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REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BJ SERVICES COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 1389 63-0084140
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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5500 NORTHWEST CENTRAL DRIVE
HOUSTON, TEXAS 77092
(713) 462-4239
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MARGARET BARRETT SHANNON
VICE PRESIDENT - GENERAL COUNSEL
5500 NORTHWEST CENTRAL DRIVE
HOUSTON, TEXAS 77092
(713) 462-4239
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
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ANDREWS & KURTH L.L.P. SIMPSON THACHER & BARTLETT SULLIVAN & CROMWELL
4200 TEXAS COMMERCE TOWER 425 LEXINGTON AVENUE 125 BROAD STREET
HOUSTON, TEXAS 77002 NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10004
G. MICHAEL O'LEARY, ESQ. ROBERT L. FRIEDMAN, ESQ. JAMES C. MORPHY, ESQ.
(713) 220-4200 (212) 455-2000 (212) 558-4000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this registration statement becomes effective and the
conditions to consummation of the Merger have been satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED UNIT PRICE FEE
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COMMON STOCK, PAR VALUE $0.10 PER SHARE, 14,193,000 SHARES
EACH WITH ONE ASSOCIATED PREFERRED SHARE WITH ASSOCIATED
PURCHASE RIGHT RIGHTS(1) (1) $211,288,290(1) $72,860
WARRANTS TO PURCHASE COMMON STOCK 4,897,000 WARRANTS(1)
COMMON STOCK, PAR VALUE $0.10 PER SHARE, 4,897,000 SHARES
EACH WITH ONE ASSOCIATED PREFERRED SHARE WITH ASSOCIATED $30.00 $146,910,000(2) $50,660
PURCHASE RIGHT RIGHTS(2)
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(1) Up to (i) 14,193,000 shares of common stock, par value $0.10 per share,
of the registrant ("BJ Common Stock") (with associated Preferred Share
Purchase Rights attached) ("Rights") and (ii) 4,897,000 Warrants to
purchase BJ Common Stock ("Warrants") are to be offered in exchange for
up to 24,483,000 shares of common stock, par value $0.10 per share
("Western Common Stock") of The Western Company of North America
("Western") upon consummation of the merger described herein. Includes a
total of up to 3,591,000 shares of BJ Common Stock (and a corresponding
number of Rights) and up to 1,239,000 Warrants that are subject to
issuance if all outstanding options to purchase Western Common Stock are
exercised, and all outstanding 7 1/4% Convertible Subordinated Debentures
of Western (the "Western Convertible Debentures") are converted into
Western Common Stock, prior to the merger transaction described herein.
Pursuant to Rule 457(f), the registration fee was computed on the basis
of the high and low prices of a share of Western Common Stock as reported
on the New York Stock Exchange Composite Tape on March 3, 1995 and
deducting cash estimated to be paid by the Registrant pursuant to the
merger exchange transaction described herein.
(2) Includes the maximum number of shares of BJ Common Stock and associated
Rights to be issued upon the exercise of the Warrants at a stated
exercise price of $30.00 per share, as the basis for the calculation of
the registration fee pursuant to Rule 457(g).
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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BJ SERVICES COMPANY
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
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FORM S-4 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
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1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus ................ Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus..................................... Inside Front and Outside Back Cover Pages
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.................. Prospectus Summary; The Merger
4. Terms of the Transaction......................... Prospectus Summary; The Merger
5. Pro Forma Financial Information.................. Prospectus Summary; Unaudited Pro
Forma Financial Statements
6. Material Contacts with the Company
Being Acquired................................. The Merger
7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters...................... *
8. Interests of Named Experts and Counsel........... *
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................... *
10. Information with Respect to S-3 Registrants..... Outside Front Cover Page; Prospectus Summary; Description of the
Companies' Businesses; The Merger; Principal Stockholders of BJ Services
and Western; Unaudited Pro Forma Financial Statements; Management and
Operations After the Merger; Description of Capital Stock of BJ Services;
Description of Certain Indebtedness of BJ Services; Comparison of
Stockholder Rights; Financial Statements
11. Incorporation of Certain Information by
Reference....................................... Incorporation of Certain Documents by Reference
12. Information with Respect to S-2 or S-3
Registrants..................................... *
13. Incorporation of Certain Information by
Reference..................................... *
14. Information with Respect to Registrants
Other Than S-2 or S-3 Registrants............. *
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15. Information with Respect to S-3 Companies....... Prospectus Summary; Description of the Companies' Businesses; The
Merger; Unaudited Pro Forma Financial Statements; Management and
Operations After the Merger; Description of Capital Stock of
Western; Comparison of Stockholder Rights; Financial Statements
16. Information with Respect to S-2 or S-3
Companies..................................... *
17. Information with Respect to
Companies Other Than S-2 or S-3
Companies..................................... *
18. Information if Proxies, Consents or
Authorizations are to be Solicited............ Prospectus Summary; The Special Meetings; The Merger; Management
and Operations After the Merger
19. Information if Proxies, Consents or
Authorizations are not to be
Solicited or in an Exchange Offer............. *
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* Not Applicable
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BJ SERVICES COMPANY
[LOGO]
March 16, 1995
Dear Stockholder:
You are cordially invited to attend a Special Meeting of
Stockholders ("Special Meeting") to be held on Thursday, April 13, 1995, at
11:00 a.m., Houston time. The meeting will be held in the Elm Room of The
Houstonian Conference Center, located at 111 North Post Oak Lane, Houston,
Texas.
At the Special Meeting, you will be asked to consider and vote
upon the following proposals:
1. to approve and adopt an Agreement and Plan of Merger, as
amended (the "Merger Agreement") providing for, among other things, the
merger of The Western Company of North America ("Western") into BJ
Services Company ("BJ Services") (the "Merger") and the issuance of
shares of common stock, par value $0.10 per share, of BJ Services ("BJ
Common Stock"), associated preferred share purchase rights ("BJ Rights")
and warrants to purchase BJ Common Stock ("BJ Warrants"). Pursuant to a
"Cash Election" or "Stock Election," as the case may be, by the
stockholders of Western, each share of common stock, par value $0.10 per
share, of Western ("Western Common Stock") outstanding immediately prior
to the effectiveness of the Merger (other than dissenting shares and
shares owned directly or indirectly by Western or BJ Services, which
will be cancelled) will be converted into the right to receive, without
interest, either (i) $20.00 in cash together with 0.2 BJ Warrants
("Warrant Consideration") or (ii) not less than 0.8989 shares nor more
than 1.1594 shares of BJ Common Stock and a corresponding number of BJ
Rights (the actual number depending upon the average daily trading
prices of BJ Common Stock on the New York Stock Exchange during a
20-trading-day period commencing 25 trading days prior to the closing
date of the Merger) (collectively, the "Stock Consideration") and the
Warrant Consideration. Pursuant to the Merger Agreement, the number of
shares of Western Common Stock with respect to which a Cash Election is
made (including, for calculation purposes, dissenting shares, if any)
(the "Cash Election Shares") and the number of shares with respect to
which a Stock Election is made (the "Stock Election Shares") will be
adjusted so that the total number of Cash Election Shares and the total
number of Stock Election Shares will be approximately equal;
2. to approve an amendment to the Restated Certificate of
Incorporation of BJ Services (the "BJ Services Charter") in order to
increase the authorized number of shares of BJ Common Stock from
40,000,000 shares to 80,000,000 shares; and
3. to approve the BJ Services Company 1995 Incentive Plan
("BJ 1995 Incentive Plan").
The proposed Merger is subject to a number of conditions,
including obtaining the approval of the stockholders of BJ Services and
Western. A summary of the basic terms and conditions of the proposed merger,
certain financial and other information relating to the Merger and a copy of
the Merger Agreement are set forth in the Joint Proxy Statement/Prospectus.
Please review and consider the enclosed materials carefully.
The Board of Directors of BJ Services has received an opinion
from Merrill Lynch & Co. to the effect that, as of the date of such opinion,
the consideration to be paid by BJ Services pursuant to the Merger, taken as a
whole, is fair to BJ Services from a financial point of view. The written
opinion of Merrill Lynch & Co. is included in the accompanying Joint Proxy
Statement/Prospectus and should be read carefully by stockholders.
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YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR TO AND
IN THE BEST INTERESTS OF BJ SERVICES AND ITS STOCKHOLDERS AND HAS UNANIMOUSLY
APPROVED (i) THE MERGER AGREEMENT AND THE PAYMENT OF THE MERGER CONSIDERATION,
INCLUDING THE ISSUANCE OF BJ COMMON STOCK AND BJ WARRANTS, IN THE MERGER, (ii)
THE PROPOSED AMENDMENT TO THE BJ SERVICES CHARTER INCREASING THE AUTHORIZED
NUMBER OF SHARES OF BJ COMMON STOCK AND (iii) THE BJ 1995 INCENTIVE PLAN. THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE (i) FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE PAYMENT OF THE MERGER
CONSIDERATION, INCLUDING THE ISSUANCE OF THE STOCK CONSIDERATION AND WARRANT
CONSIDERATION, (ii) FOR THE AMENDMENT TO THE BJ SERVICES CHARTER INCREASING THE
AUTHORIZED NUMBER OF SHARES OF BJ COMMON STOCK FROM 40,000,000 TO 80,000,000
AND (iii) FOR THE ADOPTION OF THE BJ 1995 INCENTIVE PLAN. NEITHER THE PROPOSED
AMENDMENT TO THE BJ SERVICES CHARTER NOR THE BJ 1995 INCENTIVE PLAN WILL BE
IMPLEMENTED UNLESS THE MERGER IS CONSUMMATED.
Your vote is very important. Pursuant to the provisions of the
Delaware General Corporation Law and in accordance with the rules of the New
York Stock Exchange, the affirmative vote of a majority of the holders of
outstanding shares of BJ Common Stock will be required to approve and adopt the
Merger Agreement and the issuance of the BJ Common Stock and BJ Warrants
pursuant to the Merger Agreement and to approve the amendment to the BJ
Services Charter. The affirmative vote of holders of a majority of the total
shares of BJ Common Stock present in person or represented by proxy and
entitled to vote at the BJ Services Special Meeting is required to approve the
BJ 1995 Incentive Plan. Any abstention with respect to the Merger proposal,
the amendment of the BJ Services Charter or the adoption of the BJ 1995
Incentive Plan will have the effect of a vote against such proposals. Any
broker nonvote will not affect the outcome of the proposal regarding the BJ
1995 Incentive Plan, but a broker nonvote will have the effect of voting
against the Merger proposal and the amendment of the BJ Services Charter. BJ
Services' stockholders will have no appraisal rights under Delaware law in
connection with the Merger. THE FAILURE TO SIGN AND RETURN YOUR PROXY WILL
HAVE THE SAME EFFECT AS VOTING AGAINST THE MERGER PROPOSAL AND THE AMENDMENT OF
THE BJ SERVICES CHARTER. ACCORDINGLY, WE URGE YOU TO COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY IMMEDIATELY, WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING. You may, of course, attend the Special Meeting and vote in
person even if you have returned a proxy.
Sincerely,
/s/ J. W. STEWART
_______________________________
J. W. Stewart
Chairman of the Board, President
and Chief Executive Officer
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BJ SERVICES COMPANY
5500 NORTHWEST CENTRAL DRIVE
HOUSTON, TEXAS 77092
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 13, 1995
To the Stockholders of BJ Services Company:
Notice is hereby given that a Special Meeting of Stockholders
("Special Meeting") of BJ Services Company ("BJ Services") will be held on
Thursday, April 13, 1995, at 11:00 a.m., Houston time, in the Elm Room of The
Houstonian Conference Center, located at 111 North Post Oak Lane, Houston,
Texas, to consider and vote upon the following proposals which are described in
more detail in the accompanying Joint Proxy Statement/Prospectus:
1. A proposal (i) to approve and adopt the Agreement and Plan
of Merger dated as of November 17, 1994, as amended (the "Merger
Agreement"), between BJ Services and The Western Company of North
America ("Western"), providing for, among other things, (a) the merger
of Western into BJ Services (the "Merger"), (b) the conversion of all of
the shares of common stock of Western, par value $0.10 per share
("Western Common Stock"), outstanding immediately prior to the
effectiveness of the Merger (other than dissenting shares and shares
owned directly or indirectly by Western or BJ Services, which will be
cancelled), at the holder's election, into the right to receive, without
interest, either (A) $20.00 in cash together with 0.2 warrants ("BJ
Warrants") to purchase a share of BJ Services common stock, par value
$0.10 per share ("BJ Common Stock"), at a purchase price of $30.00 per
share, subject to adjustment ("Warrant Consideration"), or (B) not less
than 0.8989 shares nor more than 1.1594 shares of BJ Common Stock (the
actual number depending on the average daily trading prices of BJ Common
Stock on the New York Stock Exchange during a 20-trading-day period
commencing 25 trading days prior to the closing date of the Merger) and
a corresponding number of preferred share purchase rights and the
Warrant Consideration and (c) the cancellation of all of the options to
purchase Western Common Stock that are outstanding immediately prior to
the Merger (whether or not then exercisable) and the grant to the
holders thereof of the right to receive, as soon as practicable after
the Merger, cash in the amount specified in the Merger Agreement; and
(ii) to approve the issuance pursuant to the Merger Agreement of up to
approximately 14,193,000 shares of BJ Common Stock (and a corresponding
number of preferred share purchase rights) and a total of up to
approximately 4,897,000 BJ Warrants (a total of up to approximately
4,897,000 additional shares of BJ Common Stock being subject to issuance
upon the exercise of such BJ Warrants, subject to adjustment) to
Western's securityholders (referred to as BJ Proposal No. 1 in the
attached Joint Proxy Statement/Prospectus).
2. A proposal to amend the Restated Certificate of
Incorporation of BJ Services (the "BJ Services Charter") in order to
increase the number of authorized shares of BJ Common Stock from
40,000,000 to 80,000,000 shares (referred to as BJ Proposal No. 2 in the
attached Joint Proxy Statement/Prospectus).
3. A proposal to approve the BJ Services Company 1995
Incentive Plan (the "BJ 1995 Incentive Plan") (referred to as BJ
Proposal No. 3 in the attached Joint Proxy Statement/Prospectus).
4. To transact such other business as may properly come
before the Special Meeting or any adjournment(s) or postponement(s)
thereof.
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The Board of Directors has fixed the close of business on March
15, 1995, as the record date for determining stockholders entitled to notice of
and to vote at the Special Meeting and any adjournment or postponement thereof.
Only stockholders of record at the close of business on such date will be
entitled to notice of and to vote at the Special Meeting and any adjournment or
postponement thereof.
When the proxies are returned properly executed, the shares
represented thereby will be voted in accordance with the indicated
instructions. However, if no instructions have been specified on a returned
proxy, the shares represented thereby will be voted (i) FOR approval and
adoption of the Merger Agreement and the payment of the merger consideration,
including the issuance of the BJ Common Stock and BJ Warrants, pursuant
thereto, (ii) FOR the amendment to the BJ Services Charter increasing the
number of authorized shares of BJ Common Stock and (iii) FOR the adoption of
the BJ 1995 Incentive Plan. Neither the proposed amendment to the BJ Services
Charter nor the BJ 1995 Incentive Plan will be implemented unless the Merger is
consummated. If any other matters are properly brought before the Special
Meeting, the persons named in the accompanying proxy will vote the shares to
which such proxies relate in accordance with their judgment. Any stockholder
giving a proxy has the power to revoke it at any time before it is voted by
filing, with the Secretary of BJ Services, either an instrument revoking the
proxy or a duly executed proxy bearing a later date. Proxies also may be
revoked by attending the meeting and voting in person.
By Order of the Board of Directors,
/s/ MARGARET BARRETT SHANNON
_____________________________________
Margaret Barrett Shannon
Vice President, General Counsel and
Secretary
Houston, Texas
March 16, 1995
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING; HOWEVER,
WHETHER OR NOT YOU EXPECT TO ATTEND, PLEASE COMPLETE, SIGN, DATE AND RETURN THE
ACCOMPANYING PROXY WITHOUT DELAY IN THE ENCLOSED POSTPAID ENVELOPE. THE PROXY
IS REVOCABLE AND WILL NOT BE USED IF YOU ARE PRESENT AND PREFER TO VOTE IN
PERSON.
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THE WESTERN COMPANY OF NORTH AMERICA
[LOGO]
March 16, 1995
Dear Stockholder:
You are cordially invited to attend a Special Meeting of
Stockholders ("Special Meeting") to be held on Thursday, April 13, 1995, at
11:00 a.m., Houston time. The meeting will be held in the Camelia Room of The
Houstonian Conference Center, 111 North Post Oak Lane, Houston, Texas.
At the Special Meeting, you will be asked to consider and vote
upon the approval and adoption of an Agreement and Plan of Merger, as amended
(the "Merger Agreement"), providing for, among other things, the merger of The
Western Company of North America ("Western") into BJ Services Company ("BJ
Services") (the "Merger"). Pursuant to a "Cash Election" or "Stock Election,"
as the case may be, by the stockholders of Western, each share of common stock,
par value $0.10 per share, of Western ("Western Common Stock") outstanding
immediately prior to the effectiveness of the Merger (other than dissenting
shares and shares owned directly or indirectly by Western or BJ Services, which
will be cancelled) will be converted into the right to receive, without
interest, either (i) $20.00 in cash together with 0.2 warrants to purchase one
share of common stock of BJ Services, par value $0.10 per share ("BJ Common
Stock"), at a purchase price of $30.00 per share, subject to adjustment
("Warrant Consideration") or (ii) not less than 0.8989 shares nor more than
1.1594 shares of BJ Common Stock and a corresponding number of associated
preferred share purchase rights (the actual number depending upon the average
daily trading prices of BJ Common Stock on the New York Stock Exchange during a
20-trading-day period commencing 25 trading days prior to the closing date of
the Merger) and the Warrant Consideration. Pursuant to the Merger Agreement,
the number of shares of Western Common Stock with respect to which a Cash
Election is made (including, for calculation purposes, dissenting shares, if
any) (the "Cash Election Shares") and the number of shares with respect to
which a Stock Election is made (the "Stock Election Shares") will be adjusted
so that the total number of Cash Election Shares and the total number of Stock
Election Shares will be approximately equal.
The proposed merger is subject to a number of conditions,
including obtaining the approval of the stockholders of BJ Services and
Western. A summary of the basic terms and conditions of the proposed merger,
certain financial and other information relating to the Merger and a copy of
the Merger Agreement are set forth in the Joint Proxy Statement/Prospectus.
Please review and consider the enclosed materials carefully. A form of
election is enclosed on which you may indicate a Cash Election or a Stock
Election.
The Board of Directors of Western has received an opinion from
Goldman, Sachs & Co. to the effect that, as of the date of such opinion, the
consideration to be received by holders of Western Common Stock pursuant to the
Merger Agreement is fair to the stockholders of Western. The written opinion
of Goldman, Sachs & Co. is included in the accompanying Joint Proxy
Statement/Prospectus and should be read carefully by stockholders.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR TO AND
IN THE BEST INTERESTS OF WESTERN AND ITS STOCKHOLDERS AND HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT THE STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT
AND MERGER.
Your vote is very important. Pursuant to the certificate of
incorporation of Western and Delaware law, the affirmative vote of the holders
of 66-2/3% of the outstanding shares of Western Common Stock is required to
approve and adopt the Merger Agreement. Abstentions and broker nonvotes will
have the effect of a vote against the proposal. Western stockholders who do
not vote in favor of approval and adoption of the Merger Agreement and Merger
will have appraisal rights under
<PAGE> 9
Delaware law if they properly perfect such rights. FAILURE TO SIGN AND RETURN
YOUR PROXY WILL HAVE THE SAME EFFECT AS A VOTE AGAINST APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT. ACCORDINGLY, WE URGE YOU TO COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY IMMEDIATELY, WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING. You may, of course, attend the Special Meeting and vote in
person even if you have returned a proxy.
Sincerely,
/s/ SHELDON R. ERIKSON
______________________________
Sheldon R. Erikson
Chairman of the Board, President
and Chief Executive Officer
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THE WESTERN COMPANY OF NORTH AMERICA
515 POST OAK BOULEVARD
HOUSTON, TEXAS 77027
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 13, 1995
To the Stockholders of The Western Company of North America:
Notice is hereby given that a Special Meeting of Stockholders
("Special Meeting") of The Western Company of North America ("Western") will be
held on Thursday, April 13, 1995, at 11:00 a.m., Houston time, in the Camelia
Room of The Houstonian Conference Center, located at 111 North Post Oak Lane,
Houston, Texas, to consider and vote upon the following matters which are
described in more detail in the accompanying Joint Proxy Statement/Prospectus:
1. A proposal to approve and adopt the Agreement and Plan of
Merger dated as of November 17, 1994, as amended (the "Merger
Agreement"), between BJ Services Company ("BJ Services") and Western,
providing for, among other things, (i) the merger of Western into BJ
Services (the "Merger"), (ii) the conversion of all of the shares of
common stock of Western, par value $0.10 per share ("Western Common
Stock"), outstanding immediately prior to the effectiveness of the
Merger (other than dissenting shares, and shares owned directly or
indirectly by Western or BJ Services, which will be cancelled), at the
holder's election, into the right to receive, without interest, either
(a) $20.00 in cash together with 0.2 warrants to purchase one share of
BJ Services common stock, par value $0.10 per share ("BJ Common Stock"),
at a purchase price of $30.00 per share, subject to adjustment ("Warrant
Consideration"), or (b) not less than 0.8989 shares nor more than 1.1594
shares of BJ Common Stock (the actual number depending on the average
daily trading prices of BJ Common Stock on the New York Stock Exchange
during a 20-trading-day period commencing 25 trading days prior to the
closing date of the Merger) and a corresponding number of preferred
share purchase rights and the Warrant Consideration and (iii) the
cancellation of all of the options to purchase Western Common Stock that
are outstanding immediately prior to the Merger (whether or not then
exercisable) and the grant to the holder thereof of the right to
receive, as soon as practicable after the Merger, cash in the amount
specified in the Merger Agreement.
2. To transact such other business as may properly come
before the Special Meeting or any adjournment(s) or postponement(s)
thereof.
The Board of Directors has fixed the close of business on March
15, 1995, as the record date for determining stockholders entitled to notice of
and to vote at the Special Meeting and any adjournment or postponement thereof.
Only stockholders of record at the close of business on such date will be
entitled to notice of and to vote at the Special Meeting and any adjournment or
postponement thereof.
<PAGE> 11
When the proxies are returned properly executed, the shares
represented thereby will be voted in accordance with the indicated
instructions. However, if no instructions have been specified on a returned
proxy, the shares represented thereby will be voted FOR approval and adoption
of the Merger Agreement. If any other matters are properly brought before the
Special Meeting, the persons named in the accompanying proxy will vote the
shares to which such proxies relate in accordance with their judgment. Any
stockholder giving a proxy has the power to revoke it at any time before it is
voted by filing, with the Secretary of Western, either an instrument revoking
the proxy or a duly executed proxy bearing a later date. Proxies also may be
revoked by attending the meeting and voting in person.
By Order of the Board of Directors,
/s/ GRAHAM L. ADELMAN
_______________________________
Graham L. Adelman
Senior Vice President, General
Counsel and Secretary
Houston, Texas
March 16, 1995
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING; HOWEVER,
WHETHER OR NOT YOU EXPECT TO ATTEND, PLEASE COMPLETE, SIGN, DATE AND RETURN THE
ACCOMPANYING PROXY WITHOUT DELAY IN THE ENCLOSED POSTPAID ENVELOPE. THE PROXY
IS REVOCABLE AND WILL NOT BE USED IF YOU ARE PRESENT AND PREFER TO VOTE IN
PERSON.
<PAGE> 12
JOINT PROXY STATEMENT/PROSPECTUS
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PROXY STATEMENT AND PROSPECTUS PROXY STATEMENT
BJ SERVICES COMPANY THE WESTERN COMPANY OF NORTH AMERICA
5500 NORTHWEST CENTRAL DRIVE 515 POST OAK BOULEVARD
HOUSTON, TEXAS 77092 HOUSTON, TEXAS 77027
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BJ Services Company, a Delaware corporation ("BJ Services"), has filed a
registration statement on Form S-4 (the "Registration Statement") pursuant to
the Securities Act of 1933, as amended (the "Securities Act"), covering up to
approximately 14,193,000 shares of its common stock, par value $0.10 per share
(the "BJ Common Stock"), each share including an associated preferred share
purchase right ("BJ Right"), and up to approximately 4,897,000 warrants to
purchase up to approximately 4,897,000 shares of BJ Common Stock (the "BJ
Warrants") issuable in connection with a transaction in which The Western
Company of North America, a Delaware corporation ("Western"), will be merged
into BJ Services (the "Merger"). This Joint Proxy Statement/Prospectus
constitutes the Prospectus of BJ Services filed as a part of the Registration
Statement and is being furnished to stockholders of each of BJ Services and
Western in connection with the solicitation of proxies by the respective Boards
of Directors of BJ Services and Western for use at their respective special
meetings of stockholders (or any adjournment or postponement thereof) to be
held on April 13, 1995 (the "BJ Services Special Meeting" and the "Western
Special Meeting" and, collectively, the "Special Meetings"). The information
contained or incorporated by reference herein with respect to BJ Services and
its subsidiaries has been supplied by BJ Services, and the information
contained or incorporated by reference herein with respect to Western and its
subsidiaries has been supplied by Western. This Joint Proxy
Statement/Prospectus and the accompanying forms of proxy are first being mailed
to stockholders of BJ Services and of Western on or about March 16, 1995.
Pursuant to a "Cash Election" or "Stock Election," as the case may be,
by the stockholders of Western, each share of common stock, par value $0.10 per
share, of Western ("Western Common Stock") outstanding immediately prior to the
effectiveness of the Merger (other than dissenting shares and shares owned
immediately prior to the effective time of the Merger directly or indirectly by
Western or BJ Services, which will be cancelled) will be converted into the
right to receive, without interest, either (i) $20.00 in cash ("Cash
Consideration") and 0.2 BJ Warrants ("Warrant Consideration") or (ii) not less
than 0.8989 shares nor more than 1.1594 shares of BJ Common Stock and a
corresponding number of BJ Rights (the actual number depending upon the average
daily trading prices of BJ Common Stock on the New York Stock Exchange ("NYSE")
during a 20-trading-day period commencing 25 trading days prior to the closing
date of the Merger) (such actual number of shares of BJ Common Stock, as so
determined, the "Stock Consideration") and the Warrant Consideration.
Stockholders of Western will be entitled to dissenters' rights under Delaware
law if they properly perfect such rights. See "Summary -- The Merger --
Appraisal Rights." Approximately 23,900,000 to 29,300,000 shares of BJ Common
Stock and associated BJ Rights will be outstanding immediately after the Merger
is consummated, of which approximately 54% to 66% will be held by former
stockholders of BJ Services and approximately 34% to 46% will be held by former
stockholders of Western, depending upon the trading price of BJ Common Stock
and whether or not holders of Western's 7 1/4% Convertible Subordinated
Debentures elect to convert such Debentures into Western Common Stock prior to
the Merger and assuming outstanding options to purchase Western Common Stock
are not exercised.
Pursuant to the agreement and plan of merger among BJ Services and
Western, as amended (the "Merger Agreement"), the number of shares of Western
Common Stock with respect to which a Cash Election is made (including, for
calculation purposes, dissenting shares, if any) (the "Cash Election Shares")
and the number of shares with respect to which a Stock Election is made (the
"Stock Election Shares") will be adjusted pro rata so that the total number of
Cash Election Shares and the total number of Stock Election Shares will be
approximately equal. BJ Common Stock is listed for trading on the NYSE under
the symbol "BJS," and the BJ Warrants have been approved for listing on the
NYSE, subject to official notice of issuance, under the trading symbol "BJS
WS." On March 7, 1995, the average of the high and low trading prices of BJ
Common Stock and Western Common Stock, as reported on the NYSE composite tape,
were $18.75 and $18.8125 per share, respectively. Based on the closing price
of BJ Common Stock on such date, the Stock Consideration per share of Western
Common Stock to be received by Western stockholders pursuant to the Merger
would be 1.0738 shares of
<PAGE> 13
BJ Common Stock and associated BJ Rights, together with the Warrant
Consideration of 0.2 BJ Warrants.
In addition to the proposal to approve and adopt the Merger Agreement
and the payment of the merger consideration pursuant thereto, BJ Services is
submitting two other proposals for the approval of its stockholders: (i) to
approve an amendment to the Restated Certificate of Incorporation of BJ
Services (the "BJ Services Charter") to increase the authorized number of
shares of BJ Common Stock from 40,000,000 to 80,000,000 shares and (ii) to
approve the adoption of the BJ Services Company 1995 Incentive Plan (the "BJ
1995 Incentive Plan"). Consummation of the Merger is not subject to or
conditioned upon approval of these other two proposals. If these two proposals
are approved by the requisite vote of BJ Services stockholders, neither will be
implemented unless the Merger is consummated.
THE BJ COMMON STOCK, BJ RIGHTS AND BJ WARRANTS TO BE ISSUED IN CONNECTION WITH
THE MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Joint Proxy Statement/Prospectus is March 16, 1995
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<PAGE> 14
AVAILABLE INFORMATION
BJ Services and Western are currently subject to the informational
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder (the "Exchange Act") and, in accordance
therewith, file reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). All such information
may be inspected and copied at the public reference facilities maintained by
the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549-1004, and at the following Regional Offices of the
Commission: Chicago Regional Office, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60621-2511; and New York Regional Office, 7 World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material
may also be obtained at prescribed rates from the Public Reference Section of
the Commission at its principal office at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549-1004. In addition, the BJ Common Stock and the
Western Common Stock are listed for trading on the NYSE and such information
may also be inspected at the offices of the NYSE, 20 Broad Street, New York,
New York 10005.
BJ Services has filed with the Commission, a Registration Statement on
Form S-4 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the BJ Common Stock, BJ Rights and BJ
Warrants offered by this Joint Proxy Statement/Prospectus. This Joint Proxy
Statement/Prospectus, which is a part of the Registration Statement, does not
contain all the information set forth in the Registration Statement, certain
parts of which have been omitted in accordance with the rules and regulations
of the Commission. For further information with respect to BJ Services and
Western and the BJ Common Stock, BJ Rights and BJ Warrants and Western Common
Stock, reference is made to the Registration Statement and the schedules and
exhibits filed as a part thereof. Statements made in this Joint Proxy
Statement/Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete, with respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement; reference is made to the exhibit for a more complete description of
the matter involved, and each such statement is qualified in its entirety by
such reference. The Registration Statement may be inspected, without charge,
at the Commission's principal office in Washington, D.C., and copies may be
obtained from the Commission at the prescribed rates or may be examined without
charge at the public reference facilities of the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
BJ Services incorporates herein by reference the following documents
filed by it with the Commission (File No. 1-10570) pursuant to the Exchange
Act: Annual Report on Form 10-K for the fiscal year ended September 30, 1994,
Current Reports on Form 8-K dated November 28, 1994 and March 9, 1995
and Quarterly Report on Form 10-Q for the quarter ended December 31, 1994.
Also incorporated herein by reference are the "Executive Compensation" and
"Severance Agreements" sections of the BJ Services Proxy Statement for the
January 26, 1995 Annual Meeting of Stockholders, excluding the sections
entitled "Executive Compensation -- Executive Compensation Committee Report"
and "Executive Compensation -- Performance Graph -- Total Stockholder Return
July 1990 through September 1994."
Western incorporates herein by reference the following documents filed by it
with the Commission (File No. 1-7451) pursuant to the Exchange Act: Annual
Report on Form 10-K for the fiscal year ended December 31, 1993, Quarterly
Report on Form 10-Q and Form 10-Q/A for the quarterly periods ended March 31,
June 30, and September 30, 1994, and Current Reports on Form 8-K dated November
23, 1994, and dated February 16 and February 24, 1995. Also incorporated
herein by reference are the "Election of Directors," "Meetings and Committees
of the Board, Compensation of Directors" and "Compensation of Executive
Officers" sections of the Western Proxy Statement for its Annual Meeting of
Stockholders held May 2, 1994, excluding the sections entitled "Compensation of
Executive Officers -- Report on Executive Officer Compensation" and
"Compensation of Executive Officers -- Stockholder Return Performance Graph."
Also incorporated by reference herein is Management's Discussion and Analysis
of Financial Condition and Results of Operation of Western which is included as
Exhibit 99.3 to the registration statement of which this Joint Proxy
Statement/Prospectus is a part.
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<PAGE> 15
All documents filed by BJ Services and Western pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Joint
Proxy Statement/Prospectus and prior to the date that the Merger becomes
effective shall be deemed to be incorporated herein by reference and to be part
hereof from the date of filing of such document. Any statement contained
herein or in a document all or a portion of which is incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Joint Proxy Statement/Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
that also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Joint Proxy Statement/Prospectus.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. BJ SERVICES
AND WESTERN HEREBY UNDERTAKE TO PROVIDE WITHOUT CHARGE TO EACH PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS HAS BEEN DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY
SUCH PERSON, A COPY OF ANY AND ALL OF THE DOCUMENTS REFERRED TO ABOVE WHICH
HAVE BEEN OR MAY BE INCORPORATED IN THIS JOINT PROXY STATEMENT/PROSPECTUS BY
REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). SUCH REQUESTS FOR
BJ SERVICES DOCUMENTS SHOULD BE DIRECTED TO BJ SERVICES COMPANY, 5500 NORTHWEST
CENTRAL DRIVE, HOUSTON, TEXAS 77092, ATTENTION: DIRECTOR OF INVESTOR
RELATIONS, TELEPHONE NUMBER (713) 462-4239. SUCH REQUESTS FOR WESTERN
DOCUMENTS SHOULD BE DIRECTED TO THE OFFICE OF THE DIRECTOR, INVESTOR RELATIONS,
THE WESTERN COMPANY OF NORTH AMERICA, 515 POST OAK BOULEVARD, HOUSTON, TEXAS
77027, TELEPHONE NUMBER (713) 629-2600. IN ORDER TO ENSURE DELIVERY OF THE
DOCUMENTS PRIOR TO THE APPLICABLE SPECIAL MEETING, REQUESTS SHOULD BE RECEIVED
BY APRIL 6, 1995.
No person is authorized to give any information or to make any
representation not contained in this Joint Proxy Statement/Prospectus, and, if
given or made, such information or representation must not be relied upon as
having been authorized. This Joint Proxy Statement/Prospectus does not
constitute an offer to sell, or a solicitation of an offer to purchase, any of
the securities offered by this Joint Proxy Statement/Prospectus, or the
solicitation of a proxy, in any jurisdiction in which, or to any person to
whom, it is unlawful to make such offer or solicitation of an offer or proxy
solicitation. Neither the delivery of this Joint Proxy Statement/Prospectus
nor any distribution of the securities offered hereby shall, under any
circumstances, create any implication that the information contained herein is
correct as of any time subsequent to the date hereof or that there has been no
change in the affairs of the BJ Services or Western since the date hereof.
-4-
<PAGE> 16
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . 3
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . 3
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . 6
General
The Companies . . . . . . . . . . . . . . . . . . 6
BJ Services . . . . . . . . . . . . . . . . . 6
Western . . . . . . . . . . . . . . . . . . . 6
The Special Meetings . . . . . . . . . . . . . . . 7
Time, Date, Place and Purposes . . . . . . . . 7
Record Date . . . . . . . . . . . . . . . . . 7
Votes Required For BJ Proposals . . . . . . . 7
Vote Required For Western Proposal . . . . . . 8
The Merger
Principal Terms of the Merger . . . . . . . . . . 8
Description of Merger Consideration . . . . . 8
Determination of Stock Consideration . . . . . 9
Warrant Consideration . . . . . . . . . . . . 9
Election Procedures to Receive Cash or
Stock Consideration . . . . . . . . . . . 9
Proration of Merger Consideration . . . . . . 10
Funding Related to the Merger . . . . . . . . . . 11
Reasons for the Merger . . . . . . . . . . . . . . 11
Recommendation of the Boards of Directors . . . . 12
Opinions of Financial Advisors . . . . . . . . . . 12
Other Terms of the Merger . . . . . . . . . . . . 13
Fractional Interests . . . . . . . . . . . . . 13
Accounting Treatment . . . . . . . . . . . . . 13
Exchange of Western Stock Certificates . . . . 13
Treatment of Western Options . . . . . . . . . 13
Treatment of Western Convertible
Debentures . . . . . . . . . . . . . . . . 13
Certain Federal Income Tax Consequences . . . 14
Effective Time of the Merger . . . . . . . . . 14
Governmental and Regulatory Approvals . . . . 14
Other Conditions to the Merger . . . . . . . . 15
Employee Benefits . . . . . . . . . . . . . . 16
Interests of Certain Persons in the Merger . . 16
No Solicitation . . . . . . . . . . . . . . . 16
Termination Fee; Expenses . . . . . . . . . . 17
Standstill Agreements . . . . . . . . . . . . 17
Termination or Amendment of the
Merger Agreement . . . . . . . . . . . . . 17
Indemnification . . . . . . . . . . . . . . . 18
Management and Operations After the Merger . . . . 18
Appraisal Rights . . . . . . . . . . . . . . . . . 18
BJ Proposal No. 2 . . . . . . . . . . . . . . . . . . 18
BJ Proposal No. 3 . . . . . . . . . . . . . . . . . . 18
Market Price and Dividend Data . . . . . . . . . . . . 19
Trading Markets and Prices . . . . . . . . . . . . 19
BJ Services Dividend Policy . . . . . . . . . . . 20
Summary Historical Financial Information . . . . . . . 20
BJ Services Company and Subsidiaries Consolidated
Historical Financial Information . . . . . . . 21
The Western Company of North America
and Subsidiaries Consolidated
Historical Financial Information . . . . . . . . 22
Summary Pro Forma Combined
Financial Information (Unaudited) . . . . . . . . 24
DESCRIPTION OF THE COMPANIES' BUSINESSES
BJ Services . . . . . . . . . . . . . . . . . . . . . 25
Western . . . . . . . . . . . . . . . . . . . . . . . 27
THE SPECIAL MEETINGS
Time, Date and Place of the Special Meetings . . . . . 29
Matters to be Considered at the Special Meetings . . . 29
Voting at Meetings; Record Dates . . . . . . . . . . . 30
Vote Required . . . . . . . . . . . . . . . . . . . . 30
BJ Services Proxies . . . . . . . . . . . . . . . . . 31
Western Proxies . . . . . . . . . . . . . . . . . . . 32
Solicitation of Proxies . . . . . . . . . . . . . . . 32
THE MERGER
General . . . . . . . . . . . . . . . . . . . . . . . 33
Merger Consideration . . . . . . . . . . . . . . . . . 33
Election Procedure . . . . . . . . . . . . . . . . . . 35
Proration . . . . . . . . . . . . . . . . . . . . . . 36
Procedures for Exchange of Certificates; the Payment
Fund . . . . . . . . . . . . . . . . . . . . . . . 37
Fractional Interests . . . . . . . . . . . . . . . . . 37
Background of the Merger . . . . . . . . . . . . . . . 38
Reasons for the Merger; Recommendations of the
Boards of Directors . . . . . . . . . . . . . . . 39
Opinions of Financial Advisors . . . . . . . . . . . . 41
Conditions to the Consummation of the Merger . . . . . 48
Certain Federal Income Tax Consequences . . . . . . . 49
Accounting Treatment . . . . . . . . . . . . . . . . . 52
Governmental and Regulatory Approvals . . . . . . . . 52
Effect on Western Employee Benefit Plans and
Employee Agreements . . . . . . . . . . . . . . . 52
Stock Exchange Listing . . . . . . . . . . . . . . . . 55
Restrictions on Resales by Affiliates . . . . . . . . 55
Interests of Certain Persons in the Merger . . . . . . 56
Conduct of Business of Western Prior to the Merger . . 59
No Solicitation . . . . . . . . . . . . . . . . . . . 60
Standstill Agreements . . . . . . . . . . . . . . . . 60
Additional Covenants of BJ Services . . . . . . . . . 61
Termination . . . . . . . . . . . . . . . . . . . . . 61
Termination Fees; Expenses . . . . . . . . . . . . . . 63
Amendment and Waiver . . . . . . . . . . . . . . . . . 65
Representations and Warranties . . . . . . . . . . . . 65
Dissenters' Appraisal Rights . . . . . . . . . . . . . 65
Description of the Warrant Agreement . . . . . . . . . 67
MANAGEMENT AND OPERATIONS AFTER
THE MERGER
Benefits of the Merger . . . . . . . . . . . . . . . . 73
Board of Directors . . . . . . . . . . . . . . . . . . 73
Committees of the Board of Directors of BJ Services . 77
Officers . . . . . . . . . . . . . . . . . . . . . . . 77
Post-Merger Dividend Policy . . . . . . . . . . . . . 77
Western Directors, Officers and Employees . . . . . . 77
PRINCIPAL STOCKHOLDERS OF BJ SERVICES AND
WESTERN
BJ Services . . . . . . . . . . . . . . . . . . . 79
Western . . . . . . . . . . . . . . . . . . . . . 79
DESCRIPTION OF CAPITAL STOCK OF BJ SERVICES . . . . . . . . 83
DESCRIPTION OF CAPITAL STOCK OF WESTERN . . . . . . . . . . 89
DESCRIPTION OF CERTAIN INDEBTEDNESS
OF BJ SERVICES . . . . . . . . . . . . . . . . . . . 93
COMPARISON OF STOCKHOLDER RIGHTS . . . . . . . . . . . . . 94
BJ PROPOSAL NO. 2: PROPOSED INCREASE IN
AUTHORIZED SHARES OF BJ COMMON STOCK . . . . . . . . . 100
BJ PROPOSAL NO. 3: PROPOSED ADOPTION OF
THE BJ 1995 INCENTIVE PLAN . . . . . . . . . . . . . . 102
RELATIONSHIPS WITH INDEPENDENT
PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . 110
LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . 110
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . 110
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . F-1
Appendix A - Agreement and Plan of Merger . . . . . . . . . A-1
Appendix B - First Amendment to Agreement
and Plan of Merger . . . . . . . . . . . . . . . . . . B-1
Appendix C - Fairness Opinion of Merrill Lynch & Co. . . . C-1
Appendix D - Fairness Opinion of Goldman, Sachs & Co. . . . D-1
Appendix E - Section 262 of the Delaware General
Corporation Law . . . . . . . . . . . . . . . . . . . E-1
Appendix F - Proposed Text of Article Fourth of the BJ
Services Charter . . . . . . . . . . . . . . . . . . . F-1
Appendix G - Proposed BJ 1995 Incentive Plan . . . . . . . G-1
</TABLE>
<PAGE> 17
SUMMARY
The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement/Prospectus and does not purport to be complete.
Reference is made to, and this Summary is qualified in its entirety by, the
more detailed information contained elsewhere or incorporated by reference in
this Joint Proxy Statement/Prospectus. Unless otherwise defined herein,
capitalized terms used in this summary have the respective meanings ascribed to
them elsewhere in this Joint Proxy Statement/Prospectus. Stockholders are
urged to read this Joint Proxy Statement/Prospectus in its entirety. Copies of
the Merger Agreement and First Amendment thereto are included as Appendix A and
Appendix B, respectively, to this Joint Proxy Statement/Prospectus.
GENERAL
THE COMPANIES
BJ Services. BJ Services is a leading provider of pressure pumping and
other oilfield services serving the petroleum industry worldwide. Pressure
pumping services offered by BJ Services consist of well cementing and
stimulation services used in the completion of new oil and natural gas wells
and in remedial work on existing wells, both onshore and offshore. These
services are provided through domestic and international locations to customers
in most of the major oil and natural gas producing regions of the United
States, the Gulf of Mexico, Latin America, Europe, Asia, Africa and the Middle
East. BJ Services believes that it is the third largest provider of pressure
pumping services worldwide with a particularly strong presence in the Alaskan
North Slope, the Gulf of Mexico, the North Sea, Indonesia and most of Latin
America. During fiscal 1994, BJ Services generated approximately 88% of its
revenue from pressure pumping services and 12% of its revenue from product and
equipment sales and other oilfield services. Other oilfield services provided
by BJ Services include casing and tubing services provided to the oil and gas
exploration and production industry and commissioning and leak detection
services provided to offshore platforms and pipelines, primarily in the United
Kingdom. During the 12 months ended September 30, 1994, approximately 52% of
BJ Services' revenues were derived from international operations. For
information with respect to BJ Services' financial position at September 30 and
December 31, 1994, and results of operations for the year and quarter then
ended, see BJ Services' Consolidated Financial Statements and the Notes thereto
included elsewhere in this Joint Proxy Statement/Prospectus. The principal
executive offices of BJ Services are located at 5500 Northwest Central Drive,
Houston, Texas 77092, and its telephone number is (713) 462-4239.
Western. Western provides pressure pumping services to oil and gas
companies operating in the continental United States, the Gulf of Mexico and
certain international markets. Western also provides production and industrial
chemicals to the oil, gas, refining and petrochemical industries in the United
States. Over the past year and a half, Western has disposed of its fleet of
offshore drilling rigs and withdrawn from the offshore contract drilling
business. Western sold its remaining drilling rigs in December 1994 and
February 1995 for $11.8 million and $37.2 million, respectively. For
information with respect to Western's financial position at December 31, 1994,
and results of operations for the year then ended, see Western's Consolidated
Financial Statements and the Notes thereto included elsewhere in this Joint
Proxy Statement/Prospectus and Management's Discussion and Analysis of
Financial Condition and Results of Operation of Western which is included as an
exhibit to the registration statement of which this Prospectus is a part and is
incorporated herein by reference. The principal executive offices of Western
are located at 515 Post Oak Boulevard, Houston, Texas 77027, and its telephone
number is (713) 629-2600.
As used herein, the terms "BJ Services" and "Western" refer to such
corporations, respectively, including, except where the context otherwise
requires, their respective subsidiaries.
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<PAGE> 18
THE SPECIAL MEETINGS
Time, Date, Place and Purposes. The BJ Services Special Meeting will
be held on Thursday, April 13 , 1995, in the Elm Room of The Houstonian
Conference Center, 111 North Post Oak Lane, Houston, Texas, commencing at
11:00 a.m., local time, for the purposes of the following proposals
(collectively, the "BJ Proposals"):
1. approving and adopting, as required by the Delaware
General Corporation Law ("DGCL") and in accordance with the rules of the
NYSE, the Merger Agreement, including the issuance pursuant to the
Merger Agreement of up to approximately 14,193,000 shares of BJ Common
Stock (including a corresponding number of BJ Rights) and up to
approximately 4,897,000 BJ Warrants to purchase shares of BJ Common
Stock ("BJ Proposal No.1");
2. approving an amendment to the BJ Services Charter
increasing the authorized number of shares of BJ Common Stock from
40,000,000 shares to 80,000,000 shares ("BJ Proposal No. 2"); and
3. approving the adoption of the BJ 1995 Incentive Plan
("BJ Proposal No. 3").
The Western Special Meeting will be held on Thursday, April 13, 1995, in
the Camelia Room of The Houstonian Conference Center, 111 North Post Oak Lane,
Houston, Texas, commencing at 11:00 a.m., local time, for the purpose of
considering and voting upon a proposal to approve and adopt the Merger
Agreement (the "Western Proposal").
Record Date. Only those stockholders of BJ Services and stockholders of
Western of record at the close of business on March 15, 1995 (the "Record
Date") are entitled to notice of, and to vote at, the BJ Services Special
Meeting and the Western Special Meeting, respectively.
Votes Required For BJ Proposals. The following votes of the holders of
BJ Common Stock are required to approve the BJ Proposals:
(i) Pursuant to provisions of the DGCL and in accordance with
the rules of the NYSE, the affirmative vote of the holders of a majority
of the outstanding shares of BJ Common Stock is required to approve the
Merger Agreement and the issuance pursuant to the Merger Agreement of
the BJ Common Stock (and associated BJ Rights) and BJ Warrants to
Western's security holders. Holders of BJ Common Stock are not entitled
to appraisal rights under Section 262 ("Section 262") of the DGCL in
connection with the Merger. See "The Merger -- Dissenters' Appraisal
Rights."
(ii) The affirmative vote of the holders of a majority of the
outstanding shares of BJ Common Stock is required to approve BJ Proposal
No. 2 (the proposed amendment to the BJ Services Charter increasing the
authorized shares of BJ Common Stock from 40,000,000 to 80,000,000).
(iii) The affirmative vote of holders of a majority of the
total shares of BJ Common Stock present in person or represented by
proxy and entitled to vote at the BJ Services Special Meeting is
required to approve BJ Proposal No. 3 (the adoption of the BJ 1995
Incentive Plan).
Any abstention with respect to the Merger proposal, the amendment of the
BJ Services Charter or the adoption of the BJ 1995 Incentive Plan will have the
effect of a vote against such proposals. Any broker nonvote will not affect
the outcome of the proposal regarding the BJ 1995 Incentive Plan, but a
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<PAGE> 19
broker nonvote will have the effect of a vote against the Merger proposal and
the amendment of the BJ Services Charter. The failure of holders of BJ Common
Stock to sign and return their proxy will have the same effect as voting
against the Merger proposal and the amendment of the BJ Services Charter.
On the Record Date, there were a total of 15,717,270 shares of BJ
Common Stock outstanding and entitled to vote at the BJ Services Special
Meeting. The directors and executive officers of BJ Services and their
affiliates held on the Record Date approximately 0.2% of the shares of BJ Common
Stock entitled to vote at the BJ Services Special Meeting.
Consummation of the Merger is not subject to or conditioned upon
stockholder approval of either BJ Proposal No. 2 or BJ Proposal No. 3. If BJ
Proposal No. 2 and BJ Proposal No. 3 are approved by the requisite vote of the
stockholders of BJ Services, however, neither of such proposals will be
implemented unless the Merger is consummated.
Vote Required For Western Proposal. Pursuant to Western's Restated
Certificate of Incorporation (the "Western Charter"), the affirmative vote of
the holders of 66 2/3% of the outstanding shares of Western Common Stock
entitled to vote at the Western Special Meeting will be required to approve and
adopt the Merger Agreement. Abstentions and broker nonvotes will have the
effect of a vote against the Western Proposal, as will the failure of holders
of Western Common Stock to sign and return their proxy. On the Record Date,
there were a total of 18,288,037 shares of Western Common Stock outstanding
and entitled to vote at the Western Special Meeting. The directors and
executive officers of Western and their affiliates held on the Record Date
approximately 1.4% of the shares of Western Common Stock entitled to vote at the
Western Special Meeting. In connection with the Merger, holders of Western
Common Stock will be entitled to demand appraisal rights under Section 262 of
the DGCL, subject to satisfaction by such stockholders of the conditions for
perfection of appraisal rights established by Section 262. See "The Merger --
Dissenters' Appraisal Rights."
THE MERGER
PRINCIPAL TERMS OF THE MERGER
At the Effective Time (as defined herein), Western will merge into BJ
Services, with BJ Services becoming the surviving corporation of such merger
whose corporate existence will continue after the Merger (the "Surviving
Corporation"). The separate corporate existence of Western will cease at the
Effective Time.
Description of Merger Consideration. In the Merger, each share of
Western Common Stock outstanding immediately prior to the Effective Time (other
than shares as to which appraisal rights have been perfected under Delaware law
("Dissenting Shares"), and shares owned immediately prior to the Effective Time
directly or indirectly by Western, BJ Services or any subsidiary of either,
which will be cancelled) will be converted into the right to receive the
following, without interest (the "Merger Consideration"): either (i) Cash
Consideration of $20.00 and Warrant Consideration of 0.2 BJ Warrants expiring
on the fifth anniversary of the closing date of the Merger (the "Closing Date")
to purchase one share of BJ Common Stock (the "BJ Warrants") in substantially
the form included with the Warrant Agreement, as amended, annexed to Appendix B
to this Joint Proxy Statement/Prospectus ("Warrant Agreement"), at an initial
exercise price of $30.00 per share of BJ Common Stock (subject to adjustment as
provided in the Warrant Agreement) ("Warrant Consideration") or (ii) not less
than 0.8989 shares nor more than 1.1594 shares of BJ Common Stock determined as
described below under "-- Determination of Stock Consideration" and a
corresponding number of BJ Rights (collectively, the "Stock Consideration") and
the Warrant Consideration; provided, that the maximum number of shares of
Western Common Stock (the "Cash Election Number") to be converted into the
right to receive the Cash Consideration (in addition to the Warrant
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Consideration) in the Merger shall be approximately equal to 50% of the number
of shares of Western Common Stock outstanding immediately prior to the
Effective Time of the Merger (less the number of Dissenting Shares and shares
of Western Common Stock owned by Western, BJ Services or any subsidiary of
either). As described below under "-- Election Procedures to Receive Cash or
Stock Consideration," Western stockholders may elect to receive Stock
Consideration or Cash Consideration in the Merger, subject to certain
allocation and proration limitations. Neither fractional shares of BJ Common
Stock nor fractions of BJ Warrants will be issued in connection with the
Merger. A holder of Western Common Stock otherwise entitled to a fractional
share of BJ Common Stock or a fractional BJ Warrant will be paid cash in lieu
of such fractional interest.
Determination of Stock Consideration. The Stock Consideration to be
issued in the Merger for each share of Western Common Stock will be determined
generally as follows: (i) if the Closing Price (as defined below) of BJ Common
Stock is $17.25 or lower, 1.1594 shares of BJ Common Stock (provided that
Western has the right under certain circumstances to terminate the Merger
Agreement if the Closing Price falls below $14.00 per share; see "The Merger --
Termination"); (ii) if the Closing Price of BJ Common Stock is $22.25 or
greater, 0.8989 shares of BJ Common Stock; or (iii) if the Closing Price of the
BJ Common Stock is greater than $17.25 but less than $22.25, that portion of a
share of BJ Common Stock equal to the quotient of $20.00 divided by the Closing
Price of the BJ Common Stock. "Closing Price" means the average of the
midpoint of the daily high and low trading prices per share of BJ Common Stock,
rounded to four decimal places, as reported in The Wall Street Journal's New
York Stock Exchange Composite Transactions Reports, for each of the first 20
consecutive trading days in the period commencing 25 trading days prior to the
Closing Date. The Stock Consideration will also include a corresponding number
of BJ Rights to purchase one one-hundredth of a share of BJ Preferred Stock,
par value $1.00 per share, pursuant to the Rights Agreement, as amended, dated
as of January 12, 1994 (the "BJ Rights Agreement").
Warrant Consideration. The Warrant Consideration to be received in the
Merger for each share of Western Common Stock will consist of 0.2 BJ Warrants
to purchase one share of BJ Common Stock at an exercise price of $30.00 per
share (subject to adjustment). The BJ Warrants will expire on the fifth
anniversary of the Closing Date and will be issued pursuant to the Warrant
Agreement. The BJ Warrants have been approved for listing on the NYSE, subject
to official notice of issuance, under the trading symbol "BJS WS."
Election Procedures to Receive Cash or Stock Consideration. Subject to
allocation and proration described below, each record holder of shares of
Western Common Stock (other than holders of Dissenting Shares and shares owned
by Western, BJ Services or any subsidiary of either) will be entitled (i) to
elect to receive Cash Consideration and Warrant Consideration (a "Cash
Election"), (ii) to elect to receive Stock Consideration and Warrant
Consideration (a "Stock Election") or (iii) to indicate that such record holder
has no preference as to the receipt (in addition to Warrant Consideration) of
Cash Consideration or Stock Consideration for such shares (a "Non-Election").
All such elections are to be made on a form of election (the "Election Form")
to be mailed to Western stockholders of record as of the Record Date. Persons
who become Western stockholders after the Record Date may obtain copies of the
Election Form upon request from First Chicago Trust Company of New York (the
"Exchange Agent") either in writing by mail to First Chicago Trust Company of
New York, Tenders & Exchanges, P.O. Box 2563, Suite 4660, Jersey City, New
Jersey 07303-2563, or by courier to First Chicago Trust Company of New York,
Tenders & Exchanges, Suite 4680-BJS, 14 Wall Street, 8th Floor, New York, New
York 10005, or by telephone at (201) 324-0137. Election Forms must be properly
completed, signed and submitted to the Exchange Agent, accompanied by all stock
certificates representing shares of Western Common Stock held by the person
submitting the Election Form (or by appropriate guarantee of delivery as set
forth in the Election Form). Election Forms must be received by the Exchange
Agent no later than 5:00 p.m., New York City time, on the business day that is
two trading days prior to the Closing Date (the "Election Deadline"). The
Closing Date is
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currently scheduled to be April 13, 1995. BJ Services will issue a public
announcement of the anticipated Closing Date as soon as practicable, but in no
event less than five trading days prior to such Closing Date. Until the
Election Deadline, all such elections will be revocable. WESTERN STOCKHOLDERS
WHO DO NOT SUBMIT THEIR STOCK CERTIFICATES WITH THEIR ELECTION FORMS (OR
PROVIDE FOR AND COMPLY WITH THE REQUIREMENTS OF, GUARANTEED DELIVERY OF SUCH
CERTIFICATES BY A U.S. INSTITUTION, AS SPECIFIED IN THE MERGER AGREEMENT
("GUARANTEED DELIVERY")) WILL BE DEEMED TO HOLD NON-ELECTION SHARES. Holders
of record of Western Common Stock who hold such shares as nominees, trustees or
in other such representative capacities may submit multiple Election Forms.
BJ Services, in its sole and absolute discretion, may deem shares of
Western Common Stock in respect of which a Non-Election is made (or deemed to
have been made) (collectively, "Non-Election Shares") to be shares in respect
of which either a Cash Election or Stock Election has been made.
IN MAKING AN ELECTION FOR CASH CONSIDERATION OR STOCK CONSIDERATION,
WESTERN STOCKHOLDERS ARE URGED TO CONSIDER THE POSSIBLE IMPACT OF THE
FLUCTUATING MARKET VALUE OF BJ COMMON STOCK ON THE VALUE OF TOTAL CONSIDERATION
RECEIVED IN THE MERGER. UNDER THE MERGER AGREEMENT, THE STOCK CONSIDERATION
PER SHARE OF WESTERN COMMON STOCK WILL BE FIXED AT NOT LESS THAN 0.8989 SHARES
AND NOT MORE THAN 1.1594 SHARES OF BJ COMMON STOCK IN ORDER TO APPROXIMATE AN
ASSUMED VALUE OF $20.00 PER SHARE OF WESTERN COMMON STOCK BASED UPON THE
CLOSING PRICE OF BJ COMMON STOCK, SUBJECT TO THE STATED MAXIMUM AND MINIMUM
STOCK CONSIDERATION. IF THE CLOSING PRICE OF BJ COMMON STOCK IS LESS THAN
$17.25 PER SHARE, THE VALUE OF THE STOCK CONSIDERATION BASED UPON THE CLOSING
PRICE WILL BE LESS THAN $20.00. CONVERSELY, IF THE CLOSING PRICE OF BJ COMMON
STOCK IS MORE THAN $22.25 PER SHARE, THE VALUE OF THE STOCK CONSIDERATION BASED
UPON THE CLOSING PRICE WILL BE MORE THAN $20.00. IN ANY EVENT, THERE IS NO
ASSURANCE THAT THE CLOSING PRICE (WHICH IS BASED UPON A 20-TRADING-DAY AVERAGE
TRADING PRICE DETERMINED PRIOR TO THE CLOSING DATE) OF BJ COMMON STOCK WILL
APPROXIMATE THE ACTUAL VALUE OF BJ COMMON STOCK AT THE CLOSING DATE OR AT ANY
TIME THEREAFTER. THE FLUCTUATING MARKET VALUE OF BJ COMMON STOCK MAY ALSO
AFFECT THE VALUE OF THE WARRANT CONSIDERATION RECEIVED IN THE MERGER, WHICH
WILL ALSO BE AFFECTED BY WHETHER OR NOT A PUBLIC MARKET DEVELOPS FOR THE BJ
WARRANTS AND, IF SO, THE FLUCTUATING MARKET VALUE OF THE BJ WARRANTS.
WESTERN STOCKHOLDERS WHO PERFECT AN ELECTION MAY NOT RECEIVE THE ELECTED
STOCK CONSIDERATION OR CASH CONSIDERATION IN FULL DUE TO PRORATION LIMITATIONS
IN THE MERGER AGREEMENT, WHICH GENERALLY ARE DESIGNED TO EXCHANGE ONE-HALF OF
THE OUTSTANDING SHARES OF WESTERN COMMON STOCK FOR STOCK CONSIDERATION AND
ONE-HALF OF SUCH SHARES (INCLUDING DISSENTING SHARES) FOR CASH CONSIDERATION.
WESTERN STOCKHOLDERS ARE ALSO URGED TO CONSIDER THE DIFFERING FEDERAL INCOME
TAX CONSEQUENCES IN MAKING THE ELECTION, AS DISCUSSED BELOW.
Proration of Merger Consideration. In the event that the aggregate
number of shares in respect of which Cash Elections have been made (the "Cash
Election Shares") exceeds the Cash Election Number, all shares of Western
Common Stock in respect of which Stock Elections have been made (the "Stock
Election Shares") and all Non-Election Shares in respect of which Stock
Elections are deemed to have been made will be converted into the right to
receive Stock Consideration (in addition to Warrant Consideration), and the
Cash Election Shares will be converted into the right to receive Stock
Consideration or Cash Consideration (in addition to Warrant Consideration) as
follows: (i) Cash Election Shares will be deemed converted to Stock Election
Shares, on a pro rata basis for each record holder of Western Common Stock with
respect to those shares of Western Common Stock, if any, of such record holder
which are Cash Election Shares, so that the number of Cash Election Shares so
converted, when added to the other Stock Election Shares and all Non-Election
Shares in respect of which Stock Elections are deemed to have been made, will
equal as closely as practicable the Stock Election Number, and all such Cash
Election Shares so converted will be converted into the right to
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receive Stock Consideration (in addition to Warrant Consideration); and (ii)
the remaining Cash Election Shares will be converted into the right to receive
Cash Consideration (in addition to Warrant Consideration).
In the event that the aggregate number of Stock Election Shares exceeds
the Stock Election Number, all Cash Election Shares and all Non-Election Shares
in respect of which Cash Elections are deemed to have been made will be
converted into the right to receive Cash Consideration (in addition to Warrant
Consideration), and all Stock Election Shares will be converted into the right
to receive Stock Consideration or Cash Consideration (in addition to Warrant
Consideration) as follows: (i) Stock Election Shares will be deemed converted
into Cash Election Shares, on a pro rata basis for each record holder of
Western Common Stock with respect to those shares of Western Common Stock, if
any, of such record holder which are Stock Election Shares, so that the number
of Stock Election Shares so converted, when added to the other Cash Election
Shares and all Non-Election Shares in respect of which Cash Elections are
deemed to have been made, will equal as closely as practicable the Cash
Election Number, and all such shares of Western Common Stock so converted will
be converted into the right to receive the Cash Consideration (in addition to
Warrant Consideration); and (ii) the remaining Stock Election Shares will be
converted into the right to receive the Stock Consideration (in addition to
Warrant Consideration).
