<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
BJ Services Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JANUARY 25, 1996
---------------------
The Annual Meeting of the Stockholders of BJ Services Company (the
"Company") will be held on Thursday, January 25, 1996, at 11:00 a.m. local time,
at The Houstonian Hotel located at 111 North Post Oak Lane, Houston, Texas, for
the following purposes:
1. To elect three Class III directors to serve a three-year term;
2. To amend Article IV of the Company's 1995 Incentive Plan to increase to
4,000 (from 3,000 currently) the number of non-qualified stock options
that are granted annually to the Company's non-employee directors; and
3. To transact such other business as may properly come before the meeting
and any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
All stockholders of record at the close of business on December 7, 1995 are
entitled to notice of and to vote at said meeting or any adjournment thereof. At
least a majority of the outstanding shares of the Company are required to be
present at the meeting or represented by proxy to constitute a quorum.
By order of the Board of Directors,
/s/ J. W. STEWART
---------------------
J. W. Stewart
Chairman of the Board, President
and Chief Executive Officer
Houston, Texas
December 19, 1995
YOUR VOTE IS IMPORTANT
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TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN YOUR
PROXY AS PROMPTLY AS POSSIBLE. AN ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED
IN THE UNITED STATES, IS ENCLOSED FOR THIS PURPOSE.
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<PAGE> 3
BJ SERVICES COMPANY
PROXY STATEMENT
This proxy statement is furnished to stockholders of BJ Services Company, a
Delaware corporation (the "Company"), in connection with the solicitation of
proxies on behalf of the Board of Directors of the Company to be voted at the
Annual Meeting of Stockholders of the Company to be held at The Houstonian Hotel
located at 111 North Post Oak Lane, Houston, Texas, on Thursday, January 25,
1996, at 11:00 a.m. local time, and at any and all adjournments thereof.
Stockholders of record at the close of business on December 7, 1995 will be
entitled to notice of and to vote at such meeting and at all adjournments
thereof.
When a properly executed proxy is received prior to the meeting, the shares
represented thereby will be voted at the meeting in accordance with the
directions noted thereon. If no specification is made, the shares will be voted
FOR the election of nominees listed herein as directors and FOR the proposed
amendment to the Company's 1995 Incentive Plan (the "1995 Plan"). A proxy may be
revoked at any time before it is exercised by submitting a written revocation or
a later dated proxy to the Secretary of the Company, or by attending the meeting
in person and so notifying the meeting judges.
Management does not intend to present any business for a vote at the
meeting, other than the election of directors and the amendment of the 1995
Plan, and it has no information others will do so. If other matters requiring
the vote of stockholders properly come before the meeting, it is the intention
of the persons named in the attached proxy card to vote proxies held by them in
accordance with their judgment on such matters.
The complete mailing address of the Company's executive offices is 5500
Northwest Central Drive, Houston, Texas 77092. The approximate date on which
this proxy statement and the accompanying proxy card were first sent or given to
the stockholders of the Company is December 19, 1995.
VOTING SECURITIES
On December 7, 1995, the record date, there were outstanding and entitled
to vote 28,011,972 shares of the Company's Common Stock, held of record by 640
persons. Stockholders are entitled to one vote, exercisable in person or by
proxy, for each share of Common Stock held on the record date. Cumulative voting
is not permitted under the Company's Certificate of Incorporation or Bylaws.
At the record date, management knew of no person that beneficially owned
more than 5% of the outstanding voting securities of the Company, other than as
set forth in the following table:
<TABLE>
<CAPTION>
TITLE OF NAME AND ADDRESS NUMBER PERCENT
CLASS OF BENEFICIAL OWNERS OF SHARES OF CLASS
-------- -------------------- --------- --------
<S> <C> <C> <C>
Common Stock FMR Corp. 3,472,377(a) 12.4%
82 Devonshire Street
Boston, Massachusetts 02109
Common Stock Prudential Insurance Company of America 2,051,800(b) 7.3%
19 Prudential Plaza
Newark, New Jersey 07102
Common Stock T. Rowe Price Associates, Inc. 1,586,100(c) 5.7%
100 East Pratt Street, 9th Floor
Baltimore, Maryland 21202
</TABLE>
- ---------------
(a) At November 30, 1995, based on information provided by FMR Corp., FMR
Corp., through its wholly owned subsidiaries Fidelity Management & Research
Company, Fidelity Management Trust Company and Fidelity International
Limited, was the beneficial owner of 3,472,377 shares of Common Stock. FMR
Corp. had sole voting power with respect to 664,072 shares, no voting power
with respect to 2,749,005
(Footnotes continued on following page)
<PAGE> 4
shares and sole dispositive power with respect to 3,413,077 shares.
Fidelity International Limited had sole voting and dispositive power with
respect to the 59,300 shares it beneficially owned.
(b) At December 11, 1995, based on information provided by Prudential Insurance
Company of America ("Prudential"), Prudential held 2,051,800 shares of the
Company's Common Stock. Of those shares, Prudential had shared voting and
dispositive power with respect to 2,016,000 shares and sole voting and
dispositive power with respect to 35,800 shares.
(c) At November 1, 1995, based on information provided by T. Rowe Price
Associates, Inc. ("Price"), Price was the beneficial owner of 1,586,100
shares of the Company's Common Stock. Price had sole dispositive power with
respect to 1,586,100 shares and sole voting power with respect to 122,100
shares.
ELECTION OF DIRECTORS
The Company's Bylaws provide for the Board of Directors to serve in three
classes having staggered terms of three years each. Three Class III directors
will be elected at the 1996 Annual Meeting of Stockholders to serve for a
three-year term expiring at the 1999 Annual Meeting of Stockholders. Pursuant to
the Company's Bylaws, in case of a vacancy on the Board of Directors, a majority
of the remaining directors of the class in which the vacancy occurs will be
empowered to elect a successor, and the person so elected will hold office for
the remainder of the full term of the director whose death, retirement,
resignation, disqualification or other cause created the vacancy, and thereafter
until the election of a successor director.
The persons whose names are set forth as proxies in the enclosed proxy card
will vote all shares over which they have control "FOR" the election of the
nominees named below unless otherwise directed. Although the Board of Directors
of the Company does not anticipate that any of the nominees will be unable to
serve, if such a situation should arise prior to the meeting, the appointed
proxies will use their discretionary authority pursuant to the proxy and vote in
accordance with their best judgment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES NAMED
BELOW. THE AFFIRMATIVE VOTE OF HOLDERS OF A MAJORITY OF THE COMMON STOCK PRESENT
OR REPRESENTED BY PROXY AT THE MEETING AND ENTITLED TO VOTE IS REQUIRED TO ELECT
EACH DIRECTOR NOMINEE.
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<PAGE> 5
The following table sets forth, for each nominee for election as a Class
III director, his name, his principal occupation, his age and the year in which
he first became a director of the Company. The nominees have consented to be
named in this proxy statement and to serve as directors, if elected.
<TABLE>
<CAPTION>
DIRECTOR
NOMINEES PRINCIPAL OCCUPATION AGE SINCE
-------- -------------------- --- -----
<S> <C> <C> <C>
L. William
Heiligbrodt.......... President, Chief Operating Officer and a director 54 1992
of Service Corporation International, a funeral
services corporation ("SCI"). He has served in
various management positions with SCI since
February 1990. Prior to joining SCI, Mr.
Heiligbrodt served as President of Provident
Services, Inc. from March 1988 to February 1990.
Prior to that, he served for five years as Vice
Chairman and Chief Executive Officer of WEDGE
Group, Incorporated, a multi-industry holding
company.
James E. McCormick..... Mr. McCormick served in various executive 68 1990
positions with ORYX Energy Company, a diversified
energy company, including President, Chief
Operating Officer and a director, from 1977 until
his retirement on March 1, 1992. Mr. McCormick
currently serves on the board of directors of Lone
Star Technology, Snyder Oil Company and Texas
Commerce Bank National Association.
J. W. Stewart.......... Chairman of the Board, President and Chief 51 1990
Executive Officer of the Company. Mr. Stewart
joined Hughes Tool Company in 1969 as Project
Engineer, served as Vice President-Legal and
Secretary of Hughes Tool Company and as Vice
President-Operations for a predecessor of the
Company prior to being named President of the
Company in 1986.
</TABLE>
INFORMATION CONCERNING OTHER DIRECTORS
The following table sets forth certain information for those directors
whose present terms will continue after the 1996 Annual Meeting. The terms of
the Class I and Class II directors will expire at the 1997 and 1998 Annual
Meetings of Stockholders, respectively.
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION AGE SINCE CLASS
---- -------------------- ---- ----- -----
<S> <C> <C> <C> <C>
John R. Huff........... Chairman, President and Chief Executive 49 1992 I
Officer of Oceaneering International,
Inc., an oilfield services corporation.
Mr. Huff has been President, Chief
Executive Officer and a director of
Oceaneering since 1986 and Chairman of the
Board since 1990. Mr. Huff is also a
director of Production Operators Corp. and
Triton Energy.
</TABLE>
(Table continued on following page)
3
<PAGE> 6
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION AGE SINCE CLASS
---- -------------------- --- -------- -----
<S> <C> <C> <C> <C>
R. A. LeBlanc.......... Mr. LeBlanc served in various executive 65 1994 I
positions with Keystone International,
Inc., a manufacturer of flow control
products, including Chairman of the Board,
Chief Executive Officer and a director,
from 1959 until his retirement in July
1995. Mr. LeBlanc currently serves as an
advisory member of the board of directors
of Texas Commerce Bank National
Association.
Michael E. Patrick..... Chief Investment Officer of The Meadows 51 1995 I
Foundation since December 1, 1995;
consultant from 1994 to 1995; President of
Lomas Information Systems, Inc., a
subsidiary of Lomas Financial Corporation,
from 1993 to 1994; Executive Vice
President, Chief Financial Officer and a
director of Lomas Financial Corporation
and President and Chief Operating Officer
of its Lomas Mortgage USA subsidiary, both
of which are engaged in mortgage banking,
real estate and information services, from
1992 until 1994; and Executive Vice
Chancellor for Asset Management of the
University of Texas System, where he was
responsible for the investment of all
endowment funds, from 1984 to 1991.
William J. Johnson..... Independent oil and natural gas producer 61 1995 II
and consultant, since May 1994; President
and Chief Operating Officer and a director
of Apache Corporation, an independent oil
and gas exploration and production
company, from 1991 to 1994; President,
Chief Executive Officer and a director of
TEX/CON Oil & Gas Company, a subsidiary of
British Petroleum P.L.C., from 1989 to
1991. Mr. Johnson also serves as a
director of Camco International, Inc., a
provider of oil and natural gas production
equipment and services, and of Snyder Oil
Corporation, an independent oil and gas
exploration and production company, and as
an advisory member of the board of
directors of Texas Commerce Bank National
Association.
Don D. Jordan.......... Chairman, Chief Executive Officer and a 63 1990 II
director of Houston Industries
Incorporated, a public utility holding
company with interests in the electric
utilities, cable television, coal and
transportation businesses. Mr. Jordan has
been employed by various subsidiaries of
Houston Industries Incorporated since
1956. He currently serves as a director of
Texas Commerce Bancshares, UTECH Joint
Venture and AEGIS Insurance Services.
</TABLE>
(Table continued on following page)
4
<PAGE> 7
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION AGE SINCE CLASS
---- -------------------- --- -------- -----
<S> <C> <C> <C> <C>
Michael McShane........ Vice President -- Finance and Chief 41 1990 II
Financial Officer of the Company. Mr.
McShane joined the Company in 1987 from
Reed Tool Company, an oil field tool
company, where he was employed for seven
years. At Reed Tool Company, he held
various financial management positions
including Corporate Controller and
Regional Controller of Far East
Operations.
</TABLE>
The following table sets forth the beneficial ownership of Common Stock as
of November 1, 1995 by each current director and nominee, by each executive
officer named in the Summary Compensation Table and by all current directors and
officers as a group.
<TABLE>
<CAPTION>
NUMBER OF
NAME OR GROUP SHARES(1)(2)
------------- ------------
<S> <C>
David A.B. Brown(3)............................................. 0
L. William Heiligbrodt.......................................... 9,000
John R. Huff.................................................... 7,000
William J. Johnson.............................................. 1,406
Don D. Jordan................................................... 8,500
R. A. LeBlanc................................................... 3,435
James E. McCormick.............................................. 9,000
Michael E. Patrick.............................................. 0
J. W. Stewart................................................... 261,341
Michael McShane................................................. 117,121
G. R. Goodarzi(4)............................................... 77,548
Thomas H. Koops................................................. 81,393
Margaret B. Shannon............................................. 22,466
All current directors and officers as a group (17 persons)(5)... 787,541
</TABLE>
- ---------------
(1) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned by them. As of
November 1, 1995, no officer or director owned in excess of 1% of the
Company's Common Stock.
(2) Includes the following shares subject to options granted pursuant to the
Company's 1990 Stock Incentive Plan and exercisable within 60 days: Mr.
Brown -- 0 shares; Mr. Heiligbrodt -- 7,000 shares; Mr. Huff -- 7,000
shares; Mr. Johnson -- 0 shares; Mr. Jordan -- 8,000 shares; Mr.
LeBlanc -- 3,000 shares; Mr. McCormick -- 8,000 shares; Mr. Patrick -- 0
shares; Mr. Stewart -- 200,355 shares; Mr. McShane -- 85,157 shares; Mr.
Goodarzi -- 58,361 shares; Mr. Koops -- 61,571 shares; Ms. Shannon -- 7,487
shares.
(3) As of January 25, 1996, Mr. Brown will no longer be a director of the
Company.
(4) Mr. Goodarzi has not been an officer of the Company since October 17, 1995.
(5) All current directors and officers as a group owned beneficially an
aggregate of approximately 3% of the Company's Common Stock.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
During fiscal 1995, the Board of Directors held eight meetings of the full
Board and eight meetings of committees. During such fiscal year, or such portion
of such year during which such director served, each director attended at least
75% of the aggregate number of meetings of the Board of Directors and meetings
of committees of the Board on which he served. During fiscal 1995, directors who
were not employees of the Company were paid a monthly retainer of $2,000 for
service on the Board, an attendance fee of $1,250 for the
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<PAGE> 8
first meeting of the Board or any of its committees attended in one day, and
$800 for each additional meeting attended in the same day. Committee chairmen
who are not Company employees receive an additional 50% of the meeting fee. In
addition, pursuant to the terms of the Company's 1990 Stock Incentive Plan and
1995 Plan, the non-employee directors receive annual automatic grants of options
to purchase 3,000 shares of Common Stock effective the fourth Thursday of
October each year. The proposed amendment to the 1995 Plan would increase such
automatic grants to options to purchase 4,000 shares, beginning in October 1996.
See "Amendment to the BJ Services Company 1995 Incentive Plan" below. Employees
of the Company are not paid any directors' fees. No member of the Board of
Directors was paid any compensation in the Company's 1995 fiscal year for his
service as a director of the Company other than pursuant to the standard
compensation arrangement for directors and expenses.
On January 26, 1995, the Board of Directors appointed members to serve on
the Audit Committee, the Executive Compensation Committee and the Nominating
Committee. The Nominating Committee held one meeting during fiscal 1995. The
Executive Compensation Committee met five times and the Audit Committee met two
times during that period.
