLP
Dallas, Texas,
March 22, 1999
23-1
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (Nos. 33-65777,
33-65772, and 333-32731) and the Registration Statements on Form S-8 (Nos.
33-54881, 333-40717, 333-37533, 333-13475, 333-65373, and 333-55747) of
Halliburton Company of our report dated November 26, 1997 appearing on page 27
of Dresser Industries, Inc.'s Annual Report on Form 10-K for the year ended
October 31, 1997 and included as Exhibit 99.1 of this Form 10-K.
/s/ PriceWaterhouseCoopers LLP
- ----------------------------------
PRICEWATERHOUSECOOPERS LLP
Dallas, Texas,
March 22, 1999
23-2
Exhibit 24.3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, a Director of
Halliburton Company, do hereby constitute and appoint Richard B. Cheney, David
J. Lesar, Gary V. Morris and Susan S. Keith, or any of them acting alone, my
true and lawful attorneys or attorney, to do any and all acts and things and
execute any and all instruments which said attorneys or attorney may deem
necessary or advisable to enable Halliburton Company to comply with the
Securities Exchange Act of 1934, as amended, and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing of Annual Reports on Form 10-K, including
specifically, but without limitation thereof, power and authority to sign my
name as Director of Halliburton Company to the Annual Reports on Form 10-K
required to be filed with the Securities and Exchange Commission for the year
ended 1998 and for all subsequent years until revoked by me or otherwise
cancelled, and to any instruments or documents filed as a part of or in
connection therewith; and I hereby ratify and confirm all that said attorneys or
attorney shall do or cause to be done by virtue hereof.
IN TESTIMONY WHEREOF, witness my hand this 5th day of October, 1998.
/s/ William E. Bradford
---------------------------
William E. Bradford
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, a Director of
Halliburton Company, do hereby constitute and appoint Richard B. Cheney, David
J. Lesar, Gary V. Morris and Susan S. Keith, or any of them acting alone, my
true and lawful attorneys or attorney, to do any and all acts and things and
execute any and all instruments which said attorneys or attorney may deem
necessary or advisable to enable Halliburton Company to comply with the
Securities Exchange Act of 1934, as amended, and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing of Annual Reports on Form 10-K, including
specifically, but without limitation thereof, power and authority to sign my
name as Director of Halliburton Company to the Annual Reports on Form 10-K
required to be filed with the Securities and Exchange Commission for the year
ended 1998 and for all subsequent years until revoked by me or otherwise
cancelled, and to any instruments or documents filed as a part of or in
connection therewith; and I hereby ratify and confirm all that said attorneys or
attorney shall do or cause to be done by virtue hereof.
IN TESTIMONY WHEREOF, witness my hand this 6th day of October, 1998.
/s/ Lawrence S. Eagleburger
------------------------------
Lawrence S. Eagleburger
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, a Director of
Halliburton Company, do hereby constitute and appoint Richard B. Cheney, David
J. Lesar, Gary V. Morris and Susan S. Keith, or any of them acting alone, my
true and lawful attorneys or attorney, to do any and all acts and things and
execute any and all instruments which said attorneys or attorney may deem
necessary or advisable to enable Halliburton Company to comply with the
Securities Exchange Act of 1934, as amended, and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing of Annual Reports on Form 10-K, including
specifically, but without limitation thereof, power and authority to sign my
name as Director of Halliburton Company to the Annual Reports on Form 10-K
required to be filed with the Securities and Exchange Commission for the year
ended 1998 and for all subsequent years until revoked by me or otherwise
cancelled, and to any instruments or documents filed as a part of or in
connection therewith; and I hereby ratify and confirm all that said attorneys or
attorney shall do or cause to be done by virtue hereof.
IN TESTIMONY WHEREOF, witness my hand this 7th day of October, 1998.
/s/ Ray L. Hunt
-------------------
Ray L. Hunt
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, a Director of
Halliburton Company, do hereby constitute and appoint Richard B. Cheney, David
J. Lesar, Gary V. Morris and Susan S. Keith, or any of them acting alone, my
true and lawful attorneys or attorney, to do any and all acts and things and
execute any and all instruments which said attorneys or attorney may deem
necessary or advisable to enable Halliburton Company to comply with the
Securities Exchange Act of 1934, as amended, and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing of Annual Reports on Form 10-K, including
specifically, but without limitation thereof, power and authority to sign my
name as Director of Halliburton Company to the Annual Reports on Form 10-K
required to be filed with the Securities and Exchange Commission for the year
ended 1998 and for all subsequent years until revoked by me or otherwise
cancelled, and to any instruments or documents filed as a part of or in
connection therewith; and I hereby ratify and confirm all that said attorneys or
attorney shall do or cause to be done by virtue hereof.
IN TESTIMONY WHEREOF, witness my hand this 7th day of October, 1998.
/s/ J. Landis Martin
------------------------
J. Landis Martin
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, a Director of
Halliburton Company, do hereby constitute and appoint Richard B. Cheney, David
J. Lesar, Gary V. Morris and Susan S. Keith, or any of them acting alone, my
true and lawful attorneys or attorney, to do any and all acts and things and
execute any and all instruments which said attorneys or attorney may deem
necessary or advisable to enable Halliburton Company to comply with the
Securities Exchange Act of 1934, as amended, and all rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing of Annual Reports on Form 10-K, including
specifically, but without limitation thereof, power and authority to sign my
name as Director of Halliburton Company to the Annual Reports on Form 10-K
required to be filed with the Securities and Exchange Commission for the year
ended 1998 and for all subsequent years until revoked by me or otherwise
cancelled, and to any instruments or documents filed as a part of or in
connection therewith; and I hereby ratify and confirm all that said attorneys or
attorney shall do or cause to be done by virtue hereof.
IN TESTIMONY WHEREOF, witness my hand this 7th day of October, 1998.
/s/ Jay A. Precourt
----------------------
Jay A. Precourt
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
Halliburton Company consolidated financial statements for the twelve months
ended December 31, 1998, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-1-1998
<PERIOD-END> Dec-31-1998
<EXCHANGE-RATE> 1
<CASH> 203
<SECURITIES> 0
<RECEIVABLES> 3,937
<ALLOWANCES> 77
<INVENTORY> 1,302
<CURRENT-ASSETS> 6,083
<PP&E> 6,850
<DEPRECIATION> 3,929
<TOTAL-ASSETS> 11,112
<CURRENT-LIABILITIES> 4,004
<BONDS> 1,370
0
0
<COMMON> 1,115
<OTHER-SE> 2,947
<TOTAL-LIABILITY-AND-EQUITY> 11,112
<SALES> 5,070
<TOTAL-REVENUES> 17,353
<CGS> 4,318
<TOTAL-COSTS> 16,357
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 137
<INCOME-PRETAX> 279
<INCOME-TAX> 244
<INCOME-CONTINUING> (15)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
Exhibit 99.1
REPORT OF INDEPENDENT ACCOUNTANTS
In our opinion, the balance sheet, the statements of income, of cash flows and
of shareholders' equity of Dresser Industries, Inc. and subsidiaries (not
presented separately herein) present fairly in all material respects its
financial position at October 31, 1997, and the results of its operations and
its cash flows for each of the two years in the period ended October 31, 1997,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PriceWaterhouseCoopers LLP
- ----------------------------------
PRICEWATERHOUSECOOPERS LLP
Dallas, Texas,
November 26, 1997
99-1