FUNDING RELATED TO THE MERGER
BJ Services has entered into a commitment agreement with Bank of America
National Trust and Savings Association ("Bank of America") pursuant to which
Bank of America has agreed, subject to execution of a definitive credit
agreement, the completion of satisfactory due diligence and certain other
conditions, to advance up to $440 million to BJ Services to fund the Cash
Consideration, to retire certain indebtedness of BJ Services and Western then
outstanding and for working capital purposes. It is expected that Bank of
America will syndicate a part of such credit facility to a group of financial
institutions. For a description of such commitment agreement and the expected
terms of the definitive credit agreement to be entered into among BJ Services,
Bank of America and such group of lenders, see "Description of Certain
Indebtedness of BJ Services -- New Bank Credit Facility." The Merger is not
conditioned upon the concluding of such financing arrangements by BJ Services.
REASONS FOR THE MERGER
In reaching its conclusion that the terms of the Merger are fair to, and
in the best interests of, BJ Services and the stockholders of BJ Services, BJ
Services' Board of Directors considered a number of factors, including, among
others, analyses of consolidation cost savings, potential business synergies,
increased competitiveness produced by combining under-performing operations and
projected accretion in earnings and cash flow with respect to the BJ Common
Stock resulting from the Merger. BJ Services' Board of Directors also relied
upon the opinion of Merrill Lynch & Co. ("Merrill Lynch"), financial advisor
to BJ Services, that the consideration to be paid by BJ Services pursuant to
the Merger, taken as a whole, is fair to BJ Services from a financial point of
view.
The Board of Directors of Western considered numerous factors in
concluding that the Merger is fair to, and in the best interests of, Western
and its stockholders (other than BJ Services). Such factors included, among
others, the large premium over recent trading prices of Western Common Stock
represented by the Merger, the fact that holders of 50% of the shares of
Western Common Stock immediately prior to the Effective Time will initially own
a substantial equity position in the combined company and the fact that Western
stockholders receiving Stock Consideration will be able to participate in a
larger oilfield services company with a more diversified geographic coverage
than Western on a stand-alone basis, with the ability to generate significant
operating efficiencies and cost savings as a result of the combination.
Western's Board of Directors also relied upon the opinion of
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Goldman, Sachs & Co. ("Goldman Sachs"), financial advisor to Western, that the
consideration to be received by holders of Western Common Stock pursuant to the
Merger Agreement is fair to the stockholders of Western.
RECOMMENDATION OF THE BOARDS OF DIRECTORS
THE BOARD OF DIRECTORS OF BJ SERVICES HAS UNANIMOUSLY APPROVED (A) THE
MERGER AGREEMENT AND THE MERGER, THE PAYMENT OF THE MERGER CONSIDERATION
PURSUANT THERETO AND THE CONSUMMATION OF THE OTHER TRANSACTIONS CONTEMPLATED
THEREBY, (B) THE AMENDMENT OF THE BJ SERVICES CHARTER PROPOSED IN BJ PROPOSAL
NO. 2 AND (C) THE ADOPTION OF THE BJ 1995 INCENTIVE PLAN PROPOSED IN BJ
PROPOSAL NO. 3, AND UNANIMOUSLY RECOMMENDS THAT BJ SERVICES STOCKHOLDERS VOTE
(X) FOR APPROVAL AND ADOPTION OF SUCH MATTERS SUBMITTED TO THEM IN CONNECTION
WITH THE MERGER, INCLUDING THE ISSUANCE OF THE STOCK CONSIDERATION AND THE
WARRANT CONSIDERATION PURSUANT THERETO, (Y) FOR THE AMENDMENT TO THE BJ
SERVICES CHARTER INCREASING THE AUTHORIZED NUMBER OF SHARES OF BJ COMMON STOCK
FROM 40,000,000 TO 80,000,000 AND (Z) FOR THE ADOPTION OF THE BJ 1995 INCENTIVE
PLAN.
THE BOARD OF DIRECTORS OF WESTERN HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE MERGER AND THE CONSUMMATION OF THE OTHER TRANSACTIONS
CONTEMPLATED THEREBY AND UNANIMOUSLY RECOMMENDS THAT WESTERN STOCKHOLDERS VOTE
FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
OPINIONS OF FINANCIAL ADVISORS
At the November 17, 1994 meeting of the Board of Directors of BJ
Services held to consider and vote on entering into the Merger Agreement,
Merrill Lynch, financial advisor to BJ Services, delivered its oral opinion
(subsequently confirmed in writing) to the Board of Directors of BJ Services
to the effect that, as of such date, the consideration to be paid by BJ
Services pursuant to the Merger, taken as a whole, is fair to BJ Services from
a financial point of view.
At its November 17, 1994 meeting to consider and vote on entering into
the Merger Agreement, the Board of Directors of Western received an oral
opinion, which was subsequently confirmed in writing, from Goldman Sachs,
financial advisor to Western, that, as of that date, the consideration to be
received by the holders of Western Common Stock pursuant to the Merger
Agreement is fair to stockholders of Western.
For information on the assumptions made, matters considered and limits
of reviews by Merrill Lynch and Goldman Sachs, see "The Merger -- Opinions of
Financial Advisors." Stockholders are urged to read in their entirety the full
texts of the opinions of Merrill Lynch and Goldman Sachs, which are attached to
this Joint Proxy Statement/Prospectus as Appendices C and D, respectively, and
are incorporated herein by reference.
In connection with Merrill Lynch's services as financial advisor to BJ
Services, BJ Services has agreed to pay Merrill Lynch as compensation for its
services a fee in the amount of $3,600,000 upon consummation of the Merger. BJ
Services has paid Merrill Lynch fees of $300,000 that will be credited against
such transaction fee. BJ Services has also agreed to reimburse Merrill Lynch
for certain reasonable out-of-pocket expenses incurred in connection with the
Merger and to indemnify Merrill Lynch (and its employees and directors) against
certain liabilities and expenses in connection with the Merger, including
certain liabilities under the federal securities laws.
In connection with Goldman Sachs' services as financial advisor to
Western, Western has agreed to pay Goldman Sachs as compensation for its
services a fee in the amount of 0.875% of the
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aggregate value of the consideration to be paid pursuant to the Merger
Agreement to holders of shares of Western Common Stock and options to acquire
such shares and the principal amount of indebtedness on Western's consolidated
balance sheet. Western has paid Goldman Sachs a fee of $250,000 that will be
credited against such transaction fee. Western has also agreed to reimburse
Goldman Sachs for certain reasonable out-of-pocket expenses incurred in
connection with the Merger and to indemnify Goldman Sachs (and its employees
and partners) against certain liabilities and expenses in connection with the
Merger, including certain liabilities under the federal securities laws.
OTHER TERMS OF THE MERGER
Fractional Interests. No fractional shares of BJ Common Stock or
associated BJ Rights or fractions of Warrants will be issued pursuant to the
Merger. In lieu of such fractional securities, each holder who would otherwise
receive a fractional interest will receive (a) cash (without interest) in an
amount equal to the product of such fractional part of a share of BJ Common
Stock multiplied by the Closing Price and/or (b) cash (without interest) in an
amount equal to the product of such fraction of a BJ Warrant multiplied by the
Warrant Current Market Price (as defined below under "The Merger -- Merger
Consideration -- Western Options").
Accounting Treatment. The Merger will be accounted for as a purchase by
BJ Services in accordance with generally accepted accounting principles.
Exchange of Western Stock Certificates. Stockholders of Western who
wish to submit an Election Form should deliver their stock certificates (or
provide for, and comply with the requirements of, Guaranteed Delivery) together
with such Election Form to the Exchange Agent. Stock certificates should not
be sent to BJ Services or Western. If a stockholder does not submit such
holder's stock certificates with a properly completed Election Form (or provide
for, and comply with the requirements of, Guaranteed Delivery), then promptly
after the Closing Date, a letter of transmittal and instructions for
surrendering stock certificates will be mailed to each such holder of Western
Common Stock for use in exchanging such holder's stock certificates for BJ
Warrants and certificates evidencing BJ Common Stock or cash, including cash in
lieu of fractional shares.
Promptly after completion of the allocation and election procedures
relating to stockholder elections (described above under "-- Election
Procedures to Receive Cash or Stock Consideration"), BJ Services will deposit
or cause to be deposited with the Exchange Agent the applicable amounts of
shares of BJ Common Stock, BJ Warrants and cash that comprise the Merger
Consideration. Because Guaranteed Delivery permits the delivery of stock
certificates up to five business days after the Effective Time, the shares of
BJ Common Stock, BJ Warrants and cash issued and paid in the Merger will not be
distributed until at least five business days after the Closing Date.
Treatment of Western Options. Western has issued stock options
("Western Options") that as of February 15, 1995 entitled the holders thereof
to purchase an aggregate of 974,165 shares of Western Common Stock, which
options have exercise prices equal to or less than $19.00 per share and a
weighted average exercise price of $8.30 per share. The Merger Agreement
provides that immediately prior to the Effective Time all outstanding Western
Options shall be cancelled and each holder of a cancelled Western Option shall
be entitled to receive, as promptly as practicable after the Effective Time, an
amount in cash equal to the product of (i) the total number of shares of
Western Common Stock subject to such holder's option and (ii) the excess of (x)
$20.00 plus the value assigned to the Warrant Consideration over (y) the
exercise price of such option.
Treatment of Western Convertible Debentures. The 7 1/4% Convertible
Subordinated Debentures due January 15, 2015 of Western (the "Western
Convertible Debentures") that are outstanding immediately prior to the
Effective Time will remain outstanding subsequent to the Effective Time as
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debt instruments of the Surviving Corporation. After the Effective Time, each
outstanding Western Convertible Debenture will be convertible into the amount
of Stock Consideration and Warrant Consideration (and cash in lieu of
fractional shares and fractional BJ Warrants) and Cash Consideration as the
holder thereof would have had the right to receive if such Western Convertible
Debentures had been converted immediately prior to the Closing Date and the
holder had made a Stock Election as to 50% of such shares and a Cash Election
as to the remaining 50%. As of March 1, 1995, approximately $88.8 million in
aggregate principal amount of Western Convertible Debentures was outstanding.
Certain Federal Income Tax Consequences. It is intended that the Merger
qualify as a reorganization within the meaning of Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended (the "Code"), and that, accordingly,
for federal income tax purposes, no gain or loss will be recognized by BJ
Services or Western as a result of the Merger. A citizen or resident of the
United States or a domestic corporation (a "U.S. Holder") who holds Western
Common Stock and exchanges such stock for Cash Consideration and Warrant
Consideration generally will recognize capital gain or loss in an amount equal
to the difference between (i) the sum of the amount of cash so received and the
fair market value of the Warrant Consideration received and (ii) such U.S.
Holder's tax basis in the shares of Western Common Stock so exchanged. A U.S.
Holder of Western Common Stock who exchanges Western Common Stock solely for
Stock Consideration and Warrant Consideration will realize gain or loss equal
to the difference between the fair market value of the Stock Consideration and
Warrant Consideration received and the U.S. Holder's adjusted tax basis in the
Western Common Stock surrendered therefor. Such gain, if any, will be
recognized, however, only to the extent of the fair market value of the Warrant
Consideration received by such holder; any loss will not be recognized. A U.S.
Holder of Western Common Stock who receives cash, BJ Common Stock and BJ
Warrants in exchange for Western Common Stock will realize gain or loss equal
to the difference between the fair market value of the BJ Common Stock and the
BJ Warrants plus the amount of cash received, and the holder's adjusted tax
basis in the Western Common Stock surrendered therefor. Such U.S. Holder's
gain, if any, will be recognized, however, only to the extent of the cash and
the fair market value of the BJ Warrants received by such U.S. Holder; any loss
will not be recognized. The holding period of BJ Common Stock received in the
Merger will include the holding period of the Western Common Stock surrendered
therefor. Prior to the Effective Time, Western expects to receive an opinion
from Sullivan & Cromwell, counsel to Western, to the effect that the Merger
will be treated as a reorganization under Section 368(a) of the Code. Receipt
from Sullivan & Cromwell of this opinion is not, however, a condition to
consummation of the Merger. Depending upon uncertain factual developments, it
is possible that the Merger might not be treated as a reorganization within the
meaning of Section 368(a) of the Code, as a result of which each Western
stockholder would recognize gain in the amount of the difference between the
fair market value of the BJ Common Stock and/or the amount of cash received
plus the fair market value of the BJ Warrants received, and such holder's
adjusted tax basis in the Western Common Stock exchanged therefor. For a
discussion of these and other federal income tax considerations in connection
with the Merger, see "The Merger -- Certain Federal Income Tax Consequences."
Effective Time of the Merger. The Merger will become effective upon the
proper filing of a certificate of merger (the "Certificate of Merger") with the
Secretary of State of Delaware (the "Effective Time"). The Merger Agreement
provides that BJ Services and Western will cause the Effective Time to occur as
promptly as practicable after the approval by the stockholders of each of BJ
Services and Western and the satisfaction (or waiver, if permissible) of the
other conditions set forth in the Merger Agreement.
Governmental and Regulatory Approvals. The Merger is subject to the
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the regulations of the Federal Trade Commission (the "FTC")
promulgated thereunder (collectively, the "HSR Act"). The
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HSR Act requires, among other things, that certain information regarding
the Merger be furnished to the Antitrust Division of the Department of Justice
(the "Antitrust Division") and the FTC and that certain waiting periods expire
or terminate before the Merger is consummated. On November 18, 1994, BJ
Services and Western filed notification reports in connection with the Merger
with the Antitrust Division and the FTC pursuant to the HSR Act. On December
16, 1994, BJ Services and Western received a request from the Antitrust Division
for additional information and documentary material in connection with the
Merger, which extends the HSR Act waiting period until 20 days after both
parties' substantive compliance therewith. On January 26, 1995 and January 27,
1995, respectively, Western and BJ Services filed additional information and
documentary material with the Antitrust Division in response to such request and
agreed with the Antitrust Division not to consummate the Merger until March 8,
1995. On March 7, 1995, the Antitrust Division agreed that it would not
challenge the Merger subject to a restructuring involving the divestiture of
certain of BJ Services' fracturing and nitrogen pumping assets located in
Brighton, Colorado and Cortland, Ohio. BJ Services has entered into an agreement
with Nowsco for the sale of such assets, which is scheduled to close
concurrently with the closing of the Merger. Despite such agreement, there can
be no assurance that a challenge to the Merger will not be made or, if such a
challenge is made, that BJ Services and Western will prevail.
Neither BJ Services nor Western is aware of any other governmental or
regulatory approvals required for the consummation of the Merger.
Other Conditions to the Merger. In addition to obtaining requisite
stockholder approvals, consummation of the Merger is subject to the
satisfaction of a number of other conditions, including, among others, the
following conditions: (i) no statute, rule or regulation shall have been
enacted by any United States federal or state governmental, regulatory or
administrative agency or authority that makes illegal or would prevent the
consummation of the Merger; (ii) no injunction or other ruling by a court of
competent jurisdiction or any federal or state governmental, regulatory or
administrative agency or authority preventing the consummation of the Merger
shall be in effect; (iii) any required post-effective amendment to the
Registration Statement of which this Joint Proxy Statement/Prospectus is a part
shall have become effective under the Securities Act and such Registration
Statement shall not be the subject of any stop order or proceedings seeking a
stop order, and any material "blue sky" and other state securities laws
applicable to the registration of the BJ Common Stock and BJ Warrants
(including the BJ Common Stock issuable upon exercise thereof) to be issued in
the Merger shall have been complied with; and (iv) the shares of BJ Common
Stock issuable to Western's stockholders pursuant to the Merger Agreement shall
have been approved for listing on the NYSE, subject to official notice of
issuance.
The obligation of Western to consummate the Merger also is subject to
the fulfillment at or prior to the Closing Date of the following additional
conditions: (i) BJ Services shall have performed or complied with in all
material respects its agreements and covenants contained in the Merger
Agreement and the Senior Executive Termination Agreements (defined herein)
required to be performed or complied with at or prior to the Closing Date and,
subject to certain exceptions, the representations and warranties of BJ
Services contained in the Merger Agreement shall be true in all respects when
made and on and as of the Closing Date with the same force and effect as if
made on and as of such date; and (ii) the Warrant Agreement shall have been
executed and delivered by BJ Services. See "The Merger -- Conditions to the
Consummation of the Merger."
The obligation of BJ Services to consummate the Merger also is subject
to the fulfillment at or prior to the Closing Date of the following additional
conditions: (i) Western shall have performed or complied with in all material
respects its agreements and covenants contained in the Merger Agreement
required to be performed or complied with at or prior to the Closing Date and,
subject to certain exceptions, the representations and warranties of Western
contained in the Merger
-15-
<PAGE> 27
Agreement shall be true in all respects when made and on and as of the Closing
Date with the same force and effect as if made on and as of such date; and (ii)
the amendment to the Western Stockholder Protection Rights Plan, as amended
(the "Western Rights Plan"), adopted by the Board of Directors of Western prior
to the execution of the Merger Agreement, shall be binding, valid and
enforceable.
Employee Benefits. For a discussion of Western's executive severance
and termination agreements and benefits and incentive plans and the effect of
the Merger on such benefit and incentive plans, see "The Merger -- Effect on
Western Employee Benefit Plans and Employee Agreements."
Interests of Certain Persons in the Merger. For a description of the
interests of certain persons in the Merger (including pursuant to Western's
termination and severance agreements, employee plans and indemnification
arrangements, pursuant to certain arrangements for the appointment of three
Western directors to the Board of Directors of BJ Services as of the Effective
Time, and resulting from the possible vesting of certain outstanding stock
options and performance stock units of BJ Services), see "The Merger --
Interests of Certain Persons in the Merger."
No Solicitation. Western has agreed not to, and to cause its
subsidiaries, affiliates, employees, agents and representatives not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal with respect to a Western Alternative Transaction (as
hereinafter defined), participate in any negotiations concerning, or provide to
any other person any information or data relating to Western or its
subsidiaries for the purpose of, or have any substantive discussions with any
person relating to, or otherwise cooperate with or assist or participate in or
facilitate, any inquiries or the making of any proposal which constitutes, or
would reasonably be expected to lead to, any effort or attempt by any other
person to seek to effect a Western Alternative Transaction, or agree to or
endorse any Western Alternative Transaction; provided, however, that Western or
its Board of Directors may, under certain circumstances, take and disclose to
the stockholders of Western a position with respect to any such Western
Alternative Transaction that is required by applicable law; provided, further,
that (i) the Board of Directors of Western may respond to an unsolicited
request of a third party which executes a confidentiality agreement with
Western by providing information under certain circumstances and participate in
negotiations or have substantive discussions with a third party who makes an
unsolicited, bona fide proposal regarding a Western Alternative Transaction,
and cooperate with or assist or facilitate such third party in its attempt to
effect such Western Alternative Transaction, and (ii) following receipt of an
unsolicited, bona fide proposal from a third party regarding a Western
Alternative Transaction, the Board of Directors of Western may withdraw or
modify its recommendation of the Merger, in each case to the extent that the
Board determines in good faith, based upon the advice of counsel, that such
action may be required in order for the Board to act in a manner that is
consistent with its fiduciary obligations under applicable law.
"Western Alternative Transaction" generally means: (i) any business
combination transaction (other than the Merger) involving Western in which
another person would acquire beneficial ownership of at least 20% of the
aggregate voting power of all voting securities of Western or the Surviving
Corporation, as the case may be; (ii) any tender offer or exchange offer for
any securities of Western which, if consummated, would result in another person
becoming the beneficial owner of at least 20% or more of the aggregate voting
power of all voting securities of Western; (iii) any sale or other disposition
of the consolidated assets of Western (excluding the offshore drilling rigs) if
the fair market value of such assets exceeds 20% of the aggregate fair market
value of the consolidated assets of Western before giving effect to such sale
or other disposition; (iv) the adoption by Western of a plan of liquidation,
the declaration or payment by Western of an extraordinary dividend or the
effectuation by Western of a recapitalization or other transaction which would
involve either a change in Western's outstanding capital stock or a
distribution of assets of any kind to stockholders; or (v) the repurchase by
Western of shares of Western Common Stock representing at least 20% or more of
the aggregate voting power of all voting securities of Western.
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<PAGE> 28
Termination Fee; Expenses. Except as discussed in the next sentence,
whether or not the Merger is consummated, all costs and expenses incurred in
connection with the Merger, the Merger Agreement and the transactions
contemplated thereby will be paid by the party incurring such cost or expense.
Under certain circumstances, BJ Services or Western may be required to pay the
other a fee as well as reimburse the other for its expenses upon termination of
the Merger Agreement. See "The Merger -- Termination Fees; Expenses."
Standstill Agreements. If the Merger Agreement is terminated (i) by
either BJ Services or Western because (a) either is prohibited by a final and
nonappealable order or injunction of a United States federal or state court of
competent jurisdiction from consummating the Merger (but only if the action
giving rise to an order or injunction sought to enjoin or otherwise prohibit
the Merger for alleged violations of the federal or state antitrust laws) or
(b) the final terms of a consent decree between BJ Services and the Antitrust
Division or the FTC (the "Consenting Parties") with respect to the Merger (the
"Consent Decree Final Agreement") have not been agreed to by the Consenting
Parties (as confirmed by Western), or an order of a Federal District Court
adjudging that the Merger does not violate the federal antitrust laws shall not
have been issued (such Consent Decree Final Agreement or court order being
collectively referred to as the "Antitrust Disposition Action") by a specified
date; (ii) by either BJ Services or Western because the stockholders of BJ
Services fail to approve the Merger Agreement and the issuance of the Stock
Consideration and Warrant Consideration in the Merger; or (iii) by Western,
because the Closing Price is below $14.00 and BJ Services has not offered to
amend the Merger Agreement so that each share of Western Common Stock which is
the subject of a Stock Election will be converted into a number of shares of BJ
Common Stock having the same aggregate value based on the actual Closing Price
as the aggregate value of the number of shares of BJ Common Stock into which
such shares of Western Common Stock would have been converted if the Closing
Price had been $14.00; then for five years after the date of such termination
in the case of clauses (i) and (ii) and for two years after the date of
termination in the case of clause (iii), BJ Services, its successors and its
affiliates will be prohibited from taking certain actions with respect to
Western (including acting to control or influence, or seeking to control or
influence, Western or the management, Board of Directors, policies or affairs
of Western). If clause (i) above is applicable and BJ Services has paid the
termination fee to Western, Western will be prohibited from taking any of the
actions set forth above with respect to BJ Services for five years after such
termination. For a more detailed description of such provisions, see "The
Merger -- Standstill Agreements."
Termination or Amendment of the Merger Agreement. The Merger Agreement
is subject to termination at the option of either BJ Services or Western if the
Merger is not consummated on or before August 31, 1995 (which date may be
extended by mutual agreement of the Boards of Directors of BJ Services and
Western), and prior to such time upon the occurrence of certain specified
events. The Merger Agreement may be amended or supplemented at any time by
agreement of BJ Services and Western, or any provision of the Merger Agreement
may be waived at any time by the Board of Directors of the party which is, or
the stockholders which are, entitled to the benefits thereof, by action taken
by their respective Boards of Directors; provided, that, after any stockholder
approval of the Merger Agreement, no amendment may be made which alters or
changes the Merger Consideration or alters or changes any other terms of the
Merger Agreement without further stockholder approval if such amendment
adversely affects the rights of the holders of Western Common Stock.
-17-
<PAGE> 29
Indemnification. The Merger Agreement provides that from and after the
Closing Date, present and former officers and directors of Western shall be
indemnified by the Surviving Corporation against liabilities and costs arising
out of matters existing or occurring at or prior to the Closing Date, to the
fullest extent allowed by law. Upon consummation of the Merger, the Surviving
Corporation has agreed to use its best efforts to maintain in effect certain of
Western's directors and officers liability insurance coverage for a period of
three years.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
The officers of BJ Services will continue as the officers of the
Surviving Corporation after the Merger. Pursuant to the Merger Agreement, at
the Effective Time, the size of BJ Services' Board of Directors will be
increased to 10, and David A. B. Brown, William J. Johnson and Michael E.
Patrick (current outside directors of Western) will become members of BJ
Services' Board of Directors, appointed to fill such vacancies. For a more
detailed description of such individuals' background and of the anticipated
business and operational benefits of the Merger, see "Management and Operations
After the Merger."
APPRAISAL RIGHTS
In connection with the Merger, holders of Western Common Stock will be
entitled to demand appraisal rights under Section 262 of the DGCL, subject to
satisfaction by such stockholder of the conditions for appraisal rights
established by Section 262. Section 262 is set forth in full in Appendix E to
this Joint Proxy Statement/Prospectus. Holders of BJ Common Stock are not
entitled to such appraisal rights. See "The Merger -- Dissenters' Appraisal
Rights."
BJ PROPOSAL NO. 2
At the BJ Services Special Meeting, stockholders of BJ Services will
also be asked to approve BJ Proposal No. 2, a proposed amendment to the BJ
Services Charter, to increase the authorized number of shares of BJ Common
Stock from 40,000,000 shares to 80,000,000 shares. The affirmative vote of a
majority of the outstanding shares of BJ Common Stock is required to approve BJ
Proposal No. 2. Abstentions and broker nonvotes will have the effect of a vote
against such proposal. For a further description of such proposed amendment to
the BJ Services Charter, see "BJ Proposal No. 2: Proposed Increase in
Authorized Shares of BJ Common Stock."
THE BOARD OF DIRECTORS OF BJ SERVICES UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS OF BJ SERVICES VOTE FOR THE AMENDMENT TO THE BJ SERVICES CHARTER
INCREASING THE AUTHORIZED NUMBER OF SHARES OF BJ COMMON STOCK FROM 40,000,000
TO 80,000,000. Consummation of the Merger is not subject to or conditioned
upon stockholder approval of BJ Proposal No. 2. If BJ Proposal No. 2 is
approved by the requisite vote of stockholders, however, BJ Proposal No. 2 will
not be implemented unless the Merger is consummated.
BJ PROPOSAL NO. 3
At the BJ Services Special Meeting, stockholders of BJ Services will be
asked to approve BJ Proposal No. 3, the adoption of the BJ 1995 Incentive Plan.
The BJ 1995 Incentive Plan provides for the issuance of up to an aggregate of
1,500,000 shares of BJ Common Stock, through the grant of stock awards
(including stock options, Performance Stock, Performance Units and Bonus Stock)
and of cash awards (including Tandem Cash Tax Rights, Performance Cash Awards
and Bonus Cash Awards) to key employees and officers. The affirmative vote of
holders of a majority of the total shares of BJ Common Stock present in person
or represented by proxy and entitled to vote at the BJ Services Special Meeting
is required to approve BJ Proposal No. 3. Any abstention will have the effect
of a vote against such proposal. Broker nonvotes will not affect the outcome
of BJ Proposal No. 3. For a further
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<PAGE> 30
description of such proposed amendment to the BJ Stock Incentive Plan, see "BJ
Proposal No. 3: Proposed Adoption of the BJ 1995 Incentive Plan."
THE BOARD OF DIRECTORS OF BJ SERVICES UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS OF BJ SERVICES VOTE FOR THE ADOPTION OF THE BJ 1995 INCENTIVE
PLAN. Consummation of the Merger is not subject to or conditioned upon
stockholder approval of BJ Proposal No. 3. If BJ Proposal No. 3 is approved by
the requisite vote of stockholders, however, BJ Proposal No. 3 will not be
implemented unless the Merger is consummated.
MARKET PRICE AND DIVIDEND DATA
Trading Markets and Prices. BJ Common Stock is traded on the NYSE under
the symbol "BJS" and the Western Common Stock is traded on the NYSE under the
symbol "WSN." Following the Merger, the BJ Common Stock will continue to be
traded on the NYSE, the BJ Warrants will be listed for trading under the symbol
"BJS WS," and Western Common Stock will cease to be traded on the NYSE and
there will be no further market for such stock. In the event the Merger is not
consummated, Western Common Stock will continue to be traded on the NYSE. The
following table sets forth the range of the high and low per share sales prices
for the BJ Common Stock and the Western Common Stock for the periods indicated,
as reported on the NYSE Composite Trading Tape. Neither BJ Services nor
Western has paid any dividends during such periods in respect of its common
stock.
<TABLE>
<CAPTION>
BJ SERVICES WESTERN
COMMON STOCK COMMON STOCK
--------------- ---------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
FISCAL YEAR ENDED SEPTEMBER 30, 1992
Quarter ended December 31, 1991 . . . . $20.50 $13.25 $ 7.00 $ 3.88
Quarter ended March 31, 1992 . . . . . 15.50 11.00 5.50 3.00
Quarter ended June 30, 1992 . . . . . . 16.50 10.00 4.25 2.75
Quarter ended September 30, 1992 . . . 17.63 12.63 5.50 3.13
FISCAL YEAR ENDED SEPTEMBER 30 , 1993
Quarter ended December 31, 1992 . . . . $18.00 $14.25 $ 6.38 $ 4.38
Quarter ended March 31, 1993 . . . . . 23.00 13.63 13.00 5.25
Quarter ended June 30, 1993 . . . . . . 31.63 21.00 16.88 10.25
Quarter ended September 30, 1993 . . . 30.00 20.00 18.88 14.50
FISCAL YEAR ENDED SEPTEMBER 30, 1994
Quarter ended December 31, 1993 . . . . $26.50 $18.00 $19.25 $11.63
Quarter ended March 31, 1994 . . . . . 22.50 17.50 15.38 9.75
Quarter ended June 30, 1994 . . . . . . 22.38 17.38 12.88 9.75
Quarter ended September 30, 1994 . . . 22.13 18.25 18.38 10.63
FISCAL YEAR ENDED SEPTEMBER 30, 1995
Quarter ended December 31, 1994 . . . . $21.00 $16.25 $18.75 $15.63
Quarter (through March 7, 1995) . . . . $18.88 $15.50 $18.88 $16.50
</TABLE>
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<PAGE> 31
The closing sales price per share of BJ Common Stock reported on the
NYSE Composite Trading Tape on (i) September 12, 1994 (the date immediately
preceding the public announcement by BJ Services of its written offer to
acquire Western) was $18.88, (ii) November 16, 1994 (the date immediately
preceding the public announcement of the Merger) was $20.00 and (iii) March 7,
1995 was $18.63. The number of holders of record of BJ Common Stock as of
March 15, 1995 was approximately 400.
The closing sales price per share of Western Common Stock reported on
the NYSE Composite Tape on (i) September 12, 1994 (the date immediately
preceding the public announcement by BJ Services of its written offer to
acquire Western) was $12.25, (ii) November 16, 1994 (the date immediately
preceding the public announcement of the Merger) was $18.00 and (iii) March 7,
1995 was $18.88. The number of holders of record of Western Common Stock as
of March 15, 1995 was approximately 5,000.
BJ Services Dividend Policy. BJ Services does not currently intend to
pay dividends on its outstanding shares of Common Stock, and there can be no
assurance that it will pay dividends at any time in the future. It is
anticipated that for the foreseeable future any earnings generated from
operations will be retained for use in BJ Services' business. Any future
determination as to the payment of dividends will be at the discretion of the
BJ Services Board of Directors and will depend upon BJ Services' operating
results, financial condition and capital requirements, and such other factors
as the Board of Directors may deem relevant.
BJ Services' existing bank credit agreement limits dividends on its
Common Stock to an amount equal to 50% of cumulative net income from July 1,
1990. Additional restrictions on the payment of dividends on the BJ Services'
Common Stock are imposed by the Note Agreements governing the 9.2% Senior Notes
due August 1, 1998 of BJ Services. Pursuant to the commitment agreement
between BJ Services and Bank of America, it is contemplated that the definitive
credit agreement to be entered into among BJ Services, Bank of America and a
group of lenders will restrict the payment of dividends unless certain
financial tests are satisfied. See "Description of Certain Indebtedness of BJ
Services."
SUMMARY HISTORICAL FINANCIAL INFORMATION
The following tables set forth certain selected historical consolidated
financial information for BJ Services and Western and are based upon the
respective historical financial statements of each company included in or
incorporated by reference in this Joint Proxy Statement/Prospectus. The
selected historical consolidated financial information for each entity
corresponds to its respective annual reporting period, which is the fiscal year
ending September 30 for BJ Services and December 31 for Western. It is
anticipated that upon consummation of the Merger, the fiscal year of BJ
Services will continue to end on September 30.
Since its initial public offering in 1990, BJ Services has not paid any
dividends or other equity distributions to its stockholders. BJ Services
expects that, for the foreseeable future, any earnings will be retained for the
development of BJ Services' business and, accordingly, no dividends will be
declared on the BJ Common Stock.
(Tables on following page)
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<PAGE> 32
BJ SERVICES COMPANY AND SUBSIDIARIES
CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Three Months
Ended
December 31,
(UNAUDITED) YEAR ENDED SEPTEMBER 30,
--------------- ------------------------------------------------
1994 1993 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenue . . . . . . . . . . . . . . . . . . . $119,415 $104,757 $434,476 $394,363 $330,028 $390,296 $350,217
Cost of sales and services . . . . . . . . . 105,460 92,904 391,022 351,337 296,044 338,287 302,490
General and administrative . . . . . . . . . 6,104 5,635 22,709 22,825 20,523 21,748 18,598
Restructuring charge and asset writedowns (1) 15,700
Operating income (loss) . . . . . . . . . . . 7,851 6,218 20,745 20,201 (2,239) 30,261 29,129
Interest expense, net . . . . . . . . . . . . (2,170) (1,356) (6,654) (4,914) (2,512) (2,424) (839)
Other income (expense), net . . . . . . . . . 401 (452) (1,183) 1,551 559 3,296 549
Income tax expense (benefit) . . . . . . . . 1,338 838 2,006 1,593 (3,657) 5,170 9,187
Net income (loss) before cumulative
effect of accounting change. . . . . . . . . 4,744 3,572 10,770 14,561 (1,104) 24,422 18,483
Cumulative effect of change in accounting
principle, net of tax(6) . . . . . . . . . . (10,400) (10,400)
Net income (loss) . . . . . . . . . . . . . . 4,744 (6,828) 370 14,561 (1,104) 24,422 18,483
Net income (loss) per share (2) . . . . . . . .30 (.43) .02 .94 (.08) 1.88 1 .42
OTHER DATA:
Depreciation and amortization (3) . . . . . $ 6,675 $ 6,205 $ 25,335 $ 24,170 $ 12,742 $ 14,497 $ 12,625
Capital expenditures (4) . . . . . . . . . . 6,093 10,458 39,345 37,350 26,197 34,588 20,089
Operating income before depreciation and
amortization(5) . . . . . . . . . . . . . . 14,526 12,423 46,080 44,371 10,503 44,758 41,754
FINANCIAL POSITION DATA (AT END OF PERIOD):
Property, net . . . . . . . . . . . . . . . . $195,192 $151,332 $198,844 $183,962 $171,420 $134,139 $114,618
Total assets . . . . . . . . . . . . . . . . 411,172 384,701 410,066 369,531 328,799 265,686 239,254
Long-term debt . . . . . . . . . . . . . . . 74,700 97,550 74,700 84,500 55,500 31,000 24,000
Stockholders' equity . . . . . . . . . . . . 195,287 181,425 189,927 187,132 134,794 135,307 111,444
Book value per share . . . . . . . . . . . . 12.43
</TABLE>
______________________
(1) See Note 3 of the Notes to Consolidated Financial Statements for BJ
Services' restructuring charge and asset writedowns in 1992.
(2) Assumes 13 million pro forma shares outstanding during 1990.
(3) In October 1991, BJ Services revised the estimated salvage values and
remaining useful lives of certain of its U.S. pumping services equipment
to more closely reflect expected remaining lives. The effect of this
change in accounting estimate resulted in a decrease of $2.9 Million, or
$.22 per share, in BJ Services' net loss for 1992.
(4) Excluding acquisitions of businesses.
(5) Operating income before depreciation and amortization is a supplemental
financial measurement used by BJ Services in the evaluation of its
business and presented solely as a supplemental disclosure, and should
not be construed as an alternative to operating income or to cash flows
from operating activities, or any other measure of financial performance
in accordance with generally accepted accounting principles.
(6) See Note 9 of the Notes to Consolidated Financial Statements for BJ
Services' change in its method of accounting for postretirement benefits
other than pensions.
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<PAGE> 33
THE WESTERN COMPANY OF NORTH AMERICA AND SUBSIDIARIES
CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues . . . . . . . . . . . . . . . . . . . . . $342,501 $294,073 $225,353 $224,378 $246,747
Cost of sales and services . . . . . . . . . . . . 319,468 264,408 214,690 223,059 225,273
General and administrative . . . . . . . . . . . . 9,956 9,674 8,805 8,879 11,429
Operating income (loss) . . . . . . . . . . . . . . 13,077 19,991 1,858 (7,560) 10,045
Interest expense, net . . . . . . . . . . . . . . . (8,796) (8,852) 9,348 (9,049) (8,010)
Merger related expenses, writedowns and other . . . (21,118)(1) (7,132)(2) -- -- (3,594)
Provision for income taxes . . . . . . . . . . . . 495 627 353 -- --
Income (loss) from continuing operations before
extraordinary gains (losses) . . . . . . . . . . (17,332) 3,380 (7,843) (16,609) (1,559)
Disontinued operations, net of income taxes(3). . . (4,197) 35,321 9,510 11,188 4,101
Extraordinary gains (losses), net of income taxes -- (25,713)(4) (1,223) -- 1,635
Net income (loss) . . . . . . . . . . . . . . . . . (21,529) 12,988 444 (5,421) 4,177
Income (loss) from continuing operations before
extraordinary gains (losses) per share. . . . . . (0.95) 0.18 (0.44) (1.07) (0.12)
Net income (loss) per share . . . . . . . . . . . . (1.18) .70 .02 (.35) .32
OTHER DATA:
Depreciation and amortization . . . . . . . . . . . $ 18,814 $ 14,589 $ 14,887 $ 14,478 $ 11,850
Capital expenditures. . . . . . . . . . . . . . . . 28,002 63,712 38,773 46,285 32,336
Operating income before depreciation and 31,891 34,580 16,745 6,918 21,895
amortization(5) . . . . . . . . . . . . . . . . .
FINANCIAL POSITION DATA (AT END OF PERIOD):
Property, net . . . . . . . . . . . . . . . . . . . $186,095 $228,816 $311,235 $297,293 $ 271,076
Total assets. . . . . . . . . . . . . . . . . . . . 353,701 488,385 431,970 421,891 396,693
Long-term debt. . . . . . . . . . . . . . . . . . . 90,909 90,910 186,261 160,454 175,716
Stockholders' equity . . . . . . . . . . . . . . . 179,149 200,447 175,405 174,136 131,249
Book value per share . . . . . . . . . . . . . . . 9.80
</TABLE>
_______________________
(1) Merger-related expenses of $21.1 million represent costs associated with
the expected merger with BJ Services and include investment banker, legal
and accounting fees, certain severance costs and other miscellaneous
expenses. In addition to the expenses recorded in 1994, additional legal
fees and certain other expenses related to the Merger are expected
to be incurred and recorded in 1995.
(2) The writedown of pressure pumping assets and other in 1993 totaled $7.1
million and included a $3.5 million writedown of older pressure pumping
equipment and idle facilities to net realizable value in anticipation
of disposal as well as various other non-operating costs.
(Footnotes continued on following page)
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<PAGE> 34
(3) Western formalized a plan in November 1994 to dispose of the remaining
assets of its offshore drilling segment. These assets consisted
primarily of two semi-submersible offshore drilling rigs and related
equipment and inventory. As a result, the offshore drilling segment has
been reclassified in the consolidated statements of operations as
discontinued operations. The results of discontinued operations were as
follows:
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . $22,609 $64,676 $89,613 $89,840 $77,040
======= ======= ======= ======= =======
Income from discontinued operations:
Operating income . . . . . . . . . . . . $ 2,429 $ 4,161 $13,919 $17,138 $ 9,563
Other income (loss):
Gains on sales of offshore drilling rigs -- 59,161 -- -- --
Writedowns of offshore drilling rigs -- (18,328) -- -- --
Interest expense -- -- (1,333) (3,360) (3,784)
------- ------- ------- ------- -------
Income from discontinued operations
before income taxes . . . . . . . . . 2,429 44,994 12,586 13,778 5,779
Provision for income taxes . . . . . . . 152 9,673 3,076 2,590 1,678
------- ------- ------- ------- -------
2,277 35,321 9,510 11,188 4,101
------- ------- ------- ------- -------
Loss on disposal, net of income tax benefit
in 1994, of $(152) . . . . . . . . . . . (6,474) -- -- -- --
------- ------- ------- ------- -------
$(4,197) $35,321 $ 9,510 $11,188 $ 4,101
======= ======= ======= ======= =======
</TABLE>
(4) During March 1994, Western purchased through a tender offer $97.8
million face amount of 12 7/8% Senior Notes. The aggregate purchase
price of these 12 7/8% Senior Notes was $117.3 million, resulting in an
extraordinary loss of $25.7 million ($1.38 per share) including
unamortized original issue costs of $3.2 million, unamortized original
issue discount of $2.3 million and offering costs of $0.7 million. The
extraordinary loss was accrued during the fourth quarter of 1993.
(5) Operating income before depreciation and amortization is a supplemental
financial measurement used by Western in the evaluation of its business
and is presented solely as a supplemental disclosure, and should not be
construed as an alternative to operating income or to cash flows from
operating activities or any other measure of financial performance in
accordance with generally accepted accounting principles.
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<PAGE> 35
SUMMARY PRO FORMA COMBINED FINANCIAL INFORMATION (UNAUDITED)
The following tables set forth certain unaudited pro forma combined
financial information giving effect to the Merger accounted for as a purchase
in accordance with generally accepted accounting principles. The information
below may not be indicative of the results that actually would have occurred if
the Merger had been consummated on the dates indicated or which will be
obtained in the future. The following presentation assumes that (i)
immediately prior to the Merger all outstanding Western Options are cancelled
in consideration for a cash payment equal to the difference between $21.00 and
the exercise price for each cancelled option and (ii) for purposes of
determining the total number of outstanding shares of Western Common Stock to
be converted into Merger Consideration, all of Western's Convertible Debentures
are converted into shares of Western Common Stock prior to the Merger. The
summary pro forma financial data for the periods indicated have been derived
from the unaudited pro forma combined financial statements and related notes
appearing elsewhere in this Joint Proxy Statement/Prospectus. For Western, the
amounts included in the Operating Data (i) for the year ended September 30,
1994 were derived by combining the last three months of its fiscal year ended
December 31, 1993 and the first nine months of its fiscal 1994 and (ii) for the
quarter ended December 31, 1994 were derived from the information for such
quarter, in each case in order to conform with the fiscal year of BJ Services.
<TABLE>
<CAPTION>
THREE
MONTHS ENDED YEAR ENDED
DECEMBER 31, 1994 SEPTEMBER 30, 1994(1)
----------------- ---------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
OPERATING DATA:
Revenue . . . . . . . . . . . . . . . . . . . . . . . $ 213,345 $ 763,313
Cost of sales and services. . . . . . . . . . . . . . 186,029 679,844
General and administrative. . . . . . . . . . . . . . 6,781 25,307
Operating income . . . . . . . . . . . . . . . . . . 20,535 58,162
Interest expense, net (4) . . . . . . . . . . . . . . 6,551 19,001
Other income (expense), net . . . . . . . . . . . . . (531) (11,928)(2)
Income from continuing operations before
extraordinary loss and accounting change . . . . . 9,206 18,862(2)
Income per share from continuing operations before
extraordinary loss and accounting change . . . . . .34 .69(2)
Average shares outstanding (3). . . . . . . . . . . . 27,452 27,401
OTHER DATA:
Depreciation and amortization . . . . . . . . . . . . $ 14,884 $ 55,196
Capital expenditures . . . . . . . . . . . . . . . . 10,451 59,903
Operating income before depreciation and
amortization (5) . . . . . . . . . . . . . . . . 35,419 $ 113,358
FINANCIAL POSITION DATA (AT END OF PERIOD):
Property, net . . . . . . . . . . . . . . . . . . . . $ 434,287
Total assets . . . . . . . . . . . . . . . . . . . . 1,014,364
Long-term debt (4) . . . . . . . . . . . . . . . . . 338,642
Stockholders' equity. . . . . . . . . . . . . . . . . 433,507
Book value per common share . . . . . . . . . . . . . 15.79
</TABLE>
_______________________
(1) The pro forma financial data presented in this table assumes a Closing
Price of $20.00 per share of BJ Common Stock. Within a certain range,
any change from a $20.00 Closing Price will increase or decrease the
number of shares of BJ Common Stock to be issued in the Merger. See
"The Merger -- Merger Consideration."
(2) Includes $6.9 million writedown of pressure pumping assets and other.
See Note 12 of Western's Notes to Consolidated Financial Statements
included elsewhere in this Joint Proxy Statement/Prospectus.
(3) Assumes the conversion of all Western Convertible Debentures and the
issuance of 11.7 million shares of BJ Common Stock in connection with
the Merger.
(4) Assumes that BJ Services will utilize borrowings under a proposed credit
facility to fund the Cash Consideration, to retire certain of its then
outstanding indebtedness and to use for working capital purposes. An
assumed rate of 5.125% and 6.625% for the year ended September 30, 1994
and the three months ended December 31, 1994, respectively, was used in
preparing the pro forma information included herein, reflecting the
rates that would have been in effect under such credit facility during
such periods had the Merger occurred at October 1, 1993. Borrowings
under such credit facility will bear interest at a floating rate equal
to the sum of LIBOR plus a fixed rate. If borrowings had been made
under such credit facility on March 1, 1995, the applicable interest
rate thereon would have been 6.750%. See "Description of Certain
Indebtedness of BJ Services -- New Bank Credit Facility."
(5) Operating income before depreciation and amortization is a supplemental
financial measurement used by BJ Services in the evaluation of its
business and is presented solely as a supplemental disclosure, and
should not be construed as an alternative to operating income or to cash
flows from operating activities or any other measure of financial
performance in accordance with generally accepted accounting principles.
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<PAGE> 36
DESCRIPTION OF THE COMPANIES' BUSINESSES
BJ SERVICES
General. BJ Services, whose operations trace back to Byron Jackson
Company (which was founded in 1872), was organized in 1990 under the corporate
laws of the State of Delaware. BJ Services is a leading provider of pressure
pumping and other oilfield services serving the petroleum industry worldwide.
BJ Services' pressure pumping services consist of well cementing and
stimulation services used in the completion of new oil and natural gas wells
and in remedial work on existing wells, both onshore and offshore. These
services are provided through domestic and international locations to customers
in most of the major oil and natural gas producing regions of the United
States, the Gulf of Mexico, Latin America, Europe, Asia, Africa and the Middle
East. BJ Services believes that it is the third largest provider of pressure
pumping services worldwide, with a particularly strong presence in the Alaskan
North Slope, the Gulf of Mexico, the North Sea, Indonesia and most of Latin
America. During its fiscal year ended September 30, 1994, BJ Services
generated approximately 88% of its revenue from pressure pumping services and
12% of its revenue from product and equipment sales and other oilfield
services. Other oilfield services include casing and tubing services provided
to the oil and gas exploration and production industry and commissioning and
leak detection services provided to offshore platforms and pipelines, primarily
in the United Kingdom. These operations were acquired in September 1992 in
connection with BJ Services' acquisition of Salvesen (Oilfield Technology)
Limited. During fiscal year 1994, BJ Services generated approximately 48% of
its revenue from domestic operations and 52% from international operations.
PUMPING SERVICES AND OTHER BUSINESS ACTIVITIES
Pressure Pumping Services. BJ Services' cementing services, which
accounted for approximately 39% of BJ Services' total revenue during fiscal
1994, consist of blending cement and water with various solid and liquid
additives to create a slurry that is pumped into a well between the casing and
the wellbore. BJ Services' stimulation services accounted for approximately
49% of BJ Services' total revenue during fiscal 1994 and consist of hydraulic
fracturing, acidizing, sand control, nitrogen and coiled tubing services
designed to improve the flow of oil and gas from producing formations. BJ
Services believes that as production continues to decline in key producing
fields of the U.S. and certain international regions, the demand for fracturing
and other stimulation services is likely to increase. BJ Services has recently
increased its pressure pumping capabilities in certain international markets.
Other Business Activities. BJ Services' other business activities,
including product and equipment sales for cementing and stimulation services,
as well as casing and tubing services and commissioning and leak detection
services, accounted for 12% of BJ Services' total revenue during fiscal 1994.
Product and equipment sales to customers are generally made in the course of
providing cementing and stimulation services to customers, and BJ Services
generally does not sell proprietary products to other companies involved in
well servicing. Casing services principally consist of installing (or
"running") pipe in a wellbore to protect the structural integrity of the
wellbore and to seal various zones in the well. These services are primarily
provided during the drilling and completion phases of a well. Tubing services,
which consist of running pipe inside the casing to improve the flow of oil and
gas, are principally provided during workovers. Leak detection services
involve the inspection and testing of the integrity of pipe connections in
offshore drilling and production platforms, onshore and offshore pipelines and
industrial plants, and are provided during the commissioning, decommissioning,
installation or construction stages of these infrastructures, as well as during
routine maintenance checks.
ENGINEERING AND SUPPORT SERVICES
BJ Services maintains a manufacturing and research and development
center near Houston, Texas. BJ Services' research and development organization
is divided into three distinct areas--Petroleum Engineering, Instrumentation
Engineering and Mechanical Engineering. The Petroleum
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<PAGE> 37
Engineering laboratory specializes in designing fluids with enhanced
performance characteristics in the fracturing, acidizing and cementing
operations (i.e., "frac fluids" and "cement slurries"). In addition to fluids
technology, BJ Services' Petroleum Engineering group develops and supports a
wide range of proprietary software utilized in the monitoring of both cement
and stimulation job parameters. BJ Services' monitoring and control
instrumentation, developed by its Instrumentation Engineering group,
complements its products and equipment and provides customers with desired
real-time monitoring of critical applications. BJ Services' Mechanical
Engineering group is responsible for the design and manufacturing of virtually
all of BJ Services' primary pumping and blending equipment, except for some
peripheral support equipment generic to the industry that is purchased
externally.
MANUFACTURING
In addition to the engineering facility, BJ Services' technology and
research center houses its main equipment and instrumentation manufacturing
facility. This operation currently occupies approximately 65,000 square feet
and includes complete fabrication, engine and transmission rebuilding, pump
manufacturing and assembly capabilities. BJ Services also has ancillary
manufacturing facilities in Singapore and Scotland. BJ Services employs
outside vendors for some fabrication but is not dependent on any one source.
COMPETITION
Pressure Pumping Services. BJ Services competes with larger pumping
service companies, in particular the Halliburton Company ("Halliburton") and
Dowell Schlumberger Incorporated, a division of Schlumberger Ltd. ("Dowell
Schlumberger"), in all areas of the U.S. in which BJ Services participates and
in most international regions. In addition, Western and Nowsco Well Service
Ltd. ("Nowsco") compete with BJ Services in the U.S. and some international
regions. Nowsco has recently been expanding its presence in the U.S. market
through acquisitions and increased capital investment. BJ Services recently
agreed to sell certain fracturing and nitrogen pumping assets located in
Brighton, Colorado and Cortland, Ohio to Nowsco for $700,000, which sale is
scheduled to close concurrently with the closing of the Merger. Several other
companies compete with BJ Services in certain areas of the U.S. and in certain
foreign countries. The principal methods of competition which apply to BJ
Services' business are its prices, service record and reputation in the
industry. While Halliburton and Dowell Schlumberger are significantly larger
in terms of overall sales, BJ Services is an effective competitor, particularly
in the Alaskan North Slope, the North Sea, Indonesia, the Gulf of Mexico and
Latin America.
Other Services. BJ Services believes that it is one of the largest
suppliers of casing and tubing services in the U.K. North Sea and the second
largest supplier of such services in Germany. The largest provider of casing
and tubing services in Europe is Weatherford International. In the U.K.,
casing and tubing services are typically provided under long-term contracts
which limit the opportunities to compete for business until the end of the
contract term. In continental Europe, shorter-term contracts are typically
available for bid by the provider of casing and tubing services. BJ Services
believes it and Nowsco are the largest suppliers of commissioning and leak
detection services in the U.K. North Sea.
MARKETS AND CUSTOMERS
General. Demand for BJ Services' services and products depends
primarily upon the number of oil and gas wells being drilled, the depth and
drilling conditions of such wells, the number of well completions and the level
of workover activity worldwide. BJ Services' principal customers consist of
major and independent oil and gas producing companies.
United States. BJ Services provides its services to its U.S. customers
through a network of approximately 60 locations, a majority of which offer both
cementing and stimulation services. Demand for BJ Services' cementing services
in the U.S. is primarily driven by oil and natural gas drilling activity, which
is affected by the current and anticipated prices of oil and natural gas. Due
to weak energy prices, drilling activity in the U.S. has declined more than 75%
from its peak in 1981, and
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<PAGE> 38
record low drilling activity levels were experienced in 1986 and 1992. These
events have led to the withdrawal by BJ Services from several low activity
regions, including Canada and Kansas in 1992 and Abilene, Texas and Casper and
Riverton, Wyoming in 1994. In addition, pumping service companies have been
unable to recapitalize their aging U.S. fleets due to the inability to
generate adequate returns on new capital investments. After allocation of
corporate expenses, BJ Services' U.S. operations have incurred operating losses
in two of the last three years.
International. BJ Services operates in approximately 40 locations in
the major international oil and natural gas producing areas of Latin America,
Europe, Africa, Asia and the Middle East. BJ Services generally provides
services to its international customers through wholly owned foreign
subsidiaries. Additionally, BJ Services operates through nine joint venture
companies, five of which it controls and in four of which it holds a minority
position. The international market is dominated by major oil companies and
national oil companies, which tend to have different objectives and more
operating flexibility than the typical independent producer in the U.S.
International activities have been increasingly important to BJ Services'
results of operations since 1992, when it implemented a strategy to expand its
international presence.
In general, BJ Services operates in those international areas where it
can achieve and maintain both a significant share position and an attractive
return on its investment. BJ Services' major international revenue and
income-producing operations are in Norway, the United Kingdom and the North Sea
in the European market; Indonesia and Malaysia in the Asian market; and
Argentina, Venezuela and Ecuador in the Latin American market. Foreign
operations are subject to special risks that can materially affect the sales
and profits of BJ Services, including currency exchange rate fluctuations, the
impact of inflation, governmental expropriation, exchange controls, political
instability and other risks.
For information with respect to BJ Services' financial position at
September 30 and at December 31, 1994, and results of operations for the year
and quarter then ended, see BJ Services' Consolidated Financial Statements and
the Notes thereto.
WESTERN
The Western Company of North America was founded in 1939 and
incorporated in 1950 under the laws of the State of Delaware. Western provides
well stimulation, cementing, sand control and coiled tubing services, referred
to collectively as pressure pumping services, to oil and gas companies
operating in the continental United States, the Gulf of Mexico and certain
foreign countries and previously engaged in offshore contract drilling in
international areas. Western also provides production and industrial chemicals
to the oil, gas, refining and petrochemical industries in the United States.
PRESSURE PUMPING SERVICES
Western's pressure pumping services consist of well stimulation,
cementing, sand control and limited coiled tubing services used in the
completion of new oil and gas wells and in remedial work on existing wells.
Stimulation services include hydraulic fracturing and acidizing programs which
are designed to improve the flow of oil and gas from new and existing wells.
Cementing services are used primarily to cement casing pipe inside an oil or
gas well to allow selective production among formations and to prevent
migration of fluids between formations. Sand control services are used
primarily for areas exhibiting formation sand problems. Coiled tubing services
involve the injection of coiled tubing into wells to perform various
applications and functions for use in well servicing operations. Western
provides its pressure pumping services in most of the active hydrocarbon
producing basins in the continental United States and in the Gulf of Mexico.
Demand for Western's pressure pumping services is closely tied to drilling and
completion activity which, in turn, is related to current and projected prices
for oil and natural gas.
Stimulation services include both hydraulic fracturing and acidizing.
The hydraulic fracturing process is used to increase the production of oil and
gas from formations having such low permeability that the natural flow of fluid
or gas is restricted. Due to reservoir characteristics, fracturing services
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<PAGE> 39
are more likely to be required for deeper, onshore wells than offshore wells in
the United States. The fracturing process consists of pumping a fluid gel into
a cased well at sufficient pressure to fracture the formation. Acidizing
involves pumping large volumes of specially-formulated acids into a reservoir
to dissolve barriers and enlarge crevices in the formation, thereby eliminating
obstacles to the flow of oil and gas. It is also used to clean out materials
which build up over time in producing formations and, in some instances, to
remedy damage that may be caused by solids in drilling fluids.
Sand control services are required for new wells and the workover of
existing wells in areas exhibiting formation sand problems. Virtually all sand
control activity in the United States occurs in the soft, unconsolidated
sandstone formations found offshore in the Gulf of Mexico and along the Gulf
Coast and utilizes "gravel pack" methods. The goal of a gravel-packed
completion is to allow the well to produce sand-free while maintaining a high
production rate. In order to accomplish this, special gravel pack tools are
used to place sized gravel inside the casing perforations and around a slotted
or screen liner in the wellbore. The gravel pack holds back the formation sand
during production.
In July 1994, Western acquired the coiled tubing business of Coiltech,
Inc. of Longview, Texas for $3.1 million in cash. Since completing such
acquisition, Western has offered limited coiled tubing services to its
customers, in addition to its other pressure pumping services.
In addition to Western's pressure pumping equipment and well stimulation
vessel, it also owns a manufacturing complex and distribution center in Fort
Worth, Texas. Western leases the space it occupies as its principal executive
offices in Houston, Texas and its research and engineering center located in
The Woodlands, Texas, north of Houston.
SPECIALTY CHEMICALS
Specialty chemicals and technical services are provided through a
division of Western to the oil, gas, refining and petrochemical industries.
This product line includes corrosion and scale inhibitors as well as process
chemicals and paraffin control for the treatment of oil wells and for refining,
gas processing plant and petrochemical facility maintenance and flow
improvement.
CONTRACT DRILLING SERVICES
Over the past year and a half, Western has disposed of its fleet of
offshore drilling rigs and withdrawn from the offshore contract drilling
business. On December 16, 1994, Western completed the sale of its
semi-submersible offshore drilling rig, Alaskan Star, for $11.8 million. The
gain on this sale was minimal. Additionally, on February 10, 1995, Western
completed the sale of its last remaining offshore drilling rig, the
semi-submersible Western Pacesetter IV, for $37.2 million, resulting in a
pre-tax loss of $6.7 million being recorded from this sale.
1994 FINANCIAL RESULTS
For information with respect to Western's financial position at December
31, 1994, and results of operations for the year then ended, see Western's
Consolidated Financial Statements and the Notes thereto and other information
set forth in the Management's Discussion and Analysis of Western included as an
exhibit to the registration statement of which this Joint Proxy
Statement/Prospectus is a part and incorporated herein by reference.
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<PAGE> 40
THE SPECIAL MEETINGS
TIME, DATE AND PLACE OF THE SPECIAL MEETINGS
This Joint Proxy Statement/Prospectus is being furnished to the holders
of BJ Common Stock in connection with the solicitation of proxies by the Board
of Directors of BJ Services for use at the BJ Services Special Meeting to be
held on Thursday, April 13, 1995, in the Elm Room of The Houstonian Conference
Center, located at 111 North Post Oak Lane, Houston, Texas, commencing at 11:00
a.m., local time, and at any adjournment or postponement thereof.
This Joint Proxy Statement/Prospectus is also being furnished to the
holders of Western Common Stock in connection with the solicitation of proxies
by the Board of Directors of Western for use at the Western Special Meeting to
be held on Thursday, April 13, 1995, in the Camelia Room of The Houstonian
Conference Center, located at 111 North Post Oak Lane, Houston, Texas,
commencing at 11:00 a.m., local time, and at any adjournment or postponement
thereof.
On February 13, 1995, the Board of Directors of Western amended the
bylaws of Western to provide that the annual meeting of the stockholders of
Western shall be held on such date as the Board of Directors may determine
rather than on the first Monday of May each year, if not a legal holiday, or,
if a legal holiday, then on the next succeeding day not a legal holiday.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETINGS
BJ Services Proposals. At the BJ Services Special Meeting, holders of
BJ Common Stock will consider and vote upon the BJ Proposals, consisting of the
following:
(i) BJ Proposal No. 1, to approve and adopt the Merger
Agreement and the issuance of the Stock Consideration and Warrant
Consideration pursuant to the Merger Agreement;
(ii) BJ Proposal No. 2, to approve an amendment to the BJ
Services Charter in order to increase the authorized number of shares of
BJ Common Stock from 40,000,000 shares to 80,000,000 shares;
(iii) BJ Proposal No. 3, to approve the adoption of the BJ 1995
Incentive Plan; and
(iv) to act on such other matters as may properly be brought
before the BJ Services Special Meeting or any adjournment(s) or
postponement(s) thereof.
Assuming no change in the number of shares of Western Common Stock
outstanding at the Effective Time from the number outstanding on the record
date for the Western Special Meeting except for the conversion of the
outstanding Western Convertible Debentures into Western Common Stock and the
exercise of Western stock options prior to the Merger, up to approximately
14,193,000 shares of BJ Common Stock and up to approximately 4,897,000 BJ
Warrants will be issued in the Merger in exchange for Western Common Stock. A
total of up to approximately 4,897,000 additional shares of BJ Common Stock
will be reserved for issuance upon the exercise of BJ Warrants issued in the
Merger and, to the extent that Western Convertible Debentures are not converted
into Western Common Stock and options to purchase Western Common Stock are not
exercised prior to the Merger, fewer shares of BJ Common Stock will be issued
in the Merger and a corresponding number of shares of BJ Common Stock will be
reserved for issuance upon the subsequent conversion of the Western Convertible
Debentures. See "The Merger -- Merger Consideration -- Western Convertible
Debentures" and "The Merger -- Merger Consideration -- Western Options."
Western Proposal. At the Western Special Meeting, holders of Western
Common Stock will consider and vote upon approving and adopting the Merger
Agreement and the Merger and such other matters as may properly be brought
before the Western Special Meeting.
Boards of Directors' Recommendations. BJ SERVICES' BOARD OF DIRECTORS
HAS UNANIMOUSLY APPROVED (i) THE MERGER AGREEMENT AND THE MERGER, THE PAYMENT
OF THE MERGER
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<PAGE> 41
CONSIDERATION, INCLUDING THE ISSUANCE OF THE STOCK CONSIDERATION AND WARRANT
CONSIDERATION, PURSUANT TO THE MERGER AGREEMENT AND THE CONSUMMATION OF THE
OTHER TRANSACTIONS CONTEMPLATED THEREBY, (ii) THE AMENDMENT TO THE BJ SERVICES
CHARTER PROPOSED IN BJ PROPOSAL NO. 2 AND (iii) THE ADOPTION OF THE BJ 1995
INCENTIVE PLAN PROPOSED IN BJ PROPOSAL NO. 3, AND UNANIMOUSLY RECOMMENDS THAT
THE STOCKHOLDERS OF BJ SERVICES VOTE (x) FOR APPROVAL AND ADOPTION OF SUCH
MATTERS SUBMITTED TO THEM PURSUANT TO BJ PROPOSAL NO. 1 IN CONNECTION WITH THE
MERGER, INCLUDING THE ISSUANCE OF THE STOCK CONSIDERATION AND WARRANT
CONSIDERATION PURSUANT THERETO, (y) FOR THE AMENDMENT TO THE BJ SERVICES
CHARTER INCREASING THE AUTHORIZED NUMBER OF SHARES OF BJ COMMON STOCK FROM
40,000,000 TO 80,000,000 PURSUANT TO BJ PROPOSAL NO. 2 AND (z) FOR THE ADOPTION
OF THE BJ 1995 INCENTIVE PLAN.