On May 25, 1995, in connection with the merger of The Western Company of
North America ("Western") with and into the Company (the "Merger"), the Board of
Directors increased the number of directors, appointed additional members to
serve on the Audit Committee, the Executive Compensation Committee and the
Nominating Committee, and appointed members to serve on the Special Committee of
the Board of Directors of the Company established pursuant to the Agreement and
Plan of Merger between the Company and Western (the "Merger Agreement"). The
Special Committee did not meet during fiscal 1995.
The responsibilities of the Audit Committee, comprised of Messrs. McCormick
(Chairman), Jordan, Huff, LeBlanc and Brown, include reviewing the scope and
results of the annual audit of the Company's consolidated financial statements
with the independent auditors, internal auditors and management; reviewing the
independence of the independent auditors and the internal auditors; reviewing
actions by management on the independent and internal auditors' recommendations;
and meeting with management, the internal auditors and the independent auditors
to review the effectiveness of the Company's system of internal control and
internal audit procedures. To promote the independence of the audit, the Audit
Committee consults separately and jointly with the independent auditors, the
internal auditors and management.
The responsibilities of the Executive Compensation Committee, comprised of
Messrs. Jordan (Chairman), McCormick, Heiligbrodt, Huff and Patrick, include
reviewing the Company's executive salary and bonus structure; reviewing the
Company's employee stock incentive plans, thrift plan and employee stock
purchase plan as well as other incentive alternatives; reviewing the Company's
perquisite program; and recommending directors' fees.
The responsibilities of the Nominating Committee, comprised of Messrs.
Heiligbrodt (Chairman), McCormick, LeBlanc and Johnson, include selecting
candidates to fill vacancies on the Board of Directors; reviewing the structure
and composition of the Board; and considering qualifications required for
continued Board service. The Committee also considers nominees recommended by
stockholders. Stockholders desiring to make such recommendations should submit
the candidate's name, together with biographical information and the candidate's
written consent to be nominated and, if elected, to serve to: Chairman,
Nominating Committee of the Board of Directors of BJ Services Company, P.O. Box
4442, Houston, Texas 77210-4442.
The responsibilities of the Special Committee, comprised of Messrs.
McCormick (Chairman), LeBlanc, Johnson and Patrick, include administering the
provisions of the Merger Agreement relating to employee arrangements.
6
<PAGE> 9
AMENDMENT TO THE BJ SERVICES COMPANY
1995 INCENTIVE PLAN
The Board of Directors recommends the approval of an amendment to the 1995
Plan to increase the number of shares for which automatic annual option grants
are made to the Company's non-employee directors. The 1995 Plan was adopted by
the Board of Directors on January 26, 1995 and was submitted to and approved by
the stockholders at a special meeting of stockholders held on April 13, 1995.
Key employees, officers and non-employee directors of the Company, its
subsidiaries and affiliated entities are eligible to participate in the 1995
Plan. As of November 1, 1995, there were 117 employees and eight non-employee
directors eligible to participate in the 1995 Plan. The 1995 Plan provides for
the issuance of up to an aggregate of 1,500,000 shares of Common Stock. The 1995
Plan will terminate on December 31, 2004, if not sooner terminated pursuant to
the terms thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT TO THE
1995 PLAN. THE AFFIRMATIVE VOTE OF HOLDERS OF A MAJORITY OF THE COMMON STOCK
PRESENT OR REPRESENTED BY PROXY AT THE MEETING AND ENTITLED TO VOTE IS REQUIRED
TO APPROVE THE PROPOSED AMENDMENT.
The 1995 Plan provides that each non-employee director who is first elected
to the Board of Directors on or after the date director options may no longer be
granted under the terms of the BJ Services Company 1990 Stock Incentive Plan
(the "1990 Plan Termination") will be granted, as of the date of his initial
election, a Nonqualified Option (hereinafter defined) under the 1995 Plan to
purchase 1,000 shares of Common Stock. In addition, annually, beginning on the
fourth Thursday of October of 1995 and each year thereafter until the expiration
of the 1995 Plan, each person who is a non-employee director on such date will
receive a grant of a Nonqualified Option to purchase 1,000 shares of Common
Stock (increased to 3,000 shares after the 1990 Plan Termination). The Board of
Directors has recommended a revision to this provision of the 1995 Plan which
would result in annual grants of Nonqualified Options to purchase 2,000 shares
of Common Stock (increased to 4,000 shares after the 1990 Plan Termination). The
Board of Directors believes such increase is necessary to provide competitive
compensation levels for the Company's non-employee directors.
The following summary describes briefly other principal features of the
1995 Plan, and is qualified in its entirety by reference to the full text of the
1995 Plan as amended by the proposed Amendment One, the full text of which
amendment is provided as Appendix A to this Proxy Statement.
The 1995 Plan permits the granting of the following types of awards: stock
options ("Options") to purchase shares of Common Stock to key employees,
officers and non-employee directors ("Optionees"), which may be either incentive
stock options ("Incentive Stock Options") within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), or options that do
not constitute Incentive Stock Options ("Nonqualified Options"); stock based
awards ("Performance Stock," "Performance Units" and "Bonus Stock") to key
employees and officers ("Employee Grantees"); and cash awards ("Tandem Cash Tax
Rights," "Performance Cash Awards" or "Bonus Cash Awards," collectively referred
to as "Cash Awards") to Employee Grantees. Options, Performance Stock,
Performance Units, Bonus Stock and Cash Awards are collectively referred to
herein as "Awards."
Incentive Stock Options may be granted only to individuals who are key
employees and officers (whether or not they are directors) of the Company or any
"Parent Corporation" or any "Subsidiary Corporation" (as defined in Section 424
of the Code) of the Company, and Nonqualified Options, Performance Stock,
Performance Units, Bonus Stock and Cash Awards may be granted to individuals who
are key employees and officers (whether or not they are directors) of the
Company, its subsidiaries and affiliated entities. Options granted to
non-employee directors must be Nonqualified Options, and nonemployee directors
are not eligible to receive any other Award.
The 1995 Plan is administered by the Executive Compensation Committee of
the Board of Directors. Each member of the Executive Compensation Committee must
be a "disinterested person" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), if and as then
in effect, and also an "outside director" within the meaning of Section 162(m)
of the Code. Subject to the terms and conditions of the 1995 Plan, the Executive
Compensation Committee has authority to
7
<PAGE> 10
determine the employees who are to be granted Awards, the number of shares to be
issued pursuant to such Awards, and, to a limited extent, the exercise price of
Options (other than Options granted to non-employee directors), to interpret the
1995 Plan and all Options and other Awards, and to administer the 1995 Plan.
The Executive Compensation Committee has the authority to grant to the
Employee Optionees, prior to the termination of and subject to the terms and
conditions of the 1995 Plan, Options that will be in such form as the Executive
Compensation Committee may from time to time approve. Subject to certain
exceptions, no Option granted under the 1995 Plan is exercisable earlier than
the date which is six months from the date of grant nor later than the date
which is ten years after the date of grant.
The price at which shares of Common Stock may be purchased upon the
exercise of a Nonqualified Option is determined by the Executive Compensation
Committee at the time the Option is granted; provided, however, that the
exercise price of a Nonqualified Option may not be less than the lesser of (i)
the per share price of the last sale of Common Stock on the trading day prior to
the grant of such Option, based on the composite transactions in the Common
Stock as reported by The Wall Street Journal, and (ii) the arithmetic average of
the closing prices per share of Common Stock on all days on which such stock was
traded during the 90-day period before the date of grant, based on the composite
transactions in the Common Stock as reported by The Wall Street Journal. In the
case of Options granted to non-employee directors, the exercise price of each
Option shall be equal to the lesser of (i) and (ii) above. In the case of the
exercise of an Incentive Stock Option, subject to the certain limitations, the
purchase price per share of Common Stock will be equal to the fair market value
per share of Common Stock at the time the Incentive Stock Option is granted as
determined by the Executive Compensation Committee, based on the composite
transactions in the Common Stock as reported by The Wall Street Journal, and
shall not be less than the per share price of the last sale of Common Stock on
the trading day prior to the date of grant. The per share price of the last sale
of Common Stock as of December 15, 1995, based on the composite transactions in
the Common Stock as reported by The Wall Street Journal, was $28.00.
The Executive Compensation Committee has the authority to grant Performance
Stock (which will be shares of Common Stock subject to a Performance Period (as
defined below)), Performance Units (which will represent phantom shares of
Common Stock subject to a Performance Period) and Bonus Stock (which will be
shares of Common Stock that are not subject to a Performance Period).
To the extent not prohibited by other provisions of the 1995 Plan, each
share of Performance Stock and each Performance Unit shall be subject to
becoming vested upon the achievement of such performance goals (Company and/or
individual) over such Performance Period (which generally shall be not less than
six months and not more than ten years after the date of grant) as the Executive
Compensation Committee in its discretion may determine at or prior to the grant
of such Award.
With respect to a Performance Stock or Performance Unit Award, the
Executive Compensation Committee may grant a Tandem Cash Tax Right that will
entitle a recipient to receive a cash amount sufficient to gross up the value of
such Award to equal its value before any federal, state and other taxes payable
thereon. Cash Awards may also include Performance Cash Awards, which shall not
vest prior to six months from the date of grant or after ten years from the date
of grant, subject to achievement of certain performance goals, as determined by
the Executive Compensation Committee in its discretion.
The Executive Compensation Committee may, from time to time and subject to
the provisions of the 1995 Plan, grant Bonus Cash Awards to key employees and
officers (whether or not they are directors) of the Company, its subsidiaries
and affiliated entities. Bonus Cash Awards are cash payments that are not
subject to a Performance Period.
Upon the occurrence of a Change of Control (defined generally as certain
acquisitions by a person, entity or group of 25% or more of the Company's Common
Stock or 25% of the combined voting power of the then outstanding voting
securities of the Company or certain reorganizations, mergers or
consolidations), each Option that is not then immediately exercisable in full
shall be immediately exercisable in full. In addition, upon the occurrence of a
Change of Control, each share of Performance Stock and each Performance Unit
8
<PAGE> 11
that was previously granted under the 1995 Plan and that is not then immediately
vested in full will be immediately vested in full.
Other than the automatic annual Option grants to non-employee directors
described above (which are subject to the limitation of the number of shares of
Common Stock available under the 1995 Plan), it is not possible to determine at
this time the number of shares of Common Stock covered by Awards that may be
granted in the future to any employee, director or group thereof. The following
table sets forth, for the executive officers of the Company named in the Summary
Compensation Table, all current executive officers as a group, all current
directors who are not executive officers as a group, each nominee for election
as a director, and all other (non-executive) employees as a group, the number of
shares of Common Stock covered by Awards granted under the 1995 Plan for fiscal
1995.
1995 PLAN BENEFITS
BJ SERVICES COMPANY 1995 INCENTIVE PLAN
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME POSITION COVERED BY AWARDS
----- -------- ----------------
<S> <C> <C>
J. W. Stewart............ President and Chief Executive Officer; Nominee.... 165,865
Vice President -- Finance and Chief Financial
Michael McShane.......... Officer........................................... 61,749
G. R. Goodarzi(1)........ Vice President -- International Operations........ 33,231
Thomas H. Koops.......... Vice President -- Technology and Logistics........ 41,934
Margaret B. Shannon...... Vice President and General Counsel................ 40,962
EXECUTIVE GROUP
(9 persons)............................................................... 484,194
NON-EMPLOYEE
DIRECTOR GROUP
(8 persons)............................................................... 8,000
L. William Heiligbrodt... Nominee........................................... 1,000
James E. McCormick....... Nominee........................................... 1,000
NON-EXECUTIVE
EMPLOYEE GROUP
(108 persons)............................................................. 236,000
</TABLE>
- ---------------
(1) Mr. Goodarzi has not been an officer of the Company since October 17, 1995;
accordingly, the Awards shown in this table for Mr. Goodarzi lapsed on
October 17, 1995 in accordance with their terms.
FEDERAL INCOME TAX CONSEQUENCES WITH RESPECT TO OPTIONS
The following summary is based on the applicable provisions of the Code as
currently in effect and the income tax regulations and proposed income tax
regulations thereunder. The 1995 Plan is not qualified under Section 401(a) of
the Code.
Nonqualified Options. No federal income tax is imposed on the Optionee upon
the grant of a Nonqualified Option. Upon the exercise of a Nonqualified Option,
the Optionee will generally be treated as receiving compensation taxable as
ordinary income in the year of exercise, in an amount equal to the excess of the
fair market value of the shares of Common Stock at the time of exercise over the
exercise price paid for such shares of Common Stock. Upon a subsequent
disposition of the shares of Common Stock received upon exercise of a
Nonqualified Option, any difference between the fair market value of the shares
of Common Stock at the time of exercise and the amount realized on the
disposition would be treated as long-term or short-term capital gain or loss,
depending on the holding period of the shares. Upon an Optionee's exercise of a
Nonqualified Option, the Company may claim a deduction for compensation paid at
the same time and in the same amount as income is recognized by the Optionee, if
and to the extent that the amount is an ordinary expense and satisfies the test
of reasonable compensation.
9
<PAGE> 12
Incentive Stock Options. No federal income tax is imposed on the Optionee
upon the grant of an Incentive Stock Option. If the Optionee does not dispose of
shares acquired pursuant to his exercise of an Incentive Stock Option within two
years from the date the Option was granted or within one year after the shares
were transferred to him (the "Holding Period"), except for the item of tax
adjustment described below under "Alternative Minimum Tax," no income would be
recognized by the Optionee by reason of his exercise of the Option, and the
difference between the Option price and the amount realized upon a subsequent
disposition of the shares of Common Stock would be treated as a long-term
capital gain or loss. In such event, the Company would not be entitled to any
deduction in connection with the grant or exercise of the Option or the
disposition of the shares of Common Stock so acquired.
If, however, an Optionee disposes of shares of Common Stock acquired
pursuant to his exercise of an Incentive Stock Option before the Holding Period
has expired, the Optionee would be treated as having received, at the time of
disposition, compensation taxable as ordinary income. In such event the Company
may claim a deduction for compensation paid at the same time and in the same
amount as compensation is treated as being received by the Optionee. The amount
treated as compensation is the excess of the fair market value of the shares of
Common Stock at the time of exercise (or, in the case of a sale in which a loss,
if sustained, would be recognized, the amount realized on the sale, if less)
over the Option price; any amount realized in excess of the fair market value of
the shares of Common Stock at the time of exercise would be treated as long-term
or short-term capital gain, depending on the holding period of the shares of
Common Stock.
Alternative Minimum Tax. The excess of the fair market value of shares of
Common Stock acquired upon exercise of an Incentive Stock Option over the
exercise price paid for such shares is an adjustment to alternative minimum
taxable income for the Optionee's taxable year in which such exercise occurs
(unless the shares of Common Stock are disposed of in the same taxable year).
Payment of Option Price in Shares. In the case of a Nonqualified Option, if
the Option price is paid by the delivery of shares of Common Stock previously
acquired by the Optionee having a fair market value equal to the Option price
("Previously Acquired Shares"), gain or loss would not be recognized on the
exchange of the Previously Acquired Shares for a like number of shares of Common
Stock pursuant to such an exercise of the Option, and the Optionee's basis in
the number of shares of Common Stock received equal to the Previously Acquired
Shares would be the same as his basis in the Previously Acquired Shares. In
addition, the Optionee would be treated as receiving compensation taxable as
ordinary income equal to fair market value at the time of exercise of the shares
of Common Stock received in excess of the number of Previously Acquired Shares,
and the Optionee's basis in such excess shares of Common Stock would generally
be equal to their fair market value at the time of exercise.