WESTERN'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE MERGER AND THE CONSUMMATION OF THE OTHER TRANSACTIONS
CONTEMPLATED THEREBY AND UNANIMOUSLY RECOMMENDS THAT WESTERN'S STOCKHOLDERS
VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
VOTING AT MEETINGS; RECORD DATES
BJ Services. BJ Services has established March 15, 1995, as the Record
Date for the determination of stockholders entitled to notice of and to vote at
the BJ Services Special Meeting. Only holders of record of BJ Common Stock at
the close of business on the Record Date are entitled to vote at the BJ
Services Special Meeting. On March 15, 1995, BJ Services had outstanding and
entitled to vote 15,717,270 shares of BJ Common Stock, each of which is
entitled to one vote per share. On such date, there were approximately 400
holders of record of BJ Common Stock.
As of March 15, 1995, directors and executive officers of BJ Services
and their affiliates beneficially owned approximately 3.2% of the outstanding
shares of BJ Common Stock. Each such director and executive officer has
advised BJ Services that he or she intends to vote or direct the vote of all
shares of BJ Common Stock over which he or she has voting control for (i) the
approval and adoption of the Merger Agreement and the issuance of the Stock
Consideration and Warrant Consideration pursuant to the Merger Agreement, (ii)
BJ Proposal No. 2, the proposed amendment to the BJ Services Charter to
increase the authorized number of shares of BJ Common Stock to 80,000,000 and
(iii) BJ Proposal No. 3, the proposed adoption of the BJ 1995 Incentive Plan.
Western. Western has established March 15, 1995, as the Record Date for
the determination of stockholders entitled to notice of and to vote at the
Western Special Meeting. Only holders of record of Western Common Stock at the
close of business on the Record Date are entitled to vote at the Western
Special Meeting. On March 15, 1995, Western had outstanding and entitled to
vote 18,288,037 shares of Western Common Stock, each of which is entitled to
one vote per share. On such date, there were approximately 5,000 holders of
record of Western Common Stock.
As of March 15, 1995, directors and executive officers of Western and
their affiliates beneficially owned approximately 5.7% of the outstanding
shares of Western Common Stock. Each such director and executive officer has
advised Western that he or she intends to vote or direct the vote of all shares
of Western Common Stock over which he or she has voting control for the
approval and adoption of the Merger Agreement.
As of March 15, 1995, BJ Services owned 1,000 shares of Western Common
Stock.
VOTE REQUIRED
BJ Services. The following votes of the holders of BJ Common Stock are
required to approve the BJ Proposals:
(i) With respect to BJ Proposal No. 1, the affirmative vote of
the holders of a majority of the outstanding shares of BJ Common Stock
will be required pursuant to the provisions of the DGCL and in
accordance with the rules of the NYSE to approve the Merger Agreement
and the
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issuance of the BJ Common Stock (and associated BJ Rights) and BJ
Warrants pursuant to the Merger Agreement. Holders of BJ Common Stock
are not entitled to appraisal rights under Section 262 of the DGCL in
connection with the Merger. See "The Merger -- Dissenters' Appraisal
Rights."
(ii) With respect to BJ Proposal No. 2, the affirmative vote of
the holders of a majority of the outstanding shares of BJ Common Stock
is required to approve the amendment to the BJ Services Charter.
(iii) With respect to BJ Proposal No. 3, the affirmative vote
of holders of a majority of the total shares of BJ Common Stock present
in person or represented by proxy and entitled to vote at the BJ
Services Special Meeting is required to approve the adoption of the BJ
1995 Incentive Plan.
Any abstention with respect to the Merger proposal, the amendment of the
BJ Services Charter or the adoption of the BJ 1995 Incentive Plan will have the
effect of a vote against such proposals. Any broker nonvote will not affect
the outcome of the proposal regarding the BJ 1995 Incentive Plan, but a broker
nonvote will have the effect of a vote against the Merger proposal and the
amendment of the BJ Services Charter. The failure of holders of BJ Common
Stock to sign and return their proxy will have the same effect as voting
against the Merger proposal and the amendment of the BJ Services Charter.
Consummation of the Merger is not subject to or conditioned upon stockholder
approval of either BJ Proposal No. 2 or BJ Proposal No. 3. If approved by the
stockholders of BJ Services, however, neither the proposed amendment to the BJ
Services Charter nor the BJ 1995 Incentive Plan will be implemented unless the
Merger is consummated.
Western. Pursuant to the Restated Certificate of Incorporation of
Western, the affirmative vote of the holders of 66 2/3% of the outstanding
shares of Western Common Stock is required to approve and adopt the Merger
Agreement. Abstentions and broker nonvotes will have the effect of a vote
against the proposal, as will the failure of holders of Western Common Stock to
sign and return a proxy. In connection with the Merger, holders of Western
Common Stock will be entitled to demand appraisal rights under Section 262 of
the DGCL, subject to satisfaction by such stockholder of the conditions for
perfection of appraisal rights established by Section 262. See "The Merger --
Dissenters' Appraisal Rights."
BJ SERVICES PROXIES
Shares of BJ Common Stock represented by proxies received by BJ Services
prior to or at the BJ Services Special Meeting will be voted in accordance with
the instructions contained therein. Shares of BJ Common Stock represented by
proxies for which no instruction is given will be voted FOR each of the BJ
Proposals.
Holders of BJ Common Stock are requested to complete, sign, date and
return promptly the enclosed proxy card in the postage paid envelope provided
for this purpose in order to insure that their shares are voted. A proxy may
be revoked at any time prior to the exercise of the authority granted
thereunder. Revocation may be accomplished by the granting of a later dated
proxy with respect to the same shares or by giving notice thereof to BJ
Services in writing or at the BJ Services Special Meeting at any time prior to
the vote on the matters to be considered at the BJ Services Special Meeting.
Presence at the BJ Services Special Meeting of a stockholder who signed a proxy
does not in itself revoke the proxy.
The Board of Directors of BJ Services is aware of no matters to be
presented at the BJ Services Special Meeting other than those described in this
Joint Proxy Statement/Prospectus. If other matters are properly brought before
the BJ Services Special Meeting, it is the intention of the persons named in
the proxies to vote the shares to which such proxies relate in accordance with
their judgment.
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WESTERN PROXIES
Shares of Western Common Stock represented by proxies received by
Western prior to or at the Western Special Meeting will be voted in accordance
with the instructions contained therein. Shares of Western Common Stock
represented by proxies for which no instruction is given will be voted FOR
approval and adoption of the Merger Agreement and the other transactions
contemplated thereby.
Holders of shares of Western Common Stock are requested to complete,
sign, date and return promptly the enclosed proxy card in the postage paid
envelope provided for this purpose in order to insure that their shares are
voted. A proxy may be revoked at any time prior to the exercise of the
authority granted thereunder. Revocation may be accomplished by the granting
of a later dated proxy with respect to the same shares or by giving notice
thereof to Western in writing or at the Western Special Meeting at any time
prior to the vote on the matters to be considered at the Western Special
Meeting. Presence at the Western Special Meeting of a stockholder who signed a
proxy does not in itself revoke the proxy.
The Board of Directors of Western is aware of no matters to be presented
at the Western Special Meeting other than those described in this Joint Proxy
Statement/Prospectus. If other matters are properly brought before the Western
Special Meeting, it is the intention of the persons named in the proxies to
vote the shares to which such proxies relate in accordance with their judgment.
See "The Merger -- Election Procedure" for a description of the
procedures by which holders of Western Common Stock may elect, subject to
certain limitations, to receive Stock Consideration or Cash Consideration (in
addition to Warrant Consideration) in exchange for their shares of Western
Common Stock upon consummation of the Merger.
SOLICITATION OF PROXIES
MacKenzie Partners ("MacKenzie") has been retained to solicit proxies on
behalf of BJ Services, and Georgeson & Company, Inc. ("Georgeson") has been
retained to solicit proxies on behalf of Western, for a fee of up to $7,500 and
$10,000, respectively, plus out-of-pocket expenses in each case. BJ Services
and Western will each bear the cost of the solicitation of proxies from their
respective stockholders. In addition to solicitation by MacKenzie and
Georgeson, officers and regular employees of BJ Services and Western, who will
receive no compensation in excess of their regular salaries for their services,
may solicit proxies from their respective stockholders by telephone, telegram
or otherwise. BJ Services and Western will also reimburse brokers and other
nominees for their reasonable expenses in communicating with the persons for
whom they hold BJ Common Stock and Western Common Stock, respectively.
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THE MERGER
GENERAL
BJ Services and Western have entered into the Merger Agreement, which
provides that, subject to the satisfaction of the conditions thereof (see "--
Conditions to the Consummation of the Merger"), Western will be merged into BJ
Services and BJ Services will be the Surviving Corporation in the Merger. As
soon as practicable after the closing under the Merger Agreement, the
Certificate of Merger will be filed with the Secretary of State of the State of
Delaware, and the time of such filing will be the Effective Time of the Merger
unless otherwise provided in the Certificate of Merger.
THE DESCRIPTION OF THE MERGER AGREEMENT CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER
AGREEMENT AND THE FIRST AMENDMENT THERETO, COPIES OF WHICH ARE INCLUDED AS
APPENDIX A AND APPENDIX B, RESPECTIVELY, TO THIS JOINT PROXY
STATEMENT/PROSPECTUS AND ARE INCORPORATED IN THEIR ENTIRETY HEREIN BY THIS
REFERENCE.
MERGER CONSIDERATION
Western Common Stock. Except for shares owned by Western, BJ Services
or any subsidiary of Western or BJ Services (which will be cancelled at the
Effective Time), fractional interests and Dissenting Shares, each share of
Western Common Stock outstanding immediately prior to the Effective Time will
be converted at the Effective Time into the right to receive (without interest)
from BJ Services the Merger Consideration consisting of (i) Cash Consideration
of $20.00 and Warrant Consideration of 0.2 BJ Warrants or (ii) Stock
Consideration (including a corresponding number of BJ Rights) and Warrant
Consideration, in each case as the holder thereof shall have elected or be
deemed to have elected as described in "-- Election Procedure" below; provided,
that the Cash Election Number (which is the maximum number of shares of Western
Common Stock to be converted into the right to receive Cash Consideration and
Warrant Consideration in the Merger) shall be equal to (i) 50% of the number of
shares of Western Common Stock outstanding immediately prior to the Effective
Time of the Merger less (ii) the sum of (A) the number of Dissenting Shares, if
any, which are not to be treated as Non-Election Shares pursuant to the
provisions set forth in "-- Election Procedure" below, and (B) the number of
shares of Western Common Stock owned immediately prior to the Effective Time
directly or indirectly by Western, BJ Services or any subsidiary of Western or
BJ Services (which will be cancelled). The Stock Election Number (which is
the number of shares of Western Common Stock to be converted into the right to
receive Stock Consideration and Warrant Consideration in the Merger) shall be
equal to the number of shares of Western Common Stock outstanding immediately
prior to the Effective Time of the Merger less the sum of (i) the Cash Election
Number, (ii) the number of Dissenting Shares, if any, which are not to be
treated as Non-Election Shares pursuant to the provisions set forth in "--
Election Procedure" below and (iii) the number of shares of Western Common
Stock owned immediately prior to the Effective Time by Western, BJ Services or
any subsidiary of Western or BJ Services (which will be cancelled). For a
description of the BJ Warrants, see "-- Description of the Warrant Agreement,"
below.
"Stock Consideration" will be determined as follows: (i) if the Closing
Price (the average of the midpoint of the daily high and low trading prices per
share of BJ Common Stock, rounded to four decimal places, as reported in The
Wall Street Journal's New York Stock Exchange Composite Transactions Reports,
for each of the first 20 consecutive trading days in the period commencing 25
trading days prior to the Closing Date) is $17.25 or lower, 1.1594 shares of BJ
Common Stock (provided that Western has the right to terminate the Merger
Agreement under certain circumstances if the Closing Price falls below $14.00
per share; see "-- Termination"); (ii) if the Closing Price of BJ Common Stock
is $22.25 or greater, 0.8989 shares of BJ Common Stock; or (iii) if the Closing
Price of BJ Common Stock is greater than $17.25 but less than $22.25, that
portion of a share of BJ Common
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Stock equal to the quotient of $20.00 divided by the Closing Price of BJ Common
Stock. In each case, Stock Consideration includes a corresponding number of
associated BJ Rights.
Western Convertible Debentures. The Western Convertible Debentures
which are outstanding at the Effective Time shall continue to be outstanding
subsequent to the Effective Time as debt instruments of the Surviving
Corporation, subject to their respective terms and conditions and the execution
and delivery of a supplemental indenture in the form required thereby.
Following the Effective Time, each outstanding Western Convertible Debenture
will be convertible into the amount of Stock Consideration, Cash Consideration
and Warrant Consideration which the holder thereof would have had the right to
receive after the Effective Time if such Western Convertible Debenture had been
converted immediately prior to the Effective Time and the holder thereof had
made an election to receive Stock Consideration and Warrant Consideration with
respect to 50% of such holder's Western Convertible Debentures and an election
to receive Cash Consideration and Warrant Consideration with respect to the
remaining 50% of such holder's Western Convertible Debentures. At March 1,
1995, approximately $88.8 million in principal amount of Western Convertible
Debentures was issued and outstanding (which are convertible into approximately
5,221,000 shares of Western Common Stock).
The indenture governing the Western Convertible Debentures (the
"Subordinated Indenture") provides that holders of Western Convertible
Debentures have the right to require Western to redeem, at 101% of the
principal amount thereof plus accrued and unpaid interest to the redemption
date, all or part of their Western Convertible Debentures, subject to certain
conditions, in the event of a change in control of Western. Consummation of
the Merger will constitute a change in control of Western as defined in the
Subordinated Indenture, as a consequence of which holders of Western
Convertible Debentures will thereafter have the right to require the Surviving
Corporation to redeem all or part of their Western Convertible Debentures at
such redemption price.
Western Senior Notes. The 12 7/8% Senior Notes due December 1, 2002 of
Western ("Western Senior Notes") that are outstanding at the Effective Time
shall continue to be outstanding subsequent to the Effective Time as debt
instruments of the Surviving Corporation, subject to their respective terms and
conditions and the execution and delivery of a supplemental indenture in the
form required thereby. At March 1, 1995, approximately $2.2 million principal
amount of Western Senior Notes was outstanding.
Western Options. Immediately prior to the Effective Time, each
outstanding Western Option (whether or not then exercisable) shall be cancelled
by Western and each holder of a cancelled Western Option shall be entitled to
receive, as soon as practicable after the Effective Time, in consideration for
the cancellation of such Western Option, an amount in cash equal to the product
of (i) the total number of shares of Western Common Stock subject to such
holder's Western Option and (ii) the excess, if any, of (x) $20.00 plus the
"Warrant Consideration Value" (as hereinafter defined) over (y) the exercise
price per share of the Western Common Stock previously subject to such Western
Option. The "Warrant Consideration Value" shall be equal to the greater of (i)
$1.00 or (ii) 0.2 multiplied by the "Warrant Current Market Price" (as defined
below). The "Warrant Current Market Price" means the average of the midpoint
of the daily high and low trading prices of BJ Warrants, rounded to four
decimal places, on a when-issued basis as reported in The Wall Street Journal's
New York Stock Exchange Composite Transactions Reports, for each of the first
20 consecutive trading days in the period commencing 25 trading days prior to
the Closing Date or, if the BJ Warrants are not then admitted to trading on the
NYSE on a when-issued basis, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which such securities are admitted to trading
on a when-issued basis or, if the BJ Warrants are not admitted to trading on
any national securities exchange on a when- issued basis, the average of the
high bid and low asked prices in the over-the-counter market, as reported by
the NASDAQ, of BJ Warrants on a when-issued basis. If on any such trading day
the BJ Warrants are not quoted on a when issued basis by any such
organization, the 20-trading day period referred to above
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shall be reduced by the number of such trading days on which the BJ Warrants
are not so quoted. If the BJ Warrants are not quoted on a when-issued basis on
any trading day during such 20-trading-day period, the Warrant Current Market
Price shall be deemed to be $5.00.
ELECTION PROCEDURE
Subject to allocation and proration, each record holder of shares of
Western Common Stock (other than Dissenting Shares, if any, which will not be
treated as Non-Election Shares, and shares owned immediately prior to the
Effective Time directly or indirectly by Western, BJ Services or any subsidiary
of Western or BJ Services, which shares will be cancelled) outstanding
immediately prior to the Election Deadline (as defined below) shall be entitled
to elect to receive in respect of each such share (in addition to Warrant
Consideration) (i) Cash Consideration or (ii) Stock Consideration or to
indicate that such record holder has no preference as to the receipt of Cash
Consideration or Stock Consideration (in addition to Warrant Consideration) for
such shares. Shares of Western Common Stock in respect of which a Non-Election
is made (collectively, "Non-Election Shares") shall be deemed by BJ Services,
in its sole and absolute discretion, to be shares in respect of which Cash
Elections or Stock Elections have been made. SHARES OF WESTERN COMMON STOCK IN
RESPECT OF WHICH A VALID ELECTION IS NOT MADE WILL BE DEEMED TO BE NON-ELECTION
SHARES.
The Election Form for making the elections referred to above is being
mailed to holders of record of Western Common Stock with this Joint Proxy
Statement/Prospectus. FOR A FORM OF ELECTION TO BE EFFECTIVE, HOLDERS OF
WESTERN COMMON STOCK MUST PROPERLY COMPLETE, SIGN AND SUBMIT SUCH FORM OF
ELECTION, AND SUCH FORM, TOGETHER WITH CERTIFICATES FOR THE SHARES OF WESTERN
COMMON STOCK TO WHICH SUCH FORM RELATES, DULY ENDORSED IN BLANK OR OTHERWISE IN
A FORM ACCEPTABLE FOR TRANSFER ON THE BOOKS OF WESTERN (OR BY APPROPRIATE
GUARANTEE OF DELIVERY AS SET FORTH IN SUCH FORM), MUST BE RECEIVED BY THE
EXCHANGE AGENT AT THE FIRST CHICAGO TRUST COMPANY OF NEW YORK, TENDERS &
EXCHANGES, IF BY MAIL, TO P.O. BOX 2563, SUITE 4660, JERSEY CITY, NEW JERSEY
07303-2563 OR, IF BY COURIER, TO SUITE 4680 - BJS, 14 WALL STREET, 8TH FLOOR,
NEW YORK, NEW YORK 10005, AND NOT WITHDRAWN, BY THE ELECTION DEADLINE. THE
CLOSING DATE IS CURRENTLY SCHEDULED TO BE APRIL 13, 1995, WHICH WOULD RESULT IN
AN ELECTION DEADLINE OF APRIL 11, 1995. BJ SERVICES WILL ISSUE A PUBLIC
ANNOUNCEMENT OF THE ANTICIPATED CLOSING DATE AS SOON AS PRACTICABLE BUT IN NO
EVENT LESS THAN FIVE TRADING DAYS PRIOR TO SUCH CLOSING DATE .
BJ Services shall determine in its sole and absolute discretion whether
Forms of Election have been properly completed, signed and submitted or
revoked. The determinations of BJ Services in such matters will be conclusive
and binding.
An election may be revoked, but only by written notice received by the
Exchange Agent prior to the Election Deadline. If such election is revoked, any
certificate(s) representing shares of Western Common Stock which have been
submitted to the Exchange Agent will be returned without charge to the holder.
Upon any such revocation, unless a duly completed Election Form is thereafter
submitted, such shares shall be Non-Election Shares. WESTERN STOCKHOLDERS WHO
DO NOT SUBMIT THEIR STOCK CERTIFICATES WITH THEIR ELECTION FORMS (OR PROVIDE
FOR AND COMPLY WITH THE REQUIREMENTS OF GUARANTEED DELIVERY OF SUCH
CERTIFICATES BY A U.S. INSTITUTION, AS SPECIFIED IN THE MERGER AGREEMENT) WILL
BE DEEMED TO HOLD NON-ELECTION SHARES. Holders of record of Western Common
Stock who hold such shares as nominees, trustees or in other such
representative capacities may submit multiple Election Forms.
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IN MAKING AN ELECTION FOR CASH CONSIDERATION OR STOCK CONSIDERATION,
WESTERN STOCKHOLDERS ARE URGED TO CONSIDER THE POSSIBLE IMPACT OF THE
FLUCTUATING MARKET VALUE OF BJ COMMON STOCK ON THE VALUE OF TOTAL CONSIDERATION
RECEIVED IN THE MERGER. UNDER THE MERGER AGREEMENT, THE STOCK CONSIDERATION
PER SHARE OF WESTERN COMMON STOCK WILL BE FIXED AT NOT LESS THAN 0.8989 SHARES
AND NOT MORE THAN 1.1594 SHARES OF BJ COMMON STOCK IN ORDER TO APPROXIMATE AN
ASSUMED VALUE OF $20.00 PER SHARE OF WESTERN COMMON STOCK BASED UPON THE
CLOSING PRICE OF BJ COMMON STOCK, SUBJECT TO THE STATED MAXIMUM AND MINIMUM
STOCK CONSIDERATION. IF THE CLOSING PRICE OF BJ COMMON STOCK IS LESS THAN
$17.25 PER SHARE, THE VALUE OF THE STOCK CONSIDERATION BASED UPON THE CLOSING
PRICE WILL BE LESS THAN $20.00. CONVERSELY, IF THE CLOSING PRICE OF BJ COMMON
STOCK IS MORE THAN $22.25 PER SHARE, THE VALUE OF THE STOCK CONSIDERATION BASED
UPON THE CLOSING PRICE WILL BE MORE THAN $20.00. IN ANY EVENT, THERE IS NO
ASSURANCE THAT THE CLOSING PRICE (WHICH IS BASED UPON A 20-TRADING-DAY AVERAGE
TRADING PRICE DETERMINED PRIOR TO THE CLOSING DATE) OF BJ COMMON STOCK WILL
APPROXIMATE THE ACTUAL VALUE OF BJ COMMON STOCK AT THE CLOSING DATE OR AT ANY
TIME THEREAFTER. THE FLUCTUATING MARKET VALUE OF BJ COMMON STOCK MAY ALSO
AFFECT THE VALUE OF THE WARRANT CONSIDERATION RECEIVED IN THE MERGER, WHICH
WILL ALSO BE AFFECTED BY WHETHER OR NOT A PUBLIC MARKET DEVELOPS FOR THE BJ
WARRANTS AND, IF SO, THE FLUCTUATING MARKET VALUE OF THE BJ WARRANTS.
WESTERN STOCKHOLDERS WHO PERFECT AN ELECTION MAY NOT RECEIVE THE ELECTED
STOCK CONSIDERATION OR CASH CONSIDERATION IN FULL DUE TO PRORATION LIMITATIONS
IN THE MERGER AGREEMENT, WHICH GENERALLY ARE DESIGNED TO EXCHANGE ONE-HALF OF
THE OUTSTANDING SHARES OF WESTERN COMMON STOCK FOR STOCK CONSIDERATION AND
ONE-HALF OF SUCH SHARES (INCLUDING DISSENTING SHARES) FOR CASH CONSIDERATION.
WESTERN STOCKHOLDERS ARE ALSO URGED TO CONSIDER THE DIFFERING FEDERAL INCOME
TAX CONSEQUENCES IN MAKING THE ELECTION, AS DISCUSSED BELOW.
PRORATION
If the aggregate number of shares in respect of which Cash Elections
have been made (the "Cash Election Shares") exceeds the Cash Election Number,
all shares of Western Common Stock in respect of which Stock Elections have
been made (the "Stock Election Shares") and all Non-Election Shares in respect
of which Stock Elections are deemed to have been made will be converted into
the right to receive Stock Consideration (in addition to Warrant
Consideration), and the Cash Election Shares will be converted into the right
to receive Stock Consideration or Cash Consideration (in addition to Warrant
Consideration) as follows: (i) Cash Election Shares will be deemed converted to
Stock Election Shares, on a pro rata basis for each record holder of Western
Common Stock with respect to those shares of Western Common Stock, if any, of
such record holder which are Cash Election Shares, so that the number of Cash
Election Shares so converted, when added to the other Stock Election Shares and
all Non-Election Shares in respect of which Stock Elections are deemed to have
been made, will equal as closely as practicable the Stock Election Number, and
all such Cash Election Shares so converted will be converted into the right to
receive Stock Consideration (in addition to Warrant Consideration); and (ii)
the remaining Cash Election Shares will be converted into the right to receive
Cash Consideration (in addition to Warrant Consideration).
If the aggregate number of Stock Election Shares exceeds the Stock
Election Number, all Cash Election Shares and all Non-Election Shares in
respect of which Cash Elections are deemed to have been made will be converted
into the right to receive Cash Consideration (in addition to Warrant
Consideration), and all Stock Election Shares will be converted into the right
to receive Stock Consideration or Cash Consideration (in addition to Warrant
Consideration) as follows: (i) Stock Election Shares will be deemed converted
into Cash Election Shares, on a pro rata basis for each record holder of
Western Common Stock with respect to those shares of Western Common Stock, if
any, of such record holder which are Stock Election Shares, so that the number
of Stock Election Shares so converted, when added to the other Cash Election
Shares and all Non-Election Shares in respect of which Cash Elections are
deemed to have been made, will equal as closely as practicable the
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Cash Election Number, and all such shares of Western Common Stock so converted
will be converted into the right to receive the Cash Consideration (in addition
to Warrant Consideration); and (ii) the remaining Stock Election Shares will be
converted into the right to receive the Stock Consideration (in addition to
Warrant Consideration).
PROCEDURES FOR EXCHANGE OF CERTIFICATES; THE PAYMENT FUND
Upon the surrender of each certificate (a "Certificate") that prior to
the Effective Time represented shares of Western Common Stock, the Exchange
Agent shall pay the holder of such Certificate the Merger Consideration
multiplied by the number of shares of Western Common Stock formerly represented
by such Certificate in exchange therefor, and such Certificate shall forthwith
be cancelled. No interest will be paid or will accrue on Merger Consideration.
As of or promptly after the Effective Time, BJ Services shall deposit or
cause to be deposited, in trust with the Exchange Agent, for the benefit of the
holders of shares of Western Common Stock, for exchange as provided herein, the
aggregate Merger Consideration.
The cash portion of the aggregate Merger Consideration shall be invested
by the Exchange Agent, as directed by and for the benefit of the Surviving
Corporation, subject to the limitations described in the Merger Agreement with
respect to the quality of such investments.
Promptly following the date which is six months after the Effective
Time, the Exchange Agent shall deliver to the Surviving Corporation all cash,
shares of BJ Common Stock, Certificates and other documents in its possession
relating to the Merger, and the Exchange Agent's duties shall terminate.
Thereafter, each holder of a Certificate may surrender such Certificate to the
Surviving Corporation and (subject to applicable abandoned property, escheat
and similar laws and, in the case of Dissenting Shares, subject to applicable
law) receive in exchange therefor the applicable Merger Consideration, without
any interest or dividends or other payments thereon.
After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any shares of Western Common
Stock. If, after the Effective Time, Certificates formerly representing shares
of Western Common Stock are presented to the Surviving Corporation or the
Exchange Agent, they will be cancelled and (subject to applicable abandoned
property, escheat and similar laws and, in the case of Dissenting Shares,
subject to applicable law) exchanged for Merger Consideration.
No dividends or other distributions declared or made after the Effective
Time with respect to shares of BJ Common Stock will be paid to the holder of
any unsurrendered Certificate with respect to the shares of BJ Common Stock
such holder is entitled to receive and no cash payment in lieu of fractional
interests shall be paid to any such holder until the surrender of such
Certificate in accordance with the Merger Agreement.
BJ Services shall not be liable to any holder of shares of Western
Common Stock for any Merger Consideration in respect of such shares (or
dividends or distributions with respect thereto) delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
FRACTIONAL INTERESTS
No certificates or scrip representing fractional shares of BJ Common
Stock or fractions of BJ Warrants will be issued in connection with the Merger,
and such fractional interests will not entitle the owner thereof to any rights
of a stockholder or warrantholder of BJ Services. In lieu of any such
fractional securities, each holder of shares of Western Common Stock who would
otherwise have been entitled to receive a fraction of a share of BJ Common
Stock (and associated BJ Right) or a fraction of a BJ Warrant (after taking
into account all shares of Western Common Stock then held of record by such
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holder) shall receive (a) cash (without interest) in an amount equal to the
product of such fractional part of a share of BJ Common Stock multiplied by the
Closing Price and/or (b) cash (without interest) in an amount equal to the
product of such fraction of a BJ Warrant multiplied by the Warrant Current
Market Price.
BACKGROUND OF THE MERGER
On numerous occasions during the two years preceding July 1994, Mr. J.W.
Stewart, Chairman of the Board and Chief Executive Officer of BJ Services,
engaged in discussions with Mr. Sheldon R. Erikson, Chairman of the Board and
Chief Executive Officer of Western, concerning the possibility of the
combination of Western and BJ Services. In July 1994, BJ Services retained
Merrill Lynch to provide financial advice and assistance in connection with a
possible combination of Western and BJ Services, including performing valuation
and financial analyses.
None of the discussions mentioned in the preceding paragraph resulted in
a common agreement regarding a possible combination of the two companies. On
July 29, 1994, Mr. Stewart delivered a letter to Mr. Erikson outlining a
contemplated proposal that BJ Services acquire Western in a merger transaction.
In this letter, Mr. Stewart proposed that Western stockholders would receive in
the merger transaction $18.50 in cash per share for one-half of the outstanding
shares of Western Common Stock and shares of BJ Common Stock having the same
current market value as the cash consideration for the remaining shares of
Western Common Stock. For a discussion of the factors that led to the decision
of BJ Services to make this merger proposal, see "-- Reasons for the Merger;
Recommendations of the Boards of Directors -- BJ Services Reasons for the
Merger" below.
Western's Board of Directors considered BJ Services' contemplated merger
proposal at its regular quarterly meeting on August 8, 1994 and concluded that
it was not then appropriate to enter into negotiations with respect to a sale
of Western. Mr. Erikson informed Mr. Stewart of the Western Board's conclusion
on August 15, 1994. Additional discussions between Messrs. Stewart and Erikson
took place in late August 1994, but those discussions did not result in an
agreement to combine the two companies. On September 13, 1994, Mr. Stewart
delivered to Mr. Erikson, and publicly disclosed, a second letter expressing BJ
Services' continued interest in consummating the previously described merger
transaction. Western subsequently retained Goldman Sachs and Alexander
Corporate Financial Consulting, Inc. to provide financial advice and assistance
in connection with BJ Services' merger proposal, including performing valuation
and financial analyses.
On September 22, 1994, Western's Board of Directors met with Goldman
Sachs, who advised the Western Board that the then pending BJ Services merger
proposal was inadequate. The Western Board then authorized its representatives
to meet with representatives of BJ Services to further examine legal and
structural issues in connection with the proposed merger in order to determine
whether a transaction could be identified that would serve the best interests
of the stockholders of both companies. Following that meeting, reciprocal
confidentiality agreements were executed by BJ Services and Western, and
nonpublic information concerning both companies was exchanged.
During late September, October and November 1994, BJ Services and
Western and their financial and legal advisors conducted due diligence
investigations and negotiated the possible terms of a merger transaction.
During this period, the respective Boards of Directors of BJ Services and
Western met on several occasions with their respective advisors to review the
status of the negotiations and, following such review, to authorize continued
discussions. During the course of these negotiations, BJ Services agreed to
increase the value of the consideration to be received by holders of Western
Common Stock in the proposed merger by increasing both the cash consideration
and the value of the BJ Common Stock to be received in the merger and by
issuing warrants to purchase BJ Common Stock as additional merger
consideration.
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At separate meetings on November 17, 1994, the Board of Directors of BJ
Services and the Board of Directors of Western each met, as is further
discussed below, to consider and approve the Merger Agreement and the exhibits
thereto. Based upon the information presented, the Board of Directors of each
of BJ Services and Western approved, in each case by the unanimous vote of all
directors, the Merger, the Merger Agreement and related transactions, and the
Merger Agreement was executed and delivered on behalf of both companies later
that day.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
BJ Services Reasons for the Merger. The Board of Directors of BJ
Services believes that the terms of the Merger are fair to, and in the best
interests of, BJ Services and the stockholders of BJ Services. In reaching its
conclusion, BJ Services' Board of Directors considered a number of factors,
including:
(i) the financial performance, operations, assets, business condition
and business prospects of BJ Services and Western;
(ii) the terms of the Merger Agreement;
(iii) the opinion of Merrill Lynch, as financial advisor to BJ
Services, that the proposed consideration to be paid by BJ Services
pursuant to the Merger, taken as a whole, is fair to BJ Services from a
financial point of view;
(iv) an analysis of the opportunities for significant consolidation
cost savings anticipated to be available as a result of the Merger;
(v) an analysis of the potential business synergies to be achieved by
the matching of relative strengths of the two companies, particularly in
respect of customer base, geographic areas and operational strengths,
thus creating opportunities for revenue and profit margin enhancement;
(vi) an analysis of the increased competitiveness produced by
combining under-performing operations;
(vii) an analysis of the projected accretion in earnings and cash flow
with respect to the BJ Common Stock resulting from the Merger; and
(viii) an analysis of improved opportunities to utilize effectively the
net operating losses of both companies.
The Board of Directors of BJ Services did not attach specific weights to
any of the foregoing factors; each was deemed to support the conclusion of the
Board of Directors of BJ Services that the terms of the Merger are fair to, and
in the best interests of, BJ Services and its stockholders.
For a more detailed discussion regarding the anticipated financial and
operational benefits inuring to the combined company as a result of the Merger,
see "Management and Operations After the Merger -- Benefits of the Merger."
In analyzing the Merger, BJ Services' Board of Directors was assisted
and advised by Merrill Lynch and, at the November 17, 1994 special meeting, the
Board of Directors of BJ Services received an oral opinion (subsequently
confirmed in writing) from Merrill Lynch that the consideration to be paid by
BJ Services pursuant to the Merger, taken as a whole, is fair to BJ Services
from a financial point of view. See "-- Opinions of the Financial Advisors --
Opinion of Financial Advisors of BJ Services" for a discussion of the analysis
performed by Merrill Lynch in connection with rendering its opinion and the
terms of BJ Services' agreement to engage, compensate and indemnify Merrill
Lynch.
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Recommendation of the Board of Directors of BJ Services. FOR THE
FOREGOING REASONS, THE BOARD OF DIRECTORS OF BJ SERVICES HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND THE MERGER, THE PAYMENT OF THE MERGER
CONSIDERATION, INCLUDING THE ISSUANCE OF THE STOCK CONSIDERATION AND WARRANT
CONSIDERATION AND THE OTHER TRANSACTIONS CONTEMPLATED THEREBY, AND UNANIMOUSLY
RECOMMENDS THAT BJ SERVICES STOCKHOLDERS VOTE FOR APPROVAL OF SUCH MATTERS
SUBMITTED TO THEM IN CONNECTION WITH THE MERGER, INCLUDING THE ISSUANCE OF THE
STOCK CONSIDERATION AND WARRANT CONSIDERATION PURSUANT THERETO.
Western Reasons for the Merger. At a meeting on November 17, 1994, the
Board of Directors of Western unanimously determined that the Merger is fair
to, and in the best interests of, Western and its stockholders (other than BJ
Services). Accordingly, it recommends approval of the Merger Agreement and the
Merger and the other transactions contemplated thereby to the Western
stockholders. In reaching its determination, the Board of Directors of Western
considered a number of factors, including:
(i) the familiarity of the Board of Directors of Western with
Western's business, operations and prospects and its review of the
financial performance and prospects of BJ Services, including its
prospects after giving effect to the Merger;
(ii) the fact that the stockholders of Western receiving Stock
Consideration and Warrant Consideration in the Merger would initially
own, immediately after the Effective Time, approximately 42% of the
outstanding shares of BJ Common Stock (assuming a Closing Price of BJ
Common Stock of $19.00 and conversion of all of the Western Convertible
Debentures then outstanding) and approximately 50% on a fully diluted
basis (assuming the exercise of the BJ Warrants in full) and will be
able to participate in a larger oilfield services company with a more
diversified geographic coverage than Western on a stand-alone basis,
with the ability to generate significant operating efficiencies and cost
savings as a result of the combination;
(iii) the opinion of Western's financial advisor, Goldman Sachs, that,
as of November 17, 1994, the Merger Consideration to be received by the
stockholders of Western pursuant to the Merger Agreement is fair to such
stockholders;
(iv) the fact that the Merger Consideration offered for the shares of
Western Common Stock represented a substantial premium over the trading
price of such shares one day before the public announcement on September
13, 1994 by BJ Services of its proposal to acquire Western, as well as a
substantial premium over the average trading price of such shares for
the 52 weeks preceding such announcement; and
(v) the fact that the terms of the Merger Agreement were negotiated
at arm's-length, including the provisions of the Merger Agreement
expressly permitting Western to terminate the Merger Agreement to enter
into a business combination with a third party, subject to the payment
of certain fees and expenses set forth in the Merger Agreement.
The Board of Directors of Western did not attach specific weights to any
of the factors enumerated above; each was deemed to support the conclusion of
the Board of Directors of Western that the terms of the Merger are fair to, and
in the best interests of, Western and its stockholders (other than BJ
Services).
For a more detailed discussion regarding the anticipated financial and
operational benefits inuring to the combined companies as a result of the
Merger, see "Management and Operations After the Merger -- Benefits of the
Merger."
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In analyzing the Merger, Western's Board of Directors was assisted and
advised by Goldman Sachs and, at the November 17, 1994 special meeting,
Western's Board of Directors received an oral opinion (subsequently confirmed
in writing) from Goldman Sachs that as of November 17, 1994, the Merger
Consideration to be received by the stockholders of Western pursuant to the
Merger Agreement is fair to such stockholders of Western. See "-- Opinions of
the Financial Advisors -- Opinion of Financial Advisors of Western" for a
discussion of the analysis performed by Goldman Sachs in connection with
rendering its opinion and the terms of Western's agreement to engage,
compensate and indemnify Goldman Sachs.
Recommendation of the Board of Directors of Western. FOR THE FOREGOING
REASONS, THE BOARD OF DIRECTORS OF WESTERN BELIEVES THAT THE MERGER IS FAIR TO,
AND IN THE BEST INTERESTS OF, WESTERN AND ITS STOCKHOLDERS (OTHER THAN BJ
SERVICES) AND HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE MERGER AND
THE OTHER TRANSACTIONS CONTEMPLATED THEREBY AND UNANIMOUSLY RECOMMENDS THAT
WESTERN STOCKHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT.
OPINIONS OF FINANCIAL ADVISORS
Opinion of Financial Advisors of BJ Services. At its meeting on
November 17, 1994 to consider and vote on entering into the Merger Agreement,
BJ Services' Board of Directors received the oral opinion (subsequently
confirmed in writing) of Merrill Lynch that, as of such date, the consideration
to be paid by BJ Services pursuant to the Merger is fair to BJ Services from a
financial point of view. Such opinion was subsequently confirmed in writing to
the Board of Directors of BJ Services. Merrill Lynch's opinion related only to
the consideration to be paid by BJ Services in connection with the Merger and
does not constitute a recommendation to any stockholder of BJ Services as to
how such stockholder should vote at the BJ Services Special Meeting. The full
text of Merrill Lynch's written opinion, which summarizes the assumptions made,
procedures followed and matters considered in connection with such opinion, is
attached as Appendix C to this Joint Proxy Statement/Prospectus and is
incorporated herein by reference. STOCKHOLDERS OF BJ SERVICES AND WESTERN ARE
URGED TO, AND SHOULD, READ THE OPINION IN ITS ENTIRETY, ESPECIALLY WITH REGARD
TO THE ASSUMPTIONS MADE AND MATTERS CONSIDERED BY MERRILL LYNCH.
In connection with rendering this opinion, Merrill Lynch, among other
things: (i) reviewed Western's Annual Reports to Stockholders, Annual Reports
on Form 10-K and related financial information for the three fiscal years ended
December 31, 1993 and its Quarterly Report on Form 10-Q and the related
unaudited financial information for the quarterly periods ending March 31, June
30 and September 30, 1994; (ii) reviewed BJ Services' Annual Reports, Forms
10-K and related financial information for the three fiscal years ended
September 30, 1993 and its Quarterly Report on Form 10-Q and the related
unaudited financial information for the quarterly periods ending December 31,
March 31 and June 30, 1994; (iii) reviewed certain information, including
financial forecasts, relating to the business, earnings, cash flow, assets and
prospects of Western and of BJ Services, furnished to Merrill Lynch by Western
and BJ Services, respectively; (iv) conducted discussions with members of
senior management of Western and BJ Services concerning their respective
businesses and prospects; (v) reviewed the historical market prices and trading
activity for the shares of common stock of each of Western and BJ Services and
compared them with similar characteristics of the common stock of certain
publicly traded companies which Merrill Lynch deemed to be reasonably similar
to Western and BJ Services, respectively; (vi) compared the results of
operations of Western and BJ Services with those of certain companies which
Merrill Lynch deemed to be reasonably similar to Western and BJ Services,
respectively; (vii) compared the proposed financial terms of the transactions
contemplated by the Merger Agreement with the financial terms of certain other
mergers and acquisitions which Merrill Lynch deemed to be relevant; (viii)
considered the pro forma effect of the Merger on BJ Services' capitalization
ratios and earnings and cash flow per share; (ix) reviewed a draft of the
Merger Agreement dated November 17, 1994; (x) reviewed a draft of the Warrant
Agreement dated November 17, 1994; and (xi) reviewed such other financial
studies and analyses and performed such
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other investigations and took into account such other matters as Merrill Lynch
deemed necessary, including its assessment of general economic, market and
monetary conditions.
In connection with orally advising the BJ Services Board of Directors
of its opinion on November 17, 1994, confirming its opinion in writing and
preparing its presentations to the BJ Services Board of Directors, Merrill
Lynch performed a variety of financial and comparative analyses, including
those described below. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstances.
Consequently, such an opinion is not readily susceptible to summary
description. In arriving at its opinion, Merrill Lynch did not attribute any
particular weight to any analysis or factor considered by it, but rather made
qualitative judgments as to the significance and relevance of each analysis and
factor. Accordingly, Merrill Lynch believes that its analyses must be
considered as a whole and that considering any portions of such analyses or
such factors without considering all analyses and factors could create an
incomplete or misleading view of the process Merrill Lynch undertook with
respect to rendering its opinion. In its analysis, Merrill Lynch made numerous
assumptions with respect to general business and economic conditions, industry
performance and other matters, many of which are beyond BJ Services' control.
Any estimates contained in these analyses are not necessarily indicative of
actual values or predictions of future results or values, which may be
significantly more or less favorable than as set forth therein. In addition,
analyses relating to the value of businesses or securities do not purport to be
appraisals or to reflect the prices at which businesses or securities actually
may trade or be acquired or sold.
Purchase Price Analysis and Stock Trading History. Merrill Lynch
performed an analysis of the Merger (assuming a Closing Price ranging from
$17.25 to $22.25), which indicated that the pro forma ownership of former
holders of the Western Common Stock of the pro forma combined company would
range from approximately 34% (assuming a Closing Price of $22.25) to
approximately 40% (assuming a Closing Price of $17.25), assuming no conversion
of the Western Convertible Debentures and no exercise of BJ Warrants following
the Merger (a range of approximately 40% to 46%, depending on the Closing
Price, assuming conversion of all Western Convertible Debentures). Merrill
Lynch also examined the history of trading prices and volume for BJ Common
Stock and Western Common Stock and various historical ratios between such
common stocks.
Pro Forma Merger Analysis. Merrill Lynch analyzed certain pro forma
effects which could result from the Merger. This analysis indicated that the
pro forma net income per share of the combined company would be accretive in
1994 and 1995 as compared to the comparable stand alone projections for BJ
Services. This analysis also indicated that the pro forma cash flow per share
of the combined company would be accretive in 1994 and 1995 as compared to the
comparable stand alone projections for BJ Services. For purposes of such
analysis, Merrill Lynch defined cash flow per share as (i) net income to common
stockholders plus depreciation and amortization plus deferred taxes, but before
changes in working capital, divided by (ii) common shares outstanding. Merrill
Lynch also analyzed the effects of the Merger on the pro forma statement of
financial position of the combined company. The combined company's projected
debt- to-debt plus common equity ratio as of December 31, 1994 was 51.1%
(assuming no conversion of the Western Convertible Debentures) or 45.1%
(assuming conversion of all outstanding Western Convertible Debentures) as
compared to 36.2% for BJ Services on a stand-alone basis.
Discounted Cash Flow Analysis. Utilizing a discounted cash flow
analysis, Merrill Lynch, in conjunction with BJ Services, estimated the present
value of the future unlevered free cash flows that Western could be expected to
generate during the period from January 1, 1994 to December 31, 1998 based upon
information provided to Merrill Lynch by Western and BJ Services and certain
other assumptions.
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In connection with BJ Services and Western, Merrill Lynch utilized
certain information presented below in its discounted cash flow analysis. Such
analysis relied on a financial model for Western based on worldwide drilling
rig activity. Projected worldwide oil and natural gas drilling rig activity
was based on rig count forecasts provided by Merrill Lynch (representing
approximately 3.0% growth per year). Operating costs were assumed to grow at an
inflation rate of 3.0%. Western's effective cash tax rate was assumed to be
zero as a result of Western's significant net operating loss carry-forward
position. Maintenance capital expenditures were assumed. In addition, Merrill
Lynch examined the discounted cash flow analysis assuming (i) no consolidation
benefits and (ii) the realization of expected annual pre-tax consolidation
benefits of $35 million (before giving effect to potential revenue loss which
may result from the consolidation of certain overlapping operations).
The estimated future unlevered free cash flows were discounted at
after-tax rates of 9.0% to 13.0%, which provided a reference value range for
Western Common Stock of $339.8 million to $418.4 million, or $18.47 to $22.74
per share, assuming no consolidation savings, and $564.1 million to $678.4
million, or $30.66 to $36.87 per share, assuming the realization of expected
annual pre-tax consolidation benefits of $35 million.
Analyses of Selected Publicly Traded Comparable Companies. Merrill
Lynch compared selected historical stock, operating and financial ratios for
each of BJ Services and Western to the respective corresponding data and ratios
of certain similar publicly traded companies. With respect to both BJ Services
and Western, Merrill Lynch made such comparisons to CAMCO International, Inc.,
Enterra Corp., Smith International, Inc., Tuboscope Vetco International
Corporation, Varco International, Inc. and Weatherford International, Inc. For
purposes of this analysis, data with respect to the companies were derived from
certain publicly available information concerning estimates of future operating
and financial performance of the companies as prepared by certain industry
analysts.
An analysis of the ratio of adjusted market capitalization to
projected earnings before depreciation, interest and taxes ("EBDIT") for 1994
yielded a range of 7.0x to 9.4x with an average of 8.0x for the comparable
group, compared to a ratio of total consideration to projected EBDIT in 1994
for Western of 11.8x excluding any consolidation benefits and 6.8x including
expected annual pre-tax consolidation benefits of $35 million; and for 1995
yielded a range of 5.9x to 7.7x with an average of 6.8x for the comparable
group, compared to a ratio of total consideration to projected EBDIT in 1995
for Western of 8.8x excluding any consolidation benefits and 5.7x including
expected annual pre-tax consolidation benefits of $35 million.
Because of the inherent differences between the operations of BJ
Services, Western and the selected comparable companies, Merrill Lynch believes
that a purely quantitative comparable company analysis would not be exclusively
dispositive in the context of the Merger. Merrill Lynch believes that an
appropriate use of a comparable company analysis in this instance would involve
qualitative judgments concerning differences between the financial and
operating characteristics of BJ Services, Western and the selected companies,
which judgments are reflected in Merrill Lynch's opinion.
Analyses of Selected Comparable Acquisition Transactions. Merrill
Lynch also reviewed publicly available information on certain acquisition
transactions which involved companies with primarily U.S. operations and
consideration in excess of $50 million in the oil field service industry which
took place between November 1989 and August 1994. The acquisitions considered
by Merrill Lynch include (in reverse chronological order from August 1994 to
November 1989 and listed by the acquiror/seller): Enterra/Total Energy
Services; Dresser Industries/Wheatley TXT; Nabors/Sundowner Offshore; Dresser
Industries/Baroid; Weatherford International/Homco International;
Halliburton/Smith Directional Drilling; Baroid/Sub Sea International; Baker
Hughes/Teleco Oilfield Services; Baker Hughes/Eastman Christensen; and Cooper
Industries/Cameron Iron Works.
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Merrill Lynch examined the multiples of the total consideration paid
in each of the transactions to, among other measures, such acquired companies'
respective EBDIT for the latest reported twelve month period which yielded a
range of 8.1x to 16.1x with an average of 10.9x. Merrill Lynch also reviewed
certain recent non-contested stock mergers in a variety of industries from
January 1990 through October 1994 and examined the premiums paid for the
targets' equity over the targets' equity market value prior to announcement of
the transactions.
Because the reasons for, and circumstances surrounding, each of the
transactions analyzed were so diverse and due to the inherent differences
between the operations of BJ Services, Western and the selected companies,
Merrill Lynch believes that a purely quantitative comparable transaction
analysis would not be dispositive in the context of the Merger. Merrill Lynch
believes that an appropriate use of a comparable transaction analysis in this
instance would involve qualitative judgments concerning differences between the
characteristics of these transactions and the Merger that would affect the
acquisition value of the acquired companies and businesses and Western, which
judgments are reflected in Merrill Lynch's opinion.
Other. In connection with rendering its opinion, Merrill Lynch
relied, without independent verification, upon the accuracy and completeness of
all of the financial and other information supplied or otherwise made available
to it by Western or BJ Services. With respect to forecasted financial
information furnished to Merrill Lynch by Western and BJ Services (including
estimates of consolidation benefits from the Merger), Merrill Lynch assumed
such information to have been reasonably prepared and to reflect the best
currently available estimates and judgments of the managements of BJ Services
and Western as to the expected future financial performance of BJ Services and
Western, respectively, and of the two companies combined. In rendering its
opinion, Merrill Lynch did not make or receive an independent evaluation or
appraisal of the assets or liabilities of BJ Services or Western. The opinion
of Merrill Lynch is necessarily based upon market, economic and other
conditions as they existed on, and could be evaluated as of, the date of such
opinion.
Merrill Lynch is an internationally recognized investment banking firm
which, as part of its investment banking business, regularly is engaged in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. BJ Services selected
Merrill Lynch to act as its financial advisor in connection with the Merger on
the basis of such firm's expertise.
In connection with Merrill Lynch's services as financial advisor to BJ
Services, BJ Services has agreed to pay Merrill Lynch as compensation for its
services a fee in the amount of $3,600,000 upon consummation of the Merger. BJ
Services has paid Merrill Lynch fees of $300,000 that will be credited against
such transaction fee. The Company has also agreed to reimburse Merrill Lynch
for certain reasonable out-of-pocket expenses incurred in connection with the
Merger and to indemnify Merrill Lynch (and its employees and directors) against
certain liabilities and expenses in connection with the Merger, including
certain liabilities under the federal securities laws.
In the ordinary course of Merrill Lynch's business, Merrill Lynch may
actively trade the securities of BJ Services and Western for its own account
and for the accounts of its customers and, accordingly, may at any time hold a
long or short position in such securities.
Opinion of Financial Advisors of Western. At the November 17, 1994
meeting of Western's Board of Directors, Goldman Sachs delivered their oral
opinion to the Board of Directors of Western that, as of the date of such
opinion, the consideration to be received by the holders of shares of Western
Common Stock pursuant to the Merger Agreement is fair to the holders of shares
of Western Common Stock. On December 5, 1994, Goldman Sachs delivered their
written opinion to the Board of Directors of Western confirming their oral
opinion of November 17, 1994. At the time Goldman Sachs rendered
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its opinion, the Merger was structured as a merger of Western into a wholly
owned subsidiary of BJ Services. Subsequent to that time, the Merger has been
restructured to provide for the Merger of Western with and into BJ Services.
Goldman Sachs has orally advised Western that had such restructuring occurred
prior to the rendering of its opinion, the opinion of Goldman Sachs as to the
fairness as of November 17, 1994 of the consideration to be received by
holders of shares of Western Common Stock pursuant to the Merger Agreement
would not have been affected.
The full text of the written opinion of Goldman Sachs, dated December 5,
1994, which sets forth the assumptions made, matters considered and limitations
on the review undertaken in connection with the opinion, is attached hereto as
Appendix D to this Joint Proxy Statement/Prospectus and is incorporated herein
by reference. STOCKHOLDERS OF WESTERN AND BJ SERVICES ARE URGED TO, AND
SHOULD, READ THE OPINION IN ITS ENTIRETY, ESPECIALLY WITH REGARD TO THE
ASSUMPTIONS MADE AND MATTERS CONSIDERED BY GOLDMAN SACHS.
In connection with their opinion, Goldman Sachs reviewed, among other
things, the Merger Agreement; Annual Reports to Stockholders and Annual Reports
on Form 10-K of Western for the five years ended December 31, 1993; Annual
Reports to Stockholders and Annual Reports on Form 10-K of BJ Services for the
three fiscal years ended September 30, 1993; certain interim reports to
stockholders and Quarterly Reports on Form 10-Q of Western and BJ Services;
certain other communications from Western and BJ Services to their respective
stockholders; and certain internal financial analyses and forecasts for Western
and BJ Services prepared by their respective managements. Goldman Sachs also
held discussions with members of the senior management of Western and BJ
Services regarding the past and current business operations, financial
condition and future prospects of their respective companies individually and
as combined in the Merger. In addition, Goldman Sachs reviewed the reported
price and trading activity for the shares of Western Common Stock and the
shares of BJ Common Stock, compared certain financial and stock market
information for Western and BJ Services with similar information for certain
other companies the securities of which are publicly traded, reviewed the
financial terms of certain recent business combinations in the oilfield
services industry specifically and in other industries generally and performed
such other studies and analyses as Goldman Sachs considered appropriate.
Goldman Sachs relied without independent verification upon the accuracy
and completeness of all of the financial and other information reviewed by them
for purposes of their opinion and assumed that the financial forecasts provided
to them have been reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the respective managements of Western and
BJ Services as to the expected future financial performance of their respective
companies individually and as combined in the Merger. In addition, Goldman
Sachs has not made an independent evaluation or appraisal of the assets and
liabilities of Western or BJ Services or any of their respective subsidiaries
and Goldman Sachs has not been furnished with any such evaluation or appraisal.
The following is a summary of certain of the financial analyses
performed by Goldman Sachs in connection with providing their oral opinion to
the Board of Directors of Western on November 17, 1994 and their written
opinion dated as of December 5, 1994 confirming their oral opinion. Goldman
Sachs reviewed these financial analyses with the Board of Directors of Western.
The following summary reflects these analyses as revised and updated at the
November 17, 1994 meeting.
Selected Companies Analysis. Goldman Sachs reviewed and compared
certain actual and estimated financial, operating and stock market information
of Western, BJ Services and selected companies in the oilfield services
industry, including production and well service companies ("Service Companies")
including BJ Services, Enterra Corp., Nowsco Well Services, Petrolite
Corporation, Pool Energy Services, Pride Petroleum Services and Tuboscope
Vetco, larger diversified oilfield service companies ("Diversified Companies"),
including Baker Hughes, Camco International, Dresser Industries, Halliburton,
Schlumberger, Smith International and Weatherford International, and primarily
offshore drilling companies ("Offshore Companies"), including Energy Service
Company,
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Global Marine, Noble Drilling, Rowan Companies, Sonat Offshore, SEACOR Holdings
and Nabors Industries. Such analysis indicated that (i) price/earnings
multiples based on estimates of 1994 earnings and estimates of 1995 earnings
(based on estimates of Wall Street financial analysts in the case of all
companies other than Western and BJ Services and on management estimates in the
case of Western and BJ Services) ranged: in the case of Service Companies,
from 14.4x to 27.7x, with a mean of 20.6x, for 1994 earnings estimates and from
9.7x to 19.4x, with a mean of 13.9x, for 1995 earnings estimates; in the case
of Diversified Companies, from 16.5x to 35.5x, with a mean of 23.8x, for 1994
earnings estimates and from 13.8x to 26.0x, with a mean of 19.1x, for 1995
earnings estimates; in the case of Offshore Companies, from 16.6x to 43.8x,
with a mean of 25.5x, for 1994 earnings estimates, and from 14.1x to 44.5x,
with a mean of 23.4x, for 1995 earnings estimates; and for all such companies
an overall mean of 23.3x and 18.8x for 1994 and 1995 earnings estimates,
respectively, as compared to 24.5x and 12.9x for 1994 and 1995 earnings
estimates for Western (based on a $12.25 market price for Western Common Stock,
the closing price on the date before BJ Services first announced a proposal to
acquire Western) and 27.7x and 19.4x for 1994 and 1995 earnings estimates for
BJ Services, (ii) levered market capitalization as a multiple of earnings
before interest, taxes and depreciation based on 1994 and 1995 estimates
ranged: in the case of Service Companies, from 5.0x to 9.2x, with a mean of
6.7x, for 1994 estimates, and from 3.2x to 8.0x, with a mean of 5.7x, for 1995
estimates; in the case of Diversified Companies, from 7.2x to 9.7x, with a mean
of 8.5x, for 1994 estimates and from 6.1x to 8.3x, with a mean of 7.3x, for
1995 estimates; in the case of Offshore Companies, from 6.1x to 16.9x, with a
mean of 9.8x, for 1994 estimates and from 3.9x to 11.0x, with a mean of 6.9x,
for 1995 estimates; and for all such companies an overall mean of 8.4x and 6.6x
for 1994 and 1995 estimates, respectively, as compared to 7.9x and 6.4x for
1994 and 1995 estimates for Western and 9.2x and 7.9x for 1994 and 1995
estimates for BJ Services, and (iii) market capitalization as a multiple of
after-tax cash flow ranged from 5.7x to 12.7x, with a mean of 8.2x, for 1994
estimates and from 4.5x to 9.1x, with a mean of 6.6x, for 1995 estimates for
Service Companies, from 7.0x to 11.1x, with a mean of 9.6x, for 1994 estimates
and from 7.4x to 10.2x, with a mean of 8.8x, for 1995 estimates for Diversified
Companies; and in the case of Offshore Companies, from 5.2x to 21.2x, with a
mean of 11.2x, for 1994 estimates and from 3.6x to 12.8x, with a mean of 7.8x,
for 1995 estimates; and for all such companies an overall mean of 9.7x and 7.7x
for 1994 and 1995 estimates, respectively, as compared to 7.4x and 5.9x for
1994 and 1995 estimates for Western and 8.6x and 7.4x for 1994 and 1995
estimates for BJ Services.
Discounted Cash Flow Analysis. Based on projections prepared by
Western's management, Goldman Sachs estimated the net present value of
Western's future cash flows. In conducting this analysis, Goldman Sachs
assumed discount rates ranging from 15.0% to 25.0% and terminal value multiples
(the multiple of earnings before interest, taxes and depreciation in the final
year covered by projections) ranging from 5x to 8x. This analysis indicated,
based upon management's estimates, a range of $14.33 per share of Western
Common Stock to $27.78 per share of Western Common Stock for the net present
value of Western's future cash flows.
Selected Transactions Analysis. Goldman Sachs reviewed and analyzed
selected financial, operating and stock market information relating to 28
acquisition transactions in the oilfield services industry since November 1989
(the "Selected Transactions"). This analysis indicated that (i) the aggregate
consideration paid in the Selected Transactions represented a premium over the
market price prior to the acquisition of the acquired company ranging from 5.0%
to 67.5%, with a mean of 41.5% and a median of 47.0%, (ii) the levered
consideration paid in the Selected Transactions as a multiple of the latest
twelve months revenues, earnings before interest and taxes, and earnings before
interest, taxes, depreciation and amortization ranged from .40x to 4.52x, 10.1x
to 38.4x, and 4.1x to 24.5x, respectively, and medians of 2.08x, 18.6x and
10.0x, respectively, and (iii) the aggregate consideration in the Selected
Transactions as a multiple of latest twelve months' net income and book value
ranged from 11.4x to 68.9x and 0.47x to 3.42x, respectively, with means of
29.8x and 1.72x, respectively, and medians of 21.3x and 1.67x, respectively.
Goldman Sachs calculated similar financial indicia for the Merger employing
assumed values for the consideration to be received by the holders of shares of
Western Common Stock in the Merger. Assuming such consideration had a total
value per share of Western Common Stock of each of $18.00, $19.50, $20.50,
$21.00, $22.50 or $24.00
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(i) the consideration to be paid by BJ Services represents a premium over the
$12.25 September 12, 1994 closing price of shares of Western Common Stock of
approximately 46.9%, 59.2%, 67.3%, 71.4%, 83.7% and 95.9%, respectively, (ii)
the levered consideration to be paid by BJ Services as a multiple (a) of
Western's latest twelve months' revenues is 1.13x, 1.24x, 1.31x, 1.34x, 1.45x
and 1.55x, respectively, and (b) of Western's latest twelve months' earnings
before interest, taxes, depreciation and amortization is 10.6x, 11.5x, 12.2x,
12.5x, 13.5x and 14.5x, respectively and (iii) the aggregate consideration to
be paid by BJ Services as a multiple of (a) the latest twelve months' net
income of Western is 13.6x, 14.8x, 15.5x, 15.9x, 17.0x and 18.2x, respectively,
and (b) book value of Western as of June 30, 1994 is 2.19x, 2.37x, 2.49x,
2.55x, 2.74x and 2.92x, respectively.
Other Analyses. Goldman Sachs reviewed and analyzed various financial,
operating and stock market information with respect to BJ Services. In this
regard, Goldman Sachs performed a discounted cash flow analysis of BJ Services
employing methodology similar to that employed in the discounted cash flow
analysis of Western. Based upon management's estimates of future cash flows,
Goldman Sachs derived a range of $12.78 per share to $30.91 per share for the
net present value of BJ Services' future cash flows (before taking into account
the Merger). Goldman Sachs also analyzed the impact of the Merger on BJ
Services under various assumptions and based upon the projections of the
managements of Western and BJ Services. This analysis indicated that at
acquisition prices per share of Western Common Stock (excluding the value of
the Warrant Consideration) of $19, $20 and $21, and assuming pre-tax synergies
of $30 million earnings per share on a pro forma basis (giving effect to the
issuance of BJ Common Stock in the Merger): earnings per share of BJ Common
Stock in 1994 would accrete by 3.8% or be diluted by 6.6% and 16.6%,
respectively, for 1995 would accrete by 39.2%, 30.8% and 22.7%, respectively,
and for 1996 would accrete by 36.0%, 29.3% and 23.0%, respectively; and cash
flow per share would show accretions of 13.6%, 9.4% and 5.4%, respectively, for
1994, 30.6%, 26.3% and 22.1%, respectively, for 1995, and 34.1%, 29.9% and
25.9%, respectively, for 1996. Assuming pre-tax synergies of $60 million, such
pro forma earnings per share accretion would be 133.6%, 120.4%, and 107.7% in
1994 for acquisition prices of $19, $20 and $21 (excluding warrants), 124.4%,
114.1% and 104.3% in 1995 for such acquisition prices, and 94.5%, 86.6% and
79.0% in 1996 for such acquisition prices, and such pro forma cash flow per
share would accrete by 52.8%, 47.8% and 43.0% in 1994 for such acquisition
prices, 64.5%, 59.5% and 54.7% in 1995 for such acquisition prices, and 62.6%,
57.9% and 53.3% for such acquisition prices. Goldman Sachs also reviewed the
valuation of the Merger Consideration under various assumptions relating to the
various market prices of shares of BJ Common Stock and employing a value for
the Warrant Consideration implied by a mathematical pricing model which is not
necessarily indicative of actual trading values. This review indicated that
the average value per share of Western Common Stock of the Merger Consideration
would range from $18.49 for a stock price for a share of BJ Common Stock of
$13.00 per share to $26.28 for a stock price for a share of BJ Common Stock of
$31.00 per share at Closing and that the holders of shares of Western Common
Stock would in the aggregate obtain ownership of BJ Common Stock (excluding
shares issuable upon exercise of the BJ Warrants) representing between 48.1%
and 40.0% of all BJ Common Stock outstanding following the Merger based on
stock prices for a share of BJ Common Stock ranging from $13.00 to $31.00,
respectively, and assuming the Western Convertible Debentures are converted
into shares of Western Common Stock prior to the Merger. Goldman Sachs also
reviewed selected analysts' earnings estimates for Western and BJ Services,
information regarding institutional holdings of shares of Western Common Stock
and shares of BJ Common Stock and historical trading prices for such
securities.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at their fairness
determination, Goldman Sachs considered the results of all such analyses. No
company or transaction used in the above analyses as a comparison is identical
to Western or BJ Services or the contemplated transaction. The analyses were
prepared solely for purposes of Goldman Sachs' providing their opinion to the
Board of Directors of Western as to the fairness of the consideration to the
holders of shares of Western
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Common Stock and do not purport to be appraisals or necessarily reflect the
prices at which businesses or securities actually may be sold. Analyses based
upon forecasts of future results are not necessarily indicative of actual
future results, which may be significantly more or less favorable than
suggested by such analyses. Because such analyses are inherently subject to
uncertainty, being based upon numerous factors or events beyond the control of
the parties or their respective advisors, none of Western, BJ Services, Goldman
Sachs or any other person assumes responsibility if future results are
materially different from those forecasts. As described above, Goldman Sachs'
opinion and presentation to the Board of Directors of Western was one of many
factors taken into consideration by the Board of Directors of Western in making
its determination to approve the Merger Agreement. The foregoing summary does
not purport to be a complete description of the analyses performed by Goldman
Sachs and is qualified by reference to the written opinion of Goldman Sachs set
forth in Appendix D to this Joint Proxy Statement/Prospectus.
Goldman Sachs, as part of their investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements, and valuations for estate, corporate and other purposes. Goldman
Sachs is familiar with Western, having acted as its financial advisor in
connection with, and having participated in certain of the negotiations leading
to, the Merger Agreement. Prior to their engagement by Western, Goldman Sachs
provided certain investment banking services to BJ Services from time to time
and may provide investment banking services to BJ Services in the future.
Western selected Goldman Sachs as its financial advisor because Goldman Sachs
is an internationally recognized investment banking firm that has substantial
experience in transactions similar to the Merger.
Goldman Sachs provide a full range of financial, advisory and brokerage
services and in the course of their normal trading activities may from time to
time effect transactions and hold positions in the securities or options on
securities of Western and BJ Services for their own account and for the account
of customers. Prior to their retention by Western in connection with the
Merger, Goldman Sachs accumulated a long position of 135,000 shares of Western
Common Stock and a short position of 241 shares of BJ Common Stock.
Pursuant to a letter agreement dated September 22, 1994 (the "Engagement
Letter"), Western engaged Goldman Sachs to act as its financial advisor as of
September 13, 1994, with respect to a proposal BJ Services had made to Western
as of that date with respect to the acquisition of Western and other proposals
Western might receive from BJ Services or any other person regarding a possible
acquisition of, or business combination with, Western. Pursuant to the terms
of the Engagement Letter, Western agreed to pay Goldman Sachs (i) a fee of
$250,000 on the date of the Engagement Letter, which will be credited against
the fee described in (ii), and (ii) a fee, payable upon consummation of the
Merger, equal to 0.875% of the aggregate value of the consideration received by
the holders of shares of Western Common Stock and Western Options in the Merger
and the principal amount of indebtedness on Western's consolidated balance
sheet. Western has agreed to reimburse Goldman Sachs for their reasonable
out-of-pocket expenses, including the fees and disbursements of their
attorneys, plus any sales, use or similar taxes arising in connection with
Goldman Sachs' engagement and to indemnify Goldman Sachs against certain
liabilities, including certain liabilities under the federal securities laws.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
The respective obligations of each party to effect the Merger are
subject to the fulfillment at or prior to the Closing Date of the following
conditions: (i) the Merger Agreement and the Merger and the other transactions
contemplated thereby shall have been adopted and approved by the requisite vote
of the holders of Western Common Stock; (ii) the applicable waiting periods
under the HSR Act shall have expired or been earlier terminated; (iii) no
statute, rule or regulation shall have been enacted by any United States
federal or state governmental, regulatory or administrative agency or
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authority that makes the consummation of the Merger illegal or would otherwise
prevent the consummation of the Merger; (iv) no preliminary or permanent
injunction or other order, decree or ruling by any federal or state court of
competent jurisdiction or by any United States federal or state governmental,
regulatory or administrative agency or authority which prevents the
consummation of the Merger shall be in effect; (v) any required post-effective
amendment to the registration statement of which this Joint Proxy
Statement/Prospectus is a part shall have become effective under the Securities
Act and such registration statement shall not be the subject of any stop order
or proceedings seeking a stop order, and any material "blue sky" and other
state securities laws applicable to the registration of the BJ Common Stock and
BJ Warrants (including the BJ Common Stock issuable upon exercise thereof) to
be exchanged for Western Common Stock shall have been complied with; (vi) the
shares of BJ Common Stock issuable to Western's stockholders pursuant to the
Merger Agreement shall have been approved for listing on the NYSE, subject to
official notice of issuance; and (vii) the issuance of BJ Common Stock and BJ
Warrants in the Merger and the Merger Agreement shall have been approved by the
requisite vote of holders of BJ Common Stock.
The obligations of Western to effect the Merger also are subject to the
fulfillment at or prior to the Closing Date of the following additional
conditions: (i) BJ Services shall have performed or complied with in all
material respects its agreements and covenants contained in the Merger
Agreement and the Executive Termination Agreements required to be performed or
complied with at or prior to the Closing Date and, subject to certain
exceptions as provided in the Merger Agreement, the representations and
warranties of BJ Services contained in the Merger Agreement shall be true in
all respects when made and on and as of the Closing Date with the same force
and effect as if made on and as of such date; and (ii) the Warrant Agreement
shall have been executed and delivered by BJ Services.
The obligations of BJ Services to effect the Merger also are subject to
the fulfillment at or prior to the Closing Date of the following additional
conditions: (i) Western shall have performed or complied with in all material
respects its agreements and covenants contained in the Merger Agreement
required to be performed or complied with at or prior to the Closing Date and,
subject to certain exceptions as provided in the Merger Agreement, the
representations and warranties of Western contained in the Merger Agreement
shall be true in all respects when made and on and as of the Closing Date with
the same force and effect as if made on and as of such date; and (ii) the
amendment to the Western Rights Agreement adopted by the Board of Directors of
Western prior to the execution of the Merger Agreement to the effect that none
of the execution and delivery of the Merger Agreement, the conversion of shares
of Western Common Stock into the right to receive Merger Consideration and the
consummation of the Merger or any other transaction contemplated thereby will
cause the Western Rights issued pursuant to the Western Rights Agreement to
become exercisable shall be in full force and effect and shall be binding,
valid and enforceable.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material United States
federal income tax consequences of the Merger and is not intended to be a
complete discussion of all potential tax effects that might be relevant to the
Merger. Such discussion deals only with U.S. Holders. This summary assumes
that the Western Common Stock has been held as a capital asset. It may not be
applicable to certain classes of taxpayers, including, without limitation,
insurance companies, tax-exempt organizations, financial institutions,
securities dealers, broker-dealers, foreign persons, persons who hold Western
Common Stock as part of a conversion transaction and persons who acquired
Western Common Stock pursuant to an exercise of employee stock options or
rights or otherwise as compensation. Moreover, the state, local, foreign and
estate tax consequences to Western stockholders of the Merger are not
discussed.
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This summary is based on laws, regulations, rulings, practice and
judicial decisions in effect at the date of this Joint Proxy
Statement/Prospectus and the opinion of Sullivan & Cromwell. However,
legislative, judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conclusions set forth
herein. Any such changes or interpretations may or may not be retroactive and
could affect the tax consequences described herein to stockholders. EACH
STOCKHOLDER IS URGED TO CONSULT WITH SUCH STOCKHOLDER'S OWN TAX ADVISOR AS TO
THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE TRANSACTIONS DESCRIBED
HEREIN, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN
TAX LAWS, AND OF CHANGES IN APPLICABLE TAX LAWS.
General. It is intended that the Merger qualify as a reorganization
within the meaning of Section 368(a)(1)(A) of the Code and that, for federal
income tax purposes, no gain or loss will be recognized by BJ Services or
Western as a result of the Merger.
Western expects to receive a tax opinion of Sullivan & Cromwell, counsel
to Western (the "Tax Opinion"), dated immediately prior to the Effective Time,
to the effect that the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code and that Western and BJ Services will
each be a party to the reorganization pursuant to Section 368(b) of the Code.
An opinion is not binding on the Internal Revenue Service or the courts, and,
therefore, the delivery of the Tax Opinion cannot assure that the Internal
Revenue Service or the courts will treat the Merger as a reorganization within
the meaning of Section 368(a) of the Code. The Tax Opinion will be based,
among other things, on assumptions relating to certain facts and circumstances
of, and the intentions of the parties to, the Merger, which assumptions will
have been made with the consent of Western and BJ Services. These assumptions
will include, among others, an assumption that is based on a representation to
the effect that there is no plan or intention on the part of Western
stockholders to sell, exchange or otherwise dispose of a number of shares
received in the Merger that would reduce such stockholders' ownership of BJ
Common Stock received in the Merger to a number of shares of BJ Common Stock
having a value, as of the Effective Time, of less than 40% of the value of all
the formerly outstanding shares of Western Common Stock as of the same time.
For this purpose, shares of Western Common Stock received on any conversion of
the Western Convertible Debentures immediately before the Merger will not be
treated as outstanding shares of Western Common Stock as of the Effective Time.
Exchange of Western Common Stock Solely for Cash and BJ Warrants. A
U.S. Holder of Western Common Stock who, pursuant to the Merger, exchanges such
U.S. Holder's Western Common Stock solely for cash and BJ Warrants generally
will recognize capital gain or loss in an amount equal to the difference
between the amount of cash and the fair market value of BJ Warrants received
and the U.S. Holder's adjusted tax basis in the Western Common Stock. Such
capital gain or loss will be long-term capital gain or loss if the U.S.
Holder's holding period for the Western Common Stock is more than one year.
Exchange of Western Common Stock Solely for BJ Common Stock and BJ
Warrants. A U.S. Holder of Western Common Stock who, pursuant to the Merger,
exchanges such U.S. Holder's Western Common Stock solely for BJ Common Stock
and BJ Warrants will realize gain or loss equal to the difference between the
fair market value of the BJ Common Stock and the BJ Warrants received and the
U.S. Holder's adjusted tax basis in the Western Common Stock surrendered
therefor. Such U.S. Holder's gain, if any, will be recognized, however, only
to the extent of the fair market value of the BJ Warrants received by such U.S.
Holder; any loss will not be recognized. Generally, complicated rules apply
for purposes of determining the character of any such recognized gain.
However, if, as expected, Western does not have any accumulated earnings and
profits at the Effective Time, any gain recognized by a U.S. Holder as a result
of the receipt of BJ Warrants should be treated as capital gain.
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The holding period of BJ Common Stock received by each U.S. Holder of
Western Common Stock in the Merger will include the holding period of the
Western Common Stock surrendered therefor. In general, the aggregate adjusted
tax basis of such BJ Common Stock will equal the U.S. Holder's adjusted tax
basis in the Western Common Stock surrendered, decreased by the fair market
value of the BJ Warrants received and increased by the amount of gain
recognized by such U.S. Holder, if any. The basis of the BJ Warrants received
by a U.S. Holder pursuant to the Merger will equal the fair market value of
such BJ Warrants.
Exchange of Western Common Stock for Cash, BJ Common Stock and BJ
Warrants. It is possible that if more than 50% of the Western stockholders
make the Cash Election or the Stock Election, each U.S. Holder of Western
Common Stock will receive in exchange therefor a combination of cash, BJ Common
Stock and BJ Warrants. A U.S. Holder of Western Common Stock who receives cash
(other than cash received in lieu of a fractional share of BJ Common Stock), BJ
Warrants and BJ Common Stock pursuant to the Merger will realize gain or loss
equal to the difference between the fair market value of the BJ Common Stock
and the BJ Warrants, plus the amount of cash received, and the U.S. Holder's
adjusted tax basis in the Western Common Stock surrendered therefor. Such U.S.
Holder's gain, if any, will be recognized, however, only to the extent of the
cash and the fair market value of the BJ Warrants received by such U.S. Holder;
any loss will not be recognized. Generally complicated rules apply for purposes
of determining the character of any such recognized gain. However, if, as
expected, Western does not have any accumulated earnings and profits at the
Effective Time, any gain recognized by a U.S. Holder who receives cash, BJ
Common Stock and BJ Warrants should be treated as capital gain.
The holding period of BJ Common Stock received by each U.S. Holder of
Western Common Stock in the Merger will include the holding period of the
Western Common Stock surrendered therefor. In general, the aggregate adjusted
tax basis of such BJ Common Stock will equal the U.S. Holder's adjusted tax
basis in the Western Common Stock surrendered, decreased by the amount of cash
and the fair market value of the BJ Warrants received and increased by the
amount of gain recognized by such U.S. Holder, if any. The basis of the BJ
Warrants received by a U.S. Holder pursuant to the Merger will equal the fair
market value of such BJ Warrants.
Fractional Shares. No fractional shares of BJ Common Stock will be
issued pursuant to the Merger. A U.S. Holder of Western Common Stock who,
pursuant to the Merger, receives cash in lieu of a fractional share of BJ
Common Stock will be treated as having received such fractional share of BJ
Common Stock pursuant to the Merger and then as having received such cash in a
redemption of such fractional share of BJ Common Stock. The U.S. Holder will
generally recognize capital gain or loss on such deemed redemption equal to the
difference between the amount of cash received and the U.S. Holder's adjusted
tax basis in the fractional share of BJ Common Stock.
Other Tax Considerations. The Merger is not contingent on the receipt
of the Tax Opinion. In the event that the Tax Opinion is not forthcoming
because, for example, the 40% continuity representation described above cannot
be satisfied, it is possible that the Merger might not be treated as a
reorganization within the meaning of Section 368(a) of the Code. In that
event, each stockholder of Western would recognize gain in the amount of the
difference between the fair market value of the BJ Common Stock and/or the
amount of cash received, plus the fair market value of the BJ Warrants
received, and such holder's adjusted tax basis in the Western Common Stock
surrendered therefor. Any such recognized gain would be generally capital gain
or loss. In addition, Western would realize gain in the amount of the
difference between the adjusted tax basis of the property of Western
transferred to BJ Services pursuant to the Merger and the amount of cash and
the fair market value of the BJ Common Stock and BJ Warrants received in
exchange therefor.
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ACCOUNTING TREATMENT
The Merger will be treated for accounting purposes in accordance with
the rules for purchase accounting, as a result of which the assets and
liabilities of Western will be recorded on BJ Services' books at their
estimated fair market values with the remaining purchase price reflected as
goodwill. See the Notes to the Pro Forma Financial Statements included
elsewhere in this Joint Proxy Statement/Prospectus.
GOVERNMENTAL AND REGULATORY APPROVALS
The Merger is subject to the requirements of the HSR Act. The HSR Act
requires, among other things, that certain information regarding the Merger be
furnished to the Antitrust Division and the FTC and that certain waiting
periods have expired or been terminated before the Merger is consummated. On
November 18, 1994, BJ Services and Western filed notification reports in
connection with the Merger with the Antitrust Division and the FTC pursuant to
the HSR Act On December 16, 1994, BJ Services and Western received a request
from the Antitrust Division for additional information and documentary material
in connection with the Merger, which extends the HSR Act waiting period until
20 days after both parties' substantive compliance therewith. On January 26,
1995 and January 27, 1995, respectively, Western and BJ Services filed
additional information and documentary material with the Antitrust Division in
response to such request and agreed with the Antitrust Division not to
consummate the Merger until March 8, 1995. On March 7, 1995, the Antitrust
Division agreed that it would not challenge the Merger subject to a
restructuring involving the divestiture of certain of BJ Services' fracturing
and nitrogen pumping assets located in Brighton, Colorado and Cortland,
Ohio. BJ Services has entered into an agreement with Nowsco for the sale of
such assets, which is scheduled to close concurrently with the closing of the
Merger. Despite such agreement, there can be no assurance that a challenge to
the Merger will not be made or, if such a challenge is made, that BJ Services
and Western will prevail.
Neither BJ Services nor Western is aware of any other governmental or
regulatory approvals required for the consummation of the Merger.
EFFECT ON WESTERN EMPLOYEE BENEFIT PLANS AND EMPLOYEE AGREEMENTS
Benefit Maintenance. The Merger Agreement provides that during the
one-year period following the Effective Time, the employees of Western and its
subsidiaries will continue to be provided with benefits under employee benefit
plans that are no less favorable in the aggregate than those provided by
Western to its employees as of the date of the Merger Agreement. The Merger
Agreement also provides that BJ Services will honor all obligations to current
and former employees and directors of Western under the Western Plans (as
defined in the Merger Agreement) under the Retirement Plan for Non-Employee
Directors and to the extent set forth in the Western SEC Documents (as defined
in the Merger Agreement) and the Western Disclosure Statement, the special
severance policy (described below) in existence on the date of the Merger
Agreement and all employment, severance or indemnification agreements entered
into by Western or adopted by the Board of Directors of Western prior to the
date of the Merger Agreement.
Service Credit. The Merger Agreement generally provides that the
employees of the Surviving Corporation will be given credit for service with
Western and its subsidiaries under all employee benefits plans, programs and
policies of the Surviving Corporation in which they become participants, except
that no service will be credited under any defined benefit pension plans that
were sponsored by BJ Services prior to the Effective Time (or adopted by the
Surviving Corporation on or after the Effective Time) to the extent counting
such service would result in a duplication of benefits.
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Special Committee Enforcement. The covenants in the Merger Agreement
regarding employee benefits will be enforced by a special committee consisting
of two current outside directors of BJ Services and two current outside
directors of Western.
Severance Agreements. On March 1, 1994, Western renewed and amended an
employment agreement with Mr. Erikson (previously entered into on May 12, 1989)
and also renewed and amended severance agreements (together with the Erikson
employment agreement, the "Executive Severance Agreements") with Messrs.
Erikson, Adelman, Hix, Beatty and Will, and Ms. Crowder (the "Western
Executive Officers") that were originally entered into at the time each such
individual became an officer of Western. Each Executive Severance Agreement
provides for payment of compensation in the event of a change in control of
Western. Entering into the Merger Agreement constituted a change of control
under the Executive Severance Agreements as they were amended on the date of
the Merger Agreement pursuant to the Executive Termination Agreements (defined
below).
An employee with whom Western has entered into a Executive Severance
Agreement and who leaves Western for "good reason" (as defined in the Executive
Severance Agreements) or has his employment terminated without "cause" (as
defined in the Executive Severance Agreements) generally will be entitled to
maximum severance benefits equal to (i) three times the highest base pay and
cash incentive compensation he received during any of the three preceding
years, (ii) certain other payments relating to the unvested portion of
retirement savings or other "qualified" plans and retirement plans applicable
to all employees, (iii) certain relocation expenses incurred within two years
of the date of termination (and any additional payment necessary to provide
such on an after tax basis) and outplacement services expenses incurred within
18 months of the date of termination, (iv) payment of all legal fees incurred
by the executive as a result of termination or to enforce the rights under the
agreement and (v) continuing life, disability, accident and group health
benefits for a period of 36 months following the date of termination (or, upon
the employee's election, three times the average cost of such benefits for the
five preceding years). In addition, if a change of control occurs while an
Executive Severance Agreement is in effect, all awards made to Western
employees under the Western Long-Term Plan (as defined under "-- Western Stock
Options and Performance Units") that are outstanding at such time would vest
and become immediately distributable or payable.
Western also has entered into severance agreements (the "Officer
Severance Agreements") substantially identical to the Executive Severance
Agreements with Messrs. de Grood, English, Garcia, Graham, Jordan, Merritt,
Thomas and White (the "Western Officers"), except that the amount of
compensation that each Western Officer will receive is equal to one and
one-half times the highest base pay and cash incentive compensation that such
Western Officer received during any of the three preceding years and except
that a change of control under the Officer Severance Agreements did not occur
as a result of Western entering into the Merger Agreement. The Merger will
constitute a change of control for purposes of the Officer Severance
Agreements. The Officer Severance Agreements will expire upon the earlier of
(i) 36 months after the change in control and (ii) the termination of the
employment of the person who has entered into the Officer Severance Agreement
by either the person or Western. The Officer Severance Agreements and the
Executive Severance Agreements are herein collectively referred to as the
"Severance Agreements."
To the extent that any acceleration of vesting or any payment,
distribution or issuance made under the Severance Agreements is subject to
federal income, excise or other tax at a rate above the rate ordinarily
applicable to like payments paid in the ordinary course of business (a
"Penalty"), whether as a result of Code Section 4999 or otherwise, the Western
Executive Officer or Western Officer who is a party to such Severance Agreement
will receive an additional amount of cash (an "Excise Tax Gross-Up") to ensure
that the payments and benefits received are as if such Penalty did not exist.
Code Section 280G prevents the deductibility of amounts subject to the excise
tax under Code Section 4999. The Severance Agreements were subsequently
amended (as contemplated in the Executive Termination Agreements), in the case
of the Western Executive Officers, to permit a partial prepayment of the cash
amount that would be owed to them pursuant to their termination
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immediately prior to the Effective Time and, in the case of three of the
Western Officers, to permit an advance payment of the bonus that would be owed
to them in early 1995. Such prepayments must be repaid to Western if the
Merger Agreement is terminated. A Western Executive Officer who receives such
prepayment also must repay it if he voluntarily terminates employment prior to
the Merger. As a result of such amendments, aggregate payments by Western
under the Severance Agreements are expected to be reduced and the aggregate
compensation realized by such Western Executive Officers and Western Officers
is expected to increase.
Western Executive Termination Agreements. To facilitate an orderly
transition in management, pursuant to and concurrently with the execution and
delivery of the Merger Agreement, Western, BJ Services and a subsidiary of BJ
Services entered into termination agreements (the "Executive Termination
Agreements") with the Western Executive Officers. The Executive Termination
Agreements provide that the Western Executive Officers will be terminated
without cause immediately prior to the Effective Time. Such termination will
trigger payment under the Executive Severance Agreements. The Termination
Agreements also provide for the amendment of the Severance Agreements to
provide for the prepayments described in the above description of the Severance
Agreements. The obligation of Western to pay the Excise Tax Gross-Up is
unaffected by the Executive Termination Agreements or any amendment to the
Severance Agreements. The Executive Termination Agreements provide, however,
that nothing contained therein or in the amendments to the Severance Agreements
may increase the aggregate obligation of Western under each Severance Agreement
as in effect prior to such amendments or the execution of the Executive
Termination Agreements.
Indemnification. The Merger Agreement provides that the Surviving
Corporation shall indemnify and hold harmless each person who is, or has been
at any time prior to the date of the Merger Agreement, an officer or director
of Western and its subsidiaries to the fullest extent allowed by law and by
indemnity agreements between Western (or any of its subsidiaries) and its
officers or directors in effect on the date of the Merger Agreement. For three
years from the Effective Time, the Surviving Corporation must use its best
efforts to maintain in effect the policies of directors' and officers'
liability insurance being maintained by Western as of the date of the Merger
Agreement (or a policy providing similar coverage) that covers claims arising
from facts or events arising or occurring at or prior to the Effective Time,
provided that the Surviving Corporation will not be obliged to pay more than
150% of the annual premium payments for such insurance as of the date of the
Merger Agreement.
Western Special Severance Policy. Western sponsors a special severance
policy on behalf of its United States- based employees (other than those
covered by employment or Severance Agreements). Employees covered by the policy
are entitled to severance benefits under this policy if, within one year after
the change of control, the employees' employment with Western is terminated,
unless the termination is due to (i) death, (ii) disability, (iii) "cause" (as
defined in the policy), (iv) retirement, (v) resignation for other than "good
reason" (as defined in the policy) or (vi) the sale of the assets or the
business of Western (and the employee is offered employment with the purchaser
on substantially the same terms and conditions under which he worked). The
consummation of the Merger will constitute a change of control under this
policy.
Western Management Incentive Compensation Plan. Western's Management
Incentive Compensation Plan is a bonus plan which pays annual cash bonuses upon
achievement of performance levels. The execution of the Merger Agreement
effected a change of control under this Plan. As a result the performance
level of each participant employed on the date the Merger Agreement was
executed was deemed to be 100% (unless the participant's performance exceeded
target, in which event, such participant's bonus was fixed by reference to his
or her actual performance). The annual bonus shall be paid upon the earlier of
April 1, 1995 or the Effective Time; provided, however, that payment may be
accelerated if acceleration will reduce Western's liabilities. If the Merger
is not consummated, the Compensation Committee of Western has discretion to pay
awards based on actual performance.
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Western Stock Options and Performance Units. The Western Long-Term
Performance Incentive Plan (the "Western Long-Term Plan") consists of a stock
option plan and a performance unit program. In the event of a change of
control, as defined under either the Executive Severance Agreements or Officer
Severance Agreements, all options granted, performance units awarded and any
other contingent compensation rights issued under the Western Long-Term Plan
and the Western Stock Option Plan for Non-Employee Directors (the "Directors
Plan") immediately shall become exercisable, distributable and unrestricted for
a period of 90 days following such change of control. The entering into the
Merger Agreement by Western constituted, and the consummation of the Merger
also will constitute, such a change of control.
The Merger Agreement provides that, immediately prior to the Effective
Time, all holders of options to purchase Western Common Stock (whether or not
then exercisable) will receive cash in return for the cancellation of their
options in an amount equal to the number of shares subject to purchase pursuant
to the option multiplied by the sum of (i) the difference between the exercise
price of such option and $21.00 plus (ii) the amount, if any, by which the
Warrant Consideration Value exceeds $1.00. (See "-- Merger Consideration --
Western Options.") The Western Long-Term Plan provides that performance units
granted thereunder shall be valued by reference to Western's performance
compared to a designated group of public companies. Pursuant to the Executive
Severance Agreements, upon a change of control, the "actual value" (as defined
in the Western Long-Term Plan) of all performance unit awards granted under the
Western Long-Term Plan will be deemed to be their maximum value, which will
result in the performance unit awards being valued as though Western's
performance during all relevant periods was first among its peer group.
Performance unit awards were exercised during the 90-day period following the
execution of the Merger Agreement.
Additional information relating to compensation and various benefits
arrangements of Western is set forth in certain sections of Western's proxy
statement for its 1994 annual meeting of stockholders. See "Available
Information" and "Incorporation of Certain Documents by Reference."
STOCK EXCHANGE LISTING
It is a condition to the Merger that the shares of BJ Common Stock
issuable pursuant to the Merger Agreement be listed for trading on the NYSE,
subject to official notice of issuance. The BJ Warrants have been approved
for listing on the NYSE, subject to official notice of issuance, under the
trading symbol "BJS WS."
RESTRICTIONS ON RESALES BY AFFILIATES
BJ Services has registered the shares of BJ Common Stock and the BJ
Warrants that the stockholders of Western will be entitled to receive upon
consummation of the Merger under the Securities Act. Those Western
stockholders who are not deemed to be "affiliates" of Western may freely sell
the shares of BJ Common Stock they receive in the Merger, without additional
registration under the Securities Act or an exemption from the registration
requirements thereunder (including Rule 145 promulgated under the Securities
Act). Stockholders of Western who are deemed to be "affiliates" of Western may
resell the shares of BJ Common Stock and the BJ Warrants received in the Merger
in transactions in compliance with Rule 145 under the Securities Act, pursuant
to an effective registration statement under the Securities Act or in
transactions exempt from registration, and may not use this Joint Proxy
Statement/Prospectus to effect resales of the shares of BJ Common Stock they
receive.
Rule 145, as currently in effect, imposes restrictions on the manner in
which such affiliates may make resales and also on the volume of resales that
such affiliates, and others with whom they may act in concert, may make in any
three-month period. The term "affiliates" is defined in the Securities Act to
include any person who, directly or indirectly, controls, is controlled by, or
is under common
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control with, Western at the time the Merger is submitted to a vote of the
stockholders of Western. BJ Services has been advised by Western that Mr.
Erikson, Mr. Adelman, Mr. Hix, Mr. Beatty, Mr. Will and Ms. Crowder (each a
Western Executive Officer) and Mr. Avery, Mr. Brown, Mr. Dove, Mr. Johnson, Mr.
Patrick and Mr. Ross (each a director of Western) may be deemed "affiliates" of
Western for purposes of the Securities Act. Pursuant to the Merger Agreement,
Western has agreed to use its reasonable best efforts to cause each such person
to deliver an affiliates' agreement to BJ Services on or prior to the Closing
Date in substantially the form attached as an exhibit to the Merger Agreement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Composition of BJ Services Board. The Merger Agreement provides that at
the Effective Time of the Merger the three following outside directors of
Western are to be elected by the current directors of BJ Services to the Board
of Directors of BJ Services: David A.B. Brown, William J. Johnson and Michael
E. Patrick. Pursuant to the Merger Agreement, BJ Services has agreed, subject
to fiduciary obligations under applicable law, to use its best efforts to cause
such persons to be elected by its stockholders to the Board of Directors of BJ
Services for at least one year after the next annual Board meeting of BJ
Services following the Effective Time.
Termination of Western Executive Officers. The Merger Agreement
provided that Western, BJ Services and a subsidiary of BJ Services would enter
into the Executive Termination Agreements with the Western Executive Officers.
Pursuant to the Executive Termination Agreements, the employment of each
Western Executive Officer shall be terminated, without cause, immediately prior
to the Effective Time. The termination of the Western Executive Officers
immediately prior to the Effective Time pursuant to the Executive Termination
Agreements will trigger payment obligations under the Executive Severance
Agreements. For a more detailed description of such agreements, see "-- Effect
on Western Employee Benefit Plans and Employee Agreements -- Western Executive
Termination Agreements."
Western Executive Severance Agreements. The Western Executive Officers
are parties to the Executive Severance Agreements that provide for compensation
in the event of termination of employment following a change in control of
Western. Because entering into the Merger Agreement constituted a change of
control under the Executive Severance Agreements, as amended pursuant to the
terms of the Executive Termination Agreements, the Western Executive Officers
will be entitled to certain payments and benefits upon termination. In
December 1994, the Western Executive Officers received a partial prepayment of
certain amounts payable to them upon the termination of their employment. For
a more detailed description of such payments and benefits, see "-- Effect on
Western Employee Benefit Plans and Employee Agreements -- Severance
Agreements."
Western Stock Options. Because entering into the Merger Agreement by
Western accelerated the vesting of outstanding options to purchase Western
Common Stock granted under the Western Long-Term Plan and the Directors Plan,
certain officers and directors of Western will be entitled to a cash payment in
exchange for options to purchase Western Common Stock that would not otherwise
have been vested. The following represents the number of options granted to
such directors and officers that became vested upon entering into the Merger
Agreement: Mr. Erikson, 86,000; Mr. Adelman, 22,925; Mr. Hix, 40,000; Mr.
Beatty, 10,975; Mr. Will, 10,925; Ms. Crowder, 6,499; and outside directors as
a group, 37,500. For a more detailed description of such payment and exchange,
see "-- Effect on Western Employee Benefit Plans and Employee Agreements --
Western Stock Options and Performance Units."
Western Performance Units. Because entering into the Merger Agreement
by Western accelerated the vesting and the satisfaction of performance criteria
under outstanding performance unit awards granted under the Long-Term Plan,
certain officers of Western will be entitled to a cash distribution in respect
of their performance unit awards. The following represents the amounts of such
performance units that became vested and distributable to such officers upon
entering into the
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Merger Agreement: Mr. Erikson $1,331,568; Mr. Adelman $418,944; Mr. Hix
$335,136; Mr. Beatty $235,152; Mr. Will $235,152; and Ms. Crowder $78,384.
For a more detailed description of such payments, see "-- Effect on Western
Employee Benefit Plans and Employee Agreements -- Western Stock Options and
Performance Units."
Indemnification and Insurance of Western Officers and Directors. For a
discussion of certain agreements by BJ Services to provide indemnification of
certain officers and directors of Western, see "-- Effect on Western Employee
Benefit Plans and Employment Agreements -- Indemnification." For a discussion
of certain agreements by BJ Services to provide liability insurance for certain
directors and officers of Western, see "-- Effect on Western Employee Benefit
Plans and Employee Agreements -- Benefit Maintenance."
Interests of BJ Executive Officers and Certain Employees. The BJ Stock
Incentive Plan, as amended and in effect as of the date hereof, consists of a
stock option and performance unit program for officers and employees, and
includes automatic grants of options to the nonemployee directors of BJ
Services. Pursuant to the terms of the BJ Stock Incentive Plan, if the Western
stockholders acquire more than 40% of the outstanding BJ Common Stock in the
Merger, a change in control would result under the BJ Stock Incentive Plan. In
such event, at the Effective Time, the vesting of all outstanding noninvested
stock options granted under the BJ Stock Incentive Plan before November 1994
would be accelerated and all performance units granted under such Plan would
become payable in full in shares of BJ Common Stock.
In consideration for the stock option grants and the performance unit
changes described under the caption "-- Recent Awards to BJ Services' Officers
Contingent Upon Consummation of the Merger" below and the amendments to the
severance agreements described under "-- BJ Services Executive Employment
Agreements" below, each executive officer of BJ Services who holds stock
options or performance units granted prior to November 1994 has agreed to waive
the accelerated vesting of stock options and deemed satisfaction of performance
units that would otherwise occur upon consummation of the Merger if it so
constitutes such a "change in control." If the Merger constitutes such a
"change in control," a total of 277,870 options held by employees of BJ
Services (other than its officers) would become fully vested and exercisable
at a weighted average exercise price of $19.25 per share of BJ Common Stock.
BJ Services Executive Employment Agreements. BJ Services has entered
into severance agreements (collectively, the "BJ Severance Agreements") with
certain of its officers, including its principal executive officers. The BJ
Severance Agreements were effective August 27, 1993, except for one agreement,
which was effective February 14, 1994. The BJ Severance 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 BJ Services
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 BJ Services. The BJ Severance Agreements provide that covered
executive officers could be entitled to certain severance benefits following a
change in control of BJ Services. If, following a change in control, the
executive is terminated by BJ Services 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 such term is defined in the BJ Severance
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
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defined in the BJ Severance Agreements. The severance payment is generally
made in the form of a lump sum. For a period of up to one year, BJ Services
would also provide life, disability, accident and health coverage substantially
similar to the benefits provided before termination.
If a change in control occurs, the BJ Severance Agreements are effective
for a period of two years from the date of such change in control. 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 Code, BJ Services
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. If the Western stockholders acquire more than 40% of
the outstanding BJ Common Stock in the Merger, a change in control (as defined
in the BJ Severance Agreements) would result, but no payments would be made
unless a covered employee's employment with BJ Services is terminated under
circumstances described above during the two-year period following the Merger.
Each executive officer of BJ Services who is a party to a BJ Severance
Agreement has entered into an agreement modifying such BJ Severance Agreement
(i) to stipulate that consummation of the Merger will constitute a "change in
control" under the terms of such agreement, whether or not the 40% threshold is
satisfied, 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 BJ Services 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 "Protected
Period"), 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 BJ Services Stock
Incentive Plan after 1994 (other than stock options granted in February 1995),
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.
Recent Awards to BJ Services' Officers Contingent Upon Consummation of
the Merger. In connection with the Merger and conditioned upon its consummation,
the Board of Directors of BJ Services has approved cash bonus awards
aggregating $375,000 payable to three of BJ Services' executive officers.
Also, vesting of a portion of performance units granted under the BJ Stock
Incentive Plan will occur upon consummation of the Merger, rather than at the
end of their three-year performance period. The percentage of outstanding
units to vest was determined by BJ Services' Executive Compensation Committee
based on: (i) BJ Services' actual financial results for 1993 and 1994 compared
to BJ Services' peer group of companies, (ii) the performance criteria for the
fiscal years ending in 1995, 1996 and 1997 will be deemed to have been fully
satisfied upon consummation of the Merger, (iii) execution of waivers with
regard to changes in control acceleration rights in the BJ Stock Incentive Plan
and (iv) successful completion of the Merger. As a result, 168,547 of the
220,316 performance units outstanding under the BJ Stock Incentive Plan will
vest, and as a result 168,547 shares of BJ Common Stock will be issued to
officers (including the executive officers) of BJ Services, plus an amount in
cash, estimated to be $2.1 million in the aggregate, based upon an assumed
price of $20.00 per share of BJ Common Stock on the date of issuance, to offset
the federal income tax payable by the recipients in respect of such issuance.
Upon consummation of the Merger, all rights with respect to the remaining
51,769 performance units outstanding at the time of the Merger will be
cancelled.
In addition, in consideration for the waivers previously described, a
total of 368,157 stock options were authorized for issuance under the BJ 1995
Incentive Plan on February 15, 1995 to a total of nine officers (including all
of BJ Services' executive officers). These options will expire if the Merger is
not consummated or the BJ 1995 Incentive Plan is not approved by the requisite
vote of the stockholders of BJ Services. If the Merger is consummated, such
options will vest in whole or in part at the end of the two-year period
commencing on consummation of the Merger if BJ Services achieves specified
consolidation benefits from combining Western's operations with those of BJ
Services over such two-year period. If an employee voluntarily leaves BJ
Services or is terminated by BJ Services prior to the end of such two-year
period, all options granted to such employee will be forfeited. All such
options will become fully vested upon a change in control as defined in the BJ
1995 Incentive Plan, which excludes the Merger. See "Proposal No. 3 --
Proposed Adoption of the BJ 1995 Incentive Plan."
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Additional information relating to compensation and various benefits
arrangements of BJ Services is set forth in certain sections of BJ Services'
proxy statement for its 1995 annual meeting of stockholders. See "Available
Information" and "Incorporation of Certain Documents by Reference."
CONDUCT OF BUSINESS OF WESTERN PRIOR TO THE MERGER
Western has agreed that, prior to the Effective Time, unless BJ Services
shall otherwise consent in writing, Western shall, and shall cause its
subsidiaries to, carry on their respective businesses only in the ordinary
course and consistent with past practice and, to the extent consistent
therewith and with the specific terms of the Merger Agreement, use all
commercially reasonable efforts to preserve intact their current business
organizations, keep available the services of their current employees and
preserve their relationships with customers, suppliers and others having
business dealings with them. In addition, Western has agreed that, prior to
the Effective Time, subject to certain exceptions, except as expressly
contemplated by the Merger Agreement or unless BJ Services shall otherwise
consent in writing, Western will not, and will cause each of its subsidiaries
not to, among other things: (i) sell or pledge or otherwise encumber any stock
owned by it in any direct or indirect subsidiary of Western; (ii) redeem,
purchase or otherwise acquire any shares of, or any options, warrants or rights
of any kind to acquire any shares of or any securities exercisable or
exchangeable for or convertible into shares of, the capital stock of Western or
any of its subsidiaries, except as provided in the Merger Agreement; (iii)
amend the Restated Certificate of Incorporation or Bylaws of Western or the
certificate of incorporation or bylaws or other governing documents of any of
Western's subsidiaries; (iv) split, combine or reclassify any of Western's
capital stock or the capital stock of any of Western's subsidiaries; or (v)
declare, set aside or pay any dividend on, or make any other distributions in
respect of, any of Western's capital stock or the capital stock of any of
Western's subsidiaries, other than dividends and distributions by a direct or
indirect subsidiary of Western to its stockholders; (vi) issue, authorize the
issuance of or agree to issue any shares of, or any options, warrants or rights
of any kind to acquire any shares of, or any securities exercisable or
exchangeable for or convertible into shares of, Western's capital stock or the
capital stock of any of Western's subsidiaries, or issue or agree to issue any
other equity securities; (vii) acquire or dispose of any business or line of
business or any assets, other than in the ordinary course of business and
consistent with past practice; (viii) make any capital expenditures in excess
of specified levels; (ix) amend or modify any of the terms of any Western
Option or grant any stock option, stock appreciation rights or stock bonuses;
(x) amend or modify the Western Rights Agreement or redeem any Western Rights;
(xi) merge or consolidate with another corporation, other than the merger of a
wholly owned subsidiary of Western into Western or another wholly owned
subsidiary; (xii) lease, license, mortgage or otherwise encumber or subject to
any consensual lien any material assets other than in the ordinary course of
business and consistent with past practice; (xiii) incur any indebtedness for
borrowed money or guarantee any such indebtedness of another person or entity;
(xiv) make any loans, advances or capital contributions to, or investments in,
any other person or entity; (xv) pay, discharge or satisfy any material claims,
liabilities or obligations; (xvi) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing such a liquidation or a
dissolution, restructuring, recapitalization or reorganization; (xvii) enter
into any collective bargaining agreement, successor collective bargaining
agreement or amended collective bargaining agreement; (xviii) change any
accounting principle used by it; (xix) settle or compromise any litigation
brought against it in excess of specified levels; (xx) enter into any new, or
amend any existing, severance agreement or arrangement, deferred compensation
arrangement or employment agreement with any current officer, director or
employee; (xxi) adopt any new, or amend any existing, incentive, retirement or
welfare benefit arrangements, plans or programs for the benefit of current,
former or retired employees of Western and its subsidiaries and their
respective predecessors that would increase the cost of aggregate benefits
available by more than 1%; (xxii) grant any increases in employee compensation,
other than in the ordinary course or pursuant to promotions, in each case
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consistent with past practice; or (xxiii) authorize or enter into any agreement
to do any of the foregoing.
NO SOLICITATION
Western has agreed not to, and to cause its subsidiaries, affiliates,
employees, agents and representatives not to initiate, solicit or encourage,
directly or indirectly, any inquiries or the making of any proposal with
respect to an Alternative Transaction, participate in any negotiations
concerning, or provide to any other person any information or data relating to
Western or its subsidiaries for the purpose of, or have any substantive
discussions with any person relating to, or otherwise cooperate with or assist
or participate in or facilitate, any inquiries or the making of any proposal
which constitutes, or would reasonably be expected to lead to, any effort or
attempt by any other person to seek to effect an Alternative Transaction, or
agree to or endorse any Alternative Transaction; provided, however, that
Western or its Board of Directors may take and disclose to the stockholders of
Western a position with respect to any such Alternative Transaction that, in
the judgment of the Board of Directors of Western, as determined in good faith
by the Board based upon the advice of counsel, is required by applicable law;
provided, further, that (i) the Board of Directors of Western may (a) upon the
unsolicited request of a third party which executes a confidentiality agreement
with Western in customary form, furnish information or data in order to allow
such third party to consider making a proposal with respect to, or entering
into, an Alternative Transaction involving such third party and Western, (b)
participate in negotiations or have substantive discussions with a third party
who makes an unsolicited, bona fide proposal regarding an Alternative
Transaction, and (c) in connection therewith, cooperate with or assist or
facilitate such third party in its attempt to effect such Alternative
Transaction, and (ii) following receipt of an unsolicited, bona fide proposal
from a third party regarding an Alternative Transaction, the Board of Directors
of Western may withdraw or modify its recommendation of the Merger, in each
case to the extent that the Board determines in good faith, based upon the
advice of counsel, that such action may be required in order for the Board to
act in a manner that is consistent with its fiduciary obligations under
applicable law.
STANDSTILL AGREEMENTS
If the Merger Agreement is terminated (i) by either BJ Services or
Western because (a) either is prohibited by a final and nonappealable order or
injunction of a United States federal or state court of competent jurisdiction
from consummating the Merger (but only if the action giving rise to an order or
injunction sought to enjoin or otherwise prohibit the Merger for alleged
violations of the federal or state antitrust laws) or (b) the Consent Decree
Final Agreement between the Consenting Parties (BJ Services and the Antitrust
Division or the FTC) with respect to the Merger have not been agreed to by the
Consenting Parties (as confirmed by Western), or an order of a Federal District
Court adjudging that the Merger does not violate the federal antitrust laws
shall not have been issued (such Consent Decree Final Agreement or court order
being collectively referred to as the Antitrust Disposition Action) by a date
no later than 160 days after Western and its outside counsel have each
certified as to Western's substantial compliance with information requests of
the Antitrust Division or the FTC (which certification was made on January 25,
1995), and in either case BJ Services is thereby obligated to pay the
$20,000,000 fee described in "-- Termination Fees; Expenses" below; (ii) by
either BJ Services or Western because the stockholders of BJ Services fail to
approve the Merger Agreement and the issuance of the Stock Consideration and
Warrant Consideration in the Merger; or (iii) by Western, because the Closing
Price is below $14.00 and BJ Services has not offered to amend the Merger
Agreement so that each share of Western Common Stock which is the subject of a
Stock Election will be converted into a number of shares of BJ Common Stock
having the same aggregate value based on the actual Closing Price as the
aggregate value of the number of shares of BJ Common Stock into which such
share of Western Common Stock would have been converted if the Closing Price
had been $14.00; then for five years after the date of such termination in the
case of clauses (i) and (ii) and for two years after the date of termination in
the case of clause (iii), BJ Services, its successors and its affiliates will
be prohibited from (v) acquiring or offering, proposing or agreeing to acquire,
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directly or indirectly, by merger, purchase or otherwise, beneficial ownership
of any assets or voting securities of Western or its affiliates; (w) making, or
in any way participating in, directly or indirectly, any solicitation of
proxies to vote, or seeking to advise, encourage or influence any person or
entity with respect to the voting of, any voting securities of Western; (x)
calling, or in any way participating in a call for, any meeting of stockholders
of Western (or taking any action with respect to stockholders acting by written
consent); (y) forming, joining or in any way participating in a "group" (within
the meaning of Section 13(d)(3) of the Exchange Act) with respect to any voting
securities of Western; or (z) otherwise acting to control or influence, or
seeking to control or influence, Western or the management, Board of Directors,
policies or affairs of Western. If clause (i) above is applicable and BJ
Services has paid the $20,000,000 fee to Western, for five years after the
termination of the Merger Agreement Western will be prohibited from taking any
of the actions set forth above with respect to BJ Services.
ADDITIONAL COVENANTS OF BJ SERVICES
BJ Services has agreed that, prior to the Effective Time, it will not
declare, set aside or pay any dividend payable in cash, stock or property with
respect to any of its capital stock. In addition, BJ Services has agreed to
vote any Western Common Stock beneficially owned by it or any of its
subsidiaries in favor of the adoption and approval of the Merger Agreement at
any meeting of stockholders of Western at which the Merger Agreement shall be
submitted for adoption and approval.
TERMINATION
The Merger Agreement may be terminated at any time prior to the
Effective Time (i) by mutual written consent of the Boards of Directors of BJ
Services and Western, (ii) by either BJ Services or Western if the Merger shall
not have been consummated by August 31, 1995 (which date may be extended by
mutual written consent), provided that such right will not be available to any
party that has breached in any material respect its obligations under the
Merger Agreement in any manner that proximately contributes to the failure of
the Merger to occur on or before such date, provided, further, that such right
will not be available to BJ Services if BJ Services shall have exercised its
rights (as described in clause (xi) below or as described in paragraph (e)
under "-- Termination Fees; Expenses") to extend either the Antitrust Approval
Period (as defined below) or the Section 10.1(m) Period (as defined below)
until after the Antitrust Approval Period and the Section 10.1(m) Period shall
have expired, (iii) by Western or BJ Services if there has not been satisfied
the condition to closing described in clause (iii) of the first paragraph under
"-- Conditions to the Consummation of the Merger" or any of the conditions to
closing described thereunder in the second or, as the case may be, third
paragraph thereof, but in each case only after such time as such condition can
no longer be satisfied, (iv) by BJ Services if (a) the Board of Directors of
Western withdraws or modifies in a manner adverse to BJ Services its
recommendation or approval of the Merger or the Merger Agreement and recommends
to its stockholders any proposal regarding a Western Alternative Transaction,
(b) the Board of Directors of Western withdraws or modifies in a manner adverse
to BJ Services its recommendation or approval of the Merger or the Merger
Agreement under any other circumstances or (c) if a third party shall have
become an "Acquiring Person" (defined generally in the Western Rights Plan to
be a person who acquires 15% or more of outstanding Western Common Stock), (v)
by Western upon at least three trading days' prior written notice to BJ
Services, if it terminates the Merger Agreement as described in clause (ii) of
the first paragraph under "-- No Solicitation" above, (vi) by Western if BJ
Services enters into an agreement to effect a "BJ Alternative Transaction" (as
defined below), (vii) by either BJ Services or Western if the stockholders of
Western fail to adopt the Merger Agreement and approve the Merger or the
stockholders of BJ Services fail to approve the Merger Agreement and the
issuance of the Stock Consideration and Warrant Consideration in the Merger,
(viii) by either BJ Services or Western if either is prohibited by a final and
nonappealable order or injunction of a United States federal or state court of
competent jurisdiction from consummating the Merger, (ix) by Western if the
Closing Price is below $14 (unless BJ Services offers to amend the Merger
Agreement as provided in clause (iii) of "-- Standstill Agreements" above), (x)
by either BJ Services or Western if the final terms
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8of an Antitrust Disposition Action have not been agreed to by 100 days after
Western and its outside counsel have each certified to BJ Services (the
"Western Compliance Certificates") that to the best of their knowledge Western
has "substantially complied" with the Antitrust Division's or FTC's "second
request" for information from Western under the Hart Scott Act (which
certification was made on January 25, 1995), provided that such 100-day period
may be extended for two successive 30-day periods in the manner specified in
paragraph (e) of "-- Termination Fees; Expenses" below (but in no event longer
than a total of 160 days), and (xi) by either BJ Services or Western, if the
Merger shall not have occurred by the thirtieth day after the later of (a) the
date of the Antitrust Disposition Action, (b) the date on which Western's
stockholders approve the Merger or (c) the date on which BJ Services'
stockholders approve the Merger (provided the meeting of BJ Services'
stockholders shall have initially been scheduled to be held prior to the
thirtieth day after the date of the Antitrust Disposition Action and adjourned
for good reason to no later than the Final Adjournment Date (as defined
below)); provided, however, that BJ Services and Western shall not have the
right to terminate the Merger Agreement as described in this clause (xi) if the
Merger shall not have occurred by such thirtieth day due to the existence of a
preliminary or permanent injunction or other order, decree or ruling by any
United States federal or state court of competent jurisdiction or by any United
States federal or state governmental, regulatory or administrative agency or
authority which prevents the consummation of the Merger (unless the action
giving rise to such injunction, order, decree or ruling sought to enjoin or
otherwise prohibit the Merger for alleged violations of the federal or state
antitrust laws or such action was initiated by BJ Services); provided, further,
that in the event any such injunction, order, decree or ruling shall cause the
30-day period referred to at the beginning of this clause (xi) (the "Section
10.1(m) Period") to be delayed, Western and BJ Services shall use their best
efforts to cause such injunction, order, decree or ruling to be lifted at the
earliest practicable date; provided, further, that BJ Services shall have the
option to extend the Section 10.1(m) Period for a period of 30 additional days
(but in no event later than the Final Adjournment Date) if either of the
following conditions shall have been satisfied:
(1) if the Antitrust Approval Period was not extended as
described in paragraph (e) in "-- Termination Fees; Expenses" below, by
the delivery of written notice of such extension by BJ Services to
Western; or
(2) if the Antitrust Approval Period was not extended for more
than 30 days as described in paragraph (e) in "-- Termination Fees;
Expenses" below, by (A) paying a fee of $5,000,000 to Western if the
Antitrust Approval Period was extended as described in clause (i) of
paragraph (e) in "-- Termination Fees; Expenses" below, or (B) by paying
a fee of $2,500,000 to Western if the Antitrust Approval Period was
extended as described in clause (ii) of paragraph (e) in "-- Termination
Fees; Expenses" below.
If the Antitrust Approval Period was not extended as described in paragraph (e)
in "-- Termination Fees; Expenses" below, the date of BJ Services'
stockholders' meeting may not be adjourned for more than 60 days after the
Antitrust Disposition Action (the "Final Adjournment Date"). If the Antitrust
Approval Period was extended for 30 days as described in paragraph (e) in
"-- Termination Fees; Expenses" below, the Final Adjournment Date may not be
more than 30 days after the Antitrust Disposition Action; provided, however,
that BJ Services may extend the Final Adjournment Date for up to 60 days after
the date of the Antitrust Disposition Action by (x) paying a fee of $5,000,000
to Western if the Antitrust Approval Period was extended as described in clause
(i) of paragraph (e) in "-- Termination Fees; Expenses" below, or (y) by paying
a fee of $2,500,000 to Western if the Antitrust Approval Period was extended as
described in clause (ii) of paragraph (e) in "-- Termination Fees; Expenses"
below. If the Antitrust Approval Period was extended for 60 days as described
in paragraph (e) in "-- Termination Fees; Expenses" below, the Final
Adjournment Date may not be more than 30 days after the Antitrust Disposition
Action. Notwithstanding anything to the contrary provided elsewhere in the
termination provisions of the Merger Agreement, BJ Services may not terminate
the Merger Agreement as described in clauses (iii) or (iv)(c) above after the
100-day Antitrust Approval Period.
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"BJ Alternative Transaction" is defined to mean (i) any merger,
consolidation or other business combination involving BJ Services in which
another entity or group (as defined in Section 13(d)(3) of the Exchange Act)
would acquire beneficial ownership of at least 50% of the aggregate voting
power of all voting securities of BJ Services; (ii) any tender offer or
exchange offer for any securities of BJ Services which, if consummated, would
result in another entity or group becoming the beneficial owner of at least 50%
or more of the aggregate voting power of all voting securities of BJ Services;
(iii) any sale or other disposition of assets of BJ Services or any of its
subsidiaries in a single transaction or in a series of related transactions if
the fair market value of such assets exceeds 50% of the aggregate fair market
value of the assets of BJ Services and its subsidiaries, taken as a whole,
before giving effect to such sale or other disposition; (iv) the adoption by BJ
Services of a plan of liquidation; or (v) the repurchase by BJ Services or any
of its subsidiaries of shares of BJ Common Stock representing at least 50% or
more of the aggregate voting power of all voting securities of BJ Services.
In the event of termination of the Merger Agreement by either BJ
Services or Western, the Merger Agreement will become void and there will be no
liability or obligation on the part of either Western or BJ Services or their
respective officers or directors, other than under certain specified provisions
of the Merger Agreement relating to payments of fees and expenses, standstill
agreements and confidentiality agreements, and other than the liability of any
party arising from any breach of the Merger Agreement.
TERMINATION FEES; EXPENSES
Except as provided in paragraphs (a) through (f) below, whether or not
the Merger is consummated, all costs and expenses incurred in connection with
the Merger, the Merger Agreement and the transactions contemplated thereby will
be paid by the party incurring such cost or expense.
(a) If (i) Western terminates the Merger Agreement as described in
clause (v) of "-- Termination" above; (ii) BJ Services terminates the Merger
Agreement as described in clause (iv)(a) of "-- Termination" above; or (iii)
either Western or BJ Services terminates the Merger Agreement because of the
failure of Western's stockholders to adopt the Merger Agreement and approve the
Merger and, prior to such failure of Western's stockholders to adopt the Merger
Agreement and approve the Merger, another party makes a proposal to effectuate
an Alternative Transaction and such proposal shall have been publicly
announced, then in any such event Western must pay to BJ Services, in
immediately available funds, (A) on the date on which such Alternative
Transaction is consummated, $16,000,000 (the "Topping Fee") and (B) within one
trading day after requested by BJ Services from time to time, all of BJ
Services' Expenses up to a maximum payment pursuant to this clause (B) of
$3,500,000. The term "BJ Services' Expenses" includes all out-of-pocket
expenses actually incurred by BJ Services on its behalf in connection with the
consummation of all transactions contemplated by the Merger Agreement.
(b) If the provisions of paragraph (a) above are not applicable and
BJ Services terminates the Merger Agreement as described in clause (iv)(b) of
"-- Termination" above, then Western must pay to BJ Services, within one
trading day after requested by BJ Services from time to time, all of BJ
Services' Expenses up to a maximum payment of $3,500,000.
(c) If Western terminates the Merger Agreement as described in clause
(vi) of "-- Termination" above and if (and only if) such termination occurs on
or after the date of consummation of the BJ Alternative Transaction which gave
rise to such right of termination as described in such clause (vi), then in
such event BJ Services must pay to Western, in immediately available funds, (i)
on the date of such termination, $16,000,000 and (ii) within one trading day
after requested by Western from time to time, all of Western's Expenses up to a
maximum payment of $3,500,000 pursuant to this clause (ii). The term
"Western's Expenses" includes all out-of-pocket expenses actually incurred by
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Western or on its behalf in connection with the consummation of the
transactions contemplated by the Merger Agreement.
(d) If either BJ Services or Western terminates the Merger Agreement
due to the failure of BJ Services' stockholders to approve the transactions
contemplated by the Merger, then BJ Services must pay to Western, within one
trading day after requested by Western from time to time, all of Western's
Expenses up to a maximum payment of $3,500,000; provided, however, that BJ
Services must pay to Western a termination fee of $20,000,000 and will not make
any additional payment to Western in reimbursement of Western's Expenses, if
either BJ Services or Western terminates the Merger Agreement as described in
this paragraph (d) and both of the following conditions shall have been
satisfied: (i) the meeting of BJ Services' stockholders shall have been held
subsequent to the receipt of the first Antitrust Termination Notice sent by
Western at the end of the 100-day period referred to in clause (x) of
"-- Termination" above (the "Antitrust Approval Period") (without regard to any
extensions thereof) and (ii) BJ Services shall have elected to extend the
Antitrust Approval Period as described in clause (i) of paragraph (e) below
rather than as described in clause (ii) of paragraph (e) below.
(e) If either BJ Services or Western terminates the Merger Agreement
as described in clauses (viii) or (x) of "-- Termination" above (but only if,
in the case of a termination as described in clause (viii), the action giving
rise to an order or injunction sought to enjoin or otherwise prohibit the
Merger for alleged violations of the federal or state antitrust laws), then BJ
Services must pay to Western a termination fee of $20,000,000 within five
trading days after written notice of termination as described in clauses (viii)
or (x) of "-- Termination" above (the "Antitrust Termination Notice") is
received by BJ Services from Western or received by Western from BJ Services;
provided, however, that BJ Services will have the option to require Western to
rescind any such Antitrust Termination Notice sent by Western under such clause
(x) if either of the conditions set forth below shall have been satisfied, in
which event such Antitrust Termination Notice will be rescinded and the
Antitrust Approval Period will be deemed to have been changed to 130 days:
(i) if at the time such Antitrust Termination Notice is
received, BJ Services has been engaged in active and continuous
negotiations with the Antitrust Division or the FTC with respect to
the Consent Decree Final Agreement, provided that prior to the tenth
day after receipt by BJ Services of the Western Compliance
Certificates, BJ Services and its outside counsel each delivered to
Western certificates that to the best of their knowledge BJ Services
is in "substantial compliance" with the Antitrust Division's or FTC's
"second request" for information from BJ Services under the Act, or
(ii) if the foregoing clause (i) is not applicable, if BJ
Services has paid a fee of $2,500,000 to Western on or prior to the
fifth Trading Day after BJ Services' receipt of such Antitrust
Termination Notice;
provided, further, that at the end of such extended Antitrust Approval Period
BJ Services will have the option to extend the Antitrust Approval Period for a
second 30-day period by (x) paying a fee of $5,000,000 to Western if the
Antitrust Approval Period was extended pursuant to clause (i) above, or (y)
paying an additional fee of $2,500,000 to Western if the Antitrust Approval
Period was extended pursuant to clause (ii) above, in which event upon such
payment the Antitrust Approval Period will be deemed to have been changed to
160 days.
(f) If either BJ Services or Western terminates the Merger Agreement
as described in clause (xi) of "-- Termination" above, then BJ Services must
pay to Western a termination fee of $20,000,000; provided, however, that if
Western's stockholders fail to approve the Merger or BJ Services' stockholders
fail to approve the issuance of BJ Common Stock and BJ Warrants in the Merger
and the Merger Agreement at the BJ Services Special Meeting and BJ Services is
not in breach of its
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obligations contained in the Merger Agreement, BJ Services will have no
obligation to pay any termination fee to Western as described in this paragraph
(f).
AMENDMENT AND WAIVER
The Merger Agreement may be amended by the parties at any time before or
after approval thereof by the stockholders of Western; provided that after any
such approval, no amendment may be made which changes the way in which the
Merger Consideration is calculated pursuant to the Merger Agreement or which in
any way alters or changes any of the other terms or conditions of the Merger
Agreement, if such alteration or change would materially adversely affect the
rights of such Western stockholders, without the further approval of such
stockholders. At any time prior to the Closing Date, each of the parties to
the Merger Agreement may (i) extend the time of the performance of any of the
obligations or other acts of the other parties thereto, (ii) waive any
inaccuracies in the representations and warranties contained therein or in any
document delivered pursuant thereto, (iii) waive compliance with any of the
agreements or conditions contained therein which may legally be waived and (iv)
grant any consents thereunder.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties
of BJ Services and Western relating to, among other things, (a) organization,
good standing, qualification to do business and other corporate matters, (b)
capitalization, (c) subsidiaries, (d) the authorization, execution, delivery
and enforceability of the Merger Agreement, the actions taken by each company's
Board of Directors with respect thereto and related matters, (e) reports filed
by each company with the Commission and the financial statements included
therein, (f) the absence of certain changes or events since the end of each
company's last fiscal year, (g) tax matters, (h) environmental matters, (i) the
absence of certain litigation, (j) the absence of any notice of revocation or
modification of certain governmental licenses and permits and compliance with
law, (k) the required vote of each company's stockholders, and (l) the receipt
by each company of the opinions discussed above under "Opinions of Financial
Advisors." BJ Services also represents and warrants in the Merger Agreement
that it will have available to it at the Effective Time all funds necessary to
satisfy its obligations under the Merger Agreement. The Merger Agreement also
contains additional customary representations of Western relating to (w)
employee benefit plans, (x) labor matters, (y) intellectual property and (z)
the amendment of the Western Rights Agreement referred to in clause (ii) of
the last paragraph under "-- Conditions to the Consummation of the Merger."