In the case of an Incentive Stock Option, the federal income tax
consequences to the Optionee of the payment of the Option price with Previously
Acquired Shares will depend on the nature of the Previously Acquired Shares. If
the Previously Acquired Shares were acquired through the exercise of a qualified
stock option, an Incentive Stock Option or an option granted under an employee
stock purchase plan ("Statutory Option") and if such Previously Acquired Shares
are being transferred prior to the expiration of the applicable minimum
statutory holding period, the transfer would be treated as a disqualifying
disposition of the Previously Acquired Shares. If the Previously Acquired Shares
were acquired other than pursuant to the exercise of a Statutory Option, or were
acquired pursuant to the exercise of a Statutory Option but have been held for
the applicable minimum statutory holding period, no gain or loss should be
recognized on the exchange of the Previously Acquired Shares. In either case,
(i) the Optionee's basis in the number of shares of Common Stock acquired equal
to the number of Previously Acquired Shares would be the same as his basis in
the Previously Acquired Shares, increased by any income recognized to the
Optionee upon the disqualifying disposition of the Previously Acquired Shares,
(ii) the Optionee's basis in the shares of Common Stock acquired in excess of
the number of Previously Acquired shares would be zero and (iii) the other
incentive stock option rules would apply. Upon a subsequent disqualifying
disposition of the shares of Common Stock so received, the shares of Common
Stock with the lowest basis would be treated as disposed of first.
10
<PAGE> 13
Additional Tax Consequences. In the event that the acceleration of vesting
or any payment, distribution or issuance of stock is subject to the golden
parachute 20% excise tax pursuant to Section 4999(a) of the Code, the
participant whose benefit is subject to such tax is entitled to receive a
gross-up payment from the Company so that the amount of the "net" benefit
received by such participant shall equal the amount of the benefit that would
have been received in the absence of a golden parachute tax. Section 280G of the
Code prevents the deductibility by the Company of amounts subject to the excise
tax under Code Section 4999.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION COMMITTEE REPORT
The Executive Compensation Committee of the Company's Board of Directors
consists of five directors who are not employees of the Company. The Committee
reviews the Company's executive compensation program and policies each year and
determines the compensation of the executive officers.
The Committee's overall policy regarding compensation of the Company's
executive officers is to provide competitive salary levels and compensation
incentives that (i) attract and retain individuals of outstanding ability in
these key positions, (ii) recognize individual performance and the performance
of the Company relative to the performance of other companies of comparable
size, complexity and quality, and (iii) support both the short-term and
long-term goals of the Company. The Executive Compensation Committee believes
this approach closely links the compensation of the Company's executives to the
accomplishment of Company goals which coincide with shareholder objectives.
In addition, the Executive Compensation Committee considers the anticipated
tax treatment of the Company's executive compensation program. Section 162(m) of
the Internal Revenue Code generally limits the corporate tax deduction for
compensation paid to executive officers named in the Summary Compensation Table
to $1 million, unless certain conditions are met. The Company's policy is to
qualify all executive compensation for deduction under applicable tax laws to
the maximum extent possible. As the current and projected compensation subject
to the $1 million threshold of Section 162(m) for each of the named executive
officers is below such threshold, the Committee believes that the requirements
of Section 162(m) will not affect the tax deductions available to the Company in
connection with its executive compensation for the 1995 or 1996 fiscal years.
The executive compensation program includes four elements that, taken
together, constitute a flexible and balanced method of establishing total
compensation for the Company's executive officers. These elements are (i) base
salary, (ii) annual bonus plan awards, (iii) long-term incentive awards, and
(iv) stock option grants. These elements are further discussed below.
Providing Competitive Levels of Compensation. The Committee attempts to
provide the Company's executives with a total compensation package that is
targeted at the 75th percentile of the market for executives holding comparable
positions when the Company's performance justifies the payment of compensation
at such levels. The Committee determines a competitive level of compensation for
each executive based on information drawn from a variety of sources, including
proxy statements of other companies and surveys conducted by compensation
consultants. An independent consultant periodically reviews and provides survey
data to the Committee on the compensation of the chief executive officer and
other executives in comparison with compensation levels at companies in an
industry peer group. The industry peer companies covered by the performance
graph are not the same as the group of companies referenced for compensation
purposes, which included additional companies within the industry.
While the targeted value of an executive's compensation package may be
competitive, its actual value may exceed or fall below competitive levels
depending on performance, as discussed below.
Base Salaries. The Committee periodically reviews and establishes executive
base salaries. Generally, base salaries are determined according to the
following factors: the individual's experience level, scope and complexity of
the position held and annual performance of the individual. In addition,
although the Committee did not obtain a survey for purposes of determining 1995
base salaries, an independent consultant
11
<PAGE> 14
periodically reviews and provides survey data to the Committee on the salaries
being paid for similar positions at companies in an industry peer group.
Notwithstanding the above criteria, based on the Company's performance for 1994
and upon Mr. Stewart's recommendation, his base salary for 1995 was maintained
at the same level as in 1994.
The Annual Bonus Plan. The purpose of the Annual Bonus Plan is to provide
motivation toward and reward the accomplishment of corporate annual objectives
and to provide a competitive compensation package which will attract, reward and
retain individuals of the highest quality. As a pay-for-performance plan, cash
bonus awards are paid based upon the achievement of corporate performance
objectives established for the fiscal year.
Targeted bonus award levels for the Company's executive officers are
established by the Committee each year. The Company's annual performance
measures are established jointly by the Committee and management. For 1995,
bonus targets for the Company's Chief Executive Officer and its other executive
officers were based on earnings per share objectives. These objectives are
established at three levels: entry level, expected value (target level) and over
achievement level. In addition, the bonus for the Company's Vice President of
International Operations was based on operating profit objectives relating to
his area of responsibility. The Committee chooses not to disclose the specific
earnings per share and operating profit objectives because it believes such
disclosure would be detrimental to the Company's position with respect to the
industry. Since the Company's 1995 earnings per share exceeded the over
achievement level, each of the named executive officers, including Mr. Stewart,
received the maximum eligible bonus.
Long-Term Incentive Program. The long-term incentive program was introduced
in fiscal 1993 to focus management attention on Company performance over a
period of time longer than one year in recognition of the long-term horizons for
return on investments and strategic decisions in the energy services industry.
The program is designed to motivate management to assist the Company in
achieving a high level of long-term performance and serves to link this portion
of executive compensation to long-term stockholder value. Pursuant to the
long-term incentive program, the Executive Compensation Committee may award
performance awards to executive officers on an annual basis. The numbers of
shares represented by such awards are designed to place the Chief Executive
Officer and other executive officers at the 75th percentile of the market for
total compensation when expected performance is met. Aggregate stock or option
holdings of the executive have no bearing on the size of a performance award.
The awards generally vest over a three-year period of time, based on Company
performance over such time period measured against pre-established objectives.
For fiscal 1995, awards under the long-term incentive program consisted of
performance units granted under the Company's 1990 Stock Incentive Plan. These
awards will vest at the end of three years according to the Company's three year
stock price performance as compared to an industry peer group index. Such
performance must exceed peer group performance by predetermined percentages in
order for the performance units to vest in full. Notwithstanding the foregoing,
the Executive Compensation Committee is permitted by the terms of the 1990 Stock
Incentive Plan to amend the performance objectives or the vesting period for any
performance award with the consent of the employee grantee. In addition, the
performance awards will vest in full upon the occurrence of a "change of
control". For fiscal 1995, Mr. Stewart was awarded performance units, based on
the criteria described above. In addition, during fiscal 1995, in connection
with the Merger, previously granted performance awards were vested or cancelled.
See "Awards to Officers of the Company in Connection with the Merger" below.
Stock Option Grants. Pursuant to the Company's 1990 Stock Incentive Plan
and the 1995 Plan, the Committee may make grants of stock options to the
Company's executive officers. The plans allow the Committee to promote the
interests of the Company and its stockholders by encouraging the executive
officers to increase their equity interest in the Company, thereby giving them
added incentive to work toward the continued growth and success of the Company.
In addition to those described below under "Awards to Officers of the Company in
Connection with the Merger," stock option grants to each executive for 1995 were
made under the 1995 Plan and were primarily based on the executive's degree of
responsibility for and
12
<PAGE> 15
contribution to the growth and success of the Company, as well as on survey data
provided by an independent consultant to the Committee regarding stock option
grants at companies in an industry peer group. Aggregate stock or option
holdings of the executive officer have not been considered in determining the
size of the option grants.
For fiscal 1995, Mr. Stewart was granted options to purchase shares of
Common Stock, based on the criteria described above. For a discussion of certain
option grants to officers of the Company made under the 1995 Plan in connection
with the Merger and not based on the foregoing criteria, see "Awards to Officers
of the Company in Connection with the Merger" below.
Awards to Officers of the Company in Connection with the Merger. Pursuant
to the terms of the Company's 1990 Stock Incentive Plan, a "change in control"
resulted from the Merger when Western stockholders acquired more than 40% of the
Company's outstanding Common Stock. At the time of the Merger, as a result of
such change in control, under the terms of the 1990 Stock Incentive Plan, the
vesting of all outstanding nonvested stock options granted under such plan
before November 1994 was accelerated, and all performance awards granted under
such plan became payable in full in shares of the Company's Common Stock. In
consideration for the stock option grants and the performance award changes
described below and the amendments to the severance agreements described below,
each officer of the Company who held stock options or performance awards granted
prior to November 1994 agreed to waive the accelerated vesting of the stock
options and a portion of the performance awards that would have otherwise
occurred upon consummation of the Merger and the resulting "change in control."
In connection with the Merger and conditioned upon its consummation, the
Board of Directors of the Company approved cash bonus awards aggregating
$450,000 payable to Mr. Stewart and three of the Company's other executive
officers. Also, vesting of a portion of the performance awards granted to the
Company's officers under the Company's 1990 Stock Incentive Plan occurred upon
consummation of the Merger, rather than at the end of their three-year
performance period. The percentage of outstanding awards to vest was determined
by the Company's Executive Compensation Committee based on: (i) the Company's
actual financial results for 1993 and 1994 compared to an industry peer group
index, (ii) the performance criteria for the fiscal years ending in 1995, 1996
and 1997 being deemed to have been fully satisfied upon consummation of the
Merger, (iii) execution of waivers with regard to change in control acceleration
rights in the Company's 1990 Stock Incentive Plan and (iv) successful completion
of the Merger. As a result, 168,547 of the 220,316 performance awards
outstanding under the Company's 1990 Stock Incentive Plan vested and 168,547
shares of the Company's Common Stock were issued to officers (including the
executive officers) of the Company, plus $2.6 million in the aggregate in cash,
based upon a price of $22.50 per share of the Company's Common Stock on the date
of issuance, to offset the federal income tax payable by the recipients in
respect of such issuance. Mr. Stewart's awards were based on the foregoing
criteria. Upon consummation of the Merger, all rights with respect to the
remaining 51,769 performance awards outstanding at the time of the Merger were
cancelled.
In addition, in consideration for the waivers previously described, a total
of 368,157 stock options were authorized for issuance under the Company's 1995
Plan on February 15, 1995 to a total of nine officers (including Mr. Stewart and
all of the Company's other executive officers). Such options will vest in whole
or in part at the end of the two-year period commencing on the date of the
Merger if the Company achieves specified consolidation benefits from combining
Western's operations with those of the Company over such two-year period. If an
employee voluntarily leaves the Company or is terminated by the Company prior to
the end of such two-year period, all such options granted to such employee will
be forfeited. All such options will become fully vested upon a future "change in
control" as defined in the Company's 1995 Plan.
13
<PAGE> 16
This report of the Executive Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, except to the
extent that the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such acts.
Don D. Jordan, Chairman
L. William Heiligbrodt
John R. Huff
James E. McCormick
Michael E. Patrick
14
<PAGE> 17
PERFORMANCE GRAPH -- TOTAL STOCKHOLDER RETURN
SEPTEMBER 1990 THROUGH SEPTEMBER 1995
Set forth below is a graph comparing the cumulative total stockholder
return on the Company's Common Stock with the cumulative total return of the
Standard & Poor's 500 Stock Index and a peer group index consisting of Nowsco
Well Service Limited, Smith International, Inc., Energy Ventures, Inc., Enterra
Corporation, Weatherford International Incorporated, Pool Energy Services Co.,
Varco International, Inc., Oceaneering International, Inc. and Tuboscope Vetco
International Corporation (the "Comparator Group"). The graph assumes
investments of $100 on September 30, 1990, and reinvestment of all dividends.
The returns of each company in the Comparator Group have been weighted according
to the market capitalization of each such company at the beginning of each
period for which a return is indicated.
This performance graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such acts.
INDEXED TOTAL SHAREHOLDER RETURN
SEPTEMBER 1990 -- SEPTEMBER 1995
<TABLE>
<CAPTION>
MEASUREMENT PERIOD BJ SERVICES COMPARATOR
(FISCAL YEAR COVERED) COMPANY S&P 500 GROUP
<S> <C> <C> <C>
9/90 100 100 100
9/91 76 131 70
9/92 72 145 70
9/93 90 164 91
9/94 81 170 91
9/95 104 221 96
</TABLE>
15
<PAGE> 18
The following information relates to compensation paid by the Company for
fiscal 1993, 1994 and 1995 to the Company's Chief Executive Officer and each of
the other four (4) most highly compensated executive officers in 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------- --------------------- ----------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
COMPENSA- STOCK OPTIONS/ LTIP COMPENSA-
NAME AND SALARY BONUS(1) TION(2)(3) AWARDS(4) SARS(5) PAYOUTS(6) TION(2)(7)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
------------------ ---- ------- ------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. W. Stewart................ 1995 400,008 560,000 165,865 1,803,511 27,500
President and Chief 1994 395,840 0 41,026 0
Executive Officer 1993 365,834 283,500 35,714 0
Michael McShane.............. 1995 213,338 229,000 61,749 986,070 11,684
Vice President -- Finance 1994 202,508 0 15,795 0
and Chief Financial Officer 1993 184,674 95,764 14,476 0
G.R. Goodarzi(8)............. 1995 180,504 81,900 33,231 541,489 11,684
Vice President -- 1994 169,170 11,198 11,077 0
International Operations 1993 147,002 56,700 10,000 0
Thomas H. Koops.............. 1995 171,504 152,850 41,934 589,466 11,099
Vice President -- 1994 162,504 0 10,769 0
Technology and Logistics 1993 150,838 58,592 9,226 0
Margaret B. Shannon.......... 1995 169,668 151,950 40,962 547,786 10,781
Vice President -- General 1994 103,134 0 10,462 0
Counsel 1993 0 0 0 0
</TABLE>
- ---------------
(1) Includes bonuses earned in the reported fiscal year and paid in the
following fiscal year, including special bonuses of $200,000, $100,000,
$75,000 and $75,000 paid to Mr. Stewart, Mr. McShane, Ms. Shannon and Mr.
Koops, respectively, in connection with the Merger.
(2) In accordance with SEC regulations, information for prior years is not
required to be disclosed in this column.