DISSENTERS' APPRAISAL RIGHTS
Record holders of BJ Common Stock are not entitled to appraisal rights
under Section 262 of the DGCL.
Record holders of Western Common Stock are entitled to appraisal rights
under Section 262 of the DGCL. A holder of Western Options or Western
Convertible Debentures must exercise such options or convert such debentures in
order to obtain Western Common Stock before such holder will be entitled to
appraisal rights as a stockholder of Western. A holder of Western Options or
Western Convertible Debentures is not otherwise entitled to appraisal rights.
This discussion is not a complete statement of the law pertaining to appraisal
rights under the DGCL and is qualified in its entirety by the full text of
Section 262, which is reprinted in its entirety as Appendix E to this Joint
Proxy Statement/Prospectus. A person having a beneficial interest in shares of
Western Common Stock held of record in the name of another person, such as a
broker or nominee, must act promptly to cause the record holder to follow the
steps summarized below properly and in a timely manner to perfect the appraisal
rights provided under Section 262.
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Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, as in the case of the Western Special Meeting, not
less than 20 days prior to the meeting, a constituent corporation must notify
each of the holders of its stock for which appraisal rights are available that
such appraisal rights are available and include in each such notice a copy of
Section 262. THIS JOINT PROXY STATEMENT/PROSPECTUS SHALL CONSTITUTE SUCH
NOTICE TO THE RECORD HOLDERS OF WESTERN COMMON STOCK. ANY SUCH STOCKHOLDER WHO
WISHES TO EXERCISE SUCH APPRAISAL RIGHTS SHOULD REVIEW THE FOLLOWING DISCUSSION
AND APPENDIX E CAREFULLY, BECAUSE FAILURE TO TIMELY AND PROPERLY COMPLY WITH
THE PROCEDURES SPECIFIED WILL RESULT IN THE LOSS OF APPRAISAL RIGHTS UNDER THE
DGCL.
Under the DGCL, record holders of Western Common Stock who follow the
procedures set forth in Section 262 will be entitled to have their shares of
Western Common Stock appraised by the Delaware Court of Chancery and to receive
payment of the "fair value" of such shares, exclusive of any element of value
arising from the accomplishment or expectation of the Merger, together with a
fair rate of interest, if any, as determined by such court. Such holders are,
in such circumstances, entitled to appraisal rights because they hold stock of
constituent corporations to the Merger and may be required by the Merger
Agreement to accept Merger Consideration in the form of Cash Consideration and
Warrant Consideration. A holder of shares of Western Common Stock wishing to
exercise his appraisal rights must deliver to the Secretary of Western, before
the vote on the Merger Agreement at the Western Special Meeting, a written
demand for appraisal of his shares of Western Common Stock. In addition, a
holder of shares of Western Common Stock wishing to exercise his appraisal
rights must hold such shares of record on the date the written demand for
appraisal is made and must hold such shares continuously through the Effective
Time. Stockholders who hold their shares of Western Common Stock in brokerage
accounts or other nominee forms and who wish to exercise appraisal rights must
take all necessary steps in order that a demand for appraisal is made by the
record holder of such shares and are urged to consult with their brokers to
determine the appropriate procedures for the making of a demand for appraisal
by the record holder.
Within 10 days after the Effective Time of the Merger, BJ Services, as
the Surviving Corporation in the Merger, must send a notice as to the
effectiveness of the Merger to each person who has satisfied the appropriate
provisions of Section 262 and who is entitled to appraisal rights under Section
262. Within 120 days after the Effective Time, but not thereafter, BJ Services
or any holder of shares of Western Common Stock who has complied with the
foregoing procedures and who is entitled to appraisal rights under Section 262,
may file a petition in the Delaware Court of Chancery demanding a determination
of the "fair value" of such shares. BJ Services is not under any obligation,
and has no present intention, to file a petition with respect to the appraisal
of the "fair value" of the shares of Western Common Stock. Accordingly, it is
the obligation of the stockholders to initiate all necessary action to perfect
their appraisal rights within the time prescribed in Section 262. A holder of
shares of Western Common Stock will fail to perfect, or effectively lose, his
right to appraisal if no petition for appraisal of shares of Western Common
Stock is filed within 120 days after the Effective Time.
If any holder of shares of Western Common Stock who demands appraisal of
his shares under Section 262 fails to perfect, or effectively withdraws or
loses, his right to appraisal, as provided in the DGCL, the shares of Western
Common Stock of such stockholder will be deemed to be Non-Election Shares in
accordance with the Merger Agreement. A holder may withdraw his demand for
appraisal by delivering to BJ Services a written withdrawal of his demand for
appraisal and acceptance of the Merger, except that any such attempt to
withdraw made more than 60 days after the Effective Time will require the
written approval of BJ Services. Failure to follow the steps required by
Section 262 of the DGCL for perfecting appraisal rights may result in the loss
of such rights.
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Any holder of shares of Western Common Stock who has duly demanded an
appraisal in compliance with Section 262 will not, after the Effective Time, be
entitled to vote the shares of Western Common Stock subject to such demand for
any purpose or be entitled to the payment of dividends or other distributions
on those shares (except dividends or other distributions payable to holders of
record of shares of Western Common Stock as of a date prior to the Effective
Time). Pursuant to the Merger Agreement, Western shall not, except with the
prior written consent of BJ Services, voluntarily make any payment with respect
to any demands for appraisals of Western Common Stock, offer to settle or
settle any such demands or approve any withdrawal of any such demands.
DESCRIPTION OF THE WARRANT AGREEMENT
General. The BJ Warrants are to be issued under a Warrant Agreement
between BJ Services and First Chicago Trust Company of New York, as Warrant
Agent (the "Warrant Agent"). THE DESCRIPTION OF THE WARRANT AGREEMENT
CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE WARRANT AGREEMENT, AS AMENDED, AND THE FORM OF WARRANT
CERTIFICATE, AS AMENDED, COPIES OF WHICH ARE ANNEXED AS ANNEX I TO THE FIRST
AMENDMENT TO THE MERGER AGREEMENT INCLUDED AS APPENDIX B TO THIS JOINT PROXY
STATEMENT/PROSPECTUS, AND WHICH ARE INCORPORATED HEREIN IN THEIR ENTIRETY BY
THIS REFERENCE.
Each BJ Warrant will entitle the registered holder thereof (the
"holder"), subject to and upon compliance with the provisions thereof and of
the Warrant Agreement, at such holder's option, prior to the close of business
on the fifth anniversary of the Closing Date (the "Expiration Date"), to
purchase the number of shares of BJ Common Stock set forth therein at an
initial Exercise Price of $30 per share, with the number of such shares and the
Exercise Price to be subject to adjustment as described below.
At any time after the Effective Time and prior to the close of business
on the Expiration Date, any Warrant Certificate may be transferred, split up,
combined or exchanged for another Warrant Certificate, entitling the registered
holder to purchase a like number of shares of BJ Common Stock as the Warrant
Certificate surrendered then entitled such holder to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Warrant
Certificate must make such request in writing delivered to the Warrant Agent,
and must surrender the Warrant Certificate to be transferred, split up,
combined or exchanged at the principal office of the Warrant Agent. Thereupon
the Warrant Agent will countersign and deliver to the person entitled thereto a
Warrant Certificate as so requested. BJ Services may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Warrant
Certificates, together with reimbursement to BJ Services and the Warrant Agent
of all reasonable expenses incidental thereto.
Holders of BJ Warrants will not be entitled to vote, receive dividends
or distributions on, or be deemed for any purpose the holder of, BJ Common
Stock or any other securities of BJ Services which may at any time be issuable
on the exercise or conversion of the BJ Warrants. Nothing contained in the
Warrant Agreement or in any Warrant Certificate shall be construed to confer
upon the holder of any Warrant Certificate any rights of a stockholder of BJ
Services or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders, or to receive dividends or distributions or
subscription rights, or otherwise, until the BJ Warrant or BJ Warrants
evidenced by such Warrant Certificate shall have been exercised in accordance
with the provisions of the Warrant Agreement.
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Adjustments of Exercise Price, Number of Shares or Number of Warrants.
The Exercise Price, the number of shares covered by each BJ Warrant and the
number of BJ Warrants outstanding are subject to adjustment from time to time.
If, at any time after the Effective Time, BJ Services (i) declares a
dividend on shares of BJ Common Stock payable in shares of any class of capital
stock of BJ Services, (ii) subdivides the outstanding shares of BJ Common Stock
into a greater number of shares of BJ Common Stock, (iii) combines the
outstanding shares of BJ Common Stock into a smaller number of shares of BJ
Common Stock, or (iv) issues any shares of capital stock in a reclassification
of shares of BJ Common Stock (including any such reclassification in connection
with a consolidation or merger in which BJ Services is the continuing
corporation), the Exercise Price in effect at the time of the record date for
such dividend or distribution or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of capital
stock issuable on such date, shall be proportionately adjusted so that the
holder of any BJ Warrant exercised after such time shall be entitled to receive
the aggregate number and kind of shares of capital stock which, if such BJ
Warrant had been exercised immediately prior to such date and at a time when
the BJ Common Stock transfer books of BJ Services were open, such holder would
have owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification.
If BJ Services fixes a record date for the issuance of rights, options
or warrants to all holders of BJ Common Stock (such rights, options or warrants
not being available to holders of BJ Warrants) entitling them (for a period
expiring within 45 calendar days after such date of issue) to subscribe for or
purchase BJ Common Stock (or securities convertible into or exercisable or
exchangeable for BJ Common Stock), other than Permitted Issuances (as defined
below), at a price per share of BJ Common Stock (or having a conversion,
exercise or exchange price per share of BJ Common Stock, in the case of a
security convertible into or exercisable or exchangeable for BJ Common Stock)
less than the Current Market Price (as defined in Section 10(f) of the Warrant
Agreement) per share of BJ Common Stock on such record date, the Exercise Price
to be in effect after such record date shall be determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction of
which the numerator shall be the number of shares of BJ Common Stock
outstanding on such record date plus the number of shares of BJ Common Stock
which the aggregate offering price of the total number of shares of BJ Common
Stock so to be offered (or the aggregate initial conversion, exercise or
exchange price of the convertible, exercisable or exchangeable securities so to
be offered) would purchase at such Current Market Price and of which the
denominator shall be the number of shares of BJ Common Stock outstanding on
such record date plus the number of additional shares of BJ Common Stock to be
offered for subscription or purchase (or into which the convertible,
exercisable or exchangeable securities so to be offered are initially
convertible, exercisable or exchangeable). In case such subscription price may
be paid in a consideration part or all of which shall be in a form other than
cash, the value of such consideration shall be as determined in good faith by
the Board of Directors of BJ Services, whose determination shall be described
in a statement filed with the Warrant Agent. Such adjustment shall be made
successively whenever such a record date is fixed, and if such rights or
warrants are not so issued the Exercise Price shall be adjusted to be the
Exercise Price which would then be in effect if such record date had not been
fixed. "Permitted Issuances" shall mean any and all issuances of shares of BJ
Common Stock or rights, options or warrants entitling the holders thereof to
subscribe for or purchase BJ Common Stock (or securities convertible into or
exercisable or exchangeable for BJ Common Stock) pursuant to any stock option,
stock purchase or other employee or director benefit plan of BJ Services or any
of its subsidiaries approved by stockholders.
If BJ Services fixes a record date for the making of a dividend or
distribution (other than aggregate cash dividends and distributions not in
excess of $0.25 per share of BJ Common Stock for the fiscal year ended
September 30, 1995, and then $1.50 for each 12-month period thereafter payable
out of retained earnings or earned surplus) to all holders of BJ Common Stock
(including any distribution made in connection with a consolidation or merger
in which BJ Services is the continuing corporation) or evidences of
indebtedness or assets or subscription rights or warrants (excluding those
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referred to in the foregoing paragraph), the Exercise Price to be in effect
after such record date will be determined by multiplying the Exercise Price in
effect immediately prior to such record date by a fraction of which the
numerator shall be the Current Market Price per share of BJ Common Stock on
such record date, less the fair market value (as determined in good faith by
the Board of Directors of BJ Services, whose determination shall be described
in a statement filed with the Warrant Agent) of such distribution applicable to
one share of BJ Common Stock, and of which the denominator shall be such
Current Market Price per share of BJ Common Stock. Such adjustment will be
made successively whenever such a record date is fixed, and if such
distribution is not so made the Exercise Price shall again be adjusted to be
the Exercise Price which would then be in effect if such record date had not
been fixed.
In case a tender offer (a "Tender Offer") made by BJ Services or any of
its subsidiaries for all or any portion of the BJ Common Stock shall expire
(the "Expiration Time") and the Tender Offer (as amended upon the expiration
thereof) shall require the payment to stockholders based on the acceptance (up
to any maximum specified in the terms of the Tender Offer) of Purchased Shares
(as defined below) of an aggregate of the cash plus other consideration having
a fair market value (as determined by the Board of Directors of BJ Services) as
of the Expiration Time of such Tender Offer that combined with the aggregate of
the cash plus the fair market value (as determined by such Board of Directors)
of consideration payable in respect of any other tender offer (determined as of
the Expiration Time of such other tender offer) by BJ Services or any of its
subsidiaries for all or any portion of the BJ Common Stock expiring within the
12 months preceding the expiration of the Tender Offer and in respect of which
no adjustment pursuant to this paragraph has been made exceeds 12.5% of the
product of the Current Market Price per share of the BJ Common Stock as of the
Expiration Time of the Tender Offer multiplied by the number of shares of BJ
Common Stock outstanding (including any shares tendered and not withdrawn) at
the Expiration Time of the Tender Offer, then, and in each such case,
immediately prior to the opening of business on the first trading day after the
date of the Expiration Time of the Tender Offer, the Exercise Price shall be
adjusted to equal the price determined by multiplying the Exercise Price in
effect immediately prior to the close of business on the date of the Expiration
Time of the Tender Offer by a fraction (A) the numerator of which shall be
equal to (x) the product of (i) the Current Market Price per share of the BJ
Common Stock as of the Expiration Time of the Tender Offer and (ii) the number
of shares of BJ Common Stock outstanding (including any shares tendered and not
withdrawn) at the Expiration Time of the Tender Offer less (y) the amount of
cash plus the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance (up to any
maximum specified in the terms of the Tender Offer) of Purchased Shares, and
(B) the denominator of which shall be equal to the product of (x) the Current
Market Price per share of the BJ Common Stock as of the Expiration Time of the
Tender Offer and (y) the number of shares of BJ Common Stock outstanding
(including any shares tendered and not withdrawn) as of the Expiration Time of
the Tender Offer less the number of all shares validly tendered and not
withdrawn as of the Expiration Time of the Tender Offer, and accepted for
purchase up to any maximum. The term "Purchased Shares" shall mean such shares
as are deemed so accepted for purchase up to any maximum.
If the BJ Rights outstanding under the BJ Rights Agreement become
exercisable for shares of Series Two Junior Participating Preferred Stock, par
value $1.00 per share, of BJ Services ("BJ Preferred Stock") or other property,
the Exercise Price and the number of and kind of securities or other property
issuable upon exercise of each BJ Warrant will be appropriately adjusted so
that the holder of any BJ Warrant exercised after such time will be entitled to
receive the aggregate number and kind of shares of BJ Preferred Stock or other
property which would have been issuable under the BJ Rights that would have
been attached to the shares of BJ Common Stock for which such BJ Warrant was
exercisable immediately prior to the BJ Rights having become exercisable, upon
payment of the same consideration, if any, payable under such BJ Rights for
such shares or other property.
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No adjustment in the Exercise Price will be required unless such
adjustment would require an increase or decrease of at least 1% in such price;
provided, however, that any adjustments which are not required to be made will
be carried forward and taken into account in any subsequent adjustment.
Except as otherwise provided in the Warrant Agreement, upon each
adjustment of the Exercise Price, each BJ Warrant outstanding immediately prior
to the making of such adjustment will thereafter evidence the right to
purchase, at the adjusted Exercise Price, that number of shares (calculated to
the nearest ten-thousandth) obtained by (i) multiplying (x) the number of
shares covered by a BJ Warrant immediately prior to such adjustment by (y) the
Exercise Price in effect immediately prior to such adjustment of the Exercise
Price and (ii) dividing the product so obtained by the Exercise Price in effect
immediately after such adjustment of the Exercise Price.
On or after any adjustment of the Exercise Price, BJ Services may elect
to adjust the number of BJ Warrants in substitution for any adjustment in the
number of shares of BJ Common Stock purchasable upon the exercise of a BJ
Warrant. Each of the BJ Warrants outstanding after such adjustment of the
number of BJ Warrants shall be exercisable for one share of BJ Common Stock.
Each BJ Warrant held of record prior to such adjustment of the number of BJ
Warrants shall become that number of BJ Warrants (calculated to the nearest
ten-thousandth) obtained by dividing the Exercise Price in effect prior to
adjustment of the Exercise Price by the Exercise Price in effect after
adjustment of the Exercise Price.
Whenever the Exercise Price or the number of shares of BJ Common Stock
issuable upon the exercise of each BJ Warrant is adjusted as provided in the
Warrant Agreement, BJ Services shall (a) promptly prepare a certificate setting
forth the Exercise Price as so adjusted and/or the number of shares of BJ
Common Stock issuable upon exercise of each BJ Warrant as so adjusted, and a
brief statement of the facts accounting for such adjustment, (b) promptly file
with the Warrant Agent and with each transfer agent for the BJ Common Stock a
copy of such certificate and (c) mail a brief summary thereof to each holder of
a Warrant Certificate.
Reclassification, Consolidation, Merger, Combination, Sale or
Conveyance. In case any of the following occurs while any BJ Warrants are
outstanding: (i) any reclassification or change of the outstanding shares of
BJ Common Stock (other than a change in par value, or from par value to no par
value or as described in the second paragraph of "-- Adjustments of Exercise
Price, Number of Shares or Number of Warrants" above), (ii) any consolidation,
merger or combination of BJ Services with or into another corporation as a
result of which holders of BJ Common Stock shall be entitled to receive stock,
securities or other property or assets (including cash) with respect to or in
exchange for such BJ Common Stock or (iii) any sale or conveyance of the
property or assets of BJ Services as, or substantially as, an entirety to any
other entity as a result of which holders of BJ Common Stock shall be entitled
to receive stock, securities or other property or assets (including cash) with
respect to or in exchange for such BJ Common Stock, then BJ Services, or such
successor corporation or transferee, as the case may be, will make appropriate
provision so that the holders of the BJ Warrants then outstanding shall have
the right at any time thereafter, upon exercise of such BJ Warrants, to receive
the kind and amount of securities, cash and other property receivable upon such
reclassification, change, consolidation, merger, combination, sale or
conveyance as would be received by a holder of the number of shares of BJ
Common Stock issuable upon exercise of such BJ Warrant immediately prior to
such reclassification, change, consolidation, merger, sale or conveyance.
If the holders of the BJ Common Stock may elect the kind or amount of
securities, cash and other property receivable upon such reclassification,
consolidation, merger, combination, sale or conveyance, then the kind and
amount of securities, cash and other property receivable upon such
reclassification, consolidation, merger, combination, sale or conveyance shall
be deemed to be the choice specified by the holder of the BJ Warrant. If the
holder of the BJ Warrant fails to make any specification, the holder's choice
shall be deemed to be whatever choice is made by a plurality of holders of BJ
Common Stock not affiliated with BJ Services or any other party to the
reclassification,
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<PAGE> 82
consolidation, merger, combination, sale or conveyance. Such new BJ Warrants
shall provide for adjustments which, for events subsequent to the effective
date of such new BJ Warrants, shall be as nearly equivalent as may be
practicable to the adjustments described herein and in "-- Adjustments of
Exercise Price, Number of Shares or Number of Warrants" above.
BJ Services will mail to each registered holder of a BJ Warrant written
notice of the execution of any such amendment or agreement. Any new agreement
entered into by the successor corporation or transferee will provide for
adjustments which will be as nearly equivalent as may be practicable to the
adjustments described in "-- Adjustments of Exercise Price, Number of Shares or
Number of Warrants" above.
Fractional BJ Warrants and Fractional Shares. BJ Services will not be
required to issue fractions of BJ Warrants. In lieu of such fractional BJ
Warrants, there will be paid to the persons to whom Warrant Certificates
representing such fractional BJ Warrants would otherwise be issuable an amount
in cash (without interest) equal to the product of such fraction of a BJ
Warrant multiplied by the following: (i) with respect to all fractions of BJ
Warrants issued in the Merger, the Warrant Merger Price (as defined in
Section 10(f) of the Warrant Agreement) and (ii) with respect to all other
fractions of BJ Warrants, the Current Market Price per whole BJ Warrant.
BJ Services will not be required to issue fractions of shares of BJ
Common Stock upon exercise of BJ Warrants or to distribute stock certificates
that evidence fractional shares of BJ Common Stock. In lieu of fractional
shares, there will be paid to the registered holders of Warrant Certificates at
the time such Warrant Certificates are exercised as herein provided an amount
in cash (without interest) equal to the product of such fraction of a share of
BJ Common Stock multiplied by the Current Market Price per share of BJ Common
Stock.
Reservation and Availability of Shares of BJ Common Stock or Cash. BJ
Services has agreed to reserve and keep available out of its authorized and
unissued shares of Common Stock, the number of shares of BJ Common Stock that
will be sufficient to permit the exercise in full of all outstanding BJ
Warrants or keep sufficient cash available for payment in lieu of BJ Common
Stock.
Listing on the NYSE. BJ Services has agreed to use its best efforts to
cause the BJ Common Stock issuable upon the exercise of the BJ Warrants to be
listed for trading on the NYSE. The BJ Warrants have been approved for listing
on the NYSE, subject to official notice of issuance, under the trading symbol
"BJS WS."
Payment of Taxes. BJ Services has agreed to pay when due and payable
any and all federal and state transfer taxes and charges which may be payable
in respect of the original issuance or delivery of the Warrant Certificates or
certificates evidencing BJ Common Stock upon exercise of a Warrant Certificate.
However, BJ Services is not required to pay any tax or governmental charge
which may be payable in respect of any transfer involved in the transfer or
delivery of Warrant Certificates or the issuance or delivery of certificates
for BJ Common Stock in a name other than that of the registered holder of the
Warrant Certificate evidencing BJ Warrants surrendered for exercise or to issue
or deliver any certificate for shares of BJ Common Stock upon the exercise of
any BJ Warrants until any such tax or governmental charge has been paid (any
such tax or governmental charge being payable by the holder of such Warrant
Certificate at the time of surrender) or until it has been established to BJ
Services' satisfaction that no such tax or governmental charge is due.
Notice of Proposed Actions. In case BJ Services shall propose to (a)
declare a stock dividend or make certain other distributions to holders of BJ
Common Stock, (b) offer rights, options or warrants to all holders of BJ Common
Stock entitling them to subscribe for or purchase BJ Common Stock (or
securities exercisable or exchangeable for or convertible into BJ Common Stock
or other securities), (c) offer any shares of capital stock in a
reclassification of shares of BJ Common Stock, (d) effect any consolidation or
merger with, or to effect any sale or other transfer of more than 50% of the
assets or
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<PAGE> 83
net income of BJ Services and its subsidiaries to, another person, or (e)
effect the liquidation, dissolution or winding up of BJ Services, then BJ
Services shall give notice of such proposed action to each registered holder of
a BJ Warrant.
Supplements and Amendments. The Warrant Agreement permits BJ Services
and the Warrant Agent, from time to time, to supplement or amend the Warrant
Agreement without the approval of any holders of BJ Warrant Certificates in
order to cure any ambiguity, to correct or supplement any provision which may
be defective or inconsistent with any other provisions, or to make any other
provisions with regard to matters or questions which BJ Services and the
Warrant Agent may deem necessary or desirable and which shall not adversely
affect the interests of the holders of Warrant Certificates. In addition to
the foregoing, with the consent of holders of not less than a majority in
number of the then outstanding BJ Warrants, BJ Services and the Warrant Agent
may modify the Warrant Agreement for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Warrant
Agreement or modifying in any manner the rights of the holders of the BJ
Warrant Certificates; provided, however, that no modification of the terms upon
which the BJ Warrants are exercisable or that reduce the percentage required
for consent to modification of the Warrant Agreement may be made without the
consent of the holder of each outstanding BJ Warrant affected thereby.
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<PAGE> 84
MANAGEMENT AND OPERATIONS AFTER THE MERGER
BENEFITS OF THE MERGER
The managements of BJ Services and Western expect that the Merger will
provide substantial opportunities to improve the earnings and cash flow of the
combined entity, primarily by (i) exploiting opportunities for significant
consolidation cost savings, (ii) achieving revenue enhancements through
integration of the relative strengths of the two companies and (iii) pursuing
opportunities to improve underperforming operations by increasing market
presence.
Consolidation Cost Savings. The combination of BJ Services and Western
will present opportunities for achieving significant consolidation cost savings
through elimination of duplicate operating and manufacturing facilities,
research and development efforts and corporate and administrative overhead. BJ
Services management estimates that such annual aggregate cost savings will
range from $30 million to $40 million. Certain of these cost savings will be
realized upon consummation of the Merger, while the remainder would not be
realized until the operations of the two companies have been fully integrated
(expected in fiscal 1996). BJ Services management also believes that the
Merger should provide the combined company the ability to reduce its purchasing
costs due to increased volume. Management also expects to realize increased
efficiencies in the North Sea vessels operations by re-deploying one of the two
stimulation vessels into another region. The Merger also will reduce the need
for certain future expenditures budgeted by Western in connection with its
international market expansion efforts due to BJ Services' current presence in
those targeted markets.
Integration of Relative Business Strengths. The managements of BJ
Services and Western expect that the Merger will combine the relative strengths
of the two companies, particularly with respect to customer base and geographic
areas of operation. The U.S. customer base of BJ Services has historically
included a concentration of primarily oil producers, while Western's customer
base includes a larger concentration of producers whose exploration activities
focus on natural gas. The two companies' geographic strengths also complement
each other. In recent years, BJ Services has significantly increased its
international presence, while Western's operations are focused primarily within
the United States. In the United States, BJ Services is a stronger competitor
in the Alaska North Slope, California and the Gulf of Mexico. Western's
historical competitive strength has been in the United States midcontinent and
Rocky Mountain regions.
Increased Competitiveness. Managements of BJ Services and Western
believe that the Merger will enable the combined company to compete more
effectively with its larger competitors, Halliburton and Dowell Schlumberger.
The foregoing benefits are based upon analyses and beliefs of members of
management of BJ Services and Western. Because of the highly competitive
nature of the oil field service industry, the adverse impact on the industry
resulting from oil and gas price fluctuations and the inherent uncertainties
involved in combining two companies, there can be no assurance that the
combined company will be able to fully exploit the foregoing opportunities or
realize the benefits described herein, including achieving the estimates of
consolidation cost savings.
BOARD OF DIRECTORS
Pursuant to the Merger Agreement, the Board of Directors of BJ Services
has approved an increase in the number of directors comprising the Board of
Directors of BJ Services from 7 to 10, such increase to be effective at the
Effective Time. Pursuant to the Merger Agreement, BJ Services has agreed that
for at least one year after the next annual meeting of the stockholders of BJ
Services, subject to fiduciary obligations under applicable law, the Board of
Directors of BJ Services shall use its best efforts to cause the three current
outside directors of Western named in the table below to be elected to the
Board of Directors of BJ Services by the stockholders of BJ Services, in order
to fill the three vacancies created by such increase. The Board of Directors
of BJ Services is divided into three classes with terms of office of the
classes ending in successive years after the annual meetings of
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<PAGE> 85
stockholders in such years. Pursuant to the BJ Services Charter and Bylaws,
newly created directorships resulting from an increase in the number of
directors fixed by the Board of Directors are required to be apportioned to
each class of directors so that the classes are approximately equal. Pursuant
to the Bylaws, to the extent that the number of directors in each class is not
equal, the additional director is required to be included in Class III. The
three directors of Western that are to be appointed to BJ Services Board of
Directors upon consummation of the Merger have been apportioned according to
these requirements.
Set forth below is certain information about each person who is to be a
member of the Board of Directors of BJ Services as of the Effective Time,
including those directors of Western who, following consummation of the Merger,
will be appointed to the BJ Services Board of Directors to fill the vacancies
created by the increase referred to above.
<TABLE>
<CAPTION>
YEAR FIRST
SERVED AS A
DIRECTOR OF
BJ SERVICES OTHER BUSINESS POSITIONS
NAME OR WESTERN AGE AND EXPERIENCE
- ---- ----------- --- -----------------------------------------------------------
<S> <C> <C> <C>
CLASS I DIRECTORS:
Terms Expiring in 1997
John R. Huff 1992 48 Chairman, President and Chief Executive Officer of
BJ Services 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 of Oceaneering since 1990. Mr. Huff
is also a director of Production Operators Corp.
R.A. LeBlanc 1994 64 Chairman of the Board and Chief Executive Officer and a
BJ Services director of Keystone International, Inc., a manufacturer of
flow control products. Mr. LeBlanc has been employed by
Keystone since 1959 and was elected Chairman of the Board
and Chief Executive Officer of Keystone in 1985 following
several years' service as President and Chief Operating
Officer. Mr. LeBlanc also serves an an advisory member of
the board of directors of Texas Commerce Bank National
Association.
Michael E. Patrick 1989 51 Managing Director of M.E. Zukerman & Co., a merchant
Western banking firm, since 1994; 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; Director of Farm & Home
Financial Corporation; 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. Mr. Patrick is currently a
member of the Governance Committee and of the Executive
Development and Compensation Committee of the Board of
Directors of Western.
</TABLE>
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<PAGE> 86
<TABLE>
<CAPTION>
YEAR FIRST
SERVED AS A
DIRECTOR OF
BJ SERVICES OTHER BUSINESS POSITIONS
NAME OR WESTERN AGE AND EXPERIENCE
- ---- ----------- --- -----------------------------------------------------------
<S> <C> <C> <C>
CLASS II DIRECTORS:
Terms Expiring in 1998
William J. Johnson 1985 60 Independent oil and natural gas producer and consultant,
Western 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;
director of Camco International, Inc., a provider of oil
and natural gas production equipment and services, since
December 1993; director of Snyder Oil Corporation, an
independent oil and gas exploration and production company,
since 1994; President and Chief Executive Officer of
TEX/CON Oil & Gas Company, a subsidiary of BP Exploration,
Inc.; President, U.S.A. of BP Exploration, Inc., and
President of Standard Oil Production Company, a wholly
owned subsidiary of The Standard Oil Company, from 1986 to
1987. Mr. Johnson is currently the Chairman of the Govern-
ance Committee and a member of the Audit Committee of the
Board of Directors of Western.
Don D. Jordan 1990 62 Chairman, Chief Executive Officer and a director of Houston
BJ Services 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.
Michael McShane 1990 40 Vice President - Finance and Chief Financial Officer of BJ
BJ Services Services. Mr. McShane joined BJ Services 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>
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<PAGE> 87
<TABLE>
<CAPTION>
YEAR FIRST
SERVED AS A
DIRECTOR OF
BJ SERVICES OTHER BUSINESS POSITIONS
NAME OR WESTERN AGE AND EXPERIENCE
- ---- ----------- --- -----------------------------------------------------------
<S> <C> <C> <C>
CLASS III DIRECTORS:
Terms Expiring in 1996
David A.B. Brown 1989 51 President of the Windsor Group, Inc., a management
Western consulting firm since 1984; and director of BTU
International, Inc., a manufacturer of thermal processing
equipment. Mr. Brown is currently a member of the Audit
Committee of the Board of Directors of Western.
L. William 1992 53 President, Chief Operating Officer and a director of
Heiligbrodt BJ Services 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 1990 67 Mr. McCormick served in various executive positions with
BJ Services ORYX Energy Company, a diversified energy company,
including President and 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, Petrolite Corporation, Snyder Oil
Company and Texas Commerce Bank National Association.
J.W. Stewart 1990 50 Chairman of the Board, President and Chief Executive
BJ Services Officer of BJ Services. Mr. Stewart joined Hughes Tool
Company in 1969 as Project Engineer, and served as Vice
President-Legal and Secretary of Hughes Tool Company and as
Vice President-Operations for a predecessor of BJ Services
prior to being named President of BJ Services in 1986.
</TABLE>
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<PAGE> 88
The retirement age policy applicable to BJ Services will result in
retirement of board members from the BJ Services Board of Directors from time
to time.
COMMITTEES OF THE BOARD OF DIRECTORS OF BJ SERVICES
The Board of Directors of BJ Services has designated three committees of
its directors, the Audit Committee, the Executive Compensation Committee and
the Nominating Committee, the members of which are appointed by the entire
Board of Directors.
The responsibilities of the Audit Committee, currently comprised of
Messrs. McCormick (Chairman), Jordan, Huff and LeBlanc, include reviewing the
scope and results of the audit 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 independent auditors to review the effectiveness of BJ Services'
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 and Huff, include
reviewing BJ Services' executive salary and bonus structure; reviewing BJ
Services' employee stock incentive plan, thrift plan and employee stock
purchase plan as well as other incentive alternatives; reviewing BJ Services'
perquisite program; and recommending directors' fees.
The responsibilities of the Nominating Committee, comprised of Messrs.
Heiligbrodt (Chairman), McCormick and LeBlanc, include selecting candidates to
fill vacancies on the Board of Directors; reviewing the structure and
composition of the Board of Directors; and considering qualification required
for continued service on the Board of Directors. The Nominating Committee also
considers nominees recommended by stockholders.
Pursuant to the Merger Agreement, a Special Committee of the Board of
Directors of BJ Services will be established, consisting of two current outside
directors of BJ Services and two of the outside directors of Western (named in
the table above) who were in office prior to the Effective Date. The Special
Committee will be responsible for enforcement of the provisions of the Merger
Agreement relating to employee arrangements. BJ Services intends to establish
the Special Committee and to designate the members thereof prior to the Merger,
contingent upon consummation thereof.
OFFICERS
Each of the nine executive officers, including the chief executive
officer and the other four most highly compensated executive officers of BJ
Services, will continue as an executive officer of BJ Services after the
Merger. Each of the executive officers serves at the discretion of the Board
of Directors.
POST-MERGER DIVIDEND POLICY
BJ Services does not currently intend to pay dividends on outstanding
shares of BJ Common Stock. It is the intention of the Board of Directors of BJ
Services to maintain its current dividend policy with respect to the BJ Common
Stock following the Merger.
WESTERN DIRECTORS, OFFICERS AND EMPLOYEES
Officer and Director Indemnification and Insurance. For a discussion of
certain agreements by BJ Services to provide indemnification of officers and
directors of Western, see "The Merger -- Effect on Western Employee Benefit
Plans and Employee Agreements -- Indemnification." For a discussion of certain
agreements by BJ Services to provide liability insurance for certain directors
and officers of Western, see "The Merger -- Effect on Western Employee Benefit
Plans and Employee Agreements -- Benefit Maintenance."
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<PAGE> 89
Benefit Maintenance and Service Credit. For a discussion of certain
agreements by BJ Services to provide benefits to employees of Western and its
subsidiaries, see "The Merger -- Effect on Western Employee Benefit Plans and
Employment Agreements -- Benefit Maintenance." The Merger Agreement generally
provides that employees of the Surviving Corporation will be given credit for
all service with Western and its subsidiaries under all employee benefit plans,
programs and policies of the Surviving Corporation or BJ Services in which they
became participants.
Western Executive Officers. To facilitate an orderly transition in
management, the Western Executive Officers will be terminated immediately prior
to the Effective Time pursuant to the Executive Termination Agreements. For a
more detailed description of these agreements, see "The Merger -- Interests of
Certain Persons in the Merger -- Termination of Western Executive Officers" and
"The Merger -- Effect on Western Employee Benefit Plans and Employee Agreements
- -- Western Executive Termination Agreements."
Special Committee Enforcement. The covenants in the Merger Agreement
regarding employee benefits will be enforced by a special committee consisting
of two current outside directors of BJ Services and two current outside
directors of Western.
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<PAGE> 90
PRINCIPAL STOCKHOLDERS OF BJ SERVICES AND WESTERN
BJ SERVICES
According to information supplied to BJ Services by the beneficial
owners listed below and, where applicable, the books and records of BJ
Services, the following entities each owned beneficially more than 5% of the
shares of BJ Common Stock outstanding as of February 15, 1995. No other person
(or "group" within the meaning of Section 13(d)(3) of the Exchange Act) is
known by BJ to be beneficial owner, as of February 15, 1995 of more than 5% of
the BJ Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
------------------ ----------------- --------
<S> <C> <C>
FMR Corp. 2,059,036 (2) 13.1 %
82 Devonshire Street
Boston, Massachusetts 02109
The Equitable Companies Incorporated 1,762,725 (3) 11.2 %
787 Seventh Avenue
New York, New York 10019
T. Rowe Price Associates, Inc. 1,565,600 (4) 10.0 %
100 East Pratt St., 9th Floor
Baltimore, Maryland 21202
The Prudential Insurance Company of America 1,239,000 (5) 7.9 %
19 Prudential Plaza
Newark, New Jersey 07102
</TABLE>
- ----------------
(1) Except as otherwise indicated, all shares are owned directly,
and the entities named in the table above have sole voting
and dispositive power with respect to all shares of BJ Common
Stock shown as beneficially owned by them.
(2) Based on information provided at February 13, 1995 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 2,059,036 shares of BJ Common Stock. FMR
Corp. had sole voting power with respect to 797,655 shares,
no voting power with respect to 1,261,381 shares, and sole
dispositive power with respect to 2,059,036 shares. Fidelity
International Limited had sole voting and dispositive power
with respect to the 49,800 shares it beneficially owned.
(3) Based on information provided at February 10, 1995 by The
Equitable Companies Incorporated, The Equitable Companies
Incorporated and its subsidiaries, including Alliance Capital
Management L.P., and The Equitable Life Assurance Society of
the United States (collectively, "Equitable"), held 1,762,725
shares of BJ Common Stock. Equitable had sole voting power
with respect to 1,525,125 shares and sole dispositive power
with respect to 1,762,725.
(4) Based on information provided at February 14, 1995 by T. Rowe
Price Associates, Inc. ("Price"), Price was the beneficial
owner of 1,565,600 shares of BJ Common Stock. Price had sole
voting power with respect to 111,100 shares and sole
dispositive power with respect to 1,565,600 shares. The
shares beneficially owned by Price include any shares owned
by the T. Rowe Price Mutual Funds.
(5) Based on information provided at February 10, 1995 by The
Prudential Insurance Company of America ("Prudential"),
Prudential held 1,239,000 shares of BJ Common Stock. Of those
shares, Prudential had shared voting and dispositive power
with respect to 1,235,500 shares and sole voting and
dispositive power with respect to 3,500 shares.
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<PAGE> 91
The following table sets forth the beneficial ownership of the outstanding
shares of BJ Common Stock as of February 15, 1995 by each current director, by
certain executive officers and by all current directors and officers as a
group.
<TABLE>
<CAPTION>
Number
of Shares (1)(2)
----------------
<S> <C>
L. William Heiligbrodt....................................... 7,000
John R. Huff ................................................ 5,000
Don D. Jordan................................................ 6,500
R. A. LeBlanc............................................... 435
James E. McCormick........................................... 7,000
J.W. Stewart................................................. 174,569
Michael McShane ............................................ 75,914
G. R. Goodarzi .............................................. 51,463
Kenneth A. Williams.......................................... 27,425
Thomas H. Koops ............................................. 54,967
All current directors and officers as a group (14 persons)(3) 489,244
</TABLE>
____________
(1) The persons named in the table have sole voting and
dispositive power with respect to all shares of BJ Common
Stock shown as beneficially owned by them. As of February
15, 1995, no executive officer or director owned in excess of
1% of the outstanding shares of BJ Common Stock, other than
Mr. Stewart, who owned 1.1%.
(2) Includes shares subject to options granted pursuant to the BJ
Services Stock Incentive Plan and exercisable within 60 days:
Mr. Heiligbrodt - 5,000 shares; Mr. Huff - 5,000 shares; Mr.
Jordan - 6,000 shares; Mr. LeBlanc - 0 shares; Mr. McCormick -
6,000 shares; Mr. Stewart - 162,108 shares; Mr. McShane -
70,399 shares; Mr. Goodarzi - 51,463 shares; Mr. Williams -
24,326 shares; Mr. Koops - 51,572 shares.
(3) On February 15, 1995, all current directors and executive
officers as a group owned beneficially an aggregate of
approximately 3.2% of the outstanding shares of BJ Common
Stock.
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<PAGE> 92
Western
According to information supplied to Western by the beneficial owners
listed below and, where applicable, the books and records of Western, the
following entities each owned beneficially more than 5% of the shares of
Western Common Stock outstanding as of February 15, 1995. No other person (or
"group" within the meaning of Section 13(d) (3) of the Exchange Act) is known
to Western to be the beneficial owner, as of February 15, 1995, of more than 5%
of the shares of Western Common Stock.
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address Beneficial Percent
of Beneficial Owner Ownership(1) of Class
- ------------------ ------------ --------
<S> <C> <C>
Metropolitan Life Insurance Company 1,046,580 (2) 5.6% (3)
One Madison Avenue
New York, New York 10010
Carl C. Icahn 1,704,450 (4) 9.3%
100 South Bedford Road
Mount Kisco, New York 10549
Wyser-Pratte & Co., Inc. 938,000 (5) 5.1%
Wyser-Pratte Management Co., Inc.
63 Wall Street
New York, New York 10005
</TABLE>
____________
(1) Except as otherwise indicated, all shares of Western Common Stock are
owned directly, and the entities named in the table have sole voting
and dispositive power with respect to all shares of Western Common Stock
shown as beneficially owned by them.
(2) Based upon the most recent amended Schedule 13G delivered to Western by
such person which states that it has sole power to vote 904,380 of such
shares and sole dispositive power with respect to all such shares and
that 596,600 of such shares are beneficially owned by a related entity,
State Street Research & Management Company, which disclaims any
beneficial interest in the shares. Includes 441,180 shares which such
person has the right to acquire by conversion of the Western Convertible
Debentures.
(3) Computed as if 441,180 shares of Western Common Stock had been issued to
such person due to conversion of the Western Convertible Debentures and
that such number of additional shares had been outstanding.
(4) Based upon the most recent amended Schedule 13D delivered to Western by
such person which states that such Schedule 13D was filed on its behalf
and on behalf of certain related entities, that such person has shared
voting and dispositive powers with respect to all such shares together
with such related entities, that 1,408,650 of such shares are owned
directly by Riverdale Investors Corp., Inc. ("Riverdale") and that
Riverdale has sole voting and dispositive powers with respect to those
shares. Carl C. Icahn is the sole stockholder and director of Riverdale
and as such may be deemed to be the beneficial owner of shares owned by
Riverdale.
(5) Based upon a Schedule 13D delivered to Western by such persons which
states that such Schedule 13D was filed on their behalf. Pursuant to
such Schedule 13D, Wyser-Pratte & Co., Inc. directly owns 253,900 shares
of Western Common Stock and Wyser-Pratte Management Co., Inc. directly
owns 684,100 shares of Western Common Stock. Both companies are owned
by Mr. Guy Wyser-Pratte who is the chief executive officer and sole
director of each of them.
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The following table sets forth the beneficial ownership of the
outstanding shares of Western Common Stock as of February 15, 1995, by each
current director, by certain executive officers and by all current directors
and officers as a group.
<TABLE>
<CAPTION>
Percent of
Common Stock Common Stock
Name of Director Owned Beneficially(1) Owned Beneficially
--------------- --------------------- ------------------
<S> <C> <C>
Sheldon R. Erikson 714,508 (2) 3.8%(3)
Graham L. Adelman 76,011 (4) *
Nathan M. Avery 5,623 (5) *
David A.B. Brown 3,123 (5) *
Grant A. Dove 5,623 (5) *
William J. Johnson 5,623 (5) *
Michael E. Patrick 3,123 (5) *
David Ross, III 2,873 (6) *
All above Directors and officers as a group
(22 persons) 1,114,840 (7) 5.7%(3)
</TABLE>
_______________
* Indicates ownership of less than 1% of the outstanding shares of Western
Common Stock.
(1) Unless otherwise indicated, all shares of Western Common Stock are owned
directly and the persons named in the table have sole voting and
dispositive power with respect to all shares of Western Common Stock
shown as beneficially owned by them.
(2) Includes 524,400 shares subject to then exercisable stock options.
(3) Computed as if all stock options granted to such person or persons had
been exercised and the equivalent number of shares was issued and
outstanding.
(4) Includes 22,100 shares subject to then exercisable stock options.
(5) Includes 3,123 shares subject to then exercisable stock options.
(6) Includes 1,873 shares subject to then exercisable stock options.
(7) Includes 95,485 shares as to which persons in the group may be deemed to
have had shared voting power by virtue of their positions as members of
the committee which administers The Western Company of North America
Retirement Savings Plan and 747,687 shares as to which persons in the
group held then exercisable stock options.
Section 16(a) of the Exchange Act requires officers and directors, and
persons who own more than 10% of a registered class of the equity securities of
either BJ Services or Western, to file reports of ownership and changes in
ownership of such equity securities with the Commission and the NYSE. Officers,
directors and greater-than-10% stockholders of BJ Services and Western are
required to furnish BJ Services and Western, respectively, with copies of all
forms filed by them pursuant to Section 16(a). Based solely on its review of
the copies of such forms received by it and written representations from
certain reporting persons, BJ Services and Western believe that all filing
requirements applicable to such officers, directors and stockholders were
complied with during 1994.
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DESCRIPTION OF CAPITAL STOCK OF BJ SERVICES
The following statements are brief summaries of certain provisions
relating to BJ Services' capital stock and are qualified in their entirety by
reference to the provisions of BJ Services' Restated Certificate of
Incorporation (the "BJ Services Charter") and Bylaws, which are incorporated by
reference as an exhibit to the Registration Statement of which this Joint Proxy
Statement/Prospectus is a part.
The authorized capital stock of BJ Services consists of 40,000,000
shares of BJ Common Stock, par value $0.10 per share, and 5,000,000 shares of
preferred stock, par value $1.00 per share, including 400,000 authorized shares
of Series Two Junior Participating Preferred Stock, par value $1.00 per share
("BJ Preferred Stock"), issuable upon exercise of the BJ Rights. If BJ
Proposal No. 2 is approved by the requisite vote of the stockholders of BJ
Services and the Merger is consummated, the authorized BJ Common Stock will be
increased to 80,000,000 shares. See "BJ Proposal No. 2: Proposed Increase in
Authorized Shares of BJ Common Stock." The following description of the
capital stock of BJ Services does not purport to be complete or to give full
effect to the provisions of statutory or common law and is subject in all
respects to the applicable provisions of BJ Services' Charter, the Certificate
of Designation for the BJ Preferred Stock, and the BJ Rights Agreement, which
is between BJ Services and First Chicago Trust Company of New York, as Rights
Agent, and the information herein is qualified in its entirety by this
reference.
COMMON STOCK
BJ Services is authorized by the BJ Services Charter to issue 40,000,000
shares of BJ Common Stock, of which 15,717,270 shares were issued and
outstanding as of March 15, 1995. Each outstanding share of BJ Common Stock,
and each of the shares of BJ Common Stock to be offered hereby, include an
associated BJ Right.
The holders of shares of BJ Common Stock are entitled to one vote for
each share held on all matters submitted to a vote of common stockholders. The
BJ Common Stock does not have cumulative voting rights, which means that the
holders of a majority of the shares of BJ Common Stock outstanding have the
ability to elect all the directors.
Each share of BJ Common Stock is entitled to participate equally in
dividends, as and when declared by BJ Services' Board of Directors, and in the
distribution of assets in the event of liquidation, subject in all cases to any
prior rights of outstanding shares of preferred stock. The shares of BJ Common
Stock have no preemptive or conversion rights, redemption provisions or sinking
fund provisions. The outstanding shares of BJ Common Stock are duly and
validly issued, fully paid and nonassessable.
PREFERRED STOCK
Pursuant to the BJ Services Charter, BJ Services is authorized to issue
5,000,000 shares of preferred stock, and BJ Services' Board of Directors by
resolution may establish one or more series of preferred stock having such
number of shares, designation, relative voting rights, dividend rates,
liquidation and other rights, preferences and limitations as may be fixed by
the Board of Directors without any further stockholder approval. BJ Services'
Board of Directors has established the BJ Preferred Stock with 400,000
authorized shares, none of which were outstanding as of the date of this Joint
Proxy Statement/Prospectus. See " -- BJ Preferred Stock" below.
TRANSFER AGENT
First Chicago Trust Company of New York, located in New York City, is
the transfer agent, registrar and dividend disbursing agent for the BJ Common
Stock.
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CERTAIN ANTI-TAKEOVER PROVISIONS
The provisions of the BJ Services Charter and Bylaws summarized in the
succeeding paragraphs may be deemed to have an anti-takeover effect and may
delay, defer or prevent a tender offer or takeover attempt that a stockholder
might consider to be in such stockholder's best interest, including those
attempts that might result in a payment of a premium over the market price for
the shares held by stockholders.
Classified Board of Directors. The Board of Directors of BJ Services is
divided into three classes that are elected for staggered three-year terms.
Stockholders may only remove a director for cause.
Preferred Stock. Pursuant to the BJ Services Charter, BJ Services'
Board of Directors by resolution may establish one or more series of preferred
stock having such number of shares, designation, relative voting rights,
dividend rates, liquidation and other rights, preferences and limitations as
may be fixed by the Board of Directors without any further stockholder
approval. Such rights, preferences, privileges and limitations as may be
established could have the effect of impeding or discouraging the acquisition
of control of BJ Services.
Fair Price Provision. The BJ Services Charter contains a "fair price"
provision that requires the approval of holders of not less than 75% of the
outstanding shares of voting stock of BJ Services (including not less than
66 2/3% of the outstanding shares of voting stock not owned, directly or
indirectly, by persons who are Related Persons (as defined below)) as a
condition for mergers, consolidations and certain other business combinations
involving BJ Services and any Related Person; provided that the 66 2/3% voting
requirement is not applicable if the business combination is approved by the
holders of not less than 90% of the outstanding shares of voting stock of BJ
Services. Related Persons include the holder of 10% or more of BJ Services'
outstanding voting stock and any affiliate of such person. The 75% voting
requirement of the "fair price" provision is not applicable to a business
combination involving a holder of 10% or more of BJ Services' outstanding
voting stock if the acquisition by such holder of such stock or the business
combination is approved in advance of such person's becoming a holder of 10% of
BJ Services' outstanding voting stock by not less than 75% of the directors of
BJ Services then holding office or the following conditions are met: (i) the
transaction is a merger or consolidation proposed to occur within one year of
the time such holder acquired 10% of BJ Services' outstanding voting stock and
the price to be paid to holders of BJ Common Stock is at least as high as the
highest price per share paid by such holder in acquiring any of its holdings of
BJ Common Stock, (ii) the consideration to be paid in the transaction is cash
or the same form of consideration paid by such holder to acquire a majority of
its holdings of BJ Common Stock, (iii) between the date of the acquisition by
such holder of 10% of BJ Services' outstanding voting stock and the transaction
there has been no failure to declare and pay preferred stock dividends and no
reduction in BJ Common Stock dividends (except as approved by a majority of the
unaffiliated directors), no further acquisition of voting stock by such holder
and no benefit, direct or indirect, received by such holder through loans or
other financial assistance from BJ Services or tax credits or other tax
advantages provided by BJ Services, and (iv) a proxy statement shall have been
mailed to stockholders of record at least 30 days prior to the consummation of
the business combination for the purpose of soliciting stockholder approval of
such business combination.
Action by Written Consent; Special Meetings; Bylaw Amendments; and
Other. The BJ Services Charter further provides that (i) stockholders may act
only at an annual or special meeting of stockholders and may not act by written
consent; (ii) special meetings of stockholders can be called only by BJ
Services' Board of Directors; (iii) a 75% vote of the outstanding voting stock
is required for the stockholders to amend BJ Services' Bylaws; and (iv) a 75%
vote of the outstanding voting stock is required to amend the BJ Services
Charter with respect to certain matters, including, without limitation, the
matters set forth in clauses (i) and (iii) above and the 75% voting requirement
required for certain business combinations described in the preceding
paragraph.
Advance Notice for Board Nominees. BJ Services' Bylaws establish
advance notice procedures with regard to the nomination, other than by or at
the direction of the Board of Directors of BJ Services or a committee thereof,
of candidates for election as directors and with regard to certain matters to
be brought before an annual meeting of stockholders of BJ Services. These
procedures
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provide that the notice of proposed stockholder nominations for the election of
directors must be timely given in writing to the Secretary of BJ Services prior
to the meeting at which directors are to be elected. The procedures also
provide that at an annual meeting, and subject to any other applicable
requirements, only such business may be conducted as has been brought before
the meeting by, or at the direction of, the Board of Directors of BJ Services
or by a stockholder who has given timely prior written notice to the Secretary
of BJ Services of such stockholder's intention to bring such business before
the meeting. In all cases, to be timely, notice must be received at the
principal executive offices of BJ Services not less than 30 days nor more than
60 days prior to the meeting (or if fewer than 40 days' notice or prior public
disclosure of the meeting date is given or made by BJ Services, not later than
the 10th day following the day on which the notice was mailed or such public
disclosure was made). The notice must contain certain information specified in
the Bylaws.
Delaware Section 203. BJ Services is a Delaware corporation and is
subject to Section 203 of the DGCL ("Section 203"). In general, Section 203
prevents an "interested stockholder" (defined generally as a person owning 15%
or more of a corporation's outstanding voting stock) from engaging in a
"business combination" (as defined) with a Delaware corporation for three years
following the date such person became an interested stockholder unless (i)
before such person became an interested stockholder, the board of directors of
the corporation approved the transaction in which the interested stockholder
became an interested stockholder or approved the business combination; (ii)
upon consummation of the transaction that resulted in the interested
stockholder's becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced (excluding stock held by directors who are also
officers of the corporation and by employee stock plans that do not provide
employees with the rights to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange offer); or (iii)
the business combination is approved by the board of directors of the
corporation and authorized at a meeting of stockholders by the affirmative vote
of the holders of two-thirds of the outstanding voting stock of the corporation
not owned by the interested stockholder. Under Section 203, the restrictions
described above also do not apply to certain business combinations proposed by
an interested stockholder following the announcement or notification of one of
certain extraordinary transactions involving the corporation and a person who
had not been an interested stockholder during the previous three years or who
became an interested stockholder with the approval of a majority of the
corporation's directors, if such extraordinary transaction is approved or not
opposed by a majority of the directors then in office who were directors prior
to any person becoming an interested stockholder during the previous three
years or were recommended for election or elected to succeed such directors by
a majority of such directors.
THE BJ RIGHTS PLAN
On January 5, 1994, the Board of Directors of BJ Services declared a
dividend distribution of one BJ Right for each outstanding share of BJ Common
Stock, payable to BJ Services stockholders of record on January 14, 1994. Each
BJ Right entitles the registered holder to purchase from BJ Services one
one-hundredth of a share of BJ Preferred Stock, at a price of $75 per one
one-hundredth of a share (the "Purchase Price"), subject to adjustment under
certain circumstances. The following summary of the BJ Rights does not purport
to be complete and is qualified in its entirety by reference to the BJ Rights
Agreement, which is an exhibit to the Registration Statement of which this
Joint Proxy Statement/Prospectus forms a part.
The BJ Rights attach to all certificates representing outstanding shares
of BJ Common Stock, and no separate BJ Rights certificates have been
distributed. Until the earlier to occur of (i) 30 days following a public
announcement that a person or group of affiliated or associated persons has
acquired or obtained the right to acquire beneficial ownership of 20% or more
of the outstanding shares of BJ Common Stock (an "Acquiring Person") and (ii)
30 days following the commencement or announcement of an intention to make a
tender offer or exchange offer that would result in a person or group
beneficially owning 30% or more of such outstanding shares (the earlier of such
dates being called the "Distribution Date") or earlier redemption or expiration
of the BJ Rights, (a) the BJ Rights will be evidenced, with respect to the
shares of BJ Common Stock outstanding, by the certificates representing such
shares and will be transferred with and only with the BJ Common Stock, (b) new
BJ Common Stock certificates will contain a notation incorporating the BJ
Rights Agreement by
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reference, and (c) the surrender for transfer of any certificates representing
shares of BJ Common Stock outstanding will also constitute the transfer of the
BJ Rights associated with such shares of BJ Common Stock. As soon as
practicable following the Distribution Date, separate certificates representing
the BJ Rights ("Rights Certificates") will be mailed to holders of record of BJ
Common Stock as of the close of business on the Distribution Date and,
thereafter, such separate Rights Certificates alone will evidence the BJ
Rights.
The BJ Rights are not exercisable until the Distribution Date and will
expire at the close of business on January 17, 2004, unless such date is
extended or the BJ Rights are earlier redeemed by BJ Services as described
below.
The Purchase Price payable, and the number of one one-hundredths of a
share of BJ Preferred Stock or other securities or property issuable, upon
exercise of the BJ Rights are subject to adjustment from time to time to
prevent dilution (i) in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the BJ Preferred Stock, (ii) upon the grant
to holders of BJ Preferred Stock of certain rights or warrants to subscribe for
BJ Preferred Stock or convertible securities at less than the current per share
market price of the BJ Preferred Stock, or (iii) upon the distribution to
holders of BJ Preferred Stock of evidences of indebtedness or assets of BJ
Services (excluding regular periodic cash dividends at a rate not in excess of
125% of the rate of the last cash dividend theretofore paid or dividends
payable in BJ Preferred Stock) or of subscription rights or warrants (other
than those referred to above).
With certain exceptions, in the event (i) BJ Services is acquired in a
merger or other business combination transaction or (ii) more than 50% of BJ
Services' consolidated assets or earning power is sold, each holder of a BJ
Right will thereafter have the right to receive, upon the exercise thereof at
the then current Purchase Price of the BJ Right, that number of shares of
common stock of the acquiring person that, at the time of such transaction,
would have a market price (as defined in the BJ Rights Agreement) of two times
the Purchase Price of the BJ Right. In the event (i) BJ Services is the
surviving corporation in certain mergers and the outstanding BJ Common Stock is
not changed or exchanged, or (ii) any person acquires 30% or more of BJ
Services' outstanding Common Stock, each holder of a BJ Right, other than BJ
Rights that were or are beneficially owned by the Acquiring Person on or after
the earlier of the Distribution Date or the date an Acquiring Person acquires
20% or more of the Common Stock (which BJ Rights will thereafter be void), will
thereafter have the right to receive upon exercise that number of shares of BJ
Common Stock (or cash, other securities or property) having a market price (as
defined in the BJ Rights Agreement) of two times the Purchase Price of the BJ
Right.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% of
the Purchase Price. No fractional shares (other than fractions that are
integral multiples of one one-hundredth of a share of Series Two Preferred
Stock, which may, at BJ Services' election, be evidenced by depositary
receipts) will be issued, and, in lieu thereof, a payment in cash will be made.
At any time prior to 30 days after such time as any person or group has
become an Acquiring Person (or a longer period if the BJ Services' Board of
Directors extends such period), BJ Services may redeem the BJ Rights in whole,
but not in part, at a price of $0.01 per BJ Right (the "Redemption Price"). In
certain circumstances, the decision to redeem the BJ Rights requires the
concurrence of a majority of the Continuing Directors (as defined in the BJ
Rights Agreement). Immediately upon the action of the Board of Directors of BJ
Services electing to redeem the BJ Rights, a holder's right to exercise the
Rights will terminate and he or she will only be entitled to receive the
Redemption Price.
Until a BJ Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of BJ Services, including, without limitation, the
right to vote or to receive dividends.
The BJ Rights Agreement may be amended by BJ Services and the Rights
Agent without the approval of the holders of BJ Rights (i) in order to cure any
ambiguity or to correct or supplement any provision contained therein that may
be defective or inconsistent with any other provision therein, (ii) to extend
the final expiration date or to extend the period during which, or the
conditions under which,
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the BJ Rights may be redeemed, or (iii) to make any other change that does not
adversely affect the interests of holders of BJ Rights.
The BJ Rights have certain anti-takeover effects. The BJ Rights will
cause substantial dilution to any person or group that attempts to acquire BJ
Services without conditioning the offer on a substantial number of BJ Rights
being acquired. The BJ Rights should not interfere with any merger or other
business combination approved by the Board of Directors of BJ Services since
the Board of Directors may, at its option, at any time prior to the close of
business on the earlier of (i) the 30th day following the Distribution Date or
(ii) January 17, 2004, redeem all, but not less than all, the then outstanding
BJ Rights at $0.01 per BJ Right.
BJ PREFERRED STOCK
General. Shares of the BJ Preferred Stock may be purchased pursuant to
the terms and conditions of the BJ Rights Agreement. No shares of BJ Preferred
Stock are currently outstanding. The BJ Preferred Stock ranks junior to all
other series of BJ Services' preferred stock as to the payment of dividends and
distribution of assets. The following summary of the terms and provisions of
the BJ Preferred Stock does not purport to be complete and is qualified in its
entirety by reference to the Certificate of Designation for the BJ Preferred
Stock.
Dividends. Subject to the rights of the holders of any series of BJ
Services' preferred stock ranking senior to the BJ Preferred Stock, holders of
shares of the BJ Preferred Stock are entitled to receive, when, as and if
declared by the Board of Directors of BJ Services, cumulative quarterly cash
dividends in an amount per share equal to the greater of (a) $1.00 or (b)
subject to the adjustments set forth below, 100 times the aggregate per share
amount of all cash dividends and 100 times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions (other than
a dividend payable in shares of BJ Common Stock or a subdivision of the
outstanding shares of BJ Common Stock by reclassification or otherwise)
declared on the BJ Common Stock since the immediately preceding quarterly
dividend payment date, or, with respect to the first quarterly dividend payment
date, since the first issuance of any share or fraction of a share of BJ
Preferred Stock. The foregoing dividend amounts are subject to adjustment in
the event of any stock dividend, stock split or combination with respect to the
BJ Common Stock. The holders of BJ Preferred Stock are not entitled to the
payment of interest with respect to accrued but unpaid dividends.
Liquidation Rights. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of BJ Services, the holders of shares of
the BJ Preferred Stock are entitled to receive out of assets of BJ Services
available for distribution to stockholders, before any distribution or payment
of assets is made to holders of BJ Common Stock or any other stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the BJ Preferred Stock, liquidating distributions in the amount of $1.00 per
share, plus an amount equal to accrued and unpaid dividends thereon (the
"Series Two Liquidation Preference"). Following the payment of the full amount
of the Series Two Liquidation Preference, no additional distribution will be
made to the holders of BJ Preferred Stock except under certain limited
circumstances.
Redemption; Consolidation or Merger. The shares of BJ Preferred Stock
are not redeemable. In the event BJ Services enters into any consolidation,
merger, combination or other transaction in which the shares of BJ Common Stock
are exchanged for or converted into other stock or securities, cash or other
property, the shares of BJ Preferred Stock will be similarly exchanged or
changed in an amount per share (subject to adjustment for any stock dividend,
stock split or combination with respect to the BJ Common Stock) equal to 100
times the aggregate amount of stock, securities, cash or other property, as the
case may be, into which or for which each share of BJ Common Stock is exchanged
or converted.