(3) Perquisites and other personal benefits paid or distributed during 1995 to
the persons listed in the compensation table above did not exceed, with
respect to any individual, the lesser of $50,000 or 10 percent of such
individual's total salary and bonus.
(4) See table entitled "Long-Term Incentive Plans -- Awards in Last Fiscal
Year" for information regarding performance units granted for 1995.
(5) Includes options earned in the reported fiscal year and granted subsequent
to the end of the fiscal year.
(6) Reflects payments in respect of performance awards granted under the 1990
Stock Incentive Plan. A portion of the outstanding performance awards
granted under the 1990 Stock Incentive Plan became vested upon consummation
of the Merger. The percentage of outstanding awards to vest was determined
by the Compensation Committee based upon (i) actual results for 1993 and
1994 as compared with the results for companies in an industry peer group,
(ii) deemed satisfaction of performance criteria for fiscal years 1995,
1996 and 1997, (iii) execution by such officers of waivers with regard to
change in control acceleration rights in the 1990 Stock Incentive Plan and
(iv) successful completion of the Merger. Also includes cash awards to
offset the federal income tax payable by the recipients of such payments in
respect of performance awards.
(7) The amount shown in this column is the annual Company contribution to the
Company's 401(k) defined contributions plan on behalf of each executive
officer.
(8) Mr. Goodarzi has not been an officer of the Company since October 17, 1995.
16
<PAGE> 19
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ----------------------------------------------------------------------------- --------------------
(a) (b) (c) (d) (e) (f) (g)
<S> <C> <C> <C> <C> <C> <C>
% OF
NUMBER TOTAL
OF OPTIONS/
SECURITIES SARS
UNDERLYING GRANTED
OPTIONS/ TO EXERCISE
SARS EMPLOYEES OR BASE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#)(1) YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
J.W. Stewart................... 42,787(2) 7.1% 24.54 12/07/05 660,335 1,673,418
123,078(3) 20.3% 16.89 02/15/05 1,307,338 3,313,052
Michael McShane................ 14,364(2) 2.4% 24.54 12/07/05 221,681 561,782
47,385(3) 7.8% 16.89 02/15/05 503,325 1,275,524
G.R. Goodarzi(4)............... 33,231(3) 5.5% 16.89 02/15/05 352,981 894,522
Thomas H. Koops................ 9,627(2) 1.6% 24.54 12/07/05 148,574 376,516
32,307(3) 5.3% 16.89 02/15/05 343,166 869,650
Margaret B. Shannon............ 9,576(2) 1.6% 24.54 12/07/05 147,787 374,522
31,386(3) 5.2% 16.89 02/15/05 333,383 844,858
</TABLE>
- ---------------
(1) All options reflected in this table were earned in fiscal 1995. The options
reflected in this table do not include options earned in fiscal 1994 and
granted on November 22, 1994. No stock appreciation rights ("SARs") or
other instruments were granted in tandem with the options reflected in this
table.
(2) Represents options granted under the 1995 Plan on December 7, 1995. Such
options will become exercisable ratably over a three period, with one-third
of each grant vesting on each of the first, second and third anniversaries
of the date of grant.
(3) Represents options granted under the 1995 Plan on February 15, 1995 in
connection with the Western acquisition. Such options shall become vested
only to the extent the target consolidation benefits of the Western
acquisition are achieved as of April 13, 1997. The nonvested portion of the
options shall be automatically cancelled as of the vesting date. For
additional information regarding these awards, see "Executive Compensation
Committee Report -- Awards to Officers of the Company in Connection with
the Merger."
(4) Mr. Goodarzi has not been an officer of the Company since October 17, 1995;
accordingly, the options shown in this table for Mr. Goodarzi lapsed on
October 17, 1995 in accordance with their terms.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT FY-END(#) AT FY-END($)
ACQUIRED VALUE ------------------------------ ---------------------------------
NAME ON EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE(1) EXERCISABLE UNEXERCISABLE(1)(2)
---- ----------- ----------- ----------- ---------------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
J.W. Stewart.......... -0- -0- 162,109 243,367 1,191,542 1,955,186
Michael McShane....... -0- -0- 70,400 91,862 510,075 748,413
G.R. Goodarzi(3)...... -0- -0- 51,465 54,308 371,882 500,082
Thomas H. Koops....... -0- -0- 51,573 62,188 372,541 508,750
Margaret B. Shannon... -0- -0- 4,000 59,424 29,480 480,910
</TABLE>
- ---------------
(1) Includes options earned in fiscal 1995 and granted on December 7, 1995.
(2) As disclosed in footnote (1) above, options granted on December 7, 1995 we
redeemed compensation for the fiscal year ended September 30, 1995. Because
the market value of the Common Stock was lower on December 7, 1995 than on
September 30, 1995, these options are in-the-money for purposes of this
table although such options were not in-the-money on the grant date.
(3) Mr. Goodarzi has not been an officer of the Company since October 17, 1995.
17
<PAGE> 20
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE-BASED
PLANS
--------------------------------
(A) (B) (C) (D) (E) (F)
NUMBER OF PERFORMANCE
SHARES, UNITS OR OTHER
OR OTHER PERIOD UNTIL
RIGHTS MATURATION THRESHOLD TARGET MAXIMUM
NAME (#)(1)(2) OR PAYOUT(3) (#) (#) (#)
---- ------------ ------------ --------- ------ -------
<S> <C> <C> <C> <C> <C>
J.W. Stewart.......................... 30,434 3 Years 4,869 20,086 30,434
Michael McShane....................... 13,623 3 Years 2,180 8,991 13,623
G.R. Goodarzi(4)...................... 0 3 Years 0 0 0
Thomas H. Koops....................... 10,937 3 Years 1,750 7,218 10,937
Margaret B. Shannon................... 10,899 3 Years 1,744 7,193 10,899
</TABLE>
- ---------------
(1) Awards reflected in this table represent performance units awarded under
the Company's 1990 Stock Incentive Plan. These awards were earned during
fiscal1995 and granted on December 7, 1995. For additional information
regarding these awards, see the Executive Compensation Committee
Report -- Long Term Incentive Program elsewhere in this Proxy Statement.
(2) Excludes the following awards earned during fiscal 1994 and granted on
November 22, 1994; Mr. Stewart -- 10,256 units; Mr. McShane -- 5,282 units;
Mr. Goodarzi -- 4,462 units; Mr. Koops -- 4,308 units; Ms. Shannon -- 4,205
units.
(3) Under the terms of the grant, the performance period is deemed to begin on
October 1, 1995. The performance period is three fiscal years unless a
change of control occurs, in which case the performance units would vest
immediately.
(4) Mr. Goodarzi has not been an officer of the Company since October 17, 1995.
SEVERANCE AGREEMENTS
The Company entered into severance agreements with certain executive
officers, including each of the named executive officers shown in the Summary
Compensation Table, as well as with Matthew D. Fitzgerald, Taylor M. Whichard
III, Kenneth A. Williams and Stephen A. Wright. The severance agreements were
effective August 27, 1993, except for Ms. Shannon's agreement, which was
effective February 14, 1994. The agreements have initial terms of approximately
three years and are automatically extended for an additional year at the end of
each year of the agreements unless the Company has given one year's prior notice
of termination. These agreements are intended to provide for continuity of
management in the event of a change in control of the Company. The agreements
provide that covered executive officers could be entitled to certain severance
benefits following a change in control of the Company. If, following a change in
control, the executive is terminated by the Company for any reason, other than
for death, disability or for cause, or if such executive officer terminates his
or her employment for good reason (as this term is defined in the agreements),
then the executive officer is entitled to a severance payment that will be three
times the sum of the executive officer's base salary and bonus amount, as
defined in the agreements. The severance payment is generally made in the form
of a lump sum. For a period of up to one year, the Company would also provide
life, disability, accident and health insurance coverage substantially similar
to the benefits provided before termination.
If a change in control occurs, the severance agreements are effective for a
period of two years from the date of such change in control. Under the severance
agreements, a change in control would generally include any of the following
events: (i) any "person" as defined in the Securities Exchange Act of 1934, as
amended, acquires 25 percent or more of the Company's voting securities; (ii) a
majority of the Company's directors are replaced during a two-year period; (iii)
stockholders approve a merger, resulting in (a) 60% or less of the common stock
and voting securities of the surviving corporation being owned by the same
persons that owned the common stock of the Company immediately prior to such
merger, (b) a person owning 25% or more of the surviving corporation's common
stock or voting securities, or (c) replacement of a majority of the members of
18
<PAGE> 21
the Company's board of directors; or (iv) the Company's stockholders approve a
liquidation or sale of the Company's assets. In the event that any payments made
in connection with a change in control would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code, the Company would pay an
additional payment (a "gross-up" payment) sufficient to satisfy such excise tax
obligations and any additional taxes imposed with respect to such gross-up
payment.
A change in control (as defined in the agreements) resulted from the
Merger, but no payments will be made unless a covered employee's employment with
the Company is terminated under circumstances described below during the
two-year period following the Merger.
Prior to the Merger, when it was not known whether a "change in control"
would result from the Merger, and as consideration for executing waivers with
regard to change in control acceleration rights in the 1990 Stock Incentive
Plan, each executive officer of the Company who was a party to a severance
agreement entered into an agreement modifying such agreement (i) to stipulate
that consummation of the Merger constituted a "change in control" under the
terms of such agreement and (ii) to permit a greater change in such person's
responsibilities without constituting "good reason" under such agreement.
Pursuant to such modification, if any such person's employment with the Company
is terminated by the Company (other than for "cause") or by such person for
"good reason" within 24 months following the consummation of the Merger, the
vesting of stock options granted to such person prior to 1995 will be
accelerated and such officer will receive (i) a cash payment with respect to all
of such person's awards granted under the Company's 1990 Stock Incentive Plan
after 1994 (other than stock options granted in February 1995, which will then
terminate), which will be deemed fully vested or earned, and (ii) a lump sum
cash payment equal to three times such person's salary and bonus.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon a review of reports on Forms 3 and 4 and amendments
thereto furnished to the Company during its most recent fiscal year and reports
on Form 5 and amendments thereto furnished to the Company with respect to its
most recent fiscal year, and written representations from reporting persons that
no Form 5 was required, the Company believes that all filing requirements
applicable to its officers, directors and beneficial owners under Section 16(a)
of the Exchange Act were complied with during fiscal 1995, except that the
initial Form 3 for each of David A.B. Brown, William J. Johnson and Michael E.
Patrick, the former directors of Western who became directors of the Company
following the Merger, was inadvertently filed three days after the due date.
SOLICITATION
The Company will bear the cost of the solicitation of proxies. In addition
to solicitation by mail, certain of the directors, officers or regular employees
of the Company may, without extra compensation, solicit the return of proxies by
telephone or telegram. Arrangements will be made with brokerage houses,
custodians and other fiduciaries to send proxy material to their principals, and
they will be reimbursed by the Company for any out-of-pocket expenses.
VOTING PROCEDURES
A majority of the outstanding shares of Common Stock present or represented
by proxy at the meeting constitutes a quorum for the transaction of business.
The inspector of elections appointed by the Company will count all votes cast,
in person or by submission of a properly executed proxy, before the closing of
the polls at the meeting. The affirmative vote of holders of a majority of the
Common Stock present or represented by proxy at the meeting and entitled to vote
is required for the election of each director nominee and for the approval of
the amendment to the 1995 Plan. Therefore, abstentions have the effect of a
negative vote. In accordance with Delaware law, broker non-votes will not be
treated as entitled to vote with respect to the election of directors or the
amendment of the 1995 Plan.
19
<PAGE> 22
INDEPENDENT AUDITORS
Deloitte & Touche LLP, independent public accountants, audited the
Company's consolidated financial statements for fiscal 1995, and have advised
the Company that they will have a representative available at the 1996 Annual
Meeting to respond to appropriate questions. Such representative will be
permitted to make a statement if he desires to do so. The Company has not yet
selected independent public accountants to audit its 1996 consolidated financial
statements; however, the Company intends to engage its accountants for such
purpose in May 1996.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the 1997 Annual
Meeting of Stockholders must be received by the Secretary of the Company by
August 21, 1996 to be considered for inclusion in the proxy statement and form
of proxy relating to the 1997 Annual Meeting.
The Annual Report of the Company for the year ended September 30, 1995,
including audited financial statements, is enclosed with this proxy statement
but does not constitute a part of the proxy soliciting material. Additional
copies of the Annual Report are available without charge, upon request.
BJ SERVICES COMPANY WILL FURNISH A COPY OF ITS ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED SEPTEMBER 30, 1995, WITHOUT EXHIBITS, WITHOUT CHARGE TO EACH
PERSON WHO FORWARDS A WRITTEN REQUEST TO ROBERT C. COONS, CORPORATE
COMMUNICATIONS MANAGER, BJ SERVICES COMPANY, 5500 NORTHWEST CENTRAL DRIVE,
HOUSTON, TEXAS 77092-2036.
20
<PAGE> 23
APPENDIX A
AMENDMENT ONE
TO THE
BJ SERVICES COMPANY 1995 INCENTIVE PLAN
WHEREAS, BJ Services Company (the "Company") and the stockholders of the
Company have heretofore adopted and approved the BJ Services Company 1995
Incentive Plan (the "1995 Plan"); and
WHEREAS, the Company desires to amend the 1995 Plan, subject to stockholder
approval, to increase the number of option shares that are automatically granted
to Non-Employee Directors;
NOW, THEREFORE, effective as of the date this amendment is approved by the
stockholders of the Company, Paragraph 3 of Article IV of the 1995 Plan is
amended to read in its entirety as follows:
"3. Annual Granting of Options to Non-Employee Directors. Subject
to the limitation of the number of shares of Common Stock set forth in
Article I, Paragraph 2, a nonqualified option to purchase 2,000
(increased to 4,000 after the 1990 Plan Termination) shares of Common
Stock (subject to adjustment in the same manner provided in Article
IV, Paragraph 5(e) with respect to shares of Common Stock subject to
options then outstanding) is hereby granted, effective the fourth
Thursday of October of 1996 and each year thereafter until the
expiration of the Plan, to each person who is a Non-Employee Director
on each such date (which date shall be the date of grant for purposes
hereof)."
All terms used herein that are defined in the 1995 Plan shall have the same
meanings given to such terms in the 1995 Plan.
Except as amended hereby, the 1995 Plan shall continue in full force and
effect without interruption or change and the 1995 Plan and this amendment shall
be read, taken and construed as one and the same instrument.
<PAGE> 24
BJ SERVICES COMPANY
P THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY FOR THE ANNUAL MEETING OF STOCKHOLDERS ON JANUARY 25, 1996
R
The undersigned hereby constitutes and appoints J.W. Stewart, Michael
O McShane, and Margaret B. Shannon, or any of them, true and lawful agents
and proxies with power of substitution in each to represent and to vote
X all of the shares of Common Stock owned of record on December 7, 1995 by
the undersigned at the Annual Meeting of Stockholders of BJ Services
Y Company to be held on January 25, 1996, at 11:00 a.m., at The Houstonian
Hotel, 111 North Post Oak Lane, Houston, Texas, and at any and all
adjournments thereof, hereby revoking any instruction previously given.