Voting Rights. Each share of BJ Preferred Stock shall entitle the
holder thereof to 100 votes on all matters submitted to a vote of the
stockholders of BJ Services, subject to adjustment in the event of any stock
dividend, stock split or combination with respect to the BJ Common Stock.
Except as indicated below or as otherwise provided by applicable law, the
holders of shares of BJ Preferred Stock
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and the holders of shares of BJ Common Stock will vote together as one class on
all matters submitted to a vote of stockholders.
If, on the date used to determine stockholders of record for any meeting
of stockholders of BJ Services for the election of directors, the equivalent of
six full quarterly dividends payable on the BJ Preferred Stock is accrued and
unpaid, then the holders of the BJ Preferred Stock, voting as a class together
with all other holders of preferred stock expressly entitled to a similar
voting right, will be entitled to elect at such meeting and subsequent meetings
of stockholders held for the purpose of electing directors a total of two
directors, to be distributed among the several classes of directors as nearly
equally as possible. Upon election, such directors will become additional
directors of BJ Services and the authorized number of directors of BJ Services
will thereupon be automatically increased by such number of directors. Such
right to elect directors will continue until all accrued dividends on all such
shares of the BJ Preferred Stock shall have been paid for all past dividend
periods at which time the term of such directors will terminate. At any such
meeting, each share of the BJ Preferred Stock entitled to vote thereat will be
entitled to one vote per share.
Unless the vote or consent of the holders of a greater number of shares
is then required by law, so long as any shares of the BJ Preferred Stock are
outstanding, BJ Services may not, without the affirmative vote or consent of
the holders of at least two-thirds of the outstanding shares of the BJ
Preferred Stock, voting as a separate class, amend any of the provisions of the
BJ Services Charter so as to affect adversely the powers, preferences or
special rights of the BJ Preferred Stock.
Certain Restrictions. Whenever dividends or other distributions payable
on the BJ Preferred Stock are in arrears and until such dividends and other
distributions are fully paid, BJ Services is prohibited from (a) declaring or
paying dividends or other distributions on or redeeming or purchasing any stock
ranking junior to the BJ Preferred Stock, (b) declaring or paying dividends or
other distributions on or redeeming or purchasing any stock ranking on a parity
with the BJ Preferred Stock unless such distribution, redemption or purchase is
effected ratably with the BJ Preferred Stock and (c) purchasing any shares of
BJ Preferred Stock or stock ranking on a parity therewith unless pursuant to a
written published purchase offer made to all holders of such shares in
accordance with the terms of the Certificate of Designation of the BJ Preferred
Stock.
WARRANTS
For a description of the BJ Warrants and the Warrant Agreement, see "The
Merger -- Description of the Warrant Agreement."
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DESCRIPTION OF CAPITAL STOCK OF WESTERN
The following statements are brief summaries of certain provisions
relating to Western's capital stock and are qualified in their entirety by
reference to the provisions of Western's Restated Certificate of Incorporation
(the "Western Charter") and Bylaws, which are incorporated by reference as an
exhibit to the Registration Statement of which this Joint Proxy
Statement/Prospectus is a part.
Western has one class of common stock with a par value of $0.10. Each
share of Western Common Stock has equal dividend and liquidation rights.
Western is authorized to issue 50,000,000 shares of common stock. The Western
Charter also authorizes the issuance without further stockholder action of up
to 6,000,000 shares of preferred stock, without par value, from time to time in
one or more series with such rights and privileges as are determined by the
Board of Directors and not inconsistent with Delaware law, provided that all
such shares are required to be voting shares. No shares of preferred stock are
outstanding.
As of March 15, 1995, Western had 18,288,037 shares of Western Common
Stock outstanding. Outstanding shares of Western Common Stock are fully paid
and nonassessable. Approximately an additional 974,165 shares are reserved for
issuance upon exercise of certain options granted or which may be granted to
employees and directors of Western. The plans and agreements pursuant to which
stock options may be granted and shares may be issued upon the exercise of
stock options provide that the number of shares subject thereto will be
proportionately increased in the event additional Western Common Stock is
issued for no consideration, as in the case of a stock split or stock dividend
or, as to such agreements and one of such plans, in exchange for indebtedness.
Consequently, the number of shares so reserved ultimately will include, to the
extent not previously issued, shares issuable upon the conversion of the
Western Convertible Debentures that remain outstanding after the Merger. Based
upon the conversion price for the Western Convertible Debentures, 5,220,352
additional shares of Western Common Stock are reserved for issuance in the
event of conversion of such Debentures.
Holders of Western Common Stock are entitled to one vote for each share
held on each matter submitted to a vote of stockholders and are entitled to
cumulate their votes in any election for Directors. This entitles each
stockholder to cast for each share held by him as many votes as there are
Directors to be elected at a stockholders' meeting, all of which may be cast
for a single candidate or distributed among candidates as the stockholder may
desire. See "-- Certain Anti-takeover Provisions" below. Stockholders have no
pre-emptive or other rights to acquire or subscribe to Western Common Stock or
any obligations of Western convertible into Western Common Stock.
Holders of Western Common Stock are entitled to receive such dividends
as may be declared by the Board of Directors from time to time pursuant to, and
in compliance with, Delaware law and, on liquidation of Western, to share
ratably in any assets available for distribution to such holders. Western
currently does not pay dividends on Western Common Stock and has no present
plan to pay dividends. Certain debt agreements to which Western is a party
prohibit, and Western's indentures may affect, payment of cash dividends on
Western Common Stock.
TRANSFER AGENT
Harris Trust and Savings Bank is the transfer agent and the registrar
for the Western Common Stock.
CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of the Western Charter and Bylaws summarized in the
succeeding paragraphs may be deemed to have an anti-takeover effect and may
delay, defer or prevent a tender offer or takeover attempt that a Western
stockholder might consider to be in such stockholder's best interest, including
those attempts that might result in a payment of a premium over the market
price for the shares held by stockholders.
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Classified Board of Directors. Western's Board of Directors is divided
into three classes. Each class has a three-year term and only one class is
elected by the stockholders each year. Although the Western Charter provides
for cumulative voting for directors, such classification results in votes being
spread among fewer directors, thereby reducing the ability of stockholders to
elect one or more Directors if a majority of shares are voted for a slate of
nominees.
Super-Majority Provisions. The Western Charter requires the affirmative
vote of the holders of at least 66 2/3% of the outstanding shares of capital
stock entitled to vote for the approval of (i) any merger or consolidation of
Western, (ii) the sale, lease, exchange or other disposition of all or
substantially all of the property and assets of Western or (iii) any issuance
or delivery of securities of Western in exchange or payment for any securities,
properties or assets of any other person or entity in a transaction in which
the authorization or approval of stockholders of Western is required by law or
any agreement to which Western is a party. A 66 2/3% approval vote is also
required for amendment of the provision of the Western Charter that creates a
staggered Board of Directors and that imposes a 66 2/3% vote for certain
fundamental corporate transactions. An 85% approval vote is required for
amendment of the fair price provision.
Preferred Stock. The Board of Directors has the power, without further
action by holders of Western Common Stock, to designate the relative rights and
preferences of preferred stock, when and if issued. Such rights could include
conversion rights and voting rights and such preferences could include
preferences as to liquidation, redemption and dividends. Certain of Western's
shares have been designated as "Participating Preferred Stock." See "--
Western Rights Plan" below.
Fair Price Provision. The Western Charter requires that certain
business transactions with related persons be approved by the affirmative vote
of the holders of not less than 85% of the outstanding shares of Western's
voting stock. Related persons are defined in the Western Charter as those
having beneficial ownership of 15% or more of Western's voting stock. This
super-majority vote of Western's stockholders does not apply (i) to a business
transaction with a related person that is a merger or consolidation in which,
among other things, the price paid for Western Common Stock equals or exceeds
the highest price paid by the related person in acquiring any of its holdings
of Western Common Stock during the one-year period prior to or in the
transaction pursuant to which such person became a related person or (ii) to a
business transaction with a related person which is approved by at least
two-thirds of the Continuing Directors. A "Continuing Director" is a director
who is not a Related Person or a nominee, employee or a representative of a
Related Person and who either was a member of the Board of Directors of Western
prior to the time such Related Person became a Related Person or who
subsequently became a director of Western and whose election or nomination for
election by the stockholders of Western was approved by a vote of at least
three-fourths of the Continuing Directors then on the Western Board.
Advance Notice for Board Nominees. Western's Bylaws require that a
record date be set by the Board of Directors to determine stockholders entitled
to consent to corporate action in writing without a meeting. The Board must
adopt a resolution fixing a record date for that purpose within ten days after
being requested to do so by a stockholder. The record date so fixed may not be
more than ten days after adoption of the resolution. Other Bylaw provisions
establish procedures, similar in certain respects to those relating to special
stockholder meetings, for action to be taken by written consent.
WESTERN RIGHTS PLAN
On March 5, 1990, Western's Board of Directors approved the Western
Rights Plan, which involves the distribution of one Western Right (to be
initially represented only by the existing Western Common Stock certificates)
for each outstanding share of Western Common Stock issued prior to the time
that the Western Rights separate from the Western Common Stock. Unless earlier
terminated by the Board of Directors, the Western Rights will separate from the
Western Common Stock and become exercisable following the earlier of (i) the
date any person or group becomes an Acquiring Person by becoming the beneficial
owner of 15% or more of the Western Common Stock outstanding or (ii) the tenth
business day (or such later time as the Board may decide) after a person makes
a tender or exchange offer which would result in such person becoming an
Acquiring Person. On April 6, 1990, the Western Rights Plan was amended by the
Board of Directors to clarify that,
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except in specified circumstances, a person will not be considered the
beneficial owner of shares of Western Common Stock which it has the power to
vote pursuant to a revocable proxy given in response to a proxy or consent
solicitation made to more than 10 persons in accordance with applicable
regulations under the Exchange Act. Until a Western Right is exercised, the
holder thereof, in the sole capacity of holder, will have no rights as a
stockholder of Western, including, without limitation, the right to vote or
receive dividends.
If and when the Western Rights separate from the Western Common Stock,
certificates evidencing the Western Rights will be mailed to all holders of
Western Common Stock, and the Western Rights will then trade apart from the
Western Common Stock. From that time, each Western Right will entitle the
holder to purchase one one-hundredth (1/100) of a share of participating
Preferred Stock of Western ("Participating Preferred Stock") at an initial
exercise price (the "Exercise Price") of $70, subject to adjustment. The terms
of the Participating Preferred Stock are designed so that each one
one-hundredth of a share is the economic and voting equivalent of one share of
Western Common Stock.
If any person or group should become an Acquiring Person, each Western
Right (other than Western Rights that are or were beneficially owned by the
Acquiring Person, which Western Rights become void) will entitle the holder
thereof to purchase, for the Exercise Price, Western Common Stock (or, at the
Board's option, Participating Preferred Stock) of Western having a market value
of twice the Exercise Price (a "Flip-in"). In addition, after an Acquiring
Person has become such, Western may not merge with, or sell 50% or more of its
assets, earning power or cash flow to, any person (a "Flip-over") if, at the
time of such merger or sale (or agreement to do any of the foregoing), the
Acquiring Person controls the Board of Directors and, in the case of a merger,
will receive different treatment than all other stockholders, unless proper
provision is made so that each Western Right would thereafter entitle the
holder to purchase, for the Exercise Price, common stock of the Acquiring
Person or other party to such transaction having a market value of twice the
Exercise Price.
If any person acquires between 15% and 50% of the outstanding Western
Common Stock, the Board may, at its option, effect the Flip-in by causing,
without any action by the holders of Rights, the automatic exchange of each
outstanding Western Right for one share of Western Common Stock or one
one-hundredth of a share of Participating Preferred Stock. If there is an
insufficient number of authorized but unissued shares of Western Common Stock
(or Participating Preferred Stock) to permit the exercise in full of either the
Flip-in or the exchange feature, debt or equity or other assets (or a
combination thereof) of Western may be issued in lieu of Western Common Stock
(or Participating Preferred Stock) and the Exercise Price may be adjusted.
The Western Rights, generally, may be terminated, without cost, by the
Western Board of Directors at any time until any person has become an Acquiring
Person. However, if, as the result of any action (whether by action taken by
stockholders or directors), a majority of the Board of Directors is composed of
directors (i) who were not nominated or appointed by a majority of the
directors in office immediately prior to such action and (ii) whose notices of
nomination for election or appointment as a director were not submitted to
Western at least 60 days but not more than 90 days prior to such action, then
for a period of 180 days following the effectiveness of such action the Western
Rights shall not be terminable by the Board if such termination is reasonably
likely to have the purpose or effect of (x) facilitating a Flip-over with an
Interested Person or (y) allowing an Interested Person to become an Acquiring
Person without causing a Flip-in to occur. For purposes of the foregoing, an
"Interested Person" means any person (or any affiliate, associate or other
person acting in concert with such person) who has nominated a director in
office at the time the Board of Directors considers whether to terminate the
Western Rights Plan if such person's director nominee was not nominated or
appointed by a majority of the directors then in office and whose notice of
nomination was not given to Western at least 60 days but not more than 90 days
prior to such nominee's election or appointment as a director.
Finally, before the occurrence of a Flip-in, the Board may supplement or
amend the Western Rights Plan in any respect, with the exception of certain
fundamental terms (for example, the ten-year term and the Exercise Price).
Thereafter, the Board may amend the Western Rights Plan in any respect not
materially adverse to holders of Western Rights generally. For 180 days
following the
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effectiveness of an action described above with regard to termination, the
Western Rights Plan also may not be supplemented or amended in any manner
reasonably likely to have the purpose or effect of facilitating a Flip-over
with an Interested Person, or allowing an Interested Person to become an
Acquiring Person without causing a Flip-in to occur.
On November 17, 1994, the Western Rights Plan was further amended by the
Board of Directors of Western to provide that so long as neither BJ Services
nor any of its affiliates is not otherwise an Acquiring Person, BJ Services and
its affiliates will not be deemed the "Beneficial Owner," or to have
"Beneficial Ownership" of, or to "Beneficially Own," any security by having
entered into the Merger Agreement or consummating the transactions contemplated
therein.
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DESCRIPTION OF CERTAIN INDEBTEDNESS OF BJ SERVICES
NEW BANK CREDIT FACILITY
BJ Services has entered into a commitment letter with Bank of America
to establish new bank credit facilities (collectively, the "New Bank Credit
Facility"). Pursuant to the commitment letter, Bank of America has agreed,
subject to the execution of a definitive credit agreement, completion of
satisfactory due diligence and other conditions, to advance up to $440 million
in borrowings in connection with the Merger and for general corporate purposes,
including issuances of standby letters of credit. An affiliate of Bank of
America will act as arranger in syndicating a part of the commitment to a group
of financial institutions. All significant operating subsidiaries of BJ
Services will be borrowers and/or guarantors under the New Bank Credit
Facility. The New Bank Credit Facility will include the following covenants,
among others: a limitation on liens, security interests and other
encumbrances; a limitation on the sale, lease, transfer or other disposition of
property; a limitation on permitted consolidations and mergers; a limitation on
permitted investments; a limitation on the indebtedness incurred by certain
subsidiaries to 10% of consolidated net worth; a limitation on contingent
obligations to 10% of consolidated net worth; the maintenance of a maximum
capitalization ratio (the ratio of funded indebtedness to total capitalization)
of 50% declining to 40% in the third fiscal quarter of 1997 (52.5% declining to
40% in the third fiscal quarter of 1997 if none of the Western Convertible
Debentures are exchanged or converted into or for BJ Common Stock and Warrant
Consideration); the maintenance of a minimum consolidated net worth of no less
than $400 million (declining to $380 million if none of the Western Convertible
Debentures are exchanged or converted for BJ Common Stock and Warrant
Consideration) plus 50% of consolidated net income (and no deduction for net
losses) earned on a cumulative basis after June 30, 1995 plus 50% of the
aggregate amount of net proceeds from the issuance by BJ Services of capital
stock after December 31, 1994 (excluding stock issued in connection with the
Merger); the maintenance of an interest coverage ratio of at least 1.75-to-1.0
during fiscal year 1995 increasing to 2.5-to-1.0 during fiscal year 1997 and
thereafter; a restriction on amounts payable as dividends and as other
"Restricted Payments," including the repurchase of stock (no dividends are
payable and no stock may be repurchased by BJ Services until the
capitalization ratio is equal to or less than 35% and no dividends may be paid
in an amount in excess of 50% of consolidated net income for the preceding four
fiscal quarters (net of other Restricted Payments made) and no stock may be
repurchased in an amount in excess of 50% of consolidated net income on a
cumulative basis (net of other Restricted Payments made)); a mandatory
prepayment obligation with respect to certain asset sales; and an obligation to
prepay the term loan facility by 50% of BJ Services' free cash flow during any
fiscal year as long as BJ Services' capitalization ratio exceeds 35% during any
fiscal quarter of such year. The Merger is not conditioned upon BJ Services'
concluding such financing arrangements, and there can be no assurances that the
New Bank Credit Facility will be concluded on the terms summarized above or on
other terms.
9.2% NOTES DUE AUGUST 1, 1998
On August 1, 1991 BJ Services issued $30 million of 9.2% Notes Due
August 1, 1998 (the "Notes") pursuant to Note Agreements between BJ Services,
BJ Services' subsidiaries and the purchasers of the Notes (the "Note
Agreements"). The principal amount of the Notes is payable in five annual
installments beginning on August 1, 1994 and ending on August 1, 1998.
Interest is payable quarterly on the first day of each February, May, August
and November beginning on November 1, 1991. For as long as any of the Notes
remain outstanding, BJ Services is prohibited from declaring or paying
dividends or other distributions on, or purchasing or redeeming any shares of
or rights with respect to, BJ Services' capital stock (each a "Restricted
Payment" and, collectively, "Restricted Payments") if (i) any such Restricted
Payment would result in an event of default under the Note Agreements or (ii)
the sum of (a) the aggregate amount of Restricted Payments made during the
period from and after September 30, 1990 to and including the date of making
the Restricted Payment in question plus (b) the aggregate amount of all
restricted investments made by BJ Services or any restricted subsidiary during
said period would exceed the sum of (x) the consolidated net income of BJ
Services and its subsidiaries for the period beginning September 30, 1990 and
ending on the last day of the fiscal quarter immediately preceding the date of
any determination (or if such consolidated
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net income is a deficit figure, then minus 100% of such deficit) plus (y) the
aggregate amount of net cash proceeds to BJ Services from the issuance or sale
(other than to BJ Services or a wholly owned restricted subsidiary) after
September 30, 1990 of shares of BJ Common Stock or warrants, rights or options
to purchase or acquire any shares of its common stock plus (z) $15,000,000.
Notwithstanding the foregoing, the Note Agreements provide that BJ Services may
issue and distribute securities pursuant to the BJ Rights Agreement and may
redeem BJ Rights up to an aggregate amount of $500,000; provided that amounts
expended for such redemptions reduce, pro tanto, the amount otherwise available
for the making of Restricted Payments thereunder. In addition, the Note
Agreements prohibit BJ Services from declaring any dividend constituting a
Restricted Payment which is payable more than 60 days after the declaration
thereof. BJ Services intends, prior to the Merger, to pursue certain
amendments to the covenants and other terms and conditions of the Note
Agreements. No assurances can be given that such amendments will be concluded.
COMPARISON OF STOCKHOLDER RIGHTS
GENERAL
As a result of the Merger, holders of Western Common Stock may elect to
become stockholders of BJ Services, and the rights of such former Western
stockholders will thereafter be governed by the BJ Services Charter and Bylaws
and the DGCL. The rights of the holders of Western Common Stock are presently
governed by the Western Charter and Bylaws and the DGCL. The following
summary, which does not purport to be a complete statement of the differences
between the rights of the stockholders of BJ Services and Western, sets forth
certain differences between the BJ Services Charter and the Western Charter and
the BJ Services Bylaws and the Western Bylaws. This summary is qualified in
its entirety by reference to the full text of each of such documents and the
DGCL. For information as to how such documents may be obtained, see "Available
Information."
Reference is also made to the description herein of the BJ Rights
Agreement and the Western Rights Plan, which contain, among other things,
provisions regarding the election of directors and the voting of BJ Services
and Western Common Stock. See "Description of Capital Stock of BJ Services --
The BJ Rights Plan" and "Description of Capital Stock of Western -- Western
Rights Plan."
CLASSIFIED BOARD OF DIRECTORS
Section 141(d) of the DGCL provides that a corporation's board of
directors may be divided into various classes with staggered terms of offices.
Both the BJ Services Charter and the Western Charter provide that each
company's board be divided into three classes of directors, as nearly equal in
number as possible. At each annual meeting of stockholders, one class of
directors is elected for a three-year term.
Classification of directors has the effect of making it more difficult
for stockholders to change the composition of the board of directors. At least
two annual meetings of stockholders, instead of one, will generally be required
to effect a change in the majority of the board of directors. Such a delay may
help ensure that BJ Services' directors, if confronted by a holder attempting
to force a proxy contest, a tender or exchange offer or other extraordinary
corporate transaction, would have sufficient time to review the proposal as
well as any available alternative to the proposal and to act in what they
believe to be the best interests of the stockholders.
The classification provisions could also have the effect of discouraging
a third party from initiating a proxy contest, making a tender offer or
otherwise attempting to obtain control of BJ Services, even though such a
transaction could be beneficial to BJ Services and its stockholders. The
classification of the board of directors might also increase the likelihood
that incumbent directors will retain their positions.
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NUMBER OF DIRECTORS; REMOVAL OF DIRECTORS; FILLING VACANCIES ON THE BOARD OF
DIRECTORS
The BJ Services Charter and Bylaws provide that, subject to any rights
of holders of BJ Preferred Stock, the number of directors will be fixed from
time to time by resolution of the Board of Directors adopted by a vote of
three-quarters of the board of directors, but in no case shall the Board
consist of less than four nor more than nine members, unless such change is
approved by the vote of not less than 75% of the Board of Directors of BJ
Services. The Western Charter and Bylaws provide that the number of directors
will be fixed as may be determined by vote of not less than a majority of the
directors then in office or by the stockholders at an annual or special
meeting, but in no case shall the Board consist of less than three, nor more
than 15 members. The Western Charter and Bylaws also provide for cumulative
voting by stockholders in the election of directors. The Board of Directors of
BJ Services currently consists of 7 members (and will be increased to 10 upon
consummation of the Merger), and the Board of Directors of Western currently
consists of 8 members.
The BJ Services Charter and Bylaws provide that, subject to any rights
of holders of BJ Preferred Stock, any vacancies (including newly created
directorships) shall be filled by a majority of the directors remaining in the
class in which the vacancy occurs. The Western Certificate and Bylaws provide
that any vacancy (including newly created directorships) shall be filled by the
affirmative vote of a majority of the directors then in office. Any such
director will serve for the remainder of the term of such director's
predecessor.
Section 141(k)(1) of the DGCL provides that directors of a corporation
with a classified board of directors, such as BJ Services and Western, may be
removed only for cause unless the certificate of incorporation provides
otherwise. The BJ Services Charter provides that directors can only be removed
for cause. The Western Charter provides that any director, or the entire Board
of Directors, may be removed with or without cause; provided that, if such
removal is without cause, not less than 90 days' notice of such proposal is
provided prior to the annual meeting of stockholders and no such removal may
occur more than once in any 12-month period.
QUORUM OF STOCKHOLDERS
The BJ Services Bylaws and the Western Bylaws provide that the holders
of a majority of the stock issued and outstanding (not including treasury
stock) and entitled to vote shall constitute a quorum at all meetings of the
stockholders for the transaction of business.
ADJOURNMENT AND NOTICE OF STOCKHOLDER MEETINGS
The BJ Services Bylaws provide that, in general, the stockholders
present at a duly organized meeting can continue to do business until
adjournment notwithstanding the withdrawal of enough stockholders to leave less
than a quorum, and if a quorum is not present or represented at a meeting, the
stockholders entitled to vote shall have power to adjourn the meeting. The
Western Bylaws provide that, in the absence of a quorum, a majority in interest
of the stockholders entitled to vote, present in person or by proxy, or, if no
stockholder entitled to vote is present in person or by proxy, any officer
entitled to preside or act as secretary of such meeting, may adjourn the
meeting from time to time for a period not exceeding 20 days in any one case.
The BJ Services Bylaws establish advance notice procedures with regard
to the nomination, other than by or at the direction of the Board of Directors
or a committee thereof, of candidates for election as directors and with regard
to certain matters to be brought before an annual meeting of stockholders.
These procedures provide that the notice of proposed stockholder nominations
for the election of directors must be timely given in writing to the Secretary
of BJ Services prior to the meeting at which directors are to be elected. The
procedures also provide that at an annual meeting, and subject to any other
applicable requirements, only such business may be conducted as has been
brought before the meeting by, or at the direction of, the Board of Directors
or by a stockholder who has given timely prior written notice to the Secretary
of BJ Services of such stockholder's intention to bring such business before
the meeting. In all cases, to be timely, notice must be received at the
principal executive offices of BJ Services not less than 30 days nor more than
60 days prior to the meeting (or if fewer than 40 days' notice or prior public
disclosure of the meeting date is given or made
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by BJ Services, not later than the 10th day following the day on which the
notice was mailed or such public disclosure was made). The notice must contain
certain information specified in the BJ Services Bylaws.
The Western Bylaws establish advance notice procedures with regard to
the nomination, other than by or at the direction of the Board of Directors or
a committee thereof, of candidates for election as directors and with regard to
certain matters to be brought before an annual meeting of stockholders. These
procedures provide that the notice of proposed stockholder nominations for the
election of directors must be timely given in writing to the Secretary of
Western prior to the meeting at which directors are to be elected. The
procedures also provide that at an annual meeting, and subject to any other
applicable requirements, only such business may be conducted as has been
brought before the meeting by, or at the direction of, the Board of Directors
or by a stockholder who has given timely prior written notice to the Secretary
of Western of such stockholder's intention to bring such business before the
meeting. In all cases, to be timely, notice must be received at the principal
executive offices of Western not less than 60 days (90 days if such notice
pertains to removal of directors without cause) nor more than 90 days prior to
the meeting (or if fewer than 70 days' notice or prior public disclosure of the
meeting date is given or made by BJ Services, not later than the 10th day
following the day on which the notice was mailed or such public disclosure was
made). The notice must contain certain information specified in the Western
Bylaws.
CALL OF SPECIAL STOCKHOLDER MEETINGS
The BJ Services Charter and Bylaws provide that special meetings of
stockholders may be called at any time by the Board of Directors or by a
committee of the Board of Directors that has been duly designated by the Board
of Directors and whose power and authority, as provided in the resolution of
the Board of Directors or in the BJ Services Bylaws, include the power to call
such meetings. The Western Charter and Bylaws provide that special meetings
may be called by the Chairman of the Board, the President or the Board of
Directors and shall be called by the Secretary of Western upon written request
by the holders of 20% or more of the issued and outstanding Western Common
Stock entitled to vote; provided that no meeting may be held during the 60-day
period preceding or the 45-day period succeeding the date fixed for the annual
meeting of stockholders.
STOCKHOLDER CONSENT IN LIEU OF MEETING
The BJ Services Charter and Bylaws provide that no action shall be taken
by stockholders except at an annual or special meeting of stockholders, and
stockholders may not act by written consent. The Western Bylaws provide that
any action that may be taken at an annual or special meeting may be taken
without a meeting by written consent of all of the stockholders who would have
been entitled to vote upon such action if such meeting were held.
DISSENTERS' RIGHTS
Section 262 of the DGCL generally entitles a stockholder to exercise its
appraisal rights upon a merger or consolidation of the corporation effected
pursuant to the DGCL if the holder complies with the requirements of Section
262 thereof. The DGCL, however, does not provide (unless required by a charter
provision, which neither the BJ Services Charter nor Western Charter include)
appraisal rights for stockholders of a corporation that engages in a sale of
all or substantially all of its assets or an amendment to its certificate of
incorporation. Appraisal rights are available under Section 262 of the DGCL if
holders of shares in a constituent company are required by the terms of the
merger to accept consideration other than shares of stock of the surviving
corporation, shares of stock of any corporation listed on a national securities
exchange, designated as a national market system security by the National
Association of Securities Dealers, Inc. or held of record by more than 2,000
stockholders or cash in lieu of fractional shares. Accordingly, because
stockholders of Western may be required to accept Merger Consideration in the
form of Cash and Warrant Consideration, such stockholders have appraisal rights
available under the DGCL. Stockholders of BJ Services are not entitled to
appraisal rights under the DGCL because BJ Common Stock is listed on the NYSE
and holders of BJ Common Stock are not required upon consummation of the Merger
to exchange such shares for any other consideration. See "The Merger --
Dissenters' Appraisal Rights."
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DERIVATIVE ACTIONS
Derivative actions may be brought in Delaware by a stockholder on behalf
of, and for the benefit of, the corporation. Section 327 of the DGCL provides
that a stockholder must aver in the complaint that he was a stockholder of the
corporation at the time of the transaction of which he complains. However, no
action may be brought by a stockholder unless he first seeks remedial action on
his claim from his corporation's board of directors unless such a demand for
redress is excused. The board of directors of a Delaware corporation can
appoint an independent litigation committee to review a stockholder's action
subject to a court's review of such committee's independence, good faith and
reasonable investigation. Under the DGCL, the court in a derivative action may
apply a variety of legal and equitable remedies on behalf of the corporation
that vary depending on the facts and circumstances of the case and the nature
of the claims brought.
DIVIDENDS AND DISTRIBUTION
Subject to any restrictions in a corporation's charter (which neither
the BJ Services Charter nor the Western Charter include), Section 170 of the
DGCL generally provides that the directors of a corporation may declare and pay
dividends out of surplus (defined as the excess if any, of the net assets over
stated capital) or, when no surplus exists, out of net profits for the fiscal
year in which the dividend is declared and/or the preceding fiscal year.
Dividends may not be paid out of net profits if the stated capital of the
corporation is less than the amount of stated capital represented by the issued
and outstanding stock of all classes having a preference upon the distribution
of assets.
DIRECTOR QUALIFICATION AND NUMBER
The number of directors of a Delaware corporation shall be fixed by, or
in the manner provided in, the Bylaws unless such number is changed by action
of the majority of the directors. Under Section 141(b) of the DGCL, a director
need not be a stockholder to be qualified unless so required by the charter or
Bylaws. The BJ Services Bylaws and the Western Bylaws require written notice
of a stockholder's intent to nominate a director. As to the number of
directors, the BJ Services Bylaws provide for the number of directors to be not
less than four nor more than nine and the Western Bylaws provide for the number
of directors to be no less than three nor more than 15.
BUSINESS COMBINATIONS
Section 203 of the DGCL provides that, subject to certain exceptions
specified therein, a corporation shall not engage in any business combination
with any "interested stockholder" for a three-year period following the date
that such stockholder becomes an interested stockholder unless certain
conditions are satisfied. For a description of Section 203 of the DGCL, see
"Description of Capital Stock of BJ Services -- Certain Anti-takeover
Provisions." Section 203(b)(1) of the DGCL permits corporations to elect not
to be governed by Section 203. Neither the BJ Services Charter nor the Western
Certificate makes such an election.
VOTE REQUIRED FOR EXTRAORDINARY CORPORATE TRANSACTIONS
The BJ Services Charter contains a "fair price" provision that requires
the approval of holders of not less than 75% of the outstanding shares of
voting stock of BJ Services (including not less than 66 2/3% of the outstanding
shares of voting stock not owned, directly or indirectly, by persons who are BJ
Related Persons (as defined above)) as a condition for mergers, consolidations
and certain other business combinations involving BJ Services and any BJ
Related Person. For a description of such provision, see "Description of
Capital Stock of BJ Services -- Certain Anti-takeover Provisions -- Fair Price
Provision."
The BJ Services Charter further provides a requirement that the repeal
or amendment of those articles of the BJ Services Charter pertaining to the
stockholder vote required to amend certain articles of the BJ Services Charter,
the amendment of Bylaws by stockholders, the prohibition of stockholder action
without meetings, the liability of directors, the classification and number of
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directors, the addition of any article imposing cumulative voting in the
election of directors and the 75% vote of stockholders required for certain
business combinations be authorized only upon receiving at least three-quarters
of the vote that all voting stockholders of BJ Services, voting as a single
class, are entitled to cast thereon. For a description of such provision, see
"Description of Capital Stock of BJ Services -- Certain Anti-takeover
Provisions."
The Western Charter requires the affirmative vote of the holders of at
least 66 2/3% of the outstanding shares of capital stock entitled to vote for
the approval of (i) any merger or consolidation of Western, (ii) the sale,
lease, exchange or other disposition of all or substantially all of the
property and assets of Western or (iii) any issuance of delivery of securities
of Western in exchange or payment for any securities, properties or assets of
any other person or entity in a transaction in which the authorization or
approval of stockholders of Western is required by law or any agreement to
which Western is a party. A 66 2/3% approval vote is also required for
amendment of the provision of the Western Charter that creates a staggered
Board of Directors and that imposes a 66 2/3% vote for certain fundamental
corporate transactions. An 85% approval vote is required for amendment of the
fair price provision. For a description of such provision, see "Description of
the Capital Stock of Western -- Certain Anti-takeover Provisions --
Super-Majority Provisions."
The Western Charter contains a "fair price" provision that requires the
approval of holders of not less than 85% of the outstanding shares of voting
stock of Western as a condition for mergers, consolidations and certain other
business combinations involving Western and any Western Related Person. For a
description of such provision, see "Description of Capital Stock of Western --
Certain Anti-takeover Provisions -- Fair Price Provision."
The Western Charter further provides a requirement that the repeal or
amendment of those articles of the Western Charter pertaining to the
requirement of a 66 2/3% stockholder vote, the classification of directors and
the number of directors be authorized only upon receiving at least 66 2/3% of
the vote that all holders of capital stock of Western are entitled to cast
thereon. Additionally, the repeal or amendment of, or the adoption of any
provision inconsistent with, the article containing the "fair price" provision
requires the approval of the holders of not less than 85% of the voting stock.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the DGCL permits a corporation to indemnify officers,
directors, employees and agents for actions taken in good faith and in a manner
they reasonably believed to be in, or not opposed to, the best interests of the
corporation, and with respect to any criminal action, which they had no
reasonable cause to believe was unlawful. Sections 145(e) and 145(g),
respectively, of the DGCL provides that a corporation may advance expenses of
defense (upon receipt of a written undertaking to reimburse the corporation if
indemnification is not appropriate) and must reimburse a successful defendant
for expenses, including attorney's fees, actually and reasonably incurred, and
permits a corporation to purchase and maintain liability insurance for its
directors and officers. Section 145(b) of the DGCL provides that
indemnification may not be made for any claim, issue or matter as to which a
person has been adjudged by a court of competent jurisdiction, after exhaustion
of all appeals therefrom, to be liable to the corporation, except only to the
extent a court determines that the person is entitled to indemnity for such
expenses that such court deems proper.
The BJ Services Bylaws provide that each person who is involved in any
actual or threatened action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or she is or was
a director, officer, employee or agent of the Company or any of its direct or
indirect wholly owned subsidiaries, or is or was serving at the request of the
Company as a director, officer, employee or agent of the Company or any of its
direct or indirect wholly owned subsidiaries, or is or was serving at the
request of the Company or any of its direct or indirect wholly owned
subsidiaries as a director, officer, employee, agent or trustee of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan, will be indemnified
by the corporation to the full extent permitted by the DGCL, as amended from
time to time (but, in the case of any such amendment, only to the extent that
such amendment permits the corporation to provide broader indemnification
rights than said law permitted prior to such amendment) or by other applicable
laws then in effect. The indemnification rights conferred by the BJ
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Services Bylaws are not exclusive of any other right to which a person seeking
indemnification may be entitled under any law, by-law, agreement, vote of
stockholders or disinterested directors or otherwise. BJ Services is
authorized to purchase and maintain (and BJ Services maintains) insurance on
behalf of its directors, officers, employees and agents. The Western Charter
contain similar provisions relating to indemnification, and Western is
authorized to purchase and maintain (and Western maintains) insurance on behalf
of its directors, officers, employees and agents.
DIRECTOR LIABILITY
Section 102(b)(7) of the DGCL permits a corporation to include a
provision in its certificate of incorporation eliminating or limiting the
personal liability of a director to the corporation or its stockholders for
damages for breach of the director's fiduciary duty subject to certain
limitations. Each of the BJ Services Charter and the Western Charter includes
such a provision, as set forth below, to the maximum extent permitted by law.
Each of the BJ Services Charter and the Western Charter provides that a
director will not be personally liable to the corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the DGCL, which concerns unlawful payments of dividends,
stock purchases or redemption or (iv) for any transaction from which the
director derived an improper personal benefit.
While these provisions provide directors with protection from liability
for monetary damages for breaches of their duty of care, they do not eliminate
such duty. Accordingly, these provisions will have no effect on the
availability of equitable remedies such as an injunction or rescission based on
a director's breach of his or her duty of care. The provisions described above
apply to an officer of the corporation only if he or she is a director of the
corporation and is acting in his or her capacity as director, and do not apply
to officers of the corporation who are not directors.
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BJ PROPOSAL NO. 2: PROPOSED INCREASE IN AUTHORIZED
SHARES OF BJ COMMON STOCK
BJ PROPOSAL NO. 2
At the BJ Services Special Meeting, stockholders of BJ Services will
also be asked to approve BJ Proposal No. 2, an amendment to the BJ Services
Charter, in order to increase the authorized number of shares of BJ Common
Stock from 40,000,000 shares to 80,000,000 shares. The affirmative vote of a
majority of the outstanding shares of BJ Common Stock is required to approve BJ
Proposal No. 2. Abstentions and broker nonvotes will have the effect of a vote
against such proposal.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF BJ SERVICES WITH RESPECT TO
BJ PROPOSAL NO. 2. THE BOARD OF DIRECTORS OF BJ SERVICES HAS UNANIMOUSLY
APPROVED THE AMENDMENT TO THE BJ SERVICES CHARTER INCREASING THE AUTHORIZED
NUMBER OF SHARES OF BJ COMMON STOCK FROM 40,000,000 SHARES TO 80,000,000 SHARES
AND UNANIMOUSLY RECOMMENDS THAT THE BJ SERVICES STOCKHOLDERS VOTE FOR APPROVAL
OF BJ PROPOSAL NO. 2. Consummation of the Merger is not subject to or
conditioned upon stockholder approval of BJ Proposal No. 2. If BJ Proposal No.
2 is approved by the requisite vote of stockholders, however, BJ Proposal No. 2
will not be implemented unless the Merger is consummated.
DESCRIPTION OF THE PROPOSAL
BJ Proposal No. 2 consists of a proposed amendment to the BJ Services
Charter that would increase the number of authorized shares of BJ Common Stock
from 40,000,000 to 80,000,000 shares (the "Authorized Shares Amendment") is
being proposed for approval at the BJ Services Special Meeting. The text of
Article FOURTH of the BJ Services Charter, as the same would read if BJ Proposal
No. 2 is approved at the BJ Services Special Meeting, is set forth in Appendix
F to this Joint Proxy Statement/Prospectus. The additional shares of BJ Common
Stock would constitute additional shares of the existing class of BJ Common
Stock and, if and when issued, would have the same rights and privileges as the
shares of BJ Common Stock presently authorized. See "Description of Capital
Stock of BJ Services."
The BJ Services Charter currently authorizes the issuance of 40,000,000
shares of BJ Common Stock. Of such shares, as of March 15, 1995, 15,717,270
shares were outstanding and 2,032,730 shares were reserved for issuance
pursuant to the BJ Stock Incentive Plan and other employee benefit plans,
leaving only approximately 22,000,000 shares currently unreserved and available
for future use. If the Merger is consummated and the proposed BJ 1995
Incentive Plan is approved by the stockholders of BJ Services, a total of
approximately 33,000,000 additional shares of BJ Common Stock will be issued or
will have to be reserved for issuance, leaving only approximately 7,000,000
authorized but unissued shares of BJ Common Stock available for the future
needs of BJ Services. See "BJ Proposal No. 3: Proposed Adoption of the BJ
1995 Incentive Plan." If the Authorized Shares Amendment is approved, the
Board of Directors of BJ Services would be authorized to issue an additional
40,000,000 shares of BJ Common Stock.
The additional shares of BJ Common Stock that would be authorized by the
Authorized Shares Amendment could be issued at the direction of BJ Services'
Board of Directors from time to time for any proper corporate purpose,
including, without limitation, the acquisition of other businesses, the raising
of additional capital for use in BJ Services' business, a split of or dividend
on then outstanding shares or in connection with any employee stock plan or
program. The holders of shares of BJ Common Stock do not presently have
preemptive rights to subscribe for any of BJ Services' securities and will not
have any such rights to subscribe for the additional BJ Common Stock proposed
to be authorized. Any future issuance of authorized shares of BJ Common Stock
may be authorized by BJ Services' Board of Directors without further action by
the stockholders, subject to the rules of the NYSE (for so long as the BJ
Common Stock is listed for trading on the NYSE). Under the NYSE's current
rules, stockholder approval is required in connection with certain issuances of
BJ Common Stock or securities convertible into or exercisable or exchangeable
therefor, including issuance of
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shares of BJ Common Stock that would result in an increase equal to or in
excess of 20% of the shares of BJ Common Stock outstanding before such
issuance.
Stockholders of BJ Services should recognize that, although the Board of
Directors will issue BJ Common Stock only when it considers such issuance to be
in the best interests of BJ Services, the issuance of additional BJ Common
Stock may, among other things, have a dilutive effect on the earnings per share
of BJ Common Stock and on the equity and voting rights of holders of shares of
BJ Common Stock. Furthermore, since the DGCL requires the vote of a majority
of shares of each class of stock in order to approve certain mergers and
reorganizations, and the BJ Services Charter requires a two-thirds vote to
approve certain transactions with major stockholders and their affiliates, the
Authorized Shares Amendment could permit the Board to issue shares to persons
supportive of management's position. Such persons might then be in a position
to vote to prevent a proposed business combination that is deemed unacceptable
to BJ Services' Board of Directors, although perceived to be desirable by some
stockholder(s), including, potentially, a majority stockholder or stockholders.
This could provide management with a means to block any two-thirds vote that
might be used to effect a business combination in accordance with the BJ
Services Charter. Also, the presence of such additional authorized but
unissued shares of BJ Common Stock could discourage unsolicited business
combination transactions that might otherwise be desirable to stockholders.
Except for (i) shares of BJ Common Stock reserved for issuance under BJ
Services' current employee benefit plans and (ii) shares of BJ Common Stock
that would be issued or reserved upon approval of the Merger and the BJ 1995
Incentive Plan proposed in BJ Proposal No. 3, the Board of Directors of BJ
Services has no current plans to issue additional shares of BJ Common Stock.
However, the Board of Directors of BJ Services believes that the benefits of
providing it with the flexibility to issue shares without delay for any proper
business purpose, including as an alternative to an unsolicited business
combination that the Board of Directors of BJ Services believes is not in the
best interests of BJ Services' stockholders, outweigh the possible
disadvantages of dilution and discouraging unsolicited business combination
proposals and that it is prudent and in the best interests of stockholders of
BJ Services to provide the advantage of greater flexibility that will result
from the adoption of the Authorized Shares Amendment.
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BJ PROPOSAL NO. 3: PROPOSED ADOPTION OF THE
BJ 1995 INCENTIVE PLAN
BJ PROPOSAL NO. 3
At the BJ Services Special Meeting, stockholders of BJ Services will
also be asked to approve BJ Proposal No. 3, the BJ 1995 Incentive Plan and to
authorize 1,500,000 shares for issuance thereunder. The affirmative vote of
holders of a majority of the shares of BJ Common Stock present in person or
represented by proxy and entitled to vote at the BJ Special Meeting is required
to approve BJ Proposal No. 3. Any abstention with respect to the approval of
the BJ 1995 Incentive Plan will have the effect of a vote against such
proposal. Any broker nonvote will not affect the outcome of such proposal.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF BJ SERVICES WITH RESPECT TO
BJ PROPOSAL NO. 3. THE BOARD OF DIRECTORS OF BJ SERVICES HAS UNANIMOUSLY
APPROVED THE BJ 1995 INCENTIVE PLAN AND UNANIMOUSLY RECOMMENDS THAT BJ SERVICES
STOCKHOLDERS VOTE FOR APPROVAL OF BJ PROPOSAL NO. 3. Consummation of the
Merger is not subject to or conditioned upon stockholder approval of BJ
Proposal No. 3. If BJ Proposal No. 3 is approved by the requisite vote of
stockholders, however, BJ Proposal No. 3 will not be implemented unless the
Merger is consummated.
GENERAL
The purpose of the BJ 1995 Incentive Plan is to promote the interests of
BJ Services and its stockholders by encouraging employees of BJ Services, its
subsidiaries (including, following the consummation of the Merger, Western) and
affiliated entities and its non-employee directors (including, following the
consummation of the Merger, the three former directors of Western who become
directors of BJ Services) to acquire or increase their equity interest in BJ
Services, and, with respect to employees, to be able to relate cash bonuses to
performance goals of BJ Services, thereby giving them an added incentive to
work toward the continued growth and success of BJ Services. The Board of
Directors of BJ Services also contemplates that through the BJ 1995 Incentive
Plan BJ Services, its subsidiaries and its affiliated entities will be better
able to compete for the services of personnel needed for growth and success.
However, nothing in the plan shall operate or be construed to prevent the
Company from granting awards outside of the plan. In the opinion of BJ
Services, the BJ 1995 Incentive Plan is not subject to any of the provisions of
the Employees Retirement Income Security Act of 1974, as amended ("ERISA").
The full text of the BJ 1995 Incentive Plan is set forth in Appendix G
to this Joint Proxy Statement/Prospectus. Certain features of the plan are
summarized below, but such summary is qualified in its entirety by reference to
the full text of the BJ 1995 Incentive Plan. All capitalized terms not defined
herein shall have the meanings set forth in the BJ 1995 Incentive Plan.
TYPES OF AWARDS
The BJ 1995 Incentive Plan would permit the granting of the following
types of awards: stock options ("Options") to purchase shares of BJ 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 Code, or options that do not constitute
Incentive Stock Options ("Nonqualified Options"); stock based awards
("Performance Stock," "Performance Units" and "Bonus Stock"); and cash awards
("Tandem Cash Tax Rights," "Performance Cash Awards" or "Bonus Cash Awards,"
collectively referred to as "Cash Awards") to key employees and officers
("Employee Grantees"). Options, Performance Stock, Performance Units, Bonus
Stock and Cash Awards are collectively referred to in as "Awards."
ELIGIBILITY FOR PARTICIPATION
Incentive Stock Options may be granted only to individuals who are key
employees and officers (whether or not they are directors) of BJ Services or
any "Parent Corporation" or any "Subsidiary Corporation" (as defined in Section
424 of the Code) of BJ Services, and Nonqualified Options,
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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 BJ Services, its subsidiaries and affiliated entities.
Options granted to non-employee directors shall be Nonqualified Options, and
non-employee directors shall not be eligible to receive any other Award. As of
the date of this Joint Proxy Statement/Prospectus, approximately 72 employees
and five non-employee directors (eight non-employee directors if the Merger
if consummated) are eligible to participate in the BJ 1995 Incentive Plan.
ADMINISTRATION
Under the terms of the BJ 1995 Incentive Plan, the BJ 1995 Incentive
Plan will be administered by the Executive Compensation Committee of BJ
Services' Board of Directors consisting of two or more directors of BJ
Services appointed by the Board of Directors. The members of the Executive
Compensation Committee, as of the date of this Joint Proxy
Statement/Prospectus, are Messrs. Don D. Jordan, James E. McCormick, L. William
Heiligbrodt and John R. Huff. Each member of the Executive Compensation
Committee must be a "disinterested person" within the meaning of Rule 16b-3
under 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 BJ 1995 Incentive Plan, the Executive Compensation
Committee has authority to 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 BJ 1995 Incentive Plan and all
Options and Awards, and to administer the BJ 1995 Incentive Plan.
AMENDMENT AND TERMINATION
The Board of Directors of BJ Services in its discretion may amend,
suspend or terminate the BJ 1995 Incentive Plan; provided that any amendment
that would (i) extend the period within which Awards may be granted under the
BJ 1995 Incentive Plan, (ii) increase the aggregate number of shares of BJ
Common Stock to be optioned or awarded under the BJ 1995 Incentive Plan (other
than as prescribed for changes in capitalization as described herein), (iii)
reduce the Option exercise prices per share of BJ Common Stock provided in the
BJ 1995 Incentive Plan, (iv) change the class of persons to whom Awards may be
made under the BJ 1995 Incentive Plan, (v) modify provisions relating to the
grant of Options to non-employee directors or (vi) grant Options to
non-employee directors other than pursuant to existing provisions of the BJ
1995 Incentive Plan requires the approval of the stockholders of BJ Services;
and provided, further, that no amendment, suspension or termination of the BJ
1995 Incentive Plan may cause the BJ 1995 Incentive Plan to fail to meet the
requirements of Rule 16b-3 of the Exchange Act or may, without the consent of
the holder of an Award, terminate an Award or adversely affect such person's
rights in any material respect. The provisions of the BJ 1995 Incentive Plan
relating to grants of Options to non-employee directors may not be amended more
than once every six months other than to comport with changes in the Code,
ERISA or the rules thereunder, unless otherwise permitted by Rule 16b-3 of the
Exchange Act.
The Executive Compensation Committee may, with the consent of the person
or persons entitled to exercise an Option, amend an Option (other than an
Option granted to a non-employee director); provided, however, that any such
amendment increasing the number of shares of BJ Common Stock subject to the
Option or reducing the exercise price per share of BJ Common Stock (other than
as prescribed for changes in capitalization as described herein), will be
subject to the approval of the stockholders of BJ Services. The Executive
Compensation Committee may at any time or from time to time, in its discretion
(other than for Options granted to non-employee directors), (i) in the case of
an Option previously granted that 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; and (ii) grant to holders of outstanding Nonqualified
Options, 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 Executive Compensation Committee may deem
appropriate.
TERM OF THE BJ 1995 INCENTIVE PLAN
The BJ 1995 Incentive Plan was adopted by the BJ Services Board of
Directors on January 26, 1995, subject to approval by the BJ Services
stockholders on or before January 25, 1996. No Awards
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will be exercisable or payable prior to approval of the BJ 1995 Incentive Plan
by the BJ Services stockholders. Except with respect to Awards then
outstanding, if not sooner terminated, the BJ 1995 Incentive Plan will
terminate on December 31, 2004, and no further Awards may be granted after such
date.
SHARES SUBJECT TO THE BJ 1995 INCENTIVE PLAN
The BJ 1995 Incentive Plan provides for the issuance of up to an
aggregate of 1,500,000 shares of BJ Common Stock (subject to adjustment in the
event of stock splits and certain other corporate events; see " -- Adjustments
to Shares") upon the purchase of BJ Common Stock acquired through the BJ 1995
Incentive Plan's Awards. Such shares of BJ Common Stock may be authorized but
unissued shares or reacquired shares. Each share of BJ Common Stock issued
pursuant to the BJ 1995 Incentive Plan will be fully paid and nonassessable and
will include an associated BJ Right.
OPTIONS
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 BJ 1995 Incentive Plan, Options that will be in such form as
the Executive Compensation Committee may from time to time approve. (For a
description of Options automatically granted to non-employee directors of BJ
Services, see "-- Non-Employee Directors' Options.") The Executive
Compensation Committee also has the authority to determine whether Options
granted to Employee Optionees will be Incentive Stock Options or Nonqualified
Options. No Optionee may receive more than 250,000 Options under the BJ 1995
Incentive Plan during any calendar year.
To exercise an Option granted under the BJ 1995 Incentive Plan, the
person entitled to exercise the Option must deliver to BJ Services payment in
full for the shares being purchased, together with any required withholding tax
in the case of the exercise of a Nonqualified Option. The payment must either
be in cash or check acceptable to the Company or through delivery to BJ
Services of shares of BJ Common Stock or sale through broker, or by any
combination thereof. The value of each share of BJ Common Stock delivered will
be deemed to be equal to the per share price of the last sale of BJ Common
Stock on the trading day prior to the date the Option is exercised, based on
the composite transactions in the BJ Common Stock as reported in The Wall
Street Journal.
The price at which shares of BJ 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 BJ Common Stock on the trading day
prior to the grant of such Option, based on the composite transactions in the
BJ Common Stock as reported by The Wall Street Journal, and (ii) the arithmetic
average of the closing prices per share of BJ 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 BJ 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, the purchase
price per share of BJ Common Stock will be equal to the fair market value per
share of BJ 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 BJ Common Stock as reported by The Wall Street Journal, and
shall not be less than the per share price of the last sale of BJ Common Stock
on the trading day prior to the date of grant; provided, however, the exercise
price per share of BJ Common Stock shall be at least 110% of the fair market
value per share of BJ Common Stock at the time of grant if the Employee
Optionee, 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 BJ Services or any Parent Corporation or Subsidiary
Corporation.
The exercise price for Options shall be subject to appropriate
adjustments in the event that the outstanding shares of BJ Common Stock are
changed into or exchanged for a different number or kind
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of shares or other securities of BJ Services by reason of merger,
consolidation, recapitalization, reclassification, stock split, stock dividend,
combination of shares or the like.
PERFORMANCE STOCK, PERFORMANCE UNITS AND BONUS STOCK
The Executive Compensation Committee has the authority to grant Awards
to Employee Grantees, which in the case of Performance Stock will be shares of
BJ Common Stock subject to a Performance Period (as defined below), in the case
of Performance Units will represent a phantom share of BJ Common Stock subject
to a Performance Period, and in the case of Bonus Stock will be shares of BJ
Common Stock that are not subject to a Performance Period. No individual may
receive more than 250,000 Performance Stock and/or Performance Unit awards
under the BJ 1995 Incentive Plan during any calendar year.
Subject to amendment with the consent of the affected Employee Grantee
of the performance objectives or period applicable to Awards of Performance
Stock and Performance Units (provided that awards intended to qualify under
Section 162(m) of the Code can be amended only to the extent permitted by such
Section), and subject to acceleration upon a Change of Control, no shares of
Performance Stock or Performance Units granted under the BJ 1995 Incentive Plan
shall be subject to becoming vested (in other words, earned and nonforfeitable)
earlier than six months from the date of grant nor later than ten years after
the date of grant (the "Performance Period"). To the extent not prohibited by
other provisions of the BJ 1995 Incentive Plan, each share of Performance Stock
and each Performance Unit shall be subject to becoming vested upon the
achievement of such performance goals (BJ Services and/or individual) over such
Performance Period as the Executive Compensation Committee in its discretion
may determine at or prior to the grant of such Award. With respect to any
Performance Stock or Performance Unit grant that is intended to meet the
requirements of Section 162(m) of the Code (as designated by the Executive
Compensation Committee at the time of granting such Award), 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 BJ Services 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 an Award of
Performance Stock or Performance Units, the weighting of the goals if more than
one is used, and whether the goal is to be measured against an established
budget or target, an index or a peer group of companies, shall also be
determined by the Executive Compensation Committee at the time of grant of the
Award. Upon the occurrence of a Change of Control, each share of Performance
Stock and each Performance Unit that was previously granted under the BJ 1995
Incentive Plan and that is not then immediately vested in full will be
immediately vested in full. Bonus Stock represents shares of BJ Common Stock
that are not subject to a Performance Period under the BJ 1995 Incentive Plan.
TANDEM CASH TAX RIGHTS, PERFORMANCE CASH AWARDS AND BONUS CASH AWARDS
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 from BJ Services 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 be exercisable prior to six months from the date of
grant or after 10 years from the date of grant (the "Performance Period"),
subject to achievement of certain performance goals (as determined by the
Executive Compensation Committee, in its discretion). With respect to any
Performance Cash Award grant that is intended to meet the requirements of
Section 162(m) of the Code (as designated by the Executive Compensation
Committee at the time of granting such Award), the performance goal or goals
for such Award shall be with respect to one or more of the following: earnings
per share; EBITDA; 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;
RONCE and/or stock price performance. The goals can be applied, where
appropriate, with respect to an individual, a business unit or BJ Services
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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 an established budget or target, an index or a peer group of companies,
shall also be determined by the Executive Compensation Committee at the time of
grant of the Award. No individual may receive a Performance Cash Award in
excess of $2 million under the BJ 1995 Incentive Plan during any calendar year.
The Executive Compensation Committee may, from time to time and subject
to the provisions of the BJ 1995 Incentive Plan, grant Bonus Cash Awards to key
employees and officers (whether or not they are directors) of BJ Services, its
subsidiaries and affiliated entities. Bonus Cash Awards are cash payments that
are not subject to a Performance Period.
NON-EMPLOYEE DIRECTORS' OPTIONS
Subject in each case to the limitation on the number of shares of BJ
Common Stock included in the BJ 1995 Incentive Plan, each director of BJ
Services who is neither an employee nor officer of BJ Services, its
subsidiaries or affiliated entities, is eligible to receive an automatic grant
of Options. Each non-employee director who is first elected to the Board of
Directors of BJ Services on or after the date director options may no longer be
granted under the terms of the BJ Services 1990 Stock Incentive Plan (the "1990
Plan Termination") will be granted, as of the date of his initial election, a
Nonqualified Option under the BJ 1995 Incentive Plan to purchase 1,000 shares
of BJ Common Stock. Annually, beginning on the fourth Thursday of October of
1995 and each year thereafter until the expiration of the BJ 1995 Incentive
Plan, each person who is a non-employee director on such date will receive a
grant of a Nonqualified Option to purchase 1,000 (increased to 3,000 after the
1990 Plan Termination) shares of BJ Common Stock. All Options granted to
non-employee directors are Nonqualified Options. Other than the foregoing
provisions, the terms and provisions of Options granted to non-employee
directors are generally the same as the terms and provisions of Nonqualified
Options. If, as of any date that the BJ 1995 Incentive Plan is in effect,
there are not sufficient shares of BJ Common Stock available under the BJ 1995
Incentive Plan to allow for the grant to each non-employee director of an
Option for the number of shares provided for in the BJ 1995 Incentive Plan,
then each non-employee director shall receive an Option for his pro rata share
of the total number of shares of BJ Common Stock then available under the BJ
1995 Incentive Plan.
CHANGE IN CONTROL
Upon the occurrence of a Change of Control (defined generally as certain
acquisitions (other than the Merger) by a person, entity or group of 25% or
more of BJ Common Stock or 25% of the combined voting power of the then
outstanding voting securities of BJ Services or certain reorganizations,
mergers or consolidations, except for the Merger), 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 that was previously granted under the BJ 1995
Incentive Plan and that is not then immediately vested in full will be
immediately vested in full.
ADJUSTMENTS TO SHARES
In the event the outstanding shares of BJ Common Stock are changed into
or exchanged for a different number or kind of shares of BJ Services or other
securities of BJ Services by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares or the
like, the Executive Compensation Committee will make an appropriate and
equitable adjustment in the number and kind of shares of BJ Common Stock
subject to the BJ 1995 Incentive Plan (including shares of BJ Common Stock as
to which all outstanding Options, or portions thereof then unexercised, are
exercisable) so that after such event the shares of BJ Common Stock subject to
the BJ 1995 Incentive Plan and the proportionate interest of each Option or
Award will be maintained as before the occurrence of such event.
-106-
<PAGE> 118
Any such adjustment made by the Executive Compensation Committee will be final
and binding upon BJ Services and all other interested persons. Any adjustment
of an Incentive Stock Option will be made in such a manner as not to constitute
a "modification" within the meaning of Section 424(h)(3) of the Code.
Additional provisions apply to adjustments related to Options received by
non-employee directors.
RECENT AWARDS TO BJ SERVICES' OFFICERS CONTINGENT UPON CONSUMMATION OF THE
MERGER
As of February 15, 1995, a total of 368,157 stock options were
authorized for issuance under the BJ 1995 Incentive Plan to a total of nine
officers (including all of BJ Services' executive officers), which options will
expire if the Merger is not consummated or the BJ 1995 Incentive Plan is not
approved by the requisite vote of the stockholders of BJ Services. If the
Merger is consummated, such options will vest in whole or in part at the end of
the two-year period commencing on consummation of the Merger if BJ Services
achieves certain consolidation benefits from combining Western's operations
with those of BJ Services over such two-year period. If an employee
voluntarily leaves BJ Services or is terminated by BJ Services prior to the end
of such two-year period, all options granted to such employee will be
forfeited. All such options will become fully vested upon a change in control
as defined in the BJ 1995 Incentive Plan.
FEDERAL INCOME TAX CONSEQUENCES
In General. The BJ 1995 Incentive Plan is not qualified under Section
401(a) of the Code.
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. It is recommended that before exercising an Option or
disposing of shares of BJ Common Stock acquired pursuant to the exercise of an
Option, through vesting of Performance Stock or Performance Units, or through
the grant of Bonus Stock, the Optionee or Grantee consult his tax advisor about
the federal, state and local income tax consequences of such an exercise or
disposition.
Status of Options. Options granted under the BJ 1995 Incentive Plan may
be either Incentive Stock Options or Nonqualified Options. As described above,
however, under certain circumstances, an Incentive Stock Option may be treated
as a Nonqualified Option. The tax consequences both to the Optionee and to BJ
Services differ depending on whether an Option is an Incentive Stock Option or
a Nonqualified Option.
Nonqualified Options. Nonqualified Options do not qualify for special
federal income tax treatment. 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 BJ Common Stock at the time of
exercise over the exercise price paid for such shares of BJ Common Stock. Upon
a subsequent disposition of the shares of BJ Common Stock received upon
exercise of a Nonqualified Option, any difference between the fair market value
of the shares of BJ 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, BJ Services 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.
-107-
<PAGE> 119
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 BJ Common Stock would be treated
as a long-term capital gain or loss. In such event, BJ Services would not be
entitled to any deduction in connection with the grant or exercise of the
Option or the disposition of the shares of BJ Common Stock so acquired.
If, however, an Optionee disposes of shares of BJ 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 BJ
Services 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 BJ 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 BJ 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 BJ Common Stock.
Alternative Minimum Tax. The excess of the fair market value of shares
of BJ 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 BJ 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 BJ 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 BJ Common Stock pursuant to such an exercise of the Option, and
the Optionee's basis in the number of shares of BJ 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 BJ Common Stock received in excess of the
number of Previously Acquired Shares, and the Optionee's basis in such excess
shares of BJ 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 BJ
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 BJ
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 BJ Common Stock so
received, the shares of BJ Common Stock with the lowest basis would be treated
as disposed of first.
-108-
<PAGE> 120
Performance Stock and Performance Units. In general, an employee of BJ
Services who receives either a Performance Stock Award or a Performance Unit
Award will not be taxed on the receipt of the Award but instead will be taxed
on the fair market value of the shares of BJ Common Stock (i) with respect to a
Performance Stock Award, on the date that the shares cease to be subject to
forfeiture and (ii) with respect to a Performance Unit Award, on the date that
the shares are received in payment of the Award. BJ Services will be entitled
to a deduction for a corresponding amount if and to the extent that the amount
is an ordinary expense and satisfies the test of reasonable compensation. If,
upon a taxable disposition of the shares of BJ Common Stock, the employee
receives more or less than his or her basis in the shares, the gain or loss
will be long- or short-term capital gain or loss, depending on the holding
period of the shares, measured from the date that the receipt of the shares was
a taxable event to such employee.