COMMENTS: CHANGE OF ADDRESS:
-------------------------------- --------------------------------
-------------------------------- --------------------------------
-------------------------------- --------------------------------
-------------------------------- --------------------------------
(If you have written in the above space, please mark the corresponding box
on the reverse side of this card)
You are encouraged to specify your choices by marking the appropriate
boxes (SEE REVERSE SIDE) but need not mark any boxes if you wish to vote
in accordance with the Board of Directors' recommendations. This proxy
cannot be voted unless you sign and return it.
-----------
SEE REVERSE
SIDE
-----------
<PAGE> 25
2087
/X/ Please mark your votes as in this example.
This proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR the election of the
nominees for Directors and FOR Approval of the Amendment to the 1995 Incentive
Plan.
- -------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Proposals 1 and 2
- -------------------------------------------------------------------------------
FOR WITHHOLD AUTHORITY
1. Election of Nominees / / / /
Nominees for election as Class III directors:
J.E. McCormick, L.W. Heiligbrodt, and J.W. Stewart
For, except authority to vote is withheld for the following nominees:
____________________________________________________________________
FOR AGAINST ABSTAIN
2. Approval of Amendment to 1995 Incentive Plan. / / / / / /
3. To vote upon such other business as may
properly come before the meeting and any
adjournment thereof.
Change of Address
Comments on
Reverse Side
NOTE: Please sign, date and
return your instruction promptly in
the enclosed envelope. Sign exactly
as name(s) appear(s) hereon. Joint
owners should each sign. When
signing as attorney, executor,
administrator, trustee or guardian
or other fiduciary, please give
full title as such.
___________________________________
___________________________________
SIGNATURE(S) DATE
<PAGE> 26
INDEX TO EXHIBITS
EXHIBIT
NO. DISCRIPTION
- ------------ ----------------------------------------
99.1 BJ Services Company 1995 Incentive Plan
<PAGE> 1
EXHIBIT 99.1
BJ SERVICES COMPANY
1995 INCENTIVE PLAN
ARTICLE I
INTRODUCTION
1. Purpose. The BJ SERVICES COMPANY 1995 INCENTIVE PLAN (the
"PLAN") is intended to promote the interests of BJ SERVICES COMPANY (the
"COMPANY") and its stockholders by encouraging employees of the Company, its
subsidiaries and affiliated entities and non-employee directors of the Company
to acquire or increase their equity interest in the Company and, with respect
to employees, to be able to relate cash bonuses to Company performance goals,
thereby giving them an added incentive to work toward the continued growth and
success of the Company. The Board of Directors of the Company (the "BOARD")
also contemplates that through the Plan, the Company, its subsidiaries and
affiliated entities will be better able to compete for the services of
personnel needed for the continued growth and success of the Company. However,
nothing in this Plan shall operate or be construed to prevent the Company from
granting bonuses and other stock awards outside of this Plan.
2. Shares Subject to the Plan. The aggregate number of shares of
Common Stock, $.10 par value per share, of the Company ("COMMON STOCK") that
may be issued under the Plan shall not exceed 1,500,000 shares; provided,
however, that in the event that at any time after the effective date of the
Plan the outstanding shares of Common Stock are changed into or exchanged for a
different number or kind of shares or other securities of the Company by reason
of merger, consolidation, recapitalization, reclassification, stock split,
stock dividend, combination of shares or the like, the aggregate number and
class of securities available under the Plan shall be ratably adjusted by the
Committee (as hereinafter defined), whose determination shall be final and
binding upon the Company and all other interested persons. In the event the
number of shares to be delivered upon the exercise in full of any option
granted under the Plan is reduced for any reason whatsoever or in the event any
option granted under the Plan can no longer under any circumstances be
exercised, the number of shares no longer subject to such option shall
thereupon be released from such option and shall thereafter be available under
the Plan. If shares of Performance Stock (as hereinafter defined) awarded
under the Plan are forfeited to the Company, such shares shall thereafter be
available for new grants and awards under the Plan unless the Employee Grantee
(as hereinafter defined) has received benefits of ownership with respect to
such shares of Performance Stock, such as dividends (but not including voting
rights). Shares issued pursuant to the Plan shall be fully paid and
nonassessable.
3. Administration of the Plan. The Plan shall be administered by a
committee (the "COMMITTEE") of two or more directors of the Company appointed
by the Board. Subject to the provisions of the Plan, the Committee shall
interpret the Plan and all awards under the Plan, shall make such rules as it
deems necessary for the proper administration of the Plan, shall make all other
determinations necessary or advisable for the administration of the Plan and
shall correct any defect or supply any omission or reconcile any inconsistency
in the Plan or in any award under the Plan in the manner and to the extent that
the Committee deems desirable to effectuate the Plan. Any action taken or
determination made by the Committee pursuant to this and the other
<PAGE> 2
paragraphs of the Plan shall be binding on all parties. The act or
determination of a majority of the Committee shall be deemed to be the act or
determination of the Committee.
Notwithstanding any provision in the Plan to the contrary, other than
options granted to Non-Employee Directors (as hereinafter defined) pursuant to
Article IV, no options, Performance Stock, Performance Units, Bonus Stock or
Cash Awards (collectively, "AWARDS") may be granted under the Plan to any
member of the Committee during the term of his membership on the Committee. No
person shall be eligible to serve on the Committee unless he is then a
"DISINTERESTED PERSON" within the meaning of Rule 16b-3 ("RULE 16B-3")
promulgated under the Securities Exchange Act of 1934, as amended (the "ACT"),
if and as such rule is then in effect and also an "OUTSIDE DIRECTOR" within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"CODE").
4. Amendment and Discontinuance of the Plan. The Board may amend,
suspend or terminate the Plan; provided, however, that each such amendment of
the Plan (a) extending the period within which Awards may be made under the
Plan, (b) increasing the number of shares of Common Stock to be awarded under
the Plan, except as provided in Article I, Paragraph 2, (c) reducing the option
exercise prices per share provided in the Plan, (d) changing the class of
persons to whom Awards may be made under the Plan, (e) modifying the provisions
of Article IV, or (f) granting options to Non-Employee Directors other than
pursuant to Article IV, shall, in each case, be subject to approval by the
stockholders of the Company; provided, further, however, that no amendment,
suspension or termination of the Plan may cause the Plan to fail to meet the
requirements of Rule 16b-3 or may, without the consent of the holder of an
Award, terminate such Award or adversely affect such person's rights in any
material respect; provided, further, that the provisions of Article IV may not
be amended more than once every six months other than to comport with changes
in the Code, the Employee Retirement Income Security Act of 1974, as amended,
or the rules thereunder, unless otherwise permitted by Rule 16b-3.
5. Granting of Awards to Employees. The Committee shall have the
authority to grant, prior to the expiration date of the Plan, to such eligible
key employees and officers as may be selected by it (with respect to options,
"EMPLOYEE OPTIONEES" and, with respect to Performance Stock, Performance Units,
Bonus Stock and Cash Awards, "EMPLOYEE GRANTEES"), options to purchase shares
of Common Stock and awards of Performance Stock, Performance Units, Bonus Stock
and/or Cash Awards on the terms and conditions hereinafter set forth. Stock
issued with respect to an Award under the Plan may be authorized but unissued,
or reacquired, shares of Common Stock. The Committee shall also have the
authority to determine whether options granted to Employee Optionees are
granted pursuant to Article II or Article III, as hereinafter set forth.
Options granted to Employee Optionees under Article III shall be "INCENTIVE
STOCK OPTIONS" as defined in Section 422 of the Code, and are hereinafter
referred to as "INCENTIVE STOCK OPTIONS." All other options granted to
Employee Optionees under the Plan shall be granted pursuant to Article II and
shall be options which do not constitute incentive stock options ("NONQUALIFIED
OPTIONS"). In selecting Employee Optionees and Employee Grantees, and in
determining the number of shares to be covered by each Award granted to such
employee, the Committee may consider the office or position held by the
employee, the employee's degree of responsibility for and contribution to the
growth and success of the Company, the employee's length of service, age,
promotions, potential and any other factors which it may consider relevant.
<PAGE> 3
6. Granting of Options to Non-Employee Directors. All options
granted to Non-Employee Directors shall be options to purchase, on the terms
and conditions hereinafter set forth in Article IV, authorized but unissued, or
reacquired, shares of Common Stock and shall be nonqualified options.
Non-Employee Directors shall not be eligible to receive any other Award.
7. Term of Plan. This 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 after the date of such adoption. In the event
that the Plan is not approved by the stockholders of the Company within twelve
months after the date of its adoption by the Board, the Plan shall be null and
void. No Award shall be exercisable or payable under the Plan prior to its
approval by the stockholders and, if the Plan is not approved by the
stockholders of the Company within such twelve month period, all Awards granted
under the Plan shall be automatically cancelled. Except with respect to Awards
then outstanding, if not sooner terminated under the provisions of Article I,
Paragraph 4, the Plan shall terminate upon and no further Awards shall be made
after December 31, 2004.
8. Miscellaneous. All references in the Plan to "ARTICLES,"
"PARAGRAPHS" and other subdivisions refer to the corresponding Articles,
Paragraphs, and subdivisions of the Plan.
9. Rule 16b-3 Compliance. The Company intends:
(a) that the Plan meet the requirements of Rule 16b-3;
(b) that participation by Non-Employee Directors
under Article IV of the Plan will not prohibit them from being
"DISINTERESTED PERSONS" within the meaning of Rule 16b-3 with respect
to administration of the Plan or with respect to administration of any
other plan of the Company;
(c) that transactions of the type specified in Rule 16b-3 by
Non-Employee Directors pursuant to Article IV of the Plan will be
exempt from the operation of Section 16(b) of the Act; and
(d) that transactions of the type specified in Rule 16b-3 by
officers of the Company (whether or not they are directors) pursuant to
the Plan will be exempt from the operation of Section 16(b) of the Act.
In all cases, the terms, provisions, conditions and limitations of the Plan
shall be construed and interpreted consistent with the Company's intent as
stated in this Article I, Paragraph 9.
10. Definition of the Term "Change of Control". As used in
the Plan, a "CHANGE OF CONTROL" shall be deemed to have occurred upon, and
shall mean (a) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Act) (a "PERSON") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Act) of 25%
or more of either (i) the then outstanding shares of Common Stock of the
Company (the "OUTSTANDING COMPANY COMMON STOCK") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "OUTSTANDING COMPANY VOTING
SECURITIES"); provided, however, that the following acquisitions shall not
constitute a Change of Control: (A) any acquisition directly from the Company
(excluding an acquisition by virtue of the exercise of a conversion privilege),
(B) any acquisition by the
<PAGE> 4
Company, (C) any acquisition by any employee benefit plan(s) (or related
trust(s)) sponsored or maintained by the Company or any corporation controlled
by the Company (D) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, immediately following such
reorganization, merger or consolidation, the conditions described in clause
(i), (ii) and (iii) of clause (b) of this Paragraph 10 are satisfied, or (E)
any acquisition by the stockholders of The Western Corporation of North America
("Western") in conjunction with the merger of Western into the Company or one
of its subsidiaries pursuant to the Agreement and Plan of Merger dated as of
November 17, 1994, as amended (the "Western Merger"); or (b) the approval by
the stockholders of the Company of a reorganization, merger or consolidation,
in each case, unless immediately following such reorganization, merger or
consolidation (other than the Western Merger) (i) more than 60% of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such reorganization,
merger or consolidation, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no Person
(excluding the Company, any employee benefit plan(s) (or related trust(s)) of
the Company and/or its subsidiaries or such corporation resulting from such
reorganization, merger or consolidation and any Person beneficially owning,
immediately prior to such reorganization, merger or consolidation, directly or
indirectly, 25% or more of the Outstanding Company Common Stock or Outstanding
Company Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors and (iii) at least a majority of the members of the board of
directors of the corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board (as defined below) at the
time of the execution of the initial agreement providing for such
reorganization, merger or consolidation. The "INCUMBENT BOARD" shall mean
individuals who, as of the date the Plan is adopted by the Board, constitute
the Board; provided, however, that any individual becoming a director
subsequent to such date whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either (1) an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Act), or an
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board or (2) a plan or agreement to replace a majority of
the members of the Board then comprising the Incumbent Board.
ARTICLE II
NONQUALIFIED STOCK OPTIONS
1. Eligible Employees. Key employees and officers (whether or not
they are directors) of the Company, its subsidiaries and affiliated entities
shall be eligible to receive nonqualified options under this Article II;
provided, however, no such person may
<PAGE> 5
receive more than 250,000 nonqualified options and/or incentive stock options
hereunder during any calendar year.
2. Calculation of Exercise Price. The exercise price to be paid
for each share of Common Stock deliverable upon exercise of each nonqualified
option granted under Article II shall be determined by the Committee but shall
not be less than the lesser of (a) the per share price of the last sale of
Common Stock on the trading day prior to the grant of such option, based on the
composite transactions in the Common Stock as reported by The Wall Street
Journal, and (b) the arithmetic average of the closing prices per share of
Common Stock on all days on which such stock was traded during the 90-day
period before the date of grant, based on the composite transactions in the
Common Stock as reported by The Wall Street Journal. The exercise price for
each nonqualified option granted under Article II shall be subject to
adjustment as provided in Article II, Paragraph 3(e).
3. Terms and Conditions of Options. Nonqualified options granted
under Article II shall be in such form as the Committee may from time to time
approve. Options granted under Article II shall be subject to the following
terms and conditions and may contain such additional terms and conditions, not
inconsistent with Article II, as the Committee shall deem desirable:
(a) Option Period and Conditions and Limitations on
Exercise. Subject to Article II, Paragraphs 4 and 5, no nonqualified
option granted under Article II shall be exercisable with respect to
any of the shares subject to the option earlier than the date which is
six months from the date of grant nor later than the date which is ten
years after the date of grant (the "NONQUALIFIED OPTION EXPIRATION
DATE"). To the extent not prohibited by other provisions of the Plan,
each nonqualified option granted under Article II shall be exercisable
at such time or times as the Committee in its discretion may determine
at or prior to the time such option is granted; provided, however, that
unless the Committee determines otherwise, each nonqualified option
granted under Article II shall be exercisable from time to time, in
whole or in part, at any time after six months from the date of grant
and prior to the Nonqualified Option Expiration Date.
(b) Termination of Employment and Death. For purposes of
Article II and each nonqualified option granted under Article II, an
Employee Optionee's employment shall be deemed to have terminated at
the close of business on the day preceding the first date on which he
is no longer for any reason whatsoever (including his death) employed
by the Company or a subsidiary or affiliated entity of the Company.
Except as provided below, if an Employee Optionee's employment is
terminated for any reason whatsoever (including his death), each
nonqualified option granted to him under Article II and all of his
rights thereunder shall wholly and completely terminate:
(i) At the time the Employee Optionee's employment
is terminated if termination occurs within the six-month period
following the date of grant; or
(ii) At the time the Employee Optionee's employment
is terminated if his employment is terminated because he is
discharged for fraud, theft or embezzlement committed against
the Company or a subsidiary, affiliated entity or customer of
the Company (collectively CAUSE); or
<PAGE> 6
(iii) At the expiration of a period of one year after
the Employee Optionee's death (but in no event later than the
Nonqualified Option Expiration Date) if the Employee Optionee's
employment is terminated after the six-month period following
the date of grant by reason of his death. To the extent
exercisable, a nonqualified option granted under Article II may
be exercised by the Employee Optionee's estate or by the person
or persons who acquire the right to exercise his option by
bequest or inheritance with respect to any or all of the shares
remaining subject to his option at the time of his death; or
(iv) Unless it is otherwise provided in the option
agreement, at the expiration of a period of three years after
the Employee Optionee's employment is terminated if the
Employee Optionee's employment is terminated after the
six-month period following the date of grant because of
retirement or disability (but in no event later than the
Nonqualified Option Expiration Date); or
(v) Unless it is otherwise provided in the option
agreement (but in no event longer than one year after the
Employee Optionee's employment is terminated), at the
expiration of a period of three months after the Employee
Optionee's employment is terminated (but in no event later than
the Nonqualified Option Expiration Date) if the Employee
Optionee's employment is terminated after the six-month period
following the date of grant for any reason other than his
death, retirement, disability or Cause; or
(vi) Notwithstanding the above, with respect to all
options outstanding at the date of a Change of Control, if the
Employee Optionee's employment is terminated within the
one-year period following such Change of Control other than for
Cause, at the expiration of one year following the Employee
Optionee's date of termination, unless subparagraph (iii),
(iv), (v) or (vii) provides a longer period for the exercise of
such options (but in no event later than the Nonqualified
Option Expiration Date); or
(vii) Notwithstanding the foregoing, the Committee, in
its discretion, may extend the period for exercise of any
option upon an Employee Optionee's termination, but in no event
later than the Nonqualified Option Expiration Date.
As used in this Plan the term "RETIREMENT" means the termination of an
employee's employment with the Company, its subsidiaries and affiliated
entities (i) on or after reaching age 65 or (ii) on or after reaching
age 55 with the consent of the Board, for reasons other than death,
disability or Cause, and the term "DISABILITY" shall mean an employee
is suffering from a mental or physical disability, which, in the
opinion of the Board, prevents the employee from performing his regular
duties and is expected to be of long continued duration or to result
in death.
(c) Manner of Exercise. In order to exercise a nonqualified
option granted under Article II, the person or persons entitled to
exercise it shall deliver to the Company payment in full for the shares
being purchased, together with any required withholding tax as provided
in Article VIII. The payment of the exercise price for each option
granted under Article II shall be (i) in cash or check payable and
acceptable to the Company, (ii) through tendering to the Company shares
of Common Stock already owned by the person (provided that the Company
may, upon confirming that the person owns the number of shares being
tendered, issue a new
<PAGE> 7
certificate for the number of shares being acquired pursuant to the
exercise of the option less the number of shares being tendered upon
the exercise and return to the person (or not require surrender of) the
certificate for the shares being tendered upon the exercise), (iii) by
the person delivering to the Company a properly executed exercise
notice together with irrevocable instructions to a broker to promptly
deliver to the Company cash or a check payable and acceptable to the
Company to pay the option exercise price and any applicable withholding
taxes; provided that in the event the person chooses to pay the option
exercise price as provided in (iii) above, the person and the broker
shall comply with such procedures and enter into such agreements of
indemnity and other agreements as the Committee shall prescribe as a
condition of such payment procedure or (iv) by any combination of the
above. The value of each share of Common Stock tendered pursuant to
(ii) above shall be deemed to be equal to the per share price of the
last sale of Common Stock on the trading day prior to the date the
option is exercised, based on the composite transactions in the Common
Stock as reported in The Wall Street Journal. The date of sale of the
shares by the broker pursuant to a "cashless exercise" under (iii)
above shall be the date of exercise of the option. If the Committee so
requires, such person or persons shall also deliver a written
representation that all shares being purchased are being acquired for
investment and not with a view to, or for resale in connection with,
any distribution of such shares.
(d) Options not Transferable. No nonqualified option
granted under Article II shall be transferable otherwise than by will
or by the laws of descent and distribution and, during the lifetime of
the Employee Optionee to whom any such option is granted, it shall be
exercisable only by the Employee Optionee. Any attempt to transfer,
assign, pledge, hypothecate or otherwise dispose of, or to subject to
execution, attachment or similar process, any nonqualified option
granted under Article II, or any right thereunder, contrary to the
provisions hereof, shall be void and ineffective, shall give no right
to the purported transferee, and shall, at the sole discretion of the
Committee, result in forfeiture of the option with respect to the
shares involved in such attempt.
(e) Adjustment of Shares. In the event that at any time
after the effective date of the Plan the outstanding shares of Common
Stock are changed into or exchanged for a different number or kind of
shares or other securities of the Company by reason of merger,
consolidation, recapitalization, reclassification, stock split, stock
dividend, combination of shares or the like, the Committee shall make
an appropriate and equitable adjustment in the number and kind of
shares as to which all outstanding nonqualified options granted under
Article II, or portions thereof then unexercised, shall be exercisable,
and with any necessary corresponding adjustment in exercise price per
share, to the end that after such event the shares subject to Article
II of the Plan and each Employee Optionee's proportionate interest
shall be maintained as before the occurrence of such event. Any such
adjustment made by the Committee shall be final and binding upon all
Employee Optionees, the Company, and all other interested persons.
(f) Listing and Registration of Shares. Each nonqualified
option granted under Article II shall be subject to the requirement
that if at any time the Committee determines, in its discretion, that
the listing, registration, or qualification of the shares subject to
such option under any securities exchange or under any state or federal
law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the
issue or purchase of shares thereunder, such option may not be
exercised in
<PAGE> 8
whole or in part unless such listing, registration, qualification,
consent or approval shall have been effected or obtained and the same
shall have been free of any conditions not acceptable to the
Committee.
4. Amendment. The Committee may, with the consent of the person or
persons entitled to exercise any outstanding nonqualified option granted under
Article II, amend such nonqualified option; provided, however, that any such
amendment increasing the number of shares of Common Stock subject to such
option (except as provided in Article II, Paragraph 3(e)) or reducing the
exercise price per share of such option (except as provided in Article II,
Paragraph 3(e)) shall in each case be subject to approval by the stockholders
of the Company. The Committee may at any time or from time to time, in its
discretion, in the case of any nonqualified option previously granted under
Article II which is not then immediately exercisable in full, accelerate the
time or times at which such option may be exercised to any earlier time or
times. The Committee, in its absolute discretion, may grant to holders of
outstanding nonqualified options granted under Article II, in exchange for the
surrender and cancellation of such options, new options having exercise prices
lower (or higher) than the exercise price provided in the options so
surrendered and canceled and containing such other terms and conditions as the
Committee may deem appropriate.
5. Acceleration upon a Change of Control. Notwithstanding any
provision in Article II or in any document or instrument evidencing a
nonqualified option granted under Article II, upon the occurrence of a Change
of Control each nonqualified option previously granted under Article II which
is not then immediately exercisable in full shall be immediately exercisable in
full.
6. Other Provisions.
(a) The person or persons entitled to exercise, or who have
exercised, a nonqualified option granted under Article II shall not be entitled
to any rights as a stockholder of the Company with respect to any shares
subject to such option until he shall have become the holder of record of such
shares.
(b) No nonqualified option granted under Article II shall be
construed as limiting any right which the Company or any subsidiary or
affiliated entity of the Company may have to terminate at any time, with or
without cause, the employment of any person to whom such option has been
granted.
(c) Notwithstanding any provision of the Plan or the terms of any
nonqualified option granted under Article II, the Company shall not be required
to issue any shares hereunder if such issuance would, in the judgment of the
Committee, constitute a violation of any state or federal law or of the rules
or regulations of any governmental regulatory body.
ARTICLE III
INCENTIVE STOCK OPTIONS
1. Eligible Employees. Key employees and officers (whether or not
they are directors) of the Company or its Parent Corporation or any Subsidiary
Corporation of the Company shall be eligible to receive incentive stock options
under this Article III; provided, however, no such person may receive more than
250,000 incentive stock options and/or nonqualified options hereunder during
any calendar year. As used in
<PAGE> 9
Article III, the terms "PARENT CORPORATION" and "SUBSIDIARY CORPORATION" shall
have the meanings ascribed to them in Section 424 of the Code.
2. Calculation of Exercise Price. The exercise price to be paid
for each share of Common Stock deliverable upon exercise of each incentive
stock option granted under Article III shall be equal to the fair market value
per share of Common Stock at the time of grant as determined by the Committee,
based on the composite transactions in the Common Stock as reported by The Wall
Street Journal, and shall not be less than the per share price of the last sale
of Common Stock on the trading day prior to the grant of such option; provided,
however, than in the case of an Employee Optionee who, at the time such option
is granted, owns (within the meaning of Section 424(d) of the Code) more than
10% of the total combined voting power of all classes of stock of the Company
or of its Parent Corporation or any Subsidiary Corporation, then the exercise
price per share shall be at least 110% of the fair market value per share of
Common Stock at the time of grant. The exercise price for each incentive stock
option shall be subject to adjustment as provided in Article III, Paragraph
3(e).
3. Terms and Conditions of Options. Incentive stock options
granted under Article III shall be in such form as the Committee may from time
to time approve. Options granted under Article III shall be subject to the
following terms and conditions and may contain such additional terms and
conditions, not inconsistent with Article III, as the Committee shall deem
desirable:
(a) Option Period and Conditions and Limitations on
Exercise. Subject to Article III, Paragraphs 4 and 5, no incentive
stock option granted under Article III shall be exercisable with
respect to any of the shares subject to such option earlier than the
date which is six months from the date of grant nor later than the date
which is ten years after the date of grant; provided, however, that in
the case of an Employee Optionee who, at the time such option is
granted, owns (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of
the Company or of its Parent Corporation or any Subsidiary Corporation,
then such option shall not be exercisable with respect to any of the
shares subject to such option later than the date which is five years
after the date of grant. The date on which an incentive stock option
ultimately becomes unexercisable under the previous sentence is
hereinafter referred to as the "ISO EXPIRATION DATE." To the extent
not prohibited by other provisions of the Plan, each incentive stock
option granted under Article III shall be exercisable at such time or
times as the Committee in its discretion may determine at or prior to
the time such option is granted; provided, however, that unless the
Committee determines otherwise, each incentive stock option granted
under Article III shall be exercisable from time to time, in whole or
in part, at any time after six months from the date of grant and prior
to the ISO Expiration Date.
(b) Termination of Employment and Death. For purposes of
Article III and each incentive stock option granted under Article III,
an Employee Optionee's employment shall be deemed to have terminated at
the close of business on the day preceding the first date on which he
is no longer for any reason whatsoever (including his death) employed
by the Company or a subsidiary or affiliated entity of the Company.
Except as provided below, if an Employee Optionee's employment is
terminated by any reason whatsoever (including his death), each
incentive stock option granted to him and all of his rights thereunder
shall wholly and completely terminate:
<PAGE> 10
(i) At the time the Employee Optionee's employment
is terminated if termination occurs within the six-month period
following the date of grant; or
(ii) At the time the Employee Optionee's employment
is terminated if his employment is terminated due to Cause; or
(iii) At the expiration of a period of one year after
the Employee Optionee's death (but in no event later than the
ISO Expiration Date) if the Employee Optionee's employment is
terminated after the six-month period following the date of
grant by reason of his death. To the extent exercisable, an
incentive stock option granted under Article III of the Plan
may be exercised by the Employee Optionee's estate or by the
person or persons who acquire the right to exercise his option
by bequest or inheritance with respect to any or all of the
shares remaining subject to his option at the time of his
death; or
(iv) Unless it is otherwise provided in the option
agreement, at the expiration of a period of three years after
the Employee Optionee's employment is terminated if the
Employee Optionee's employment is terminated after the
six-month period following the date of grant because of
retirement or disability (but in no event later than the ISO
Expiration Date); or
(v) Unless it is otherwise provided in the option
agreement (but in no event longer than one year after the
Employee Optionee's employment is terminated), at the
expiration of a period of three months after the Employee
Optionee's employment is terminated (but in no event later than
the ISO Expiration Date) if the Employee Optionee's employment
is terminated after the six-month period following the date of
grant for any other reason than his death, retirement,
disability or Cause; or
(vi) Notwithstanding the above, with respect to all
options outstanding at the date of a Change of Control, if the
Employee Optionee's employment is terminated within the
one-year period following such Change of Control other than for
Cause, at the expiration of one year following the Employee
Optionee's date of termination, unless subparagraph (iii),
(iv), (v) or (vii) provides a longer period for the exercise of
such options (but in no event later than the ISO Expiration
Date); or
(vii) Notwithstanding the foregoing, the Committee, in
its discretion, may extend the period for exercise of any
option upon an Employee Optionee's termination, but in no event
later than the ISO Expiration Date.
In the event and to the extent that an incentive stock option granted
under Article III is not exercised (A) within three months after the
Employee Optionee's employment is terminated because of retirement or a
disability not within the meaning of Section 22(e)(3) of the Code or
(B) within one year after the Employee Optionee's employment is
terminated because of disability within the meaning of Section 22(e)(3)
of the Code, such option shall be taxed as a nonqualified option and
shall be subject to the manner of exercise provisions described in
Article II, Paragraph 3(c). Further, in the event that an Employee
Optionee's employment is not terminated in accordance with the first
sentence of Article III, Paragraph 3(b), but such Employee Optionee
ceases to be employed by the Company, its Parent
<PAGE> 11
Corporation or any Subsidiary Corporation, then, to the extent an
incentive stock option granted under Article III is not exercised
within three months after the date of such cessation, such option shall
be taxed as a nonqualified option and shall be subject to the manner of
exercise provisions described in Article II, Paragraph 3(c).
(c) Manner of Exercise. In order to exercise an incentive
stock option granted under Article III, the person or persons entitled
to exercise it shall deliver to the Company payment in full for the
shares being purchased. The payment of the exercise price for each
option granted under Article III shall be in (i) cash or check payable
and acceptable to the Company, (ii) through tendering to the Company
shares of Common Stock already owned by the person (provided that the
Company may, upon confirming that the person owns the number of shares
being tendered, issue a new certificate for the number of shares being
acquired pursuant to the exercise of the option less the number of
shares being tendered upon the exercise and return to the person (or
not require surrender of) the certificate for the shares being tendered
upon the exercise), (iii) by the person delivering to the Company a
properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company cash or a
check payable and acceptable to the Company to pay the option exercise
price; provided that in the event the person chooses to pay the option
exercise price as provided in (iii) above, the person and the broker
shall comply with such procedures and enter into such agreements of
indemnity and other agreements as the Committee shall prescribe as a
condition of such payment procedure or (iv) by any combination of the
above. The value of each share of Common Stock tendered pursuant to
(ii) above shall be deemed to be equal to the per share price of the
last sale of Common Stock on the trading day prior to the date the
option is exercised, based on the composite transactions in the Common
Stock as reported in The Wall Street Journal. The date of sale of the
shares by the broker pursuant to a "cashless exercise" under (iii)
above, shall be the date of exercise of the option. If the Committee
so requires, such person or persons shall also deliver a written
representation that all shares being purchased are being acquired for
investment and not with a view to, or for resale in connection with,
any distribution of such shares.
(d) Options not Transferable. No incentive stock option
granted under Article III shall be transferable otherwise than by will
or by the laws of descent and distribution and, during the lifetime of
the Employee Optionee to whom any option is granted, it shall be
exercisable only by such Employee Optionee. Any attempt to transfer,
assign, pledge, hypothecate or otherwise dispose of, or to subject to
execution, attachment or similar process, any incentive stock option
granted under Article III, or any right thereunder, contrary to the
provisions hereof, shall be void and ineffective, shall give no right
to the purported transferee, and shall, at the sole discretion of the
Committee, result in forfeiture of the option with respect to the
shares involved in such attempt.