Bonus Stock. In general, a person will be taxed upon the fair market
value of Bonus Stock Awards on the date such amount is received, and BJ
Services will be entitled to a deduction for the corresponding amount if and to
the extent that the amount is an ordinary expense and satisfies the test of
reasonable compensation.
Cash Awards. Generally, a Cash Award would be subject to tax at
ordinary income tax rates when paid.
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 BJ Services 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 BJ Services of amounts subject to the
excise tax under Code Section 4999.
Important Tax Considerations. The foregoing does not constitute a
definitive statement of the tax effects of Awards granted under the BJ 1995
Incentive Plan and is based upon the laws and regulations presently in effect.
There can be no assurance that the tax consequences discussed above will
continue or that other tax laws will not be applicable. Accordingly, prior to
exercising an Option or upon receipt of any other Award granted under the BJ
1995 Incentive Plan and prior to disposing of shares acquired pursuant to an
Award, a participant should consult his or her own tax advisor.
-109-
<PAGE> 121
RELATIONSHIPS WITH INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP has acted as independent public accountants for BJ
Services since its initial public offering in 1990, and Price Waterhouse LLP
has acted as independent public accountants for Western since presenting a
report on Western's financial statements for the year ended December 31, 1968.
It is expected that representatives of Deloitte & Touche LLP and Price
Waterhouse LLP will be present at the BJ Services Special Meeting and the
Western Special Meeting, respectively, to respond to appropriate questions of
stockholders and to make a statement if they so desire.
LEGAL OPINIONS
Certain legal matters with respect to the securities offered
hereby will be passed upon for the Company by Andrews & Kurth L.L.P., Houston,
Texas. Certain tax consequences of the Merger will be passed upon for Western
by Sullivan & Cromwell.
EXPERTS
The consolidated financial statements and the related financial
statement schedules of BJ Services as of September 30, 1994 and 1993 and for
each of the three years in the period ended September 30, 1994 included and
incorporated by reference in this Joint Proxy Statement/Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports, which are included and incorporated by reference herein, and have been
so included and incorporated by reference in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of The Western Company of
North America as of December 31, 1994 and 1993 and for each of the three years
in the period ended December 31, 1994 included in this Joint Proxy
Statement/Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
-110-
<PAGE> 122
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C> <C>
I. Audited Consolidated Financial Statements of BJ Services Company
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . F -2
Consolidated Statement of Operations for the Years Ended
September 30, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . F -3
Consolidated Statement of Financial Position as of
September 30, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . F -4
Consolidated Statement of Stockholders' Equity for the Years Ended
September 30, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . F -6
Consolidated Statement of Cash Flows for the Years Ended
September 30, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . F -7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . F -8
II. Unaudited Consolidated Condensed Financial Statements of BJ Services Company
Consolidated Condensed Statement of Operations (Unaudited) for the
Three Months Ended December 31, 1994 and 1993 . . . . . . . . . . . . . . . . . F -20
Consolidated Condensed Statement of Financial Position
as of December 31, 1994 (Unaudited) and September 30, 1994 . . . . . . . . . . . F -21
Consolidated Condensed Statement of Cash Flows (Unaudited) for the
Three Months Ended December 31, 1994 and 1993 . . . . . . . . . . . . . . . . . F -22
Notes to Unaudited Consolidated Condensed Financial Statements . . . . . . . . . . . F -23
III. Audited Consolidated Financial Statements of The Western Company of North America
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . F -24
Consolidated Balance Sheets as of December 31, 1994 and 1993 . . . . . . . . . . . . F -25
Consolidated Statements of Operations for the Years Ended
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . F -26
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . F -27
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . F -28
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . F -29
IV. Unaudited Pro Forma Financial Statements of BJ Services Company and
The Western Company of North America
Pro Forma Financial Information (Unaudited) . . . . . . . . . . . . . . . . . . . . F -55
Pro Forma Statement of Financial Position (Unaudited) as of
December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F -56
Pro Forma Statement of Operations (Unaudited) for the
Three Months Ended December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . F -57
Pro Forma Statement of Operations (Unaudited) for the Year
Ended September 30, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . F -58
Notes to Pro Forma Financial Statements (Unaudited) . . . . . . . . . . . . . . . . F -59
</TABLE>
F-1
<PAGE> 123
REPORT OF INDEPENDENT AUDITORS
Stockholders of BJ Services Company:
We have audited the accompanying consolidated statements of financial position
of BJ Services Company and its subsidiaries as of September 30, 1994 and 1993,
and the related consolidated statements of operations, stockholders' equity,
and cash flows for each of the three years in the period ended September 30,
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of BJ Services Company and its
subsidiaries at September 30, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1994 in conformity with generally accepted accounting principles.
As described in Note 9 to the consolidated financial statements, the Company
changed its method of accounting for postretirement benefits other than
pensions effective October 1, 1993 to conform with Statement of Financial
Accounting Standards No. 106.
DELOITTE & TOUCHE LLP
Houston, Texas
November 22, 1994
F-2
<PAGE> 124
BJ SERVICES COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended September 30,
----------------------------------------------------
1994 1993 1992
----------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Revenue $ 434,476 $ 394,363 $ 330,028
Operating Expenses:
Cost of sales and services 368,232 329,270 275,627
Research and engineering 8,621 9,098 8,551
Marketing 14,169 12,969 11,866
General and administrative 22,709 22,825 20,523
Restructuring charge and asset writedowns 15,700
------------- ------------- --------------
Total operating expenses 413,731 374,162 332,267
------------- ------------- --------------
Operating income (loss) 20,745 20,201 (2,239)
Interest expense (7,383) (5,414) (2,977)
Interest income 729 500 465
Other income (expense) - net (1,183) 1,551 559
------------- ------------- --------------
Income (loss) before income taxes,
minority interest and cumulative effect
of accounting change 12,908 16,838 (4,192)
Income tax expense (benefit) 2,006 1,593 (3,657)
------------- ------------- --------------
Income (loss) before minority interest and
cumulative effect of accounting change 10,902 15,245 (535)
Minority interest 132 684 569
------------- ------------- --------------
Income (loss) before cumulative effect of
accounting change 10,770 14,561 (1,104)
Cumulative effect of change in
accounting principle, net of tax benefit of
$5,600,000 (10,400)
------------- ------------- --------------
Net income (loss) $ 370 $ 14,561 $ (1,104)
============= ============= =============
Net income (loss) per share:
Income (loss) per share before
cumulative effect of accounting change $ .69 $ .94 $ (.08)
Cumulative effect of change in
accounting principle, net of tax (.67)
------------- -------------- --------------
Net income (loss) per share $ .02 $ .94 $ (.08)
============= ============= ==============
Weighted average shares outstanding 15,665 15,456 13,000
============= ============= ==============
</TABLE>
See Notes to Consolidated Financial Statements
F-3
<PAGE> 125
BJ SERVICES COMPANY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
September 30,
1994 1993
--------------------------------------------
(in thousands)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,218 $ 1,620
Receivables - Less allowance for doubtful
accounts: 1994, $2,184,000; 1993, $2,352,000 103,754 94,519
Inventories:
Finished goods 30,970 29,257
Work in process 1,118 1,521
Raw materials 6,591 7,280
--------------- --------------
Total inventories 38,679 38,058
Deferred income taxes 4,478 5,665
Other current assets 8,230 6,509
--------------- --------------
Total current assets 158,359 146,371
Property:
Land 12,031 12,352
Buildings 47,042 43,604
Machinery and equipment 446,739 436,056
--------------- --------------
Total property 505,812 492,012
Less accumulated depreciation 306,968 308,050
--------------- --------------
Property - net 198,844 183,962
Goodwill 20,998 20,646
Deferred income taxes 20,607 6,758
Investments and other assets 11,258 11,794
--------------- --------------
$ 410,066 $ 369,531
=============== ==============
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE> 126
BJ SERVICES COMPANY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
September 30,
1994 1993
--------------------------------------------
(in thousands)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable - trade $ 54,609 $ 46,192
Short-term borrowings 2,250 4,530
Current portion of long-term debt 31,200 6,000
Accrued employee compensation and benefits 10,521 11,205
Income taxes 7,927 6,711
Taxes other than income 2,751 2,619
Accrued insurance 2,637 4,257
Other accrued liabilities 9,162 8,340
------------- ------------
Total current liabilities 121,057 89,854
Long-term debt 74,700 84,500
Deferred income taxes 6,986 4,871
Accrued postretirement benefits 15,834
Minority interest and other long-term liabilities 1,562 3,174
Commitments and contingencies
Stockholders' Equity:
Preferred Stock (authorized 5,000,000 shares)
Common stock, $.10 par value (authorized
40,000,000 shares; issued and outstanding
1994 - 15,670,903 shares,
1993 - 15,607,006 shares) 1,567 1,561
Capital in excess of par 151,340 149,889
Retained earnings 43,616 43,246
Cumulative translation adjustment (4,133) (5,209)
Unearned compensation (2,463) (2,355)
------------- -------------
Total stockholders' equity 189,927 187,132
------------- -------------
$ 410,066 $ 369,531
============= =============
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE> 127
BJ SERVICES COMPANY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Capital Unearned Cumulative
Common In Excess Compen- Retained Translation
Stock Of Par sation Earnings Adjustment Total
------- --------- -------- ---------- ----------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1991 $ 1,300 $ 104,777 $ 29,789 $ (559) $135,307
Net loss (1,104) (1,104)
Issuance of stock for stock options 4 597 601
Cumulative translation adjustment (10) (10)
------- --------- -------- -------- ------- --------
BALANCE, SEPTEMBER 30, 1992 1,304 105,374 28,685 (569) 134,794
Net income 14,561 14,561
Issuance of stock for:
Business acquisition 250 40,537 40,787
Stock options 3 504 507
Stock purchase plan 4 619 623
Stock performance awards 2,855 $ (2,855)
Amortization of unearned compensation 500 500
Cumulative translation adjustment (4,640) (4,640)
------- --------- -------- -------- ------- --------
Balance, September 30, 1993 1,561 149,889 (2,355) 43,246 (5,209) 187,132
Net income 370 370
Issuance of stock for:
Stock options 2 294 296
Stock purchase plan 4 680 684
Stock performance awards 944 (944)
Buyback of stock rights (155) (155)
Amortization of unearned compensation 524 524
Revaluation of stock performance awards (312) 312
Cumulative translation adjustment 1,076 1,076
------- --------- -------- -------- ------- --------
BALANCE, SEPTEMBER 30, 1994 $ 1,567 $ 151,340 $ (2,463) $ 43,616 $(4,133) $189,927
======= ========= ======== ======== ======= ========
</TABLE>
See Notes to Consolidated Financial Statements
F-6
<PAGE> 128
BJ SERVICES COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended September 30,
1994 1993 1992
-------------------------------------------------
(in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 370 $ 14,561 $ (1,104)
Adjustments to reconcile net income (loss) to
cash provided from (used for) operating activities:
Cumulative effect of accounting change 10,400
Depreciation and amortization 25,335 24,170 12,742
Net (gain) loss on disposal of assets (346) 62 (429)
Amortization of unearned compensation 524 500
Deferred income tax benefit (4,959) (4,877) (10,447)
Restructuring charge (non cash) 10,645
Minority interest 132 684 569
Changes in:
Receivables (9,235) (17,550) 4,212
Accounts payable-trade 8,417 6,687 (2,651)
Inventories (621) (572) 260
Other current assets and liabilities (1,960) (16,481) (2,187)
Other non-current assets and liabilities (2,295) (3,886) (2,985)
Other, net 493 (3,613) (498)
------------ ------------- -------------
Net cash flows provided from (used for)
operating activities 26,255 (315) 8,127
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (39,345) (37,350) (26,197)
Proceeds from disposal of assets 2,588 3,982 1,883
Acquisitions of businesses (2,000) (7,400) (52,000)
------------ ------------- -------------
Net cash used for investing activities (38,757) (40,768) (76,314)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 40,787
Proceeds from exercise of stock options
and stock purchase grants 980 1,130 601
Proceeds from (reduction of) borrowings-net 19,120 (689) 63,656
Principal payment on long-term notes (6,000)
------------ ------------- -------------
Net cash flows provided from financing activities 14,100 41,228 64,257
Increase (decrease) in cash and
cash equivalents 1,598 145 (3,930)
Cash and cash equivalents at
beginning of year 1,620 1,475 5,405
------------ ------------- -------------
Cash and cash equivalents at end of year $ 3,218 $ 1,620 $ 1,475
============ ============= =============
</TABLE>
See Notes to Consolidated Financial Statements
F-7
<PAGE> 129
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
BJ Services Company is a leading provider of pressure pumping and other
oilfield services to the petroleum industry. The consolidated financial
statements include the accounts of BJ Services Company and its majority-owned
subsidiaries (the "Company"). All significant intercompany balances and
transactions have been eliminated in consolidation.
Certain amounts for 1993 and 1992 have been reclassified in the accompanying
consolidated financial statements to conform to the current year presentation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Net income (loss) per share: Net income (loss) per share has been computed by
dividing net income (loss) by the weighted average number of outstanding
common shares. Common stock equivalents had no material dilutive effect on
the computation of net income (loss) per share for each year presented.
Cash and cash equivalents: The Company considers all highly liquid debt
instruments purchased with original maturities of three months or less to be
cash equivalents.
Inventories: Inventories, which consist principally of (a) products which are
consumed in the Company's services provided to customers, (b) spare parts for
equipment used in providing these services and (c) manufactured components and
attachments for equipment used in providing services, are stated primarily at
the lower of average cost or market.
Property: Property is stated at cost less amounts provided for permanent
impairments and includes capitalized interest of $541,000, $167,000 and
$800,000 for the years ended September 30, 1994, 1993 and 1992, respectively,
on funds borrowed to finance the construction of capital additions.
Depreciation is generally provided using the straight-line method over the
estimated useful lives of individual items. Leasehold improvements are
amortized on a straight-line basis over the shorter of the estimated useful
life or the lease term.
Goodwill: Goodwill represents the excess cost over fair value of the net
assets of companies acquired in purchase transactions. Goodwill is being
amortized on a straight-line method over periods ranging from 5 to 40 years.
Accumulated amortization at September 30, 1994 and 1993 was $1,880,000 and
$691,000, respectively.
Investments: Investments in companies in which the Company's ownership
interest ranges from 20 to 50 percent and the Company exercises significant
influence over operating and financial policies are accounted for using the
equity method. Other investments are accounted for using the cost method.
Foreign currency translation: Gains and losses resulting from balance sheet
translation of foreign operations where the U.S. dollar is the functional
currency are included in the consolidated statement of operations. Gains and
losses resulting from balance sheet translation of foreign operations where a
foreign currency is the functional currency are included as a separate
component of stockholders' equity. The Company's foreign operations primarily
use the U.S. dollar as the functional currency.
Foreign exchange contracts: From time to time, the Company enters into forward
foreign exchange contracts to hedge the impact of foreign currency fluctuations
on certain assets and liabilities denominated in foreign currencies. Changes
in market value are offset against foreign exchange gains or losses on the
related assets or liabilities and are included in other income (expense). There
were no foreign exchange contracts outstanding at September 30, 1994 or 1993.
F-8
<PAGE> 130
Environmental remediation and compliance: Environmental remediation costs are
accrued based on estimates of known environmental remediation exposures.
Liabilities are recorded when environmental assessments and/or remedial efforts
are probable, and the cost can be reasonably estimated.
3. RESTRUCTURING CHARGE AND ASSET WRITEDOWNS
During 1992, the Company recorded a provision of $13.7 million ($9.0 million
after tax, or $.69 per share) for restructuring its operations in North
America. The restructuring charge included $10.0 million relating primarily
to U.S. operations for writedowns of assets no longer used in operations,
severance costs for terminated employees and costs resulting from relocation of
equipment and personnel. The remaining $3.7 million was provided for the
closing of the Company's operations in Canada, consisting primarily of
writedowns of property and inventories to net realizable value, provisions for
future lease obligations and severance costs for terminated employees. These
restructurings were substantially completed in 1992.
In addition to the restructuring of its North American operations, in 1992
the Company also recorded a provision of $2.0 million ($1.4 million after tax,
or $.11 per share) to reduce its investment in the Company's North Sea
stimulation vessel.
4. ACQUISITIONS OF BUSINESSES
In September 1992, the Company acquired from Christian Salvesen PLC all of the
business and operations of Salvesen (Oilfield Technology) Limited ("Salvesen")
and certain related assets for a total purchase price of $52.0 million. The
operations of Salvesen acquired by the Company include casing and tubing
services and coiled tubing services provided to the oil and gas exploration and
production industry and commissioning and leak detection services provided to
offshore platforms and pipelines. Salvesen conducts its operations primarily
in the U.K. North Sea.
On April 1, 1993, the Company completed a transaction to acquire the assets,
including existing service contracts, of Norsk Bronnservice A/S, a subsidiary
of Odfjell Drilling & Consulting A/S, for $5.4 million. These operations
provide cementing, gravel packing and completion fluids services to the
Norwegian oil and gas industry.
On July 30, 1993 the Company acquired the coiled tubing operations of Italog,
S.p.A. for $2.0 million. Italog is based in Milan, Italy and provides coiled
tubing and nitrogen pumping services in Italy and Nigeria, under the name of
SIAT. The acquisition included the assets and existing contracts of SIAT.
On February 9, 1994, the Company acquired the remaining 50% ownership of its
joint venture in Egypt, Hughes Services C.I., Ltd., for $2.0 million. Prior to
the acquisition, this joint venture was accounted for using the equity method
of consolidation.
These acquisitions have been accounted for as purchases and accordingly, the
acquired assets and liabilities have been recorded at their estimated fair
values at the date of acquisition. The excess of the consideration paid over
the estimated fair value of net assets acquired has been recorded as goodwill.
5. LONG-TERM DEBT AND BANK CREDIT FACILITIES
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
September 30,
1994 1993
-------------------------------
(in thousands)
<S> <C> <C>
Notes payable, banks $ 81,900 $ 60,500
9.2% notes due August 1998 24,000 30,000
------------ -----------
105,900 90,500
Less current maturities of long-term debt 31,200 6,000
------------ -----------
Long-term debt $ 74,700 $ 84,500
============ ===========
</TABLE>
At September 30, 1994, the Company had $117.0 million in revolving credit
facilities with commercial banks. Included in this amount is a committed,
unsecured bank credit agreement (the "Agreement") under which the Company may
borrow up to $85.0 million until July 1995, at which time the commitment is
reduced to $56.7 million.
F-9
<PAGE> 131
The commitment further reduces to $28.3 million in July 1996 and the Agreement
expires in July 1997. Borrowings under the Agreement bear interest at a LIBOR
based rate, corporate based prime rate or at a certificate of deposit based
rate, at the Company's option. The Company is charged various fees in
connection with the Agreement, including a commitment fee charged on the daily
unborrowed portion of the commitment. Borrowings under this and another $3.0
million committed credit facility in the United Kingdom, which expires in
April 1995, amounted to $84.2 million and $60.5 million at September 30, 1994
and 1993, respectively. The weighted average interest rate for such outstanding
borrowings was 5.4% and 4.1% as of September 30, 1994 and 1993, respectively.
Commitment fees under the Company's credit facilities were $16,223, $63,679
and $124,374 for 1994, 1993 and 1992, respectively.
In addition to the committed facility, the Company had $29.0 million in
various unsecured, discretionary lines of credit at September 30, 1994 which
expire at various dates in 1995. There are no requirements for commitment fees
or compensating balances in connection with these lines of credit. There is no
stated interest rate for borrowings under these credit lines. At September 30,
1994, there were no outstanding borrowings under these lines of credit. There
were $4.5 million in outstanding borrowings under these lines of credit at
September 30, 1993.
In August 1991, the Company placed $30.0 million of unsecured notes with
private investors. The notes bear interest at a fixed rate of 9.2% with
principal payments due in five equal annual installments the first of which was
paid in August 1994. Since October 1991, the Company has entered into interest
rate swap agreements which effectively converted $30.0 million of fixed rate
debt with an interest rate of 9.2% to floating rate debt. Under the current
agreement which expires in August 1998, the Company makes payments at variable
rates based on LIBOR and in return receives payments based on fixed interest
rates. The agreements resulted in an average annual effective interest rate of
9.3% and 6.2% on the notes for 1994 and 1993, respectively.
At September 30, 1994, the Company had outstanding letters of credit and
performance related bonds totaling $10.0 million and $11.4 million,
respectively. The letters of credit are issued to guarantee various trade and
insurance activities.
The Company's credit facilities contain various customary covenants including
the maintenance of certain profitability and solvency ratios, and a restriction
on dividend payments which provides that the aggregate dividends paid by the
Company cannot exceed an amount equal to 50% of cumulative net income from July
1, 1990.
At September 30, 1994, long-term debt was due in aggregate annual installments
of $31,200,000, $34,400,000, $34,300,000 and $6,000,000 in the years ended
September 30, 1995, 1996, 1997 and 1998, respectively.
6. FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value.
Cash and Cash Equivalents, Trade Receivables and Trade Payables: The carrying
amount approximates fair value because of the short maturity of those
instruments.
Long-term debt and Interest Swap Agreement: Based on the rates currently
available to the Company for debt with similar terms and average maturities,
the fair value of the Company's unsecured notes is $26.0 million. The Company
would pay approximately $1.3 million to terminate the related interest swap
agreement at September 30, 1994. Other long-term debt consists of borrowings
under the Company's revolving credit facilities with commercial banks. The
carrying amount of such borrowings approximates fair value as the individual
borrowings under the revolver bear interest at current market rates.
F-10
<PAGE> 132
7. INCOME TAXES
The geographical sources of income (loss) before income taxes, minority
interest and cumulative effect of accounting change for the three years ended
September 30, 1994, were as follows:
<TABLE>
<CAPTION>
September 30,
1994 1993 1992
-------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
United States $ (12,793) $ (8,540) $ (23,333)
Foreign 25,701 25,378 19,141
--------------- --------------- ------------------
Income (loss) before income taxes,
minority interest and cumulative
effect of accounting change $ 12,908 $ 16,838 $ (4,192)
=============== =============== ==================
</TABLE>
The provision (benefit) for income taxes for the three years ended September
30, 1994 is summarized as follows:
<TABLE>
<CAPTION>
September 30,
1994 1993 1992
------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Current:
United States
Foreign $ 6,965 $ 6,470 $ 6,790
------------------ ----------------- -----------------
Total current 6,965 6,470 6,790
------------------ ----------------- -----------------
Deferred:
United States (2,831) (4,414) (10,698)
Foreign (2,128) (463) 251
------------------ ----------------- -----------------
Total deferred (4,959) (4,877) (10,447)
------------------ ----------------- -----------------
Income tax expense (benefit) $ 2,006 $ 1,593 $ (3,657)
================== ================= =================
</TABLE>
Due to improving economic conditions in certain foreign jurisdictions, the
Company now believes that its remaining unrecognized foreign net operating loss
carryforwards are more likely than not to be utilized before they expire. As a
result, the current year income tax provision for 1994 and 1993 includes
$1,867,000 and $620,000, respectively, of deferred foreign tax benefits related
to the recognition of foreign net loss carryforwards which were reserved for in
the valuation account at September 30, 1993 and September 30, 1992.
F-11
<PAGE> 133
The consolidated effective income tax rates (as a percent of income (loss)
before income taxes, minority interest and cumulative effect of accounting
change) for the three years ended September 30, 1994, varied from the United
States statutory income tax rate for the reasons set forth below:
<TABLE>
<CAPTION>
September 30,
1994 1993 1992
-----------------------------------------------
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% (34.0%)
Foreign earnings at varying tax rates (17.4) (11.9) (15.4)
Amortization of excess tax basis over book basis
resulting from separation from former parent (13.8) (10.6) (41.3)
Changes in valuation reserve (14.5) (3.7)
Foreign income recognized domestically 25.6 4.3
Other - net .7 (3.6) 3.5
-------- ------- ---------
Effective income tax rate 15.6% 9.5% (87.2%)
======== ======= =========
</TABLE>
Deferred tax assets and liabilities are recognized for the estimated future tax
effects of temporary differences between the tax basis of an asset or liability
and its reported amount in the financial statements. The measurement of
deferred tax assets and liabilities is based on enacted tax laws and rates
currently in effect in each of the jurisdictions in which the Company has
operations. Generally, deferred tax assets and liabilities are classified as
current or noncurrent according to the classification of the related asset or
liability for financial reporting. The estimated deferred tax effect of
temporary differences and carryforwards at September 30, 1994 and 1993 were
as follows:
<TABLE>
<CAPTION>
September 30,
1994 1993
----------------------------------
(in thousands)
<S> <C> <C>
Deferred assets:
Expenses accrued for financial reporting,
not yet deducted for tax $ 7,956 $ 1,692
Net operating loss carryforwards 44,621 42,593
Valuation allowance (11,164) (13,031)
-------------- -------------
Total deferred tax asset 41,413 31,254
Deferred liabilities:
Differences in depreciable basis of property 16,838 17,193
Income accrued for financial reporting,
not yet reported for tax 6,684 6,509
-------------- -------------
Total deferred tax liability 23,522 23,702
-------------- -------------
Deferred tax asset - net $ 17,891 $ 7,552
============== =============
</TABLE>
At September 30, 1994, the Company had approximately $112 million of U.S. tax
net operating loss carryforwards expiring in varying amounts between 2004 and
2009. In addition, the Company had approximately $3.4 million of tax net
operating loss carryforwards in various foreign jurisdictions in which the
Company operates. If not utilized, the foreign net operating losses will
expire beginning in 1996.
At September 30, 1994, the Company had approximately $3.5 million in foreign
tax credits available to offset future
F-12
<PAGE> 134
payments of federal income taxes. If not used, the foreign tax credits will
expire in varying amounts between 1995 and 1999. The Company had approximately
$.9 million of research and development tax credits available to offset future
payments of federal income taxes at September 30, 1994. If not used, the
research and development tax credits will expire in varying amounts between
2003 and 2006.
The Company does not provide federal income taxes on the undistributed earnings
of its foreign subsidiaries that the Company considers to be permanently
reinvested in foreign operations. The cumulative amount of such undistributed
earnings was approximately $111 million at September 30, 1994. If these
earnings were to be remitted to the Company, any U.S. income taxes payable
would be substantially reduced by foreign tax credits generated by the
repatriation of the earnings.
8. GEOGRAPHIC INFORMATION
Summarized information concerning geographic areas in which the Company
operated at September 30, 1994, 1993 and 1992 and for each of the years then
ended is shown as follows:
<TABLE>
<CAPTION>
Western Hemisphere Eastern Hemisphere
----------------------------- ---------------------------
United Latin America
States and Canada Europe Other Total
------------ ------------- ---------- ----------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
1994:
Revenue $ 208,279 $ 75,745 $ 95,181 $ 55,271 $ 434,476
------------ ------------- ---------- ----------- ----------
Operating income(loss) $ (2,634) $ 10,352 $ 5,858 $ 7,169 $ 20,745
------------ ------------- ---------- ----------- ----------
Identifiable assets $ 127,561 $ 72,558 $ 156,594 $ 53,353 $ 410,066
------------ ------------- ---------- ----------- ----------
1993:
Revenue $ 196,674 $ 60,560 $ 83,553 $ 53,576 $ 394,363
------------ ------------- ---------- ----------- ----------
Operating income $ 1,694 $ 2,249 $ 6,908 $ 9,350 $ 20,201
------------ ------------- ---------- ----------- ----------
Identifiable assets $ 117,543 $ 54,950 $ 150,612 $ 46,426 $ 369,531
------------ ------------- ---------- ----------- ----------
1992:
Revenue $ 162,471 $ 62,008 $ 50,040 $ 55,509 $ 330,028
------------ ------------- ---------- ----------- ----------
Operating income (loss) $ (13,198) $ 2,482 $ (2,470) $ 10,947 $ (2,239)
------------ ------------- ---------- ----------- ----------
Identifiable assets $ 160,696 $ 45,259 $ 80,865 $ 41,979 $ 328,799
------------ ------------- ---------- ----------- ----------
</TABLE>
Included in revenues for the United States are export sales totaling
$1,392,000, $1,861,000 and $3,065,000 for the years ended September 30, 1994,
1993 and 1992, respectively.
Corporate general and administrative expense, research and engineering expense
and certain other expenses related to worldwide manufacturing and other support
functions benefit both domestic and international operations. An allocation of
these expenses has been made to foreign areas based on total revenues. The
expenses allocated totaled $6,847,000, $8,390,000 and $7,236,000 for the years
ended September 30, 1994, 1993 and 1992, respectively.
9. EMPLOYEE BENEFIT PLANS
The Company has a thrift plan whereby eligible employees elect to contribute
from 2% to 12% of their base salaries to an employee benefit trust. Employee
contributions are matched by the Company at the rate of $.50 per $1.00 up to 6%
of the employee's base salary. In addition, the Company contributes between 2%
and 5% of each employee's base salary depending on his age as of January 1 each
year as a base contribution. Company matching contributions vest immediately
while base contributions become fully vested after five years of employment.
F-13
<PAGE> 135
The Company's contributions to these thrift plans amounted to $2,551,000,
$2,324,000 and $2,287,000 in 1994, 1993 and 1992, respectively.
In addition, the Company sponsors defined benefit plans for foreign operations
which cover substantially all employees in the United Kingdom and Venezuela.
Due to differences in foreign pension laws and economics, the defined benefit
plans are at least partially unfunded. The funded status of these plans at
September 30, 1994 and 1993 is as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
---------------- --------------------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $ 4,789 $ 3,498
================ ====================
Accumulated benefit obligation $ 5,292 $ 4,001
================ ====================
Projected benefit obligation $ 7,155 $ 6,204
Plan assets at fair value (5,531) (4,558)
---------------- --------------------
Projected benefit obligation in
excess of plan assets 1,624 1,646
Unrecognized gain (loss) 248 (22)
Unrecognized transition asset,
net of amortization 166 175
Unrecognized prior service cost (281) (290)
---------------- --------------------
Net pension liability $ 1,757 $ 1,509
================ ====================
</TABLE>
Assumptions used in accounting for the Company's defined-benefit pension plans
are as follows:
<TABLE>
<CAPTION>
1994 1993
-------------- ---------------
<S> <C> <C>
Weighted average discount rate 8% 9%
Weighted average rate of increase in future compensation 7% 8%
Weighted average expected long-term rate of return on assets 9% 9%
</TABLE>
Combined costs for the Company's defined plans are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
-------------- ----------------
<S> <C> <C>
Net Periodic Foreign Pension Cost:
Service cost for benefits earned $ 830 $ 760
Interest cost on projected benefit obligation 497 424
Actual return on plan assets (45) (651)
Net amortization and deferral (391) 441
--------------- ---------------
Net pension cost $ 891 $ 974
=============== ===============
</TABLE>
The Company also sponsors a plan whereby certain health care (primarily in the
U.S.) and life insurance benefits are provided for retired employees (and their
eligible dependents) if the employee meets specified age and service
requirements. These plans are unfunded and the Company retains the right,
subject to existing agreements, to modify or eliminate these plans.
Effective October 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions" ("SFAS 106"). In accordance with the
requirements of SFAS 106, the Company has changed its accounting for
postretirement benefits from a cash basis to an accrual basis over an
employee's period of service. The Company elected to immediately recognize
the cumulative effect at October 1, 1993 of the change in accounting principle
of $16.0 million ($10.4 million after taxes, or $.67 per share).
Effective January 1, 1994 the Company amended its postretirement medical
benefit plan to provide credits based on years of service which could be used
to purchase coverage under the active employee plans. This change effectively
caps the Company's health care inflation
F-14
<PAGE> 136
rate at a 4% increase per year. The reduction of approximately $5.7 million in
the accumulated postretirement benefit obligation due to this amendment is
being amortized over the average period of future service to the date of full
eligibility for such postretirement benefits of the active employees. As a
result of this amendment, the net postretirement benefit cost for 1994 was
comparable to the prior year's cost. Postretirement medical benefit costs
were $639,000, $590,000 and $425,000 in 1994, 1993 and 1992, respectively.
Net periodic postretirement benefit costs for the year ended September 30, 1994
included the following components (in thousands):
<TABLE>
<S> <C>
Service cost-benefits attributed to service during the period $ 512
Interest cost on accumulated postretirement benefit obligation 798
Amortization of prior service costs (671)
---------------------
Net periodic postretirement benefit cost $ 639
======================
</TABLE>
The actuarial and recorded liabilities for these postretirement benefits are as
follows at September 30, 1994 (in thousands):
Accumulated postretirement benefit obligation:
<TABLE>
<S> <C>
Retirees $ 5,312
Fully eligible active plan participants 1,391
Other active plan participants 4,059
-----------------------
10,762
Unrecognized prior service cost 5,072
-----------------------
Accrued postretirement benefit liability $ 15,834
========================
</TABLE>
The accumulated postretirement benefit obligation was determined using a
discount rate of 7% and a health care cost trend rate of 13%, decreasing
ratably to 5.2% in the year 2020 and thereafter. Increasing the assumed health
care cost trend rates by one percentage point in each year would increase the
accumulated postretirement benefit obligation as of September 30, 1994 by
approximately $1.4 million and increase the aggregate of the service and
interest cost components of the net periodic postretirement benefit cost for
fiscal 1994 by approximately $200,000.
F-15
<PAGE> 137
10. COMMITMENTS AND CONTINGENCIES
The Company through performance of its service operations is sometimes named
as a defendant in litigation, usually relating to either personal injury claims
or product and service liability claims. The Company maintains insurance
coverage against such claims to the extent deemed prudent by management. The
Company believes that there are no existing claims of a potentially material
adverse nature for which it has not already provided.
Federal, state and local laws and regulations govern the Company's operation of
underground fuel storage tanks. Rather than incur additional costs to restore
and upgrade tanks as required by regulations, management has opted to remove
the existing tanks. The Company is in the process of removing these tanks and
has identified certain tanks with leaks which will require remedial cleanups.
In addition, the Company is conducting a number of environmental investigations
and remedial actions at current and former company locations and, along with
other companies, has been named a potentially responsible party for two waste
disposal sites. The Company has established an accrual of $1,333,000 for such
environmental matters which management believes to be its best estimate of the
Company's portion of future costs to be incurred. The Company also maintains
insurance for environmental liabilities which the Company believes is
reasonable based on its knowledge of its industry.
Lease Commitments: At September 30, 1994, the Company had long-term operating
leases covering certain facilities and equipment with varying expiration dates.
Minimum annual rental commitments for the years ended September 30, 1995, 1996,
1997, 1998 and 1999 are $9,187,000, $7,566,000, $5,386,000, $4,350,000 and
$3,841,000, respectively, and $7,568,000 in the aggregate thereafter.
11. SUPPLEMENTAL FINANCIAL INFORMATION
Supplemental financial information for the three years ended September 30, 1994
is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------------------------------------------
(in thousands)
<S> <C> <C> <C>
Consolidated Statement of Operations:
Maintenance and repairs $ 32,338 $ 27,890 $ 23,907
Rent expense 15,580 11,020 7,539
Research and development 6,421 6,500 4,858
Taxes other than payroll and income 8,960 8,308 7,951
Consolidated Statement of Cash Flows:
Income taxes paid $ 6,233 $ 7,168 $ 6,033
Interest paid 10,330 5,112 3,088
Details of acquisitions:
Fair value of assets acquired 1,808 4,483 37,801
Liabilities assumed 501 3,436
Goodwill 693 2,917 17,635
Cash paid for acquisitions 2,000 7,400 52,000
</TABLE>
F-16
<PAGE> 138
Other income - net for the three years ended September 30, 1994 is summarized
as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----------------------------------------------
(in thousands)
<S> <C> <C> <C>
Net foreign exchange translation gain (loss) $ (762) $ 228 $ 262
Gain (loss) on sales of assets - net 346 (62) 429
Gain on Argentine bonds 400 800
Amortization of intangibles (1,298) (691)
Gain on forward foreign exchange contract 1,416
Other - net 131 (140) (132)
---------- ---------- ------------
Other income (expense) - net $ (1,183) $ 1,551 $ 559
========== ========== ============
</TABLE>
12. EMPLOYEE STOCK PLANS
Stock Incentive Plan:
The Company's 1990 Stock Incentive Plan as amended and restated provides for
the granting of options for the purchase of the Company's common stock ("Common
Stock") to officers and key employees of the Company. Such options vest over a
three year period and are exercisable for periods ranging from one to ten
years. An aggregate of 1,500,000 shares of Common Stock have been reserved for
grants through the year 2000. At September 30, 1994, there were 809,820
options to purchase shares of Common Stock granted. Stock option activity
under the Company's 1990 Stock Incentive Plan is summarized below:
<TABLE>
<CAPTION>
Number of Shares 1994 1993 1992
- ---------------- --------- ------- -------
(in thousands)
<S> <C> <C> <C>
Stock options outstanding, beginning of year 621 451 300
Changes during the year:
Granted (per share):
1994, $19.63 to $22.75 188
1993, $16.28 195
1992, $12.00 to $19.38 151
Exercised/surrendered(per share):
1994, $13.63 to $23.25 (42)
1993, $19.38 to $23.25 (25)
--------- ------- --------
Stock options outstanding, end of year
(per share: $12.00 to $23.25) 767 621 451
========= ======= =======
Stock options exercisable, end of year
(per share: $13.63 to $23.25) 417 250 176
========= ======= ========
</TABLE>
In addition to the options granted, the Company has also issued 177,700
Performance Units ("Units"), pursuant to the terms of the 1990 Stock Incentive
Plan, to certain officers of the Company. Each Unit represents the right to
receive from the Company at the end of a stipulated period an unrestricted
share of Common Stock, contingent upon achievement of certain financial
performance goals over the stipulated period. The underlying shares are
considered granted under the 1990 Stock Incentive Plan which reduces the
number available for future grants at September 30, 1994 to 512,480. Should
the Company fail to achieve the specific financial goals as set by the
Executive Compensation Committee of the Board of Directors, the Units are
canceled and the related shares revert to the Company for reissuance under the
plan. The aggregate fair market value of the underlying shares granted under
this plan is considered unearned compensation at the time of grant and is
adjusted annually based on the current market price for the Company's Common
Stock. Compensation expense is determined based on management's current
estimate of the likelihood of meeting the specific financial goals and charged
ratably over the stipulated period.
F-17
<PAGE> 139
Stock Purchase Plan:
In July 1990, the Company adopted the 1990 Employee Stock Purchase Plan (the
"Purchase Plan") under which all employees may purchase shares of the Company's
Common Stock at 85% of market value on the first or last business day of the
twelve-month plan period beginning each October, whichever is lower. Such
purchases are limited to 10% of the employee's regular pay. A maximum
aggregate of 750,000 shares has been reserved under the Purchase Plan, 621,827
of which were available for future purchase at September 30, 1994. In October
1994, 45,001 shares were purchased at $16.15 per share.
13. STOCKHOLDER RIGHTS PLAN
The Company has a Stockholder Rights Plan designed to deter coercive takeover
tactics and to prevent an acquirer from gaining control of the Company without
offering a fair price to all of the Company's stockholders. Under this plan,
each outstanding share of the Company's Common Stock includes one preferred
share purchase right ("Right") which becomes exercisable under certain
circumstances, including when beneficial ownership of the Company's Common
Stock by any person, or group, equals or exceeds 20% of the Company's
outstanding Common Stock. Each Right entitles the registered holder to
purchase from the Company one one-hundredth of a share of Series Two Junior
Participating Preferred Stock, at a price of $75, subject to adjustment under
certain circumstances. Upon the occurrence of certain events specified in the
Rights Plan, each holder of a Right (other than an Acquiring Person) will have
the right, upon exercise of such Right to receive that number of shares of
common stock of the Company (or the surviving corporation) that, at the time of
such transaction, would have a market price of two times the purchase price of
the Right. No shares of Series Two Junior Participating Preferred Stock have
been issued by the Company at September 30, 1994.
In January 1994 the former Rights Plan was triggered and the Company redeemed
all of the preferred share purchase rights issued under its Stockholder Rights
Agreement to acquire Series One Junior Participating Preferred Stock at a
redemption price of $.01 per Right, at a total cost to the Company of $155,000.
F-18
<PAGE> 140
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
Fiscal
First Second Third Fourth Year
Quarter Quarter Quarter Quarter Total
--------------------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Fiscal Year 1994:
Revenue $ 104,757 $98,451 $ 106,318 $ 124,950 $ 434,476
Gross profit(a) 11,853 7,219 10,143 14,239 43,454
Income before cumulative effect
of accounting change 3,572 445 2,067 4,686 10,770
Cumulative effect of change in
accounting principle, net of tax
benefit of $5,600,000 (10,400) (10,400)
Net income (loss) (6,828) 445 2,067 4,686 370
Net income (loss) per share:
Before cumulative effect of
accounting change .23 .03 .13 .30 .69
Cumulative effect of change in
accounting principle, net of tax (.67) (.67)
Net income (loss) per share (.44) .03 .13 .30 .02
Fiscal Year 1993:
Revenue $ 94,444 $100,106 $ 96,692 $ 103,121 $ 394,363
Gross profit(a) 9,867 9,471 12,077 11,611 43,026
Net income 3,082 2,287 3,250 5,942(b) 14,561
Net income per share .21 .15 .21 .38(b) .94
</TABLE>
(a) Represents revenue less cost of sales and services, research and
engineering expenses and marketing expenses.
(b) Includes $1.3 million ($.08 per share) of nonrecurring tax benefits.
15. SUBSEQUENT EVENT (UNAUDITED)
On November 17, 1994, the Company and The Western Company of North America
("Western") entered into a definitive merger agreement whereby the Company will
exchange cash, common stock and warrants with an estimated value of
approximately $493 million to acquire all of Western's outstanding common
shares. The transaction is subject to customary closing conditions, including
shareholder and normal government approvals, and is expected to be completed in
the first half of calendar 1995. Both the Company and Western are leading
providers of oilfield services. Western's revenue from continuing operations
for the twelve months ended September 30, 1994 was $328.8 million. The
transaction will be accounted for using the purchase method of accounting.
F-19
<PAGE> 141
BJ SERVICES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1994 1993
-------------- -------------
<S> <C> <C>
Revenue $ 119,415 $ 104,757
Operating Expense:
Cost of sales and services 99,453 87,478
Research and engineering 2,063 2,044
Marketing 3,944 3,382
General and administrative 6,104 5,635
-------------- -------------
Total operating expense 111,564 98,539
-------------- -------------
Operating income 7,851 6,218
Interest expense (2,307) (1,542)
Interest income 137 186
Other income (expense) - net 401 (452)
-------------- -------------
Income before income taxes and
cumulative effect of accounting change 6,082 4,410
Income taxes 1,338 838
-------------- -------------
Income before cumulative effect of
accounting change 4,744 3,572
Cumulative effect of change in accounting principle, net of tax (10,400)
-------------- -------------
Net income (loss) $ 4,744 $ (6,828)
============== =============
Net income (loss) per common share:
Income per common share before cumulative effect
of accounting change $ .30 $ .23
Cumulative effect of change in accounting principle, net of tax (.66)
-------------- -------------
Net income (loss) per common share $ .30 $ (.43)
============== =============
Average shares outstanding 15,716 15,663
============== =============
</TABLE>
See Notes to Consolidated Condensed Financial Statements
F-20
<PAGE> 142
BJ SERVICES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION
(IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, September 30,
1994 1994
--------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 6,934 $ 3,218
Receivables - net 102,910 103,754
Inventories:
Finished goods 29,955 30,970
Work in process 1,515 1,118
Raw materials 7,375 6,591
---------------- -----------------
Total inventories 38,845 38,679
Deferred income taxes 4,972 4,478
Other current assets 8,710 8,230
---------------- -----------------
Total current assets 162,371 158,359
Property - net 195,192 198,844
Goodwill 20,692 20,998
Investments and other assets 32,917 31,865
---------------- -----------------
$ 411,172 $ 410,066
================ =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 45,728 $ 54,609
Short-term borrowings and current
portion of long-term debt 29,713 33,450
Accrued employee compensation and benefits 11,496 10,521
Income and other taxes 10,437 10,678
Accrued insurance 3,706 2,637
Other accrued liabilities 13,611 9,162
---------------- -----------------
Total current liabilities 114,691 121,057
Long-term debt 74,700 74,700
Deferred income taxes 8,554 6,986
Accrued postretirement benefits and other 17,940 17,396
Stockholders' equity 195,287 189,927
---------------- -----------------
$ 411,172 $ 410,066
================ =================
</TABLE>
See Notes to Consolidated Condensed Financial Statements
F-21
<PAGE> 143
BJ SERVICES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1994 1993
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 4,744 $ (6,828)
Adjustments to reconcile net income (loss) to cash
provided by (used for) operating activities:
Cumulative effect of accounting change 10,400
Depreciation and amortization 6,675 6,205
Deferred income taxes (benefit) (1,057) (1,121)
Gain on disposal of property (687) (132)
Changes in:
Receivables 844 (1,850)
Accounts payable (8,881) (148)
Other current assets and liabilities 5,744 (4,986)
Other, net 2,087 (1,758)
--------------- ---------------
Net cash provided by (used for) operating activities 9,469 (218)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (6,093) (10,458)
Proceeds from disposal of assets 3,328 834
--------------- ---------------
Net cash used for investing activities (2,765) (9,624)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 10,520
Reduction of borrowings (3,737)
Proceeds from issuance of stock 749 854
--------------- ---------------
Net cash provided by (used for) financing activities (2,988) 11,374
Increase in cash and cash equivalents 3,716 1,532
Cash and cash equivalents at beginning of period 3,218 1,620
--------------- ---------------
Cash and cash equivalents at end of period $ 6,934 $ 3,152
=============== ===============
</TABLE>
See Notes to Consolidated Condensed Financial Statements
F-22
<PAGE> 144
BJ SERVICES COMPANY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. GENERAL
In the opinion of management, the unaudited consolidated condensed financial
statements for BJ Services Company (the "Company") include all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation of the financial position as of December 31, 1994, and the results
of operations and cash flows for each of the three month periods ended December
31, 1994 and 1993. The consolidated condensed statement of financial position
at September 30, 1994 is derived from the September 30, 1994 audited financial
statements. Although management believes the disclosures in these financial
statements are adequate to make the information presented not misleading,
certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. The results of operations and the
cash flows for the three-month period ended December 31, 1994 are not
necessarily indicative of the results to be expected for the full year.
Certain amounts for fiscal 1994 have been reclassified in the accompanying
consolidated condensed financial statements to conform to current year
presentation.
F-23
<PAGE> 145
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
THE WESTERN COMPANY OF NORTH AMERICA
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity and of cash
flows present fairly, in all material respects, the financial position of The
Western Company of North America and its subsidiaries at December 31, 1994 and
1993, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 7 to the consolidated financial statements, The Western
Company of North America changed its method of accounting for income taxes by
adopting Statement of Financial Accounting Standards No. 109 in 1993. Also in
1993, The Western Company of North America adopted Statement of Financial
Accounting Standards No. 106, discussed in Note 8, and accordingly changed its
method of accounting for postretirement benefits other than pensions.
PRICE WATERHOUSE LLP
Houston, Texas
February 22, 1995
F-24
<PAGE> 146
THE WESTERN COMPANY OF NORTH AMERICA
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1993
---------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash (including cash equivalents of $10,459 in
1994 and $134,467 in 1993) ....................... $ 12,650 $141,279
Marketable securities ............................. -- 18,868
Receivables (less allowances of $4,273 in
1994 and $4,373 in 1993) ......................... 74,080 63,853
Inventories ....................................... 20,065 16,887
Assets held for sale, net - discontinued
operations ....................................... 35,060 --
Other current assets .............................. 5,154 9,464
-------- --------
Total current assets ............................ 147,009 250,351
-------- --------
PROPERTY AND EQUIPMENT, AT COST:
Pressure pumping equipment ........................ 199,720 183,172
Offshore drilling equipment ....................... -- 69,668
Buildings and other ............................... 56,395 45,098
Construction in progress .......................... 6,676 8,775
-------- --------
262,791 306,713
Less - Accumulated depreciation and
amortization ................................... 76,696 77,897
-------- --------
186,095 228,816
-------- --------
OTHER ASSETS ........................................ 20,597 9,218
-------- --------
$353,701 $488,385
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt ................. $ -- $ 97,784
Accounts payable .................................. 29,996 33,112
Accrued liabilities ............................... 38,389 51,184
--------- --------
Total current liabilities ....................... 68,385 182,080
--------- --------
LONG-TERM DEBT ...................................... 90,909 90,910
--------- --------
OTHER LONG-TERM LIABILITIES AND DEFERRED CREDITS .... 15,258 14,948
--------- --------
STOCKHOLDERS' EQUITY:
Common stock -- par value $.10; authorized
50,000,000 shares, issued 18,279,914 and
18,198,285 shares at December 31, 1994
and 1993, respectively ........................... 1,828 1,820
Additional paid-in capital ........................ 193,991 193,451
Cumulative translation adjustment ................. (317) --
Retained earnings (accumulated deficit),
since May 12, 1989 ............................... (16,353) 5,176
--------- --------
179,149 200,447
--------- --------
COMMITMENTS AND CONTINGENCIES (NOTE 6)
$ 353,701 $488,385
========= ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-25
<PAGE> 147
THE WESTERN COMPANY OF NORTH AMERICA
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES:
Pressure pumping ............................. $ 307,511 $ 294,073 $ 225,353
Production chemicals ......................... 34,990 -- --
---------- ---------- ----------
342,501 294,073 225,353
---------- ---------- ----------
OPERATING COSTS AND EXPENSES:
Pressure pumping ............................. 270,737 250,471 200,532
Production chemicals ......................... 31,027 -- --
Depreciation and amortization ................ 18,814 14,589 14,887
General and administrative ................... 8,846 9,022 8,076
---------- ---------- ----------
329,424 274,082 223,495
---------- ---------- ----------
Operating income ........................... 13,077 19,991 1,858
---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest expense, net of interest capitalized (10,032) (13,505) (10,407)
Interest income .............................. 1,236 4,653 1,059
Merger related expenses ...................... (21,118) -- --
Writedown of pressure pumping assets and other -- (7,132) --
---------- ---------- ----------
Total other income (expense) ............... (29,914) (15,984) (9,348)
---------- ---------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES AND
EXTRAORDINARY LOSSES .......................... (16,837) 4,007 (7,490)
Provision for income taxes ................... 495 627 353
---------- ---------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY LOSSES ................... (17,332) 3,380 (7,843)
DISCONTINUED OPERATIONS ........................ (4,197) 35,321 9,510
EXTRAORDINARY LOSSES ........................... -- (25,713) (1,223)
---------- ---------- ----------
NET INCOME (LOSS) .............................. $ (21,529) $ 12,988 $ 444
========== ========== ==========
EARNINGS (LOSS) PER SHARE:
Primary:
Income (loss) from continuing
operations before extraordinary
losses .................................... $ (0.95) $ 0.18 $ (0.44)
Discontinued operations .................... (0.23) 1.90 0.53
Extraordinary losses ....................... -- (1.38) (0.07)
---------- ---------- ----------
Net income (loss) .......................... $ (1.18) $ 0.70 $ 0.02
========== ========== ==========
Fully diluted:
Income (loss) from continuing operations
before extraordinary losses ............... $ * $ * $ *
Discontinued operations .................... * 1.48 *
Extraordinary losses ....................... * * *
---------- ---------- ----------
Net income (loss) .......................... $ * $ * $ *
========== ========== ==========
</TABLE>
* Fully diluted computation is not reflected because per share effect is
antidilutive
The accompanying notes are an integral part of these statements.
F-26
<PAGE> 148
THE WESTERN COMPANY OF NORTH AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS ASSOCIATED WITH OPERATING ACTIVITIES:
Net income (loss) ................................... $ (21,529) $ 12,988 $ 444
Reconciliation of net income (loss) to net
cash provided by operating activities --
Depreciation and amortization ..................... 22,846 24,294 26,891
(Gains)/losses on sales of offshore
drilling rigs .................................... 4,818 (59,161) --
Writedown of offshore drilling rigs ............... -- 18,328 --
Writedown of pressure pumping assets .............. -- 3,500 --
Extraordinary losses .............................. -- 25,713 1,223
Non-cash provision for income taxes ............... -- 6,630 825
Provision for doubtful accounts receivable ........ (207) (450) --
Other, net ........................................ 1,439 2,146 457
Changes in assets and liabilities --
Accounts receivable .............................. 1,721 10,935 (3,177)
Inventory ........................................ (1,319) (4,689) 1,869
Accounts payable ................................. (5,778) 5,077 (2,066)
Accrued interest payable ......................... (1,049) (448) 572
Accrued merger related expenses .................. 10,386 -- --
Other, net ....................................... 1,523 (246) (2,512)
---------- ---------- ----------
Net cash provided by operating activities ...... 12,851 44,617 24,526
---------- ---------- ----------
CASH FLOWS ASSOCIATED WITH INVESTING ACTIVITIES:
Additions to property and equipment ................. (21,313) (53,312) (38,773)
Acquisitions, net of cash acquired .................. (27,535) (10,400) --
Proceeds from sales of offshore drilling rigs ....... 5,340 169,250 --
Disposition costs for rig sales ..................... -- (4,406) --
Proceeds from sales of marketable securities ........ 18,711 153,458 --
Purchases of marketable securities .................. -- (173,687) --
Other, net .......................................... 964 347 367
---------- ---------- ----------
Net cash provided (used) in investing activities (23,833) 81,250 (38,406)
---------- ---------- ----------
CASH FLOWS ASSOCIATED WITH FINANCING ACTIVITIES:
Debt incurred ....................................... 7,000 7,000 114,801
Debt payments ....................................... (124,946) (7,000) (106,118)
Proceeds from exercise of stock options ............. 486 2,243 --
Other, net .......................................... (187) (10) (307)
---------- ---------- ----------
Net cash provided (used) by financing activities (117,647) 2,233 8,376
---------- ---------- ----------
Net increase (decrease) in cash and
cash equivalents ............................ (128,629) 128,100 (5,504)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR ......... 141,279 13,179 18,683
---------- ---------- ----------
CASH AND CASH EQUIVALENTS - END OF YEAR ............... $ 12,650 $ 141,279 $ 13,179
========== ========== ==========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid, net of interest capitalized .......... $ 11,007 $ 14,182 $ 10,577
Income taxes paid ................................... 1,804 1,965 1,345
</TABLE>
NONCASH INVESTING AND FINANCING ACTIVITIES (NOTES 1, 3, 4 AND 8)
The accompanying notes are an integral part of these statements.
F-27
<PAGE> 149
THE WESTERN COMPANY OF NORTH AMERICA
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK RETAINED
PAR VALUE $.10 ADDITIONAL CUMULATIVE EARNINGS
------------------------- PAID-IN TRANSLATION (ACCUMULATED
SHARES AMOUNT CAPITAL ADJUSTMENT DEFICIT) TOTAL
---------- ---------- ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1991 .............. 17,741 $ 1,774 $ 180,618 -- $ (8,256) $ 174,136
Net income ........................... -- -- -- -- 444 444
Realization of pre-reorganization net
operating losses .................... -- -- 825 -- -- 825
Other, net ........................... 1 -- -- -- -- --
------- -------- --------- ------ --------- ----------
BALANCE DECEMBER 31, 1992 .............. 17,742 1,774 181,443 -- (7,812) 175,405
Net income ........................... -- -- -- -- 12,988 12,988
Realization of pre-reorganization net
operating losses .................... -- -- 6,013 -- -- 6,013
Exercise of stock options ............ 455 46 5,374 -- -- 5,420
Tax benefit of stock options exercised -- -- 617 -- -- 617
Other, net ........................... 1 -- 4 -- -- 4
------- -------- --------- ------ --------- ----------
BALANCE DECEMBER 31, 1993 .............. 18,198 1,820 193,451 -- 5,176 200,447
Net loss ............................. -- -- -- -- (21,529) (21,529)
Exercise of stock options ............ 90 9 539 -- -- 548
Cumulative translation adjustment .... -- -- -- (317) -- (317)
Other, net ........................... (9) (1) 1 -- -- --
------- -------- --------- ------ --------- ----------
BALANCE DECEMBER 31, 1994 .............. 18,279 $ 1,828 $ 193,991 $ (317) $ (16,353) $ 179,149
======= ======== ========= ====== ========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-28
<PAGE> 150
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include all accounts of The Western
Company of North America and its wholly-owned subsidiaries (the "Company"). All
significant intercompany transactions have been eliminated in consolidation.
PLAN OF REORGANIZATION
On February 2, 1988, The Western Company of North America ("WCNA") filed a
voluntary petition for reorganization under chapter 11 of the federal
Bankruptcy Code. On May 12, 1989 the WCNA Third Amended Plan of Reorganization
was consummated.
The Company adopted reorganization accounting to record the effects of
consummating the Plan of Reorganization.
REVENUE RECOGNITION
Revenue related to pressure pumping, production chemicals and offshore drilling
services and sales of pressure pumping and production chemical products are
recognized as services are provided and products are shipped or delivered.
The Company uses the percentage-of-completion method for equipment sales
contracts to recognize revenues and expenses as the earnings process
progresses.
CONCENTRATION OF CREDIT RISK
The Company's customers consist primarily of major integrated international oil
companies and independent oil and gas companies, including companies owned in
whole or in part by foreign governments. The Company performs ongoing credit
evaluations of its customers and generally does not require material
collateral. The Company maintains reserves for potential credit losses, and
historically such losses have been within its expectations. No single customer
accounted for 10% or more of the Company's consolidated revenues during 1994,
1993 and 1992.
CASH EQUIVALENTS AND MARKETABLE SECURITIES
Cash equivalents represent highly liquid investments with a maturity of three
months or less. Marketable securities represent highly liquid investments with a
maturity in excess of three months but less than one year. Cash equivalents and
marketable securities are carried at cost, which approximates market value at
December 31, 1994 and 1993. During 1994, proceeds from the sales of marketable
securities classified as available for sale totaled $18.7 million. Loss on the
sales of these securities was immaterial.
INVENTORIES
Inventories are comprised principally of materials and supplies and are stated
at lower of cost or market. Cost is determined using the first-in, first-out
method for pressure pumping inventories and the average cost method for
production chemicals and offshore drilling rig inventories.
F-29
<PAGE> 151
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
PROPERTY AND EQUIPMENT
Except for offshore drilling rigs and associated equipment and a well
stimulation vessel and associated equipment, property and equipment is
depreciated or amortized using the straight-line method over their estimated
useful lives.
The Company uses the units-of-service method to calculate depreciation expense
associated with offshore drilling rigs and its well stimulation vessel. Under
this method, depreciation is reduced to 20% of its normal rate while the rigs
and the well stimulation vessel are not being utilized.
The Company capitalizes renewals and improvements which significantly enhance
the value or extend the useful life of an asset. Expenditures for normal
maintenance and repairs are charged to expense as incurred. The cost of pressure
pumping equipment retired or sold and related accumulated depreciation are
removed from the accounts, and gains and losses are reflected in operations.
Normal retirements of offshore drilling equipment are reflected in accumulated
depreciation accounts; gains or losses arising from unusual retirements are
reflected in earnings, and asset cost and related accumulated depreciation are
removed from the accounts.
INTEREST EXPENSE
The Company capitalizes interest expense applicable to significant capital
projects which require a period of time to construct. In 1994, 1993 and 1992,
total interest incurred was $10.0 million, $19.3 million and $14.0 million,
respectively, and interest of $5.8 million in 1993 and $2.3 million in 1992 was
capitalized. No interest was capitalized in 1994. Included in the 1992 income
from discontinued operations is $1.3 million of interest expense associated
with certain rig debt.
IMPAIRMENT OF LONG-LIVED ASSETS
An impairment writedown on long-lived assets is recorded whenever events or
changes in circumstances indicate that market value is less than net book value.
Market value is determined by either independent appraisals or calculation of
future undiscounted net cash flows.
A 1993 writedown of pressure pumping assets and other included a $3.5 million
writedown of older pressure pumping equipment and idle facilities to net
realizable value in anticipation of disposal.
GOODWILL
Goodwill represents the excess of cost of acquisitions over the fair value of
identifiable assets acquired less liabilities assumed. Goodwill is included as a
component of other assets and is amortized on a straight-line basis over 15
years. As of December 31, 1994 and 1993, goodwill was
$18.4 million and $1.2 million, respectively, net of accumulated amortization
of $1.4 million and $0.2 million, respectively. Impairment of goodwill is
evaluated in the same manner as other long-lived assets.
F-30
<PAGE> 152
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
ACCRUED LIABILITIES
At December 31, 1994 and 1993, accrued liabilities included the following:
<TABLE>
<CAPTION>
1994 1993
-------- -------
(In thousands)
<S> <C> <C>
Accrued extraordinary loss (see Note 5).................. $ -- $23,408
Accrued merger related expenses.......................... 10,386 --
Accrued payroll and related expenses..................... 11,371 10,356
Income taxes payable..................................... 4,495 5,806
Accrued interest......................................... 3,127 4,022
</TABLE>
ENVIRONMENTAL COSTS
Environmental costs that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations and that do not contribute to current or future
revenue generation are expensed. Liabilities are recorded when remedial efforts
are probable and the costs can be reasonably estimated. Generally, the timing of
these accruals coincides with the completion of an environmental evaluation or
the Company's commitment to a formal plan of action. At December 31, 1994 and
1993, liabilities for environmental costs were $2.6 million and $2.4 million,
respectively.
INTEREST RATE SWAP
During 1993, the Company entered into an interest rate swap agreement to manage
its interest rate exposure. This agreement involves the exchange of fixed rate
interest payments for floating rate interest payments based on the six month
London Interbank Offering Rate ("LIBOR"). The estimated differential to be paid
or received at each semiannual settlement date is charged or credited to
interest expense as interest rates change.
This agreement was entered into with a major financial institution. Management
believes the risk of incurring losses related to nonperformance by the financial
institution is remote and any such losses would be immaterial.
FOREIGN CURRENCY TRANSLATION
The financial statements of certain foreign operations are translated from the
functional currencies to U.S. dollars. Adjustments resulting from the
translation process totaled $0.3 million in 1994 and are reflected as a
cumulative translation adjustment in stockholders' equity.
EARNINGS (LOSS) PER SHARE
Primary earnings (loss) per share is based on the weighted average number of
shares of Common Stock, $.10 par value ("Common Stock") and Common Stock
equivalent shares (when dilutive) outstanding during the year. Common stock
equivalent shares relate to options to purchase shares under various stock
option plans (see Note 9). Additionally, the fully diluted earnings per share
computation assumes the conversion of the Company's 7 1/4% Convertible
Subordinated Debentures (see Note 5).