(e) Adjustment of Shares. In the event that at any time
after the effective date of the Plan the outstanding shares of Common
Stock are changed into or exchanged for a different number or kind of
shares or other securities of the Company by reason of merger,
consolidation, recapitalization, reclassification, stock split, stock
dividend, combination of shares or the like, the Committee shall make
an appropriate and equitable adjustment in the number and kind of
shares as to which all outstanding incentive stock options granted
under Article III, or portions thereof then unexercised, shall be
exercisable, and with any necessary corresponding adjustment in
exercise price per share, to the end that after such
<PAGE> 12
event the shares subject to Article III of the Plan and each Employee
Optionee's proportionate interest shall be maintained as before the
occurrence of such event. Any such adjustment made by the Committee
shall be final and binding upon all Employee Optionees, the Company,
and all other interested persons. Any adjustment of an incentive stock
option under this paragraph shall be made in such manner as not to
constitute a "MODIFICATION" within the meaning of Section 424(h)(3) of
the Code.
(f) Listing and Registration of Shares. Each incentive
stock option granted under Article III shall be subject to the
requirement that if at any time the Committee determines, in its
discretion, that the listing, registration, or qualification of the
shares subject to such option upon any securities exchange or under any
state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in
connection with, the issue or purchase of shares thereunder, such
option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been
effected or obtained and the same shall have been free of any
conditions not acceptable to the Committee.
(g) Limitation on Amount. Notwithstanding any other
provision of the Plan, to the extent that the aggregate fair market
value (determined as of the time the respective incentive stock option
is granted) of the Common Stock with respect to which incentive stock
options are exercisable for the first time by an Employee Optionee
during any calendar year under all incentive stock option plans of the
Company and its Parent Corporation and Subsidiary Corporations exceeds
$100,000, such incentive stock options shall be taxed as nonqualified
options and shall be subject to the manner of exercise provisions
described in Article II, Paragraph 3(c). The Committee shall
determine, in accordance with applicable provisions of the Code,
Treasury Regulations and other administrative pronouncements, which of
an Employee Optionee's incentive stock options will be treated as
nonqualified options because of such limitation and shall notify the
Employee Optionee of such determination as soon as practicable after
such determination.
4. Amendment. The Committee may, with the consent of the person or
persons entitled to exercise any outstanding incentive stock option granted
under Article III, amend such incentive stock option; provided, however, that
any such amendment increasing the number of shares of Common Stock subject to
such option (except as provided in Article III, Paragraph 3(e)) or reducing the
exercise price per share of such option (except as provided in Article III,
Paragraph 3(e)) shall in each case be subject to approval by the stockholders
of the Company. Subject to Article III, Paragraph 3(g), the Committee may at
any time or from time to time, in its discretion, in the case of any incentive
stock option previously granted under Article III which is not then immediately
exercisable in full, accelerate the time or times at which such option may be
exercised to any earlier time or times.
5. Acceleration upon a Change of Control. Notwithstanding any
provision in Article III or in any document or instrument evidencing an
incentive stock option granted under Article III, but subject to the provisions
of Article III, Paragraph 3(g), upon the occurrence of a Change of Control,
each incentive stock option previously granted under Article III which is not
then immediately exercisable in full shall be immediately exercisable in full.
<PAGE> 13
6. Other Provisions.
(a) The person or persons entitled to exercise, or who have
exercised, an incentive stock option granted under Article III shall not be
entitled to any rights as a stockholder of the Company with respect to any
shares subject to such option until he shall have become the holder of record
of such shares.
(b) No incentive stock option granted under Article III shall be
construed as limiting any right which the Company or any subsidiary or
affiliated entity of the Company may have to terminate at any time, with or
without cause, the employment of any person to whom such option has been
granted.
(c) Notwithstanding any provision of the Plan or the terms of any
incentive stock option granted under Article III, the Company shall not be
required to issue any shares hereunder if such issuance would, in the judgment
of the Committee, constitute a violation of any state or federal law or of the
rules or regulations of any governmental regulatory body.
(d) The Committee may require any person who exercises an incentive
stock option to give prompt notice to the Company of any disposition of shares
of Common Stock acquired upon exercise of an incentive stock option within two
years after the date of grant of such option or within one year after the
transfer of shares to such person.
ARTICLE IV
NON-EMPLOYEE DIRECTOR STOCK OPTIONS
1. Eligible Persons. Persons who are members of the Board but are
neither employees nor officers of the Company, its subsidiaries or affiliated
entities ("NON-EMPLOYEES DIRECTORS") shall receive options under, and solely
under, this Article IV.
2. Initial Granting of Options to Non-Employee Directors After the
1990 Plan Termination. Subject to stockholder approval of the Plan pursuant to
Article I, Paragraph 7, and to the limitation of the number of shares of Common
Stock set forth in Article I, Paragraph 2, each Non-Employee Director who is
first elected to the Board on or after the date director options may no longer
be granted under the terms of the Company's 1990 Stock Incentive Plan (the
"1990 PLAN TERMINATION"), is hereby granted, effective on the date of his
initial election (which date shall be the date of grant for purposes hereof), a
nonqualified option to purchase 1,000 shares of Common Stock (subject to
adjustment in the same manner provided in Article IV, Paragraph 5(e) with
respect to shares of Common Stock subject to options then outstanding).
3. Annual Granting of Options to Non-Employee Directors. Subject to
stockholder approval of the Plan pursuant to Article I, Paragraph 7, and to the
limitation of the number of shares of Common Stock set forth in Article I,
Paragraph 2, a nonqualified option to purchase 1,000 (increased to 3,000 after
the 1990 Plan Termination) shares of Common Stock (subject to adjustment in the
same manner provided in Article IV, Paragraph 5(e) with respect to shares of
Common Stock subject to options then outstanding) is hereby granted, effective
the fourth Thursday of October of 1995 and each year thereafter until the
expiration of the Plan, to each person who is a Non-Employee Director on each
such date (which date shall be the date of grant for purposes hereof).
<PAGE> 14
4. Calculation of Exercise Price. The exercise price to be paid
for each share of Common Stock deliverable upon exercise of each option granted
under Article IV shall be equal to the lesser of (a) the per share price of the
last sale of Common Stock on the trading day prior to the date of grant
relating to such option, based on the composite transactions in the Common
Stock as reported by The Wall Street Journal, and (b) the arithmetic average of
the closing price per share of Common Stock on all days in which such stock was
traded during the 90-day period before the date of grant, based on the
composite transactions in the Common Stock as reported by The Wall Street
Journal. The exercise price for each option granted under Article IV shall be
subject to adjustment as provided in Article IV, Paragraph 5(e).
5. Terms and Conditions of Options. Options granted under Article
IV shall be subject to the following terms and conditions:
(a) Option Period and Conditions and Limitations on
Exercise. Each option granted under Article IV shall be exercisable
from time to time, in whole or in part, at any time after six months
from the date of grant and prior to the date which is ten years after
the date of grant (the "OPTION EXPIRATION DATE"). Notwithstanding the
foregoing or any provision in any document or instrument evidencing an
option granted under Article IV, upon the occurrence of a Change of
Control, each option previously granted under Article IV which is not
then immediately exercisable in full shall be immediately exercisable
in full.
(b) Termination of Directorship and Death. For purposes of
Article IV and each option granted under Article IV, a Non-Employee
Director's directorship shall be deemed to have terminated at the close
of business on the day preceding the first date on which he ceases to
be a member of the Board for any reason whatsoever (including his
death). If a Non-Employee Director's directorship is terminated for any
reason whatsoever (including his death), each option granted to him
under Article IV and all of his rights thereunder shall wholly and
completely terminate:
(i) At the time the Non-Employee Director's
directorship is terminated if termination occurs within the
six-month period following the date of grant; or
(ii) At the time the Non-Employee Director's
directorship is terminated if his directorship is terminated as
a result of his removal from the Board for cause (other than
disability or in accordance with the provisions of the
Company's Bylaws regarding automatic termination of directors'
terms of office); or
(iii) At the expiration of a period of one year after
the Non-Employee Director's death (but in no event later than
the Option Expiration Date) if the Non-Employee Director's
directorship is terminated after the six-month period following
the date of grant by reason of his death. To the extent
exercisable, an option granted under Article IV may be
exercised by the Non-Employee Director's estate or by the
person or persons who acquire the right to exercise his option
by bequest or inheritance with respect to any or all of the
shares remaining subject to his option at the time of his
death; or
(iv) At the expiration of a period of three years
after the Non-Employee Director's directorship is terminated if
such person's directorship is
<PAGE> 15
terminated after the six-month period following the date of
grant as a result of such person's resignation or removal from
the Board because of disability or in accordance with the
provisions of the Company's Bylaws regarding automatic
termination of directors' terms of office (but in no
event later than the Option Expiration Date); or
(v) At the expiration of a period of three months
after the Non-Employee Director's directorship is terminated
(but in no event later than the Option Expiration Date) if the
Non-Employee Director's directorship is terminated after the
six-month period following the date of grant for any reason
other than the reasons specified in Article IV, Paragraphs
5(b)(ii) through 5(b)(iv).
(c) Manner of Exercise. In order to exercise a nonqualified
option granted under Article II, the person or persons entitled to
exercise it shall deliver to the Company payment in full for the shares
being purchased, together with any required withholding tax as provided
in Article VII. The payment of the exercise price for each option
granted under Article II shall be (i) in cash or check payable and
acceptable to the Company, (ii) through tendering to the Company shares
of Common Stock already owned by the person (provided that the Company
may, upon confirming that the person owns the number of shares being
tendered, issuef a new certificate for the number of shares being
acquired pursuant to the exercise of the option less the number of
shares being tendered upon the exercise and return to the person (or
not require surrender of) the certificate for the shares being tendered
upon the exercise), (iii) by the person delivering to the Company a
properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company cash or a
check payable and acceptable to the Company to pay the option exercise
price and any applicable withholding taxes; provided that in the event
the person chooses to pay the option exercise price as provided in
(iii) above, the person and the broker shall comply with such
procedures and enter into such agreements of indemnity and other
agreements as the Committee shall prescribe as a condition of such
payment procedure or (iv) by any combination of the above. The value
of each share of Common Stock tendered pursuant to (ii) above shall be
deemed to be equal to the per share price of the last sale of Common
Stock on the trading day prior to the date the option is exercised,
based on the composite transactions in the Common Stock as reported in
The Wall Street Journal. The date of sale of the shares by the broker
pursuant to a "cashless exercise" under (iii) above shall be the date
of exercise of the option. If the Committee so requires, such person
or persons shall also deliver a written representation that all shares
being purchased are being acquired for investment and not with a view
to, or for resale in connection with, any distribution of such shares.
(d) Options Not Transferable. No option granted under
Article IV shall be transferable otherwise than by will or by the laws
of descent and distribution and, during the lifetime of the
Non-Employee Director to whom any such option is granted, it shall be
exercisable only by such Non-Employee Director. Any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of, or to
subject to execution, attachment or similar process, any option granted
under Article IV, or any right thereunder, contrary to the provisions
hereof, shall be void and ineffective and shall give no right to the
purported transferee.
(e) Adjustment of Shares. In the event that at any time
after the effective date of the Plan the outstanding shares of Common
Stock are changed into or
<PAGE> 16
exchanged for a different number or kind of shares or other securities
of the Company by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares or
the like, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares as to which all outstanding
nonqualified options granted under Article II, or portions thereof then
unexercised, shall be exercisable, and with any necessary corresponding
adjustment in exercise price per share, to the end that after such
event the shares subject to Article II of the Plan and each
Non-Employee Director's proportionate interest shall be maintained as
before the occurrence of such event. Any adjustment provided for in
the preceding provisions of this Paragraph 5(e) shall be subject
to any required stockholder action.
(f) Listing and Registration of Shares. Each option granted
under Article IV shall be subject to the requirement that if at any
time the Committee determines, in its discretion, that the listing,
registration, or qualification of the shares subject to such option
under any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary
or desirable as a condition of, or in connection with, the issue or
purchase of shares thereunder, such option may not be exercised in
whole or in part unless such listing, registration, qualification,
consent or approval shall have been effected or obtained and the same
shall have been free of any conditions not acceptable to the Committee.
6. Other Provisions.
(a) The person or persons entitled to exercise, or who have
exercised, an option granted under Article IV shall not be entitled to any
rights as a stockholder of the Company with respect to any shares subject to
such option until he shall have become the holder of record of such shares.
(b) No option granted under Article IV shall be construed as
limiting any right which either the stockholders of the Company or the Board
may have to remove at any time, with or without cause, any person to whom such
option has been granted from the Board.
(c) Notwithstanding any provision of the Plan or the terms of any
option granted under Article IV, the Company shall not be required to issue any
shares hereunder if such issuance would, in the judgment of the Committee,
constitute a violation of any state or federal law or of the rule or
regulations of any governmental regulatory body.
(d) If, as of any date that the Plan is in effect, there are not
sufficient shares of Common Stock available under the Plan to allow for the
grant to each Non-Employee Director of an option for the number of shares
provided for in Article IV, each Non-Employee Director shall receive an option
for his pro-rata share of the total number of shares of Common Stock then
available under the Plan.
ARTICLE V
PERFORMANCE STOCK AND PERFORMANCE UNITS
1. Eligible Employees. Key employees and officers (whether or not
they are directors) of the Company, its subsidiaries and affiliated entities
shall be eligible to receive awards of Performance Stock and/or Performance
Units (as hereinafter defined)
<PAGE> 17
under this Article V; provided, however, no such individual may receive more
than 250,000 Performance Stock and/or Performance Unit awards hereunder during
any calendar year.
2. Terms and Conditions of Performance Awards. Shares of
Performance Stock and Performance Units granted under Article V to an eligible
employee (an "EMPLOYEE GRANTEE") shall be, with respect to Performance Stock,
shares of Common Stock and, with respect to Performance Units, a unit shall
represent a phantom share of Common Stock. Both types of Awards shall be
subject to the following terms and conditions and may contain such additional
terms and conditions, not inconsistent with Article V, as the Committee shall
deem desirable:
(a) Performance Period and Vesting. Subject to Article V,
Paragraphs 3 and 4, no shares of Performance Stock or Performance Units
granted under Article V shall be subject to becoming vested; i.e.,
earned and nonforfeitable, earlier than the date which is six months
from the date of grant nor later than the date which is ten years after
the date of grant (the "PERFORMANCE PERIOD"). To the extent not
prohibited by other provisions of the Plan, each share of Performance
Stock and each Performance Unit granted under Article V shall be
subject to becoming vested upon the achievement of such performance
goals (Company and/or individual) over such Performance Period as the
Committee in its discretion may determine at or prior to the grant of
such performance Award. The Committee shall also designate, at the
date of grant, whether a performance Award is intended to meet the
requirements of Section 162(m) of the Code. With respect to any
Performance Stock or Performance Unit grant that is intended to meet
the requirements of Section 162(m) of the Code, the performance goal or
goals for such Award shall be with respect to one or more of the
following: earnings per share; earnings before interest, taxes,
depreciation and amortization expenses ("EBITDA"); earnings before
interest and taxes ("EBIT"); EBITDA, EBIT or earnings before taxes and
unusual or nonrecurring items as measured either against the annual
budget or as a ratio to revenue; market share; sales; costs; return on
equity; operating cash flow; return on net capital employed ("RONCE")
and/or stock price performance. The goals can be applied, where
appropriate, with respect to an individual, a business unit or the
Company as a whole and need not be based on increases or positive
results, but can be based on maintaining the status quo or limiting
economic losses, for example. Which goals to use with respect to a
performance Award, the weighting of the goals if more than one is used,
and whether the goal is to be measured against a Company-established
budget or target, an index or a peer group of companies, shall also be
determined by the Committee at the time of grant of the Award.
(b) Termination of Employment and Death. For purposes of
Article V, and each share of Performance Stock and each Performance
Unit granted hereunder, an Employee Grantee's employment shall be
deemed to have terminated at the close of business on the day preceding
the first date on which he is no longer for any reason whatsoever
(including his death) employed by the Company or a subsidiary or an
affiliated entity of the Company. If an Employee Grantee's employment
is terminated for any reason whatsoever (including his death), all of
his rights with respect to each share of Performance Stock and each
Performance Unit granted to him under Article V which is not then
vested shall wholly and completely terminate:
(i) At the time the Employee Grantee's employment is
terminated if termination is for any reason other than
retirement, disability or death; or
<PAGE> 18
(ii) If the Employee Grantee's employment is
terminated due to retirement, disability or death, at the time
of such termination but only with respect to that portion of
the Award which is equal to the fraction, the numerator of
which is the number of full calendar months remaining in the
Performance Period and the denominator of which is the total
number of calendar months in the Performance Period; provided,
however, the remaining, nonforfeited portion of the Award shall
continue to be subject to the terms and conditions of the
Performance Period and at the end of such Performance Period
shall be forfeited and/or paid as unrestricted stock to the
Employee Grantee depending on the achievement of the goals for
such Performance Period; provided further, however, with
respect to any performance Award not intended on its date of
grant to meet the requirements of Section 162(m) of the Code,
the Committee may, in its sole discretion, deem the terms and
conditions have been met at the date of such termination for
all or part of such remaining, nonforfeited portion of the
Performance Stock award or Performance Unit award.
(c) Performance Awards not Transferable. No shares of
Performance Stock or Performance Units granted under Article V shall be
transferable during a Performance Period otherwise than by will or by
the laws of descent and distribution. Any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of, or to subject to
execution, attachment or similar process, any shares of Performance
Stock or Performance Units granted under Article V, or any right
thereunder, contrary to the provisions hereof, shall be void and
ineffective, shall give no right to the purported transferee, and
shall, at the sole discretion of the Committee, result in forfeiture of
the shares of the Performance Stock or Performance Units involved in
such attempt.
3. Amendment. With respect to any outstanding Performance Stock or
Performance Unit that does not qualify as performance based compensation under
Section 162(m) of the Code, the Committee may, at any time or times, amend the
performance objectives and/or the Performance Period for earning such Award.
However, with respect to any Performance Stock or Performance Unit Award that
is intended on its date of grant to qualify as performance based compensation
under Section 162(m) of the Code, the Committee, in its sole discretion and
without the consent of the Employee-Grantee, may amend the Award only to
reflect a change in corporate capitalization, such as a stock split or
dividend, or a corporate transaction, such as a corporate merger, a corporate
consolidation, any corporate separation (including a spinoff or other
distribution of stock or property by a corporation), any corporate
reorganization (whether or not such reorganization comes within the definition
of such term in section 368), or any partial or complete corporate liquidation.
4. Acceleration upon a Change of Control. Notwithstanding any
provision in Article V or in any document or instrument evidencing Performance
Stock or Performance Units granted under Article V, upon the occurrence of a
Change of Control each share of Performance Stock and each Performance Unit
previously granted under Article V which is not then immediately vested in full
shall be immediately vested in full, all performance goals shall be deemed to
have been met to the fullest extent under the terms of such grant, and the
Performance Periods shall immediately end.
<PAGE> 19
5. Other Provisions.
(a) No grant of Performance Stock or Performance Units under
Article V shall be construed as limiting any right which the Company or
any subsidiary or affiliated entity of the Company may have to
terminate at any time, with or without cause, the employment of any
person to whom such Award has been granted.
(b) Each certificate representing Performance Stock awarded
under the Plan shall be registered in the name of the Employee Grantee
and, during the Performance Period, shall be left in deposit with the
Company and a stock power endorsed in blank. The grantee of
Performance Stock shall have all the rights of a stockholder with
respect to such shares including the right to vote and the right to
receive dividends or other distributions paid or made with respect to
such shares. Any certificate or certificates representing shares of
Performance Stock shall bear a legend similar to the following:
The shares represented by this certificate have been
issued pursuant to the terms of the BJ Services Company 1995
Incentive Plan and may not be sold, pledged, transferred,
assigned or otherwise encumbered in any manner except as is set
forth in the terms of such award dated ____________.
After certification by the Committee as to the satisfaction of
the terms and conditions set by the Committee with respect to an Award
of (i) Performance Stock, a certificate, without the legend set forth
above, for the number of shares of Common Stock that are no longer
subject to such restrictions, terms and conditions shall be delivered
to the employee and (ii) Performance Units, a certificate for the
number of shares of Common Stock equal to the number of Performance
Units vested shall be delivered to the employee. The remaining
unearned shares of Performance Stock issued with respect to such Award,
if any, or unearned Performance Units, as the case may be, shall either
be forfeited back to the Company or, if appropriate under the terms of
the Award applicable to such shares or units, shall continue to be
subject to the restrictions, terms and conditions set by the Committee
with respect to such Award.
ARTICLE VI
BONUS STOCK
The Committee may, from time to time and subject to the provisions of
the Plan, grant shares of Bonus Stock to key employees and officers (whether or
not they are directors) of the Company, its subsidiaries and affiliated
entities. Bonus Stock shall be shares of Common Stock that are not subject to
a Performance Period under Article V.
ARTICLE VII
CASH AWARDS
1. Eligible Employees. Officers (whether or not they are
directors) of the Company, its subsidiaries and affiliated entities shall be
eligible to receive Cash Awards, which may be Tandem Cash Tax Rights,
Performance Cash Awards or Bonus Cash Awards (as hereinafter defined) under
this Article VII.
<PAGE> 20
2. Tandem Cash Tax Rights. The Committee may grant a Tandem Cash
Tax Right with respect to a Performance Stock or Performance Unit Award that,
subject to the further provisions hereof, entitles the Employee Grantee to
receive from the Company, upon the later of the vesting of the Performance
Stock or Performance Unit Award or the date such Performance Stock or
Performance Unit Award is taxable to the Employee Grantee, an amount of cash
such that the "net" benefit received by the Employee Grantee, after paying all
applicable federal, state and other taxes (assuming for this purpose, the
highest marginal income tax rate for individuals applies) on the Performance
Stock or Performance Unit Award and this Tandem Cash Tax Right, shall be equal
to the value of the Performance Stock or Performance Unit Award payment
received by the Employee Grantee before any such taxes thereon.
3. Terms and Conditions of Performance Cash Awards. Performance
Cash Awards granted an Employee Grantee shall be subject to the following terms
and conditions and may contain such additional terms and conditions, not
inconsistent with Article VII, as the Committee shall deem desirable:
(a) Performance Period and Vesting. Subject to Article VII,
Paragraphs 4 and 5, no Performance Cash Awards granted under Article
VII shall be subject to becoming vested; i.e., earned and
nonforfeitable, earlier than the date which is six months from the date
of grant nor later than the date which is ten years after the date of
grant (the "PERFORMANCE PERIOD"). To the extent not prohibited by
other provisions of the Plan, each Performance Cash Award granted under
Article VII shall be subject to becoming vested upon the achievement of
such performance goals (Company and/or individual) over such
Performance Period as the Committee in its discretion may determine at
or prior to the grant of such Performance Cash Award. The Committee
shall also designate, at the date of grant, whether a Performance Cash
Award is intended to meet the requirements of Section 162(m) of the
Code. With respect to any Performance Cash Award grant that is
intended to meet the requirements of Section 162(m) of the Code, the
performance goal or goals for such Award shall be with respect to one
or more of the following: earnings per share; earnings before
interest, taxes, depreciation and amortization expenses ("EBITDA");
earnings before interest and taxes ("EBIT"); EBITDA, EBIT or earnings
before taxes and unusual or nonrecurring items as measured either
against the annual budget or as a ratio to revenue; market share;
sales; costs; return on equity; operating cash flow; return on net
capital employed ("RONCE") and/or stock price performance. The goals
can be applied, where appropriate, with respect to an individual, a
business unit or the Company as a whole and need not be based on
increases or positive results, but can be based on maintaining the
status quo or limiting economic losses, for example. Which goals to use
with respect to a Performance Cash Award, the weighting of the goals if
more than one is used, and whether the goal is to be measured against a
Company-established budget or target, an index or a peer group of
companies, shall also be determined by the Committee at the time of
grant of the Award.
(b) Termination of Employment and Death. For purposes of
Article VII and each Performance Cash Award granted hereunder, an
Employee Grantee's employment shall be deemed to have terminated at the
close of business on the day preceding the first date on which he is no
longer for any reason whatsoever (including his death) employed by the
Company or a subsidiary or an affiliated entity of the Company. If an
Employee Grantee's employment is terminated for any reason whatsoever
(including his death), all of his rights with respect to each
Performance Cash Award granted to him under Article VII which is not
then vested shall wholly and completely terminate:
<PAGE> 21
(i) At the time the Employee Grantee's employment is
terminated if termination is for any reason other than
retirement, disability or death; or
(ii) If the Employee Grantee's employment is
terminated due to retirement, disability or death, at the time
of such termination but only with respect to that portion of
the Award which is equal to the fraction, the numerator of
which is the number of full calendar months remaining in the
Performance Period and the denominator of which is the total
number of calendar months in the Performance Period; provided,
however, the remaining, nonforfeited portion of the Award shall
continue to be subject to the terms and conditions of the
Performance Period and at the end of such Performance Period
shall be forfeited and/or paid in cash to the Employee Grantee
depending on the achievement of the goals for such Performance
Period;
provided, however, notwithstanding the foregoing, with respect to any
Performance Cash Award not intended on its date of grant to meet the
requirements of Section 162(m) of the Code, the Committee may, in its sole
discretion, deem the terms and conditions of an Employee Grantee's Performance
Cash Award(s) to have been met in full or in part on the date of such Employee
Grantee's termination of employment, regardless of the reason for such
termination of employment.
(c) Performance Cash Awards not Transferable. No
Performance Cash Awards granted under Article VII shall be transferable
during a Performance Period otherwise than by will or by the laws of
descent and distribution. Any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of, or to subject to execution,
attachment or similar process, any Performance Cash Awards granted
under Article VII, or any right thereunder, contrary to the provisions
hereof, shall be void and ineffective, shall give no right to the
purported transferee, and shall, at the sole discretion of the
Committee, result in forfeiture of the Performance Cash Awards involved
in such attempt.
(d) Maximum Award. With respect to a Performance Cash Award
that is intended to qualify as performance based compensation under
Section 162(m) of the Code, the maximum aggregate of such awards that
may be granted to any one Employee Grantee during any calendar year
shall not exceed $2 million.
4. Amendment. With respect to any outstanding Performance Cash
Awards that does not qualify as performance based compensation under Section
162(m) of the Code, the Committee may, at any time or times, amend the
performance objectives and/or the Performance Period for earning such Award.
However, with respect to any Performance Cash Award that is intended on its
date of grant to qualify as performance based compensation under Section 162(m)
of the Code, the Committee, in its sole discretion and without the consent of
the Employee-Grantee, may amend the Award only to reflect a change in corporate
capitalization, such as a stock split or dividend, or a corporate transaction,
such as a corporate merger, a corporate consolidation, any corporate separation
(including a spinoff or other distribution of stock or property by a
corporation), any corporate reorganization (whether or not such reorganization
comes within the definition of such term in section 368), or any partial or
complete corporate liquidation.
5. Acceleration upon a Change of Control. Notwithstanding any
provision in Article VII or in any document or instrument evidencing
Performance Cash Awards
<PAGE> 22
granted under Article VII, upon the occurrence of a Change of Control each
Performance Cash Award previously granted under Article VII which is not then
immediately vested in full shall be immediately vested and payable in cash in
full, all performance goals shall be deemed to have been met to the fullest
extent under the terms of such grant, and the Performance Periods shall
immediately end.
6. Other Provisions.
(a) No grant of a Performance Cash Award under Article VIII
shall be construed as limiting any right which the Company or any
subsidiary or affiliated entity of the Company may have to terminate at
any time, with or without cause, the employment of any person to whom
such Award has been granted.
(b) After certification by the Committee as to the
satisfaction of the terms and conditions set by the Committee with
respect to a Performance Cash Award, the portion of such Award that is
no longer subject to such restrictions, terms and conditions shall be
paid (in cash) to the Employee Grantee. The remaining unearned portion
of such Performance Award, if any, shall either be forfeited or, if
appropriate under the terms applicable to such Award, shall continue to
be subject to the restrictions, terms and conditions set by the
Committee with respect to such Award.
7. Bonus Cash Awards. The Committee may, from time to time and
subject to the provisions of the Plan, grant Bonus Cash Awards to key employees
and officers (whether or not they are directors) of the Company, its
subsidiaries and affiliated entities. Bonus Cash Awards shall be cash payments
that are not subject to a Performance Period under Article VII.
ARTICLE VIII
WITHHOLDING FOR TAXES
Notwithstanding anything in the Plan to the contrary, any issuance of
Common Stock pursuant to the exercise of an option or payment of any other
Award under the Plan shall not be made until appropriate arrangements
satisfactory to the Company have been made for the payment of any tax amounts
(federal, state, local or other) that may be required to be withheld or paid by
the Company with respect thereto. Such arrangements may, at the discretion of
the Committee, include allowing the optionee or grantee to tender to the
Company shares of Common Stock owned by the optionee or grantee, or to request
the Company to withhold a portion of the shares of Common Stock being acquired
pursuant to the Award, whether through the exercise of an option or as a
distribution of earned Performance Stock, payment of earned Performance Units
or as Bonus Stock, which have a fair market value per share as of the date of
such withholding that is not greater than the sum of all tax amounts to be
withheld with respect thereto, together with payment of any remaining portion
of such tax amounts in cash or by check payable and acceptable to the Company;
provided, however, with respect to any Employee Optionee or Employee Grantee
who is subject to Rule 16b-3 at the time withholding is required with respect
to an Award payable in Common Stock, the Company shall automatically withhold
from such Award, to the extent such withholding is not satisfied by a Tandem
Cash Tax Right, a number of shares of Common Stock having an aggregate fair
market value per share equal to the amount of tax required to be withheld.
<PAGE> 23
ARTICLE IX
PARACHUTE TAX GROSS-UP
To the extent that the grant, payment, or acceleration of vesting or
payment, whether in cash or stock, of any Award made to a participant under the
Plan (a "Benefit") is subject to a golden parachute excise tax under Section
4999(a) of the Code (a "Parachute Tax"), the Company shall pay such person an
amount of cash (the "Gross-up Amount") such that the 'net' Benefit received by
the person under this Plan, after paying all applicable Parachute Taxes
(including those on the Gross-up Amount) and any federal or state income taxes
on the Gross-up Amount, shall be equal to the Benefit that such person would
have received if such Parachute Tax had not been applicable.