F-31
<PAGE> 153
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The weighted average number of shares used in computing earnings (loss) per
share are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Primary........................................ 18,236 18,591 17,757
Fully diluted.................................. 23,958 23,794 23,136
</TABLE>
RESEARCH AND DEVELOPMENT
During the years ended December 31, 1994, 1993 and 1992, expenditures classified
as research and development costs incurred by the Company were $8.4 million,
$6.5 million and $5.5 million, respectively.
RECLASSIFICATIONS
Certain amounts in the prior years' consolidated financial statements and notes
thereto have been reclassified to conform to the current year's presentation
including the presentation of discontinued operations.
NOTE 2 - MERGER
In November 1994, the Company and BJ Services Company ("BJ Services") entered
into a definitive merger agreement. Subject to certain conditions and to
appraisal rights under Delaware law, this agreement provides that stockholders
of the Company will receive $20 in cash or in shares of BJ Services common stock
for each outstanding share of Company Common Stock they own. Additionally, for
each share of Common Stock they hold, each stockholder will receive .2 of a
five-year warrant to purchase one share of BJ Services common stock for $30 per
share. Pursuant to the merger agreement, stockholders may elect to receive any
proportion of cash and BJ Services common stock, provided that the total number
of shares of Common Stock for which such elections are made will be adjusted so
that the total shares for which each type of election is made will be
approximately equal. The transaction is subject to the approval of both
companies' stockholders, antitrust review and other customary closing
conditions, and is expected to close during the first half of 1995. Merger
related expenses of $21.1 million represent costs associated with the expected
merger with BJ Services and include investment banker, legal and accounting
fees, certain severance costs and other miscellaneous expenses. In addition to
the expenses recorded in 1994, additional legal fees and other expenses related
to the merger are expected to be incurred and recorded in 1995.
NOTE 3 - ACQUISITIONS
The Company completed the acquisitions, in February 1994, of substantially all
of the assets of the production and process chemical business of Unichem
International, Inc. ("Unichem") for $19.8 million in cash and in June 1994, of
substantially all of the oilfield chemicals business and assets of Betz Energy
Chemicals, Inc. ("Betz") for $4.8 million in cash. The businesses acquired from
Unichem and Betz are substantially the same. In July 1994, the Company completed
the
F-32
<PAGE> 154
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
acquisition of the coiled tubing business of Coiltech, Inc. ("Coiltech") for
$3.1 million in cash. All three acquisitions were accounted for using the
purchase method of accounting. Goodwill associated with these transactions
totaled $18.4 million (see Note 1). The Unichem, Betz and Coiltech results of
operations have been included in the consolidated financial statements since
January 1994, July 1994 and July 1994, respectively. In April 1993, the Company
completed a $10.4 million cash acquisition of the assets of the Smith Energy
Services division of Allied Products Corporation. This acquisition was accounted
for using the purchase method of accounting.
NOTE 4 - DISCONTINUED OPERATIONS
The Company formalized a plan in November 1994 (the "Measurement Date") to
dispose of the remaining assets of its offshore drilling segment. These assets
consisted primarily of two semi-submersible offshore drilling rigs and related
equipment and inventory. As a result, the offshore drilling segment has been
reclassified in the consolidated statements of operations as discontinued
operations.
The results of the discontinued operations were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Revenues ..................................... $ 22,609 $ 64,676 $ 89,613
========= ========= =========
Income from discontinued operations:
Operating income ........................... $ 2,429 $ 4,161 $ 13,919
Other income (loss):
Gains on sales of offshore drilling
rigs .................................... -- 59,161 --
Writedowns of offshore drilling rigs ..... -- (18,328) --
Interest expense ......................... -- -- (1,333)
--------- --------- ---------
Income from discontinued operations before
income taxes .............................. 2,429 44,994 12,586
Provision for income taxes ................. 152 9,673 3,076
--------- --------- ---------
2,277 35,321 9,510
--------- --------- ---------
Loss on disposal, net of income tax benefit in
1994 of $(152) .............................. (6,474) -- --
--------- --------- ---------
$ (4,197) $ 35,321 $ 9,510
========= ========= =========
</TABLE>
The loss on disposal includes operating results subsequent to the Measurement
Date including shut-down expenses and gain (loss) from the disposal of the two
semi-submersible offshore drilling rigs, ALASKAN STAR and PACESETTER IV. In
December 1994, the Company completed the sale of the ALASKAN STAR for $11.8
million, of which $6.3 million is a bankers' acceptance drawn on a U.S. bank due
within one year. This rig sale resulted in a gain of $0.3 million. In December
1994, the Company signed a letter of intent to sell the PACESETTER IV. The
Company completed the sale in early February 1995 for $37.2 million which
resulted in a loss of $6.7 million (see Note 13). At December 31, 1994, Assets
held for sale, net - discontinued operations primarily consists of the net
realizable value of the PACESETTER IV.
F-33
<PAGE> 155
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Income from discontinued operations includes operating results prior to the
Measurement Date. Income from discontinued operations during 1993 included the
following sales of offshore drilling rigs and writedowns of offshore drilling
rigs. In March 1993, the Company completed the sale of the TRITON III jack-up
drilling rig for $17.8 million in cash. This sale resulted in a gain of $9.1
million. In July 1993, the Company completed the sale of the DELTA jack-up
drilling rig for $1.5 million in cash which resulted in a gain of $0.4 million.
In October 1993, the Company completed the sale of nine jack-up drilling rigs
and associated equipment and inventories for $150.0 million cash that resulted
in a 1993 fourth quarter gain of $49.7 million. The rigs sold were: APOLLO I,
APOLLO II, APOLLO IV, NIKE I, POLARIS I, POLARIS II, TRITON I, TRITON II and
TRITON IV. In March 1993, the Company wrote down the net book value of its three
mat-supported jack-up rigs by $8.8 million. This writedown reflected the low
utilization experienced by these types of rigs and the expectation of lower
future utilization for them. In December 1993, the Company wrote down the net
book value of the ALASKAN STAR semi-submersible drilling rig by $9.5 million.
This writedown reflected the Company's lower expectation of future operating
cash flow opportunities for second generation semi-submersibles like the ALASKAN
STAR.
Included in the 1992 income from discontinued operations is $1.3 million
of interest expense associated with certain rig debt.
NOTE 5 - LONG-TERM DEBT
At December 31, 1994 and 1993, long-term debt consisted of the following:
<TABLE>
<CAPTION>
1994 1993
-------- ---------
(In thousands)
<S> <C> <C>
Senior Unsecured:
12 7/8% Senior Notes................................ $ 2,212 $ 100,000
Subordinated Unsecured:
7 1/4% Convertible Subordinated Debentures.......... 88,746 88,746
-------- ---------
90,958 188,746
Less: Unamortized portion of original issue discount.. 49 52
-------- ---------
90,909 188,694
Less: Current portion................................. -- 97,784
-------- ---------
$ 90,909 $ 90,910
======== =========
</TABLE>
The 12 7/8% Senior Notes, Due 2002 (the "Notes"), are unsecured and were issued
in November 1992 in the face amount of $100 million. During March 1994, the
Company purchased, through a tender offer, and retired $97.8 million face amount
of the Notes. The aggregate purchase price of these Notes was $117.3 million,
resulting in an extraordinary loss of $25.7 million ($1.38 per share) including
unamortized original debt issuance costs of $3.2 million, unamortized original
issue discount of $2.3 million and offering costs of $0.7 million. This
extraordinary loss was recognized in December 1993. The carrying value of the
Notes represents the face amount less unamortized original issue discount.
Interest at 12 7/8% per annum is payable semiannually. The effective interest
rate associated with the Notes, after considering amortization of original issue
discount, is 13.33%.
F-34
<PAGE> 156
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The Notes mature December 1, 2002, and there are no sinking fund requirements.
The indenture governing the Notes contains restrictions and requirements
relating to mergers.
During the fourth quarter of 1992, the Company issued the Notes and used the net
proceeds to prepay secured debt totaling $94.6 million associated with bank loan
facilities, ship financing bonds and a note relating to an offshore drilling
rig. As a result, it incurred a $1.2 million ($0.07 per share) extraordinary
loss primarily representing prepayment penalties and the write-off of
unamortized debt issuance costs.
In 1990, the Company issued $90 million face amount of 7 1/4% Convertible
Subordinated Debentures, due January 15, 2015 (the "Debentures"). Interest at
7 1/4% per annum is payable semiannually. Annual payments equal to 5% of the
principal amount of the Debentures commence in 2001; such payments are
calculated to retire 70% of principal prior to maturity. The Debentures, unless
previously redeemed, are convertible into Common Stock at $17 per share at the
option of the holder at any time prior to maturity. The indenture governing the
Debentures contains restrictions and requirements relating to mergers.
The Company has a $30 million revolving credit facility which had no borrowings
outstanding at December 31, 1994 and 1993. Borrowings under this revolving
credit facility are secured by the Company's accounts receivable and are limited
to a percentage of such receivables. The revolving credit facility bears
interest at 1 1/2% over LIBOR or 1/2% over prime and matures December 31, 1995.
Commitment fees on the unused portion of the revolving credit facility are 1/2%
per annum. The revolving credit facility contains restrictions and requirements
relating to, among other things, mergers and maintenance of certain financial
ratios.
The Company has entered into an interest rate swap agreement which effectively
changes fixed-rate debt into floating-rate debt. Under the agreement, the
Company receives a fixed rate of 5.26% on a notional principal amount of $100
million and pays a floating rate based on LIBOR, as determined in six month
intervals. On June 1, 1995 the notional principal amount will be reduced from
$100 million to $75 million until the agreement expires on June 1, 1996. The
Company may elect from time to time to terminate the swap agreement. Had it
elected to do so at December 31, 1994, it would have been required to make a
termination payment of $4.1 million.
At December 31, 1994, there were no required principal payments associated with
long-term debt until 2001.
F-35
<PAGE> 157
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
At December 31, 1994, the fair value of the Company's long-term debt, determined
based on quoted market prices, was as follows:
<TABLE>
<CAPTION>
Amount
--------------
(In thousands)
<S> <C>
12 7/8% Senior Notes............................................ $ 2,349
7 1/4% Convertible Subordinated Debentures...................... 91,519
---------
$ 93,868
=========
</TABLE>
Such market prices are subject to changing market conditions; therefore, the
fair value of the Company's long-term debt at December 31, 1994 is not
indicative of future fair market value.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
The Company's operating leases include rental commitments associated with
office buildings, equipment and vehicles. As of December 31, 1994, the Company
had lease commitments for future minimum rental payments as follows:
<TABLE>
<CAPTION>
Amount
--------------
(In thousands)
<S> <C>
1995.............................................................. $ 7,570
1996.............................................................. 5,281
1997.............................................................. 3,070
1998.............................................................. 1,791
1999.............................................................. 1,528
Thereafter........................................................ 5,452
-------
$24,692
=======
</TABLE>
Rental expense for the years ended December 31, 1994, 1993 and 1992 was
approximately $9 million, $7 million and $7 million, respectively.
At December 31, 1994, the Company was contingently liable for outstanding
letters of credit, not reflected in the accompanying consolidated financial
statements, in the amount of $3.5 million.
Actions for well damage and loss of oil and gas production alleging negligence,
breach of contract and fraud, under common law as well as state and federal
statutes, are incidental to the pressure pumping business. Actions for personal
injury are also incidental to that business and the offshore drilling business
where federal statutes permit employees who work on rigs to sue their employers
instead of pursuing workmen's compensation remedies. Increasingly, plaintiffs in
both property damage and personal injury litigation allege damages for which
insurance coverage generally does not exist or is prohibited, such as punitive
damages, treble damages or damages for breach of contract. Numerous such
incidental lawsuits are pending against the Company which include claims covered
by insurance and which are being defended by the Company's insurance carriers.
To the extent a plaintiff is ultimately successful on an uninsured portion of a
claim, the Company would be responsible for satisfying such judgment. To date,
the Company has not, by judgment or through
F-36
<PAGE> 158
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
settlement, incurred a material uninsured liability arising out of personal
injury or property damage litigation.
From time to time it has been alleged by competitors of the Company that the use
by the Company of certain products or methods to perform particular pressure
pumping services constitutes infringement of patents they hold. Such claims
could result in payment by the Company of damages or royalties and the Company
could be enjoined from performing services in which such products or services
are used. To date, the Company has not experienced a material reduction in
revenues or incurred a material loss as a result of such allegations.
Shortly after the public announcement by BJ Services in September 1994 of a
proposal to acquire the Company ("BJS Proposal"), four actions were commenced
against the Company and its directors in the Delaware Court of Chancery styled
CROYDEN ASSOCIATES VS. SHELDON R. ERIKSON, ET AL. AND THE WESTERN COMPANY OF
NORTH AMERICA, C. A. No. 13740, filed September 13, 1994, REGGIE P. JUDICE VS.
SHELDON R. ERIKSON, ET AL. AND THE WESTERN COMPANY OF NORTH AMERICA, C. A. No.
13742, filed September 14, 1994, WILLIAM T. HENDERSON VS. SHELDON R. ERIKSON,
ET AL. AND THE WESTERN COMPANY OF NORTH AMERICA, C. A. No. 13743, filed
September 14, 1994, and RUSS SEGER VS. SHELDON R. ERIKSON, ET AL. AND THE
WESTERN COMPANY OF NORTH AMERICA, C. A. No. 13769, filed September 27, 1994.
The allegations in these lawsuits, all of which were filed as class action
complaints, are substantially the same and relate to the rejection of the BJS
Proposal by the Company's Board of Directors. The purported class of plaintiffs
on whose behalf the class action complaints were filed is all stockholders of
the Company. It is claimed in these lawsuits, INTER ALIA, that by failing to
accept the BJS Proposal the Company and its directors breached their fiduciary
duties to the stockholders of the Company. The plaintiffs seek equitable relief
to compel the Company and its directors to perform their fiduciary duties, as
such are construed by the plaintiffs, and unspecified damages. The Company
believes the allegations in these lawsuits are untrue and that the claims they
assert are totally without merit. A motion to consolidate the four actions is
pending.
F-37
<PAGE> 159
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 7 - INCOME TAXES
Components of the provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- ------
(In thousands)
<S> <C> <C> <C>
Current tax expense:
U.S. federal................................ $ -- $ -- $ --
Foreign..................................... 495 241 353
------- ------- ------
495 241 353
------- ------- ------
Noncash tax expense:
U.S. federal................................ -- 386 --
Foreign..................................... -- -- --
------- ------- ------
-- 386 --
------- ------- ------
$ 495 $ 627 $ 353
======= ======= ======
</TABLE>
The non-cash taxes are due primarily to the utilization of prereorganization tax
benefits which are recorded directly to stockholders' equity and, therefore, are
not reflected as a reduction of income tax expense.
The total provision for income taxes is reflected in the consolidated statements
of operations under the following components:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- ------
(In thousands)
<S> <C> <C> <C>
Continuing operations......................... $ 495 $ 627 $ 353
Discontinued operations........................ -- 9,673 3,076
------- ------- ------
$ 495 $10,300 $3,429
======= ======= ======
</TABLE>
The deferred tax assets (liabilities) consisted of the following:
<TABLE>
<CAPTION>
December 31,
----------------- January 1,
1994 1993 1993
-------- -------- -------
(In thousands)
<S> <C> <C> <C>
Gross deferred tax assets:
Loss carryforwards.......................... $144,388 $129,346 $157,080
Stock of foreign affiliates................. 28,055 23,247 20,625
Property and equipment...................... 7,433 6,202 5,800
Inventory reserves.......................... 3,201 4,818 5,637
Allowances for doubtful accounts receivable. -- -- 5,449
Other....................................... 16,010 13,566 10,614
-------- -------- -------
199,087 177,179 205,205
Gross deferred tax liabilities:
Property and equipment...................... (13,569) (10,301) (27,050)
Deferred tax asset valuation allowance......... (185,518) (166,878) (178,155)
-------- -------- --------
$ -- $ -- $ --
======== ======== ========
</TABLE>
F-38
<PAGE> 160
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The differences between the provision for income taxes and income taxes computed
using the U.S. federal income tax rate and income (loss) from continuing
operations before provision for income taxes and extraordinary losses were as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------ --------
(In thousands)
<S> <C> <C> <C>
Income taxes computed using the U.S. federal rate.. $(5,893) $ 1,402 $(2,547)
Losses not receiving income tax benefits........... 2,350 -- 2,491
Foreign taxes, net of foreign tax deduction taken.. 327 159 233
Merger related costs not deductible................ 2,720 -- --
Noncash taxes due to carryover tax benefits
recorded directly to stockholders' equity......... -- 386 --
Net benefit of operating loss carryforwards........ -- (1,605) --
Other, net......................................... 991 285 176
------- ------ -------
$ 495 $ 627 $ 353
======= ======= =======
</TABLE>
In 1993, current taxable income was reduced by $84.5 million of net operating
loss carryforwards. The financial statement impact was limited to $14.2 million
due to the change in deferred tax assets and liabilities.
The net change in the deferred tax asset valuation allowance was an increase of
$18.6 million in 1994 and a decrease of $11.3 million in 1993. The portion of
the deferred tax asset valuation allowance which, if realized, will be recorded
directly to stockholders' equity was $114 million at December 31, 1994, $114
million at December 31, 1993 and $120 million at January 1, 1993.
The Company has net operating loss carryforwards for federal income tax purposes
of $372 million. If not utilized, these carryforwards will expire between 2001
and 2009. As a result of the Company having experienced changes in control as
defined in Internal Revenue Code Section 382 in prior years, the usage of
approximately $219 million of these carryforwards is subject to an annual
limitation. The entire $372 million of carryforwards could be subject to an
annual limitation due to the pending merger with BJ Services (see Note 2). For
United Kingdom income tax purposes, the Company at December 31, 1994 had tax
attribute carryforwards amounting to (pound)43 million which are not subject to
an annual limitation. However, these United Kingdom tax benefits will be reduced
substantially as a result of the sale of the PACESETTER IV in 1995 (see Note
13).
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). The Company
elected to adopt SFAS 109 prospectively. The initial adoption did not materially
affect results of operations.
F-39
<PAGE> 161
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Income (loss) before provision for income taxes and extraordinary items
consisted of the following:
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Domestic income (loss)...................... $ (13,303) $ 37,245 $ (20,457)
Foreign income (loss)....................... (7,731) 11,756 25,553
--------- --------- ---------
$ (21,034) $ 49,001 $ 5,096
========= ========= =========
</TABLE>
NOTE 8 - RETIREMENT AND OTHER BENEFIT PROGRAMS
PENSION PLAN
The Company has a defined benefit pension plan (the "Pension Plan") covering all
employees with one year of service. Pension benefits are based on years of
service and average compensation for each employee's five consecutive highest
paid years during the last ten years worked. Pension benefits are fully vested
after five years of service.
Generally, the Company makes annual contributions to the Pension Plan to the
extent they are tax deductible and, at a minimum, funds the amount necessary to
meet minimum funding requirements under the Employees' Retirement Income
Security Act, as amended.
Net pension expense for 1994, 1993 and 1992 included the following components:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- ------
(In thousands)
<S> <C> <C> <C>
Service cost - benefits earned during the
period ...................................... $ 1,309 $ 1,153 $ 1,240
Interest cost on projected benefit obligation.. 2,822 2,697 2,513
Actual return on plan assets................... 448 (3,485) (1,614)
Net gain (loss) deferred....................... (3,132) 1,106 (566)
------- ------- -------
$ 1,447 $ 1,471 $ 1,573
======= ======= =======
</TABLE>
Assumptions used in determining 1994, 1993 and 1992 net pension expense were:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Discount rate..................................... 7.0% 7.75% 8.0%
Rate of increase in compensation levels........... 5.0% 5.0% 5.0%
Expected long-term rate of return on assets....... 9.0% 9.0% 9.0%
</TABLE>
Pension Plan assets consist primarily of government debt securities, corporate
equities, money market instruments and long-term corporate debt obligations,
both domestic and foreign.
The following table sets forth as of December 31, 1994 and 1993 the Pension
Plan's estimated funded status, amounts recognized in the Company's consolidated
balance sheets and actuarial present value of benefit obligations. The discount
rates used to determine all benefit obligations at December 31, 1994 and 1993
were 8.00% and 7.00%, respectively.
F-40
<PAGE> 162
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
Projected benefit obligation............................. $ 37,849 $ 39,732
Pension Plan assets at fair value........................ 28,994 29,675
-------- --------
Projected benefit obligation in excess of
Pension Plan assets .................................... 8,855 10,057
Net unrecognized prior service cost and gain/loss from
past experience......................................... (1,608) (1,879)
-------- --------
Accrued pension liability................................ $ 7,247 $ 8,178
======== ========
Accumulated benefit obligation, including vested benefits
of $33.4 million in 1994 and $36.5 million in 1993...... $ 34,684 $ 37,416
======== ========
</TABLE>
POSTRETIREMENT BENEFITS
The Company provides postretirement life insurance and medical benefits to
retired employees between the ages of 55 and 65. Certain life insurance benefits
are also provided to retired employees over 65 years of age. The life insurance
is funded by insurance premiums paid entirely by the Company. The medical
benefits are funded by a capped self insurance program with contributions made
by retirees for themselves and their covered dependents. Effective January 1,
1993, the Company adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," which
requires the accrual method of accounting for the expected costs of providing
such benefits. Under such accounting method, the future costs of postretirement
benefits are recorded during the years employees render service to earn
eligibility for such benefits.
Net periodic postretirement benefit cost for 1994 and 1993 included the
following components:
<TABLE>
<CAPTION>
1994 1993
------ ------
(In thousands)
<S> <C> <C>
Service cost - benefits attributed to service during
the period............................................ $ 282 $ 232
Actual return on plan assets............................. -- --
Interest cost on accumulated postretirement benefit
obligation........................................ 349 336
Amortization of transition obligation.................... 99 117
Other, net............................................... 21 214
------ ------
$ 751 $ 899
====== ======
</TABLE>
The discount rates used to determine postretirement benefit costs were 7% in
1994 and a weighted average of 7.75% in 1993.
F-41
<PAGE> 163
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The following table sets forth the status of postretirement benefit obligations
at December 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
------ -------
(In thousands)
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees.............................................. $ 1,741 $ 1,746
Other fully eligible participants..................... 1,160 1,134
Other active participants............................. 2,180 2,237
------- -------
Total accumulated postretirement benefit obligation...... 5,081 5,117
Unrecognized actuarial loss.............................. (44) (546)
Unrecognized transition obligation....................... (1,782) (1,881)
Plan assets at fair value................................ -- --
------- -------
Accrued postretirement benefit cost...................... $ 3,255 $ 2,690
======= =======
</TABLE>
The discount rate used to determine postretirement benefit obligations at
December 31, 1994 and 1993 were 8% and 7%, respectively. There were no plan
assets.
For measurement purposes, a 9% annual rate of increase for covered health care
benefits was assumed for 1994. The rate is assumed to decrease gradually to 5%
by 2026 and remain at that level thereafter.
Increasing the health care cost trend rates by one percentage point in each year
would increase the accumulated postretirement benefit obligation as of December
31, 1994 by $279,000 and the aggregate of the service and interest cost
components of net postretirement health care cost for fiscal year 1994 by
$59,000.
NON-EMPLOYEE DIRECTOR RETIREMENT PLAN
During 1994, the Company adopted an unfunded retirement plan for non-employee
directors. To be eligible for benefits under the plan, a director must have
retired from the Board of Directors after having served for at least 10
consecutive years and reached the age of 65. Benefits are payable for 10 years
and at December 31, 1994, the Company accrued $250,000 related to the plan.
RETIREMENT SAVINGS PLAN
All employees with one year of service are eligible to participate in the
Company's Retirement Savings Plan. Subject to certain Internal Revenue Code
limitations, participants may contribute up to 15% of their annual compensation.
Effective March 1, 1994, the Company began matching employee contributions to
the Plan up to 6% of compensation at the rate of 25 cents for each dollar the
employee contributes. In addition, the Company has the option of providing an
additional match at the end of each year at the rate of 1 cent to 25 cents for
each dollar the employee has contributed to the Plan during the year up to 6% of
compensation. In February 1995, the Company elected to make an additional match
at the 25 cents level for the 1994 plan year. Matching contributions made or
accrued in 1994 were $656,000.
F-42
<PAGE> 164
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
POSTEMPLOYMENT BENEFITS
Effective January 1, 1994, the Company adopted the Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits" which requires accrual accounting for
postemployment benefits such as disability-related and workers' compensation
payments. The effect of this adoption on 1994 operating income was immaterial,
as the Company has historically accrued for most of these costs incurred by the
Company. At December 31, 1994, the Company's liability for these benefits was
$5.1 million.
NOTE 9 - STOCK INCENTIVE PLANS
The Company maintains a long-term management incentive plan and a non-employee
Director stock option plan. Up to 1,837,500 shares of Common Stock may be or
have been issued under this long-term management incentive plan. Of such number,
1,112,500 shares were allocated to an employee stock option plan, 375,000 shares
were allocated for restricted stock awards and 350,000 shares were allocated for
performance share awards. Under the non-employee Director stock option plan,
75,000 shares of Common Stock were reserved for issuance.
Under the employee stock option plan, shares of Common Stock may be purchased at
a price determined by the Executive Development and Compensation Committee (the
"Committee") of the Board of Directors, but in no case less than 90% of market
price on date of grant for nonqualified options and 100% of market price on date
of grant for incentive stock options. Options which have been granted expire up
to ten years after date of grant and are exercisable on a cumulative basis equal
to either 25% or 33% for each year outstanding or such other basis as may be
determined by the Committee. At December 31, 1994, options to purchase 693,538
shares were outstanding under this plan at option prices ranging from $4.50 to
$19.00 per share.
Under the non-employee Director stock option plan, shares of Common Stock may be
purchased at 100% of market price on date of grant. During 1989, options to
purchase 2,500 shares were granted to each non-employee Director, thereafter,
pursuant to the plan options to purchase 1,250 shares have been granted to each
Director at each annual meeting of the Company's stockholders. This plan is, in
most other respects, similar in its operation to the employee stock option plan
discussed above. At December 31, 1994, options to purchase 37,500 shares were
outstanding under this plan at option prices ranging from $4.00 to $15.38 per
share; options to purchase 18,750 shares were exercisable at that date.
As a result of the merger agreement signed by BJ Services and the Company (see
Note 2), all stock options outstanding under the long-term management incentive
plan became fully vested and exercisable for a period of ninety days. At the end
of the ninety day period, all options still outstanding will revert back to the
original terms of the option plans until consummation of the merger, at which
time they will again become fully vested and exercisable.
F-43
<PAGE> 165
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
A summary of transactions relating to these stock option plans during 1994, 1993
and 1992 is as follows:
<TABLE>
<CAPTION>
Number of Total Option
Options Price
--------- ------------
(In thousands)
<S> <C> <C>
Outstanding at December 31, 1991........................ 320,700 $ 3,472
Granted ($4.00 to $7.00 per share)................... 251,125 1,257
Cancelled ($5.88 to $19.13 per share)................ (96,450) (1,348)
-------- --------
Outstanding at December 31, 1992........................ 475,375 3,381
Granted ($4.88 to $12.13 per share).................. 338,500 3,114
Exercised ($4.50 to $9.00 per share)................. (155,937) (898)
Cancelled ($7.00 to $18.25 per share)................ (11,281) (101)
-------- --------
Outstanding at December 31, 1993........................ 646,657 5,496
Granted ($12.50 to $14.50 per share)................. 238,500 3,076
Exercised ($4.50 to $12.13 per share)................ (69,994) (425)
Cancelled ($4.50 to $15.50 per share)................ (84,125) (777)
-------- --------
Outstanding at December 31, 1994........................ 731,038 $ 7,370
======== ========
</TABLE>
The number of shares of Common Stock available for future granting of options
under these stock option plans was 178,406, 332,781 and 60,000 at December 31,
1994, 1993 and 1992, respectively.
In addition to the stock options included in the preceding table, an executive
of the Company was granted an option to purchase 268,750 shares of Common Stock
at a price of $3.02 per share in connection with his employment in 1987.
Compensation associated with these options was recorded pursuant to
reorganization accounting. The option agreement expires December 31, 1998. At
December 31, 1994, such option was outstanding and exercisable for 248,750
shares.
During 1989, the 375,000 shares of Common Stock reserved for restricted stock
awards were issued. Compensation associated with such awards was recorded
pursuant to reorganization accounting. With one exception, 50% of the shares
issued were issued without forfeiture restrictions, and, generally, the
remaining restrictions lapsed as to 12.5% of the shares awarded on each of the
first four anniversaries of the date the restricted stock awards were issued. At
December 31, 1994, no shares remained subject to forfeiture restrictions.
The 350,000 performance shares were awarded during 1989 subject to vesting over
four years upon the attainment of specified performance objectives or at earlier
dates under certain conditions relating to the reduction of principal and
interest outstanding under a long-term debt agreement. During 1990, the
performance share awards became vested and 140,000 shares of Common Stock were
issued. The remainder of the performance share awards were converted into
options to purchase 298,945 shares of Common Stock based on the value of such
performance share awards. During 1993, all 298,945 options were exercised. This
resulted in a 1993 non-cash reclassification of the difference between $4.50,
the exercise price, and the value of the share awards when vested from other
long-term liabilities to additional paid-in capital.
F-44
<PAGE> 166
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 10 - STOCKHOLDER PROTECTION RIGHTS PLAN
In March 1990, the Company's Board of Directors (the "Board") adopted a
Stockholder Protection Rights Plan (the "Rights Plan") designed to protect
against attempts to acquire control of the Company that the Board believes are
not in the best interest of the stockholders. The Rights Plan provides for the
distribution of one Right for each outstanding share of Common Stock. Such
Rights will separate from the Common Stock upon the earlier of (i) the date any
person or group becomes the beneficial owner of 15% or more outstanding Common
Stock, or (ii) the tenth business day (or a later date designated by the Board)
after any person makes a tender or exchange offer for 15% or more of outstanding
Common Stock.
Upon separation from Common Stock, each Right will entitle the holder thereof to
purchase 1/100th share of Participating Preferred Stock at an exercise price of
$70, subject to adjustment (the "Exercise Price"). Each 1/100th share of the
Participating Preferred Stock is the economic and voting equivalent to one share
of Common Stock. Additionally, if any person or group becomes the beneficial
owner of 15% or more of outstanding Common Stock, each Right will entitle the
holder thereof to purchase, for the Exercise Price, Common Stock having a value
of twice the Exercise Price. Rights held by such person or group would become
void. Under certain circumstances, without action by the holders of Rights, the
Board may exchange each Right for one share of Common Stock or 1/100th share of
Participating Preferred Stock. The Board can terminate the Rights anytime before
a person or group acquires 15% or more of outstanding Common Stock.
The Company amended the Rights Plan in November 1994 to provide that BJ Services
would not be a beneficial owner of Company securities for purposes of the Rights
Plan by reason of entering into the merger agreement with the Company or
consummating the transactions contemplated therein (see Note 2).
F-45
<PAGE> 167
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 11 - SEGMENT INFORMATION AND FOREIGN OPERATIONS
Following is a summary of the Company's domestic and foreign operations by
business segment:
<TABLE>
<CAPTION>
PRESSURE PRODUCTION OFFSHORE ELIMINA-
PUMPING CHEMICALS DRILLING TIONS CONSOLIDATED
-------- ---------- -------- ------- ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
1994
REVENUES:
Domestic .................................... $ 291,441 $ 34,990 $ -- $ -- $ 326,431
Foreign and export sales .................... 16,070 -- -- -- 16,070
Intersegment sales .......................... -- 963 -- (963) --
---------- --------- ---------- ---------- ----------
$ 307,511 $ 35,953 $ -- $ (963) $ 342,501
========== ========= ========== ========== ==========
OPERATING INCOME:
Domestic .................................... $ 29,258 $ 1,861 $ -- $ -- $ 31,119
Foreign and export sales .................... (8,086) -- -- -- (8,086)
---------- --------- ---------- ---------- ----------
$ 21,172 $ 1,861 $ -- $ -- 23,033
---------- --------- ---------- ----------
General and administrative .................. (9,956)
----------
Operating income ............................ 13,077
Interest expense, net of interest
capitalized ................................ (10,032)
Interest income ............................. 1,236
Merger related expenses ..................... (21,118)
----------
Loss from continuing operations before
provision for income taxes ................. $ (16,837)
==========
IDENTIFIABLE ASSETS:
Domestic .................................... $ 234,031 $ 29,112 $ -- $ -- $ 263,143
Foreign ..................................... 25,517 -- 39,655 -- 65,172
---------- --------- ---------- ----------- ----------
$ 259,548 $ 29,112 $ 39,655 $ -- 328,315
---------- --------- ---------- -----------
Corporate assets ............................ 25,386
----------
$ 353,701
==========
1993
REVENUES:
Domestic..................................... $ 278,131 $ -- $ -- $ -- $ 278,131
Foreign and export sales..................... 15,942 -- -- -- 15,942
---------- --------- ---------- ---------- ----------
$ 294,073 $ -- $ -- $ -- $ 294,073
========== ========= ========== ========== ==========
OPERATING INCOME:
Domestic .................................... $ 35,409 $ -- $ -- $ -- $ 35,409
Foreign and export sales .................... (5,744) -- -- -- (5,744)
---------- --------- ---------- ---------- ----------
$ 29,665 $ -- $ -- $ -- 29,665
---------- --------- ---------- ----------
General and administrative ................ (9,674)
----------
Operating income .......................... 19,991
Interest expense, net of interest
capitalized .............................. (13,505)
Interest income ........................... 4,653
Writedown of pressure pumping assets
and other ................................ (7,132)
-----------
Income from continuing operations
before provision for income tax and
extraordinary loss ....................... $ 4,007
==========
IDENTIFIABLE ASSETS:
Domestic .................................. $ 157,031 $ -- $ 894 $ -- $ 157,925
Foreign ................................... 96,932 -- 62,311 -- 159,243
---------- --------- ---------- ---------- ----------
$ 253,963 $ -- $ 63,205 $ -- 317,168
---------- --------- ---------- ----------
Corporate assets .......................... 171,217
----------
$ 488,385
==========
</TABLE>
F-46
<PAGE> 168
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 11 - SEGMENT INFORMATION AND FOREIGN OPERATIONS - (CONTINUED)
<TABLE>
<CAPTION>
PRESSURE PRODUCTION OFFSHORE ELIMINA-
PUMPING CHEMICALS DRILLING TIONS CONSOLIDATED
---------- ---------- ---------- ---------- ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
1992
REVENUES:
Domestic................................... $ 211,576 $ -- $ -- $ -- $ 211,576
Foreign and export sales................... 13,777 -- -- -- 13,777
---------- --------- ---------- ---------- ----------
$ 225,353 $ -- $ -- $ -- $ 225,353
========== ========= ========== ========== ==========
OPERATING INCOME:
Domestic................................... $ 10,640 $ -- $ -- $ -- $ 10,640
Foreign and export sales................... 23 -- -- -- 23
---------- --------- ---------- ---------- ----------
$ 10,663 $ -- $ -- $ -- 10,663
---------- --------- ---------- ----------
General and administrative ................ (8,805)
----------
Operating income........................... 1,858
Interest expense, net of interest..........
capitalized.............................. (10,407)
Interest income............................ 1,059
----------
Loss from continuing operations before
provision for income taxes and
extraordinary loss....................... $ (7,490)
==========
IDENTIFIABLE ASSETS:
Domestic................................... $ 145,828 $ -- $ 27,990 $ -- $ 173,818
Foreign.................................... 64,969 -- 166,648 -- 231,617
---------- --------- ---------- ---------- ----------
$ 210,797 $ -- $ 194,638 $ -- 405,435
---------- --------- ---------- ----------
Corporate assets........................... 26,535
----------
$ 431,970
==========
</TABLE>
F-47
<PAGE> 169
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 11 - SEGMENT INFORMATION AND FOREIGN OPERATIONS - (CONTINUED)
In November 1994, the Company formalized a plan to dispose of the remaining
assets of its offshore drilling segment. These assets consisted primarily of two
semi-submersible offshore drilling rigs and related equipment and inventory. As
a result, the business segment data for 1993 and 1992 has been restated to
exclude the offshore drilling segment (see Note 4).
The results of operations for the offshore drilling segment for 1993 and 1992
were as follows:
<TABLE>
<CAPTION>
1993 1992
------- -------
(In thousands)
<S> <C> <C>
Revenues................................................... $64,676 $89,613
------- -------
Operating income........................................... $ 4,161 $13,919
Interest expense........................................... -- (1,333)
Gains on sales of offshore drilling rigs................... 59,161 --
Writedowns of offshore drilling rigs....................... (18,328) --
------- -------
Income before income taxes and extraordinary losses........ $44,994 $12,586
======= =======
</TABLE>
<TABLE>
<CAPTION>
1994 1993 1992
------------------------------ ------------------------------ -----------------------------
DEPRECIATION CAPITAL DEPRECIATION CAPITAL DEPRECIATION CAPITAL
AND AMORTIZATION EXPENDITURES AND AMORTIZATION EXPENDITURES AND AMORTIZATION EXPENDITURES
---------------- ------------ ---------------- ------------ ---------------- ------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Pressure pumping ................... $ 15,601 $ 21,353 $ 13,937 $ 50,166 $ 14,158 $ 29,921
Production chemicals ............... 2,103 5,722 -- -- -- --
Offshore drilling .................. -- 66 -- 11,526 -- 8,765
Corporate .......................... 1,110 861 652 2,020 729 87
-------- -------- -------- -------- -------- --------
$ 18,814 $ 28,002 $ 14,589 $ 63,712 $ 14,887 $ 38,773
======== ======== ======== ======== ======== ========
</TABLE>
F-48
<PAGE> 170
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 11 - SEGMENT INFORMATION AND FOREIGN OPERATIONS - (CONTINUED)
Amounts reported above for 1994, 1993 and 1992 foreign and export sales include
operations in the following geographic areas:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Revenues:
Northwest Europe .......... $ 1,130 $ 434 $ --
West Africa ............... 3,280 3,995 5,997
South America ............. 4,420 1,171 2,014
Far East .................. 1,774 9,355 4,949
Eastern Europe and Former
Soviet Union ............. 5,231 814 602
Other ..................... 235 173 215
---------- ---------- ----------
$ 16,070 $ 15,942 $ 13,777
========== ========== ==========
Operating income (loss):
Northwest Europe .......... $ (4,362) $ (4,193) $ (1,260)
West Africa ............... (1,452) (1,029) 767
South America ............. 1,034 140 561
Far East .................. (1,016) (152) 327
Eastern Europe and Former
Soviet Union ............. (2,062) (408) (206)
Other ..................... (228) (102) (166)
---------- ---------- ----------
$ (8,086) $ (5,744) $ 23
========== ========== ==========
Identifiable assets:
Northwest Europe .......... $ 41,676 $ 116,232 $ 86,458
West Africa ............... 5,442 5,338 89,097
South America ............. 4,835 16,737 45,040
Far East .................. 5,975 11,982 9,886
Eastern Europe and Former
Soviet Union ............. 6,528 7,095 1,023
Other ..................... 716 1,859 113
---------- ---------- ----------
$ 65,172 $ 159,243 $ 231,617
========== ========== ==========
</TABLE>
The pressure pumping business provides two major services, stimulation and
cementing. During 1994, 1993 and 1992, stimulation services accounted for
approximately 71%, 73% and 68%, respectively, of the segment's revenues,
exclusive of export sales of equipment and products of approximately $5 million,
$9 million and $7 million in 1994, 1993 and 1992, respectively.
The production chemical business was acquired in 1994 (see Note 3). This segment
provides specialty chemicals and services to the upstream oil and gas industry
as well as downstream to the refinery, petrochemical, gas processing, pipeline
and power generation industries.
The Company's well stimulation vessel, WESTERN RENAISSANCE, moved from foreign
to domestic operations during the third quarter of 1994.
Offshore drilling foreign identifiable assets represent all assets associated
with offshore drilling rigs which are operating in foreign waters at the end of
each year (see Note 4).
Capital expenditures represent cash expended on property and equipment,
including interest capitalized.
Corporate assets are comprised principally of cash and other assets.
F-49
<PAGE> 171
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 12 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Company operating results by quarter for the year ended December 31, 1994 were
as follows:
<TABLE>
<CAPTION>
QUARTER
------------------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
-------- -------- -------- --------- ---------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
1994
Revenues:
Pressure pumping ................ $ 70,278 $ 70,901 $ 82,052 $ 84,280 $ 307,511
Production chemicals ............ 7,773 7,867 9,700 9,650 34,990
-------- -------- -------- --------- ---------
78,051 78,768 91,752 93,930 342,501
-------- -------- -------- --------- ---------
Operating costs and expenses:
Pressure pumping ................ 64,677 63,139 71,107 71,814 270,737
Production chemicals ............ 7,092 7,215 8,108 8,612 31,027
Depreciation and amortization ... 4,577 4,347 4,832 5,058 18,814
General and administrative ...... 2,234 2,366 1,953 2,293 8,846
-------- -------- -------- --------- ---------
78,580 77,067 86,000 87,777 329,424
-------- -------- -------- --------- ---------
Operating income (loss) ...... (529) 1,701 5,752 6,153 13,077
-------- -------- -------- --------- ---------
Other income (expense):
Interest expense ................ (3,746) (1,950) (1,954) (2,382) (10,032)
Interest income ................. 772 174 109 181 1,236
Merger related expenses(1) ...... -- -- -- (21,118) (21,118)
-------- -------- -------- --------- ---------
Total other income
(expense) .................. (2,974) (1,776) (1,845) (23,319) (29,914)
-------- -------- -------- --------- ---------
Income (loss) from continuing
operations before provision for
income taxes and extraordinary
loss .............................. (3,503) (75) 3,907 (17,166) (16,837)
Provision for income taxes ...... 103 2 205 185 495
-------- -------- -------- --------- ---------
Income (loss) from continuing
operations ........................ (3,606) (77) 3,702 (17,351) (17,332)
Discontinued operations ............ 318 978 1,142 (6,635) (4,197)
-------- -------- -------- --------- ---------
Net income (loss) .................. $ (3,288) $ 901 $ 4,844 $ (23,986) $ (21,529)
======== ======== ======== ========= =========
Earnings (loss) per share:
Income (loss) from continuing
operations ..................... $ (0.20) $ 0.00 $ 0.20 $ (0.95) $ (0.95)
Discontinued operations ......... 0.02 0.05 0.06 (0.36) (0.23)
-------- -------- -------- --------- ---------
Net income (loss) ............... $ (0.18) $ 0.05 $ 0.26 $ (1.31) $ (1.18)
======== ======== ======== ========= =========
</TABLE>
(1) Merger related expenses of $21.1 million represent costs associated with
the expected merger with BJ Services and include investment banker, legal
and accounting fees, certain severance costs and other miscellaneous
expenses. In addition to the expenses recorded in 1994, additional legal
fees and other expenses related to the merger are expected to be incurred
and recorded in 1995 (see Note 2).
F-50
<PAGE> 172
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 12- QUARTERLY FINANCIAL INFORMATION (UNAUDITED) - (CONTINUED)
The Company formalized a plan in November 1994 to dispose of the remaining
assets of its offshore drilling segment. These assets consisted primarily of two
semi-submersible offshore drilling rigs and related equipment and inventory. As
a result, the offshore drilling segment has been reclassified in the
consolidated statements of operations as discontinued operations (see Note 4).
The results of the discontinued operations by quarter for the year ended
December 31, 1994 were as follows:
<TABLE>
<CAPTION>
QUARTER
-------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
-------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Revenues ................................................. $ 5,495 $ 6,056 $ 6,115 $ 4,943 $ 22,609
======== ======== ======== ======== ========
Income from discontinued operations ...................... $ 345 $ 1,081 $ 1,172 (169) $ 2,429
Provision for income taxes ............................... 27 103 30 (8) 152
-------- -------- -------- -------- --------
318 978 1,142 (161) 2,277
-------- -------- -------- -------- --------
Loss on disposal, net of income tax benefit of $(152) .... -- -- -- (6,474) (6,474)
-------- -------- -------- -------- --------
$ 318 $ 978 $ 1,142 $ (6,635) $ (4,197)
======== ======== ======== ======== ========
</TABLE>
Income from discontinued operations includes operating results prior to the
Measurement Date.
The loss on disposal includes operating results subsequent to the Measurement
Date including shut-down expenses and gain (loss) from the disposal of the two
semi-submersible offshore drilling rigs, ALASKAN STAR and PACESETTER IV. In
December 1994, the Company completed the sale of the ALASKAN STAR for $11.8
million, of which $6.3 million is a bankers' acceptance drawn on a U.S. bank due
within one year. This rig sale resulted in a gain of $0.3 million. In December
1994, the Company signed a letter of intent to sell the PACESETTER IV. The
Company completed the sale in early February 1995 for $37.2 million (see Note
13). At December 31, 1994, Assets held for sale, net - discontinued operations
primarily consists of the net book value and inventory of the PACESETTER IV, net
of the loss on sale of such rig.
F-51
<PAGE> 173
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 12 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED) - (CONTINUED)
Company operating results by quarter for the year ended December 31, 1993 were
as follows:
<TABLE>
<CAPTION>
QUARTER
------------------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
-------- -------- -------- --------- ---------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
1993
Revenues:
Pressure pumping. . . . . . . . . . . . $ 74,901 $ 67,361 $ 71,545 $ 80,266 $ 294,073
Operating costs and expenses:
Pressure pumping. . . . . . . . . . . . 62,921 57,487 60,778 69,285 250,471
Depreciation and amortization . . . . . 3,508 3,984 3,596 3,501 14,589
General and administrative. . . . . . . 1,955 1,926 2,029 3,112 9,022
-------- -------- -------- --------- ---------
68,384 63,397 66,403 75,898 274,082
-------- -------- -------- --------- ---------
Operating income . . . . . . . . . . 6,517 3,964 5,142 4,368 19,991
-------- -------- -------- --------- ---------
Other income (expense):
Interest expense. . . . . . . . . . . . (3,631) (3,432) (2,962) (3,480) (13,505)
Interest income . . . . . . . . . . . . 146 1,575 383 2,549 4,653
Writedown of pressure pumping assets
and other (1) . . . . . . . . . . . . (248) -- -- (6,884) (7,132)
-------- -------- -------- --------- ---------
Total other income (expense). . . . . (3,733) (1,857) (2,579) (7,815) (15,984)
-------- -------- -------- --------- ---------
Income (loss) from continuing operations
before provision for income taxes and
extraordinary loss. . . . . . . . . . . 2,784 2,107 2,563 (3,447) 4,007
Provision for income taxes. . . . . . 180 309 538 (400) 627
-------- -------- -------- --------- ---------
Income (loss) from continuing operations
before extraordinary loss 2,604 1,798 2,025 (3,047) 3,380
Discontinued operations . . . . . . . . . (114) 166 2,131 33,138 35,321
Extraordinary loss (2). . . . . . . . . . -- -- -- (25,713) (25,713)
-------- -------- -------- --------- ---------
Net income . . . . . . . . . . . . . . . $ 2,490 $ 1,964 $ 4,156 $ 4,378 $ 12,988
======== ======== ======== ========= =========
Earnings (loss) per share:
Primary:
Income (loss) from continuing
operations. . . . . . . . . . . . . $ 0.15 $ 0.10 $ 0.11 $ (0.16) $ 0.18
Discontinued operations . . . . . . . (0.01) 0.01 0.11 1.77 1.90
Extraordinary loss. . . . . . . . . . -- -- -- (1.38) (1.38)
-------- -------- -------- --------- ---------
Net income (loss) . . . . . . . . . . $ 0.14 $ 0.11 $ 0.22 $ 0.23 $ 0.70
======== ======== ======== ========= =========
Fully diluted:
Income (loss) from continuing
operations. . . . . . . . . . . . . $ * $ * $ * $ * $ *
Discontinued operations . . . . . . . * * * 1.39 1.48
Extraordinary loss. . . . . . . . . . * * * * *
-------- -------- -------- --------- ---------
Net income (loss) . . . . . . . . . . $ * $ * $ * $ * $ *
======== ======== ======== ========= =========
</TABLE>
- -------------
*Fully diluted computation is not reflected because per share effect is
antidilutive.
(1) The writedown of pressure pumping assets and other totaled $7.1 million
and included a $3.5 million writedown of older pressure pumping equipment
and idle facilities to net realizable value in anticipation of disposal
and various other non-operating costs.
(2) During March 1994, the Company purchased through a tender offer $97.8
million face amount of Notes. The aggregate purchase price of these Notes
was $117.3 million, resulting in an extraordinary loss of $25.7 million
($1.38 per share) including unamortized original issue costs of $3.2
million, unamortized original issue discount of $2.3 million and offering
costs of $.7 million. The anticipated extraordinary loss was accrued
during the fourth quarter of 1993.
F-52
<PAGE> 174
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 12- QUARTERLY FINANCIAL INFORMATION (UNAUDITED) - (CONTINUED)
The Company formalized a plan in November 1994 to dispose of the remaining
assets of its offshore drilling segment. These assets consisted primarily of two
semi-submersible offshore drilling rigs and related equipment and inventory. As
a result, the offshore drilling segment has been reclassified in the
consolidated statements of operations as discontinued operations.
The results of the discontinued operations by quarters for the year ended
December 31, 1993 were as follows:
<TABLE>
<CAPTION>
QUARTER
----------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
-------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Revenues ....................................... $ 18,629 $ 19,186 $ 19,870 $ 6,991 $ 64,676
======== ======== ======== ======== ========
Income from discontinued operations
Operating income ............................. $ 462 $ 896 $ 2,406 $ 397 $ 4,161
-------- -------- -------- -------- --------
Other income (loss):
Gains on sales of offshore drilling rigs.... 9,076 -- 372 49,713 59,161
Writedowns of offshore drilling rigs ....... (8,828) -- -- (9,500) (18,328)
-------- -------- -------- -------- --------
248 -- 372 40,213 40,833
-------- -------- -------- -------- --------
Income from discontinued
operations before income taxes .............. 710 896 2,778 40,610 44,994
Provision for income taxes ..................... 824 730 647 7,472 9,673
-------- -------- -------- -------- --------
$ (114) $ 166 $ 2,131 $ 33,138 $ 35,321
======== ======== ======== ======== ========
</TABLE>
Income from discontinued operations includes operating results prior to the
Measurement Date. Income from discontinued operations during 1993 included the
following sales of offshore drilling rigs and writedowns of offshore drilling
rigs. In March 1993, the Company completed the sale of the TRITON III jack-up
drilling rig for $17.8 million in cash. This sale resulted in a gain of $9.1
million. In July 1993, the Company completed the sale of the DELTA jack-up
drilling rig for $1.5 million in cash which resulted in a gain of $0.4 million.
In October 1993, the Company completed the sale of nine jack-up drilling rigs
and associated equipment and inventories for $150.0 million cash that resulted
in a 1993 fourth quarter gain of $49.7 million. The rigs sold were: APOLLO I,
APOLLO II, APOLLO IV, NIKE I, POLARIS I, POLARIS II, TRITON I, TRITON II and
TRITON IV. In March 1993, the Company wrote down the net book value of its
three mat-supported jack-up rigs by $8.8 million. This writedown reflected the
low utilization experienced by these types of rigs and the expectation of lower
future utilization for them. In December 1993, the Company wrote down the net
book value of the ALASKAN STAR semi-submersible drilling rig by $9.5 million.
This writedown reflected the Company's lower expectation of future operating
cash flow opportunities for second generation semi-submersibles like the
ALASKAN STAR.
F-53
<PAGE> 175
THE WESTERN COMPANY OF NORTH AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 13 - SUBSEQUENT EVENT (UNAUDITED)
The Company completed the sale of the PACESETTER IV in early February 1995 for
$37.2 million which resulted in a loss of $6.7 million. At December 31, 1994,
Assets held for sale, net - discontinued operations primarily consists of the
net book value and inventory of the PACESETTER IV, net of the loss on sale of
such rig.
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<PAGE> 176
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The pro forma financial statements are based on the historical financial
information of BJ Services and Western giving effect, under the purchase method
of accounting, to certain adjustments. The pro forma financial statements are
derived from BJ Services' and Western's historical consolidated financial data
for the indicated periods, which, in the case of the statement of operations of
Western, differ from those periods used for presentation of Western's financial
statements included elsewhere in this Joint Proxy Statement/Prospectus. In the
case of Western, the statement of operations for the year ended September 30,
1994 was derived by combining the last three months of its fiscal year ended
December 31, 1993 with the first nine months of its fiscal 1994. The pro forma
statement of financial position was prepared as if the Merger occurred on
December 31, 1994. The pro forma statements of operations were prepared as if
the Merger had occurred as of October 1, 1993 and do not include any estimate
for loss of revenue from overlapping locations or the effect of any
modifications in operations that might have occurred had BJ Services owned and
operated the businesses during the periods presented except as described in the
Notes to the Pro Forma Financial Statements. The statements also do not
reflect the disposition of assets from BJ Services' Brighton, Colorado and
Cortland, Ohio operations (see "Description of the Companies' Businesses BJ
Services -- Competition" and "The Merger -- Governmental and Regulatory
Approvals"). Revenue generated from these operations was $5.6 million for the
year ended September 30, 1994 and $1.4 million for the three months ended
December 31, 1994. A supplemental pro forma presentation of operating results
for the year ended September 30, 1994 was made to reflect the effects of
eliminating certain nonrecurring charges included in Western's historical
financial statements so that the results would, in management's opinion, be
more reflective of normal operations.
The pro forma financial statements should be read in conjunction with
the Notes to Pro Forma Financial Statements and with the Consolidated Financial
Statements of BJ Services and the related notes thereto and the Consolidated
Financial Statements of Western and the related notes thereto, all contained
elsewhere in this Joint Proxy Statement/Prospectus. The pro forma financial
information has been prepared based upon assumptions deemed appropriate by
management of BJ Services and Western. This information is prepared for
informational purposes only and is not necessarily indicative of the actual
results or financial condition that would have been achieved had the Merger and
related financings occurred at these dates or of future results. Actual
results of Western's operations will be included with BJ Services' results only
from the date on which the Merger is consummated.
F-55
<PAGE> 177
PRO FORMA STATEMENT OF FINANCIAL POSITION (UNAUDITED)
DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
Historical Pro Forma
---------------------- ----------------------------
BJ
Services Western Adjustments Combined
-------- ------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............. $ 6,934 $ 12,650 $ (12,650) (2) $ 6,934
Receivables, net....................... 102,910 74,080 176,990
Inventories............................ 38,845 20,065 58,910
Deferred income taxes and other........ 13,682 40,214 53,896
--------- --------- --------- -----------
Total current assets................. 162,371 147,009 (12,650) 296,730
Property, net............................ 195,192 186,095 53,000 (1) 434,287
Goodwill................................. 20,692 18,400 149,141 (1) 188,233
Deferred income taxes.................... 21,118 60,000 (1) 81,118
Investments and other assets............. 11,799 2,197 13,996
--------- --------- --------- -----------
$ 411,172 $ 353,701 $ 249,491 $ 1,014,364
========= ========= ========= ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................... $ 45,728 $ 29,996 $ $ 75,724
Short-term borrowings and current
portion of long-term debt............ 29,713 (29,713) (2)
Accrued liabilities.................... 39,250 38,389 27,100 (1)
20,000 (9) 124,739
--------- --------- --------- -----------
Total current liabilities............ 114,691 68,385 17,387 200,463
Long-term debt........................... 74,700 90,909 (88,750) (1)
261,783 (2) 338,642
Other long-term liabilities.............. 26,494 15,258 41,752
Stockholders' equity..................... 195,287 179,149 79,071 (1)
(20,000) (9) 433,507
--------- --------- --------- -----------
$ 411,172 $ 353,701 $ 249,491 $ 1,014,364
========= ========= ========= ===========
</TABLE>
See Notes to Pro Forma Financial Statements
F-56
<PAGE> 178
PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------- -----------------------------
BJ
SERVICES WESTERN ADJUSTMENTS COMBINED
-------- ------- ----------- --------
<S> <C> <C> <C> <C>
Revenue............................ $ 119,415 $ 93,930 $ $ 213,345
Operating expenses:
Cost of sales and services....... 105,460 85,100 2,219 (3)
(6,750) (4) 186,029
General and administrative....... 6,104 2,677 (2,000) (4) 6,781
--------- --------- -------- ---------
111,564 87,777 (6,531) 192,810
--------- --------- -------- ---------
Operating income................... 7,851 6,153 6,531 20,535
Other income (expense):
Interest expense................. (2,307) (2,382) (2,180) (5) (6,869)
Interest income.................. 137 181 318
Write-downs and other............ 401 (21,118) (932) (6)
21,118 (8) (531)
--------- --------- -------- ---------
Income (loss) from continuing
operations before income taxes... 6,082 (17,166) 24,537 13,453
Income tax expense................. 1,338 185 2,724 (7) 4,247
--------- --------- -------- ---------
Income (loss) from continuing
operations....................... $ 4,744 $ (17,351) $ 21,813 $ 9,206
========= ========= ======== =========
Weighted average shares
outstanding...................... 15,716 11,736 (1) 27,452
========= ======== =========
Income per share from continuing
operations before extraordinary
loss and cumulative effect of
accounting change................ $ .30 $ .34
========= =========
</TABLE>
See Notes to Pro Forma Financial Statements
F-57
<PAGE> 179
PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED SEPTEMBER 30, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
Supplemental
Historical Pro Forma Pro Forma
---------------------- -------------------------- ---------------------------
Non-
BJ recurring As
Services Western Adjustments Combined Adjustments Adjusted
-------- ------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenue............................ $ 434,476 $ 328,837 $ 763,313 $ 763,313
Operating expenses:
Cost of sales and services....... 391,022 306,947 $ 8,875 (3)
(27,000)(4) 679,844 679,844
General and administrative....... 22,709 10,598 (8,000)(4) 25,307 25,307
--------- --------- --------- --------- ---------
413,731 317,545 (26,125) 705,151 705,151
--------- --------- --------- --------- ---------
Operating income................... 20,745 11,292 26,125 58,162 58,162
Other income (expense):
Interest expense................. (7,383) (11,130) (4,821)(5) (23,334) (23,334)
Interest income.................. 729 3,604 4,333 4,333
Write-downs and other............ (1,315) (6,884) (3,729)(6) (11,928) $ 6,884(10) (5,044)
--------- --------- --------- --------- ------- ---------
Income (loss) from continuing
operations before income taxes... 12,776 (3,118) 17,575 27,233 6,884 34,117
Income tax expense (benefit)....... 2,006 (90) 6,455 (7) 8,371 2,409(10) 10,780
--------- --------- --------- --------- ------- ---------
Income (loss) from continuing
operations before extraordinary
loss and cumulative effect of
accounting change................ $ 10,770 $ (3,028) $ 11,120 $ 18,862 $ 4,475 $ 23,337
========= ========= ========= ========= ======= =========
Weighted average shares
outstanding...................... 15,665 11,736 (1) 27,401 27,401
========= ========= ========= =========
Income per share from continuing
operations before extraordinary
loss and cumulative effect of
accounting change................ $ .69 $ .69 $ .85
========= ========= =========
</TABLE>
See Notes to Pro Forma Financial Statements
F-58
<PAGE> 180
NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS)
(1) The pro forma financial statements reflect the purchase of 100% of the
outstanding shares of Western common stock in exchange for total
consideration of $492.9 million ($21.00 per share), consisting of
11,736,000 shares of BJ Common Stock, cash of $234.7 million and
warrants to purchase 4,700,000 shares of BJ Common Stock. For purposes
of determining Western's outstanding shares, it is assumed that
Western's convertible debentures, which have a face value of $88.8
million, are converted into 5,221,000 shares of common stock prior to
the transaction. The BJ Common Stock to be issued will be valued at the
average closing price prior to the closing date in accordance with the
Merger Agreement. The Pro Forma Financial Statements assume a Closing
Price (as such term is defined in the Merger Agreement) of $20.00 per
share. Within a certain range (see "The Merger -- Merger
Consideration"), any change in the Closing Price from $20.00 per share
will increase or decrease, as applicable, the number of shares to be
issued. In addition, transaction costs are estimated at $10.0 million,
resulting in an assumed total purchase price of $502.9 million.
In accordance with purchase accounting, the assets and liabilities of
Western will be recorded on BJ Services' books at estimated fair market
value with the remaining purchase price reflected as goodwill. For
purposes of these Pro Forma Financial Statements, the allocation of the
purchase price has been made based upon valuations and other studies
which have not been finalized. Accordingly, the allocation of the
purchase price is preliminary. The following adjustments reflect
management's estimates of the necessary adjustments to Western's
historical Statement of Financial Position to reflect fair market value:
<TABLE>
<S> <C>
BJ Consideration Paid:
Cash $ 234,720
Stock 234,720
Warrants 23,500
Transaction costs 10,000
-----------
502,940
Less: Western stockholders' equity 179,149
Conversion of Western debentures 88,750
-----------
267,899
-----------
Net Adjustment $ 235,041
===========
Allocation of adjustment:
Property $ 53,000
Deferred tax asset - net operating loss carryforwards 60,000
Accrual for severance, facility closings and other
nonrecurring costs associated with the acquisition (11,500)
Accrual for buyout of Western stock options (12,200)
Accrual of past service costs - benefit plans (3,400)
Goodwill 149,141
-----------
$ 235,041
===========
</TABLE>
(2) Assumes that immediately upon consummation of the Merger, BJ Services
will utilize a new credit facility to retire all of its then outstanding
debt and, after utilizing $12.7 million in available excess cash held by
Western (which excludes $37.2 million received from the sale of an
offshore drilling rig subsequent to December 31, 1994), pay the cash
portion of the merger consideration as discussed in Note (1).
(3) Reflects increased depreciation expense due to the net write-up of
property depreciated over its average estimated remaining useful life.
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<PAGE> 181
(4) Reflects estimated consolidation savings from the elimination of
personnel and facility costs from overlapping operations, corporate
staff and other administrative and support functions.
(5) Reflects the interest expense on the borrowings under the new credit
facility described in Note (2) at an average assumed rate of 5.125% for
the fiscal year and 6.625% for the three-month period. The effect of
each .125% change in the assumed rate would change interest expense by
$423,000 per annum.
(6) Reflects amortization of increase to goodwill over a 40-year period.
(7) Adjustment to reflect 35% effective tax rate for Western and the tax
effect of the pro forma adjustments, with the exception of goodwill
amortization.
(8) Adjustment to eliminate expenses incurred by Western which are directly
attributable to the Merger.
(9) The pro forma statement of operations has not been adjusted for the
following nonrecurring charges which are estimated and are expected to
be incurred by BJ Services within the 12-month period following the
Merger:
<TABLE>
<S> <C>
Severance and special incentive costs $ 8,600
Facility closings, equipment relocation, etc. 8,000
Legal, accounting and other 3,400
---------
$ 20,000
=========
</TABLE>
These items have been reflected in the pro forma statement of financial
position as an addition to accrued liabilities and a reduction to
stockholders' equity.
(10) Adjustment to eliminate the following historical nonrecurring charge
(and the related tax effects) of Western:
(a) The writedown of pressure pumping assets and other which totaled
$6.9 million and included a $3.5 million writedown of older
pressure pumping equipment and idle facilities to net realizable
value in anticipation of disposal and various other non-operating
costs.
(b) Tax expense on the above at a 35% rate.
F-60
<PAGE> 182
APPENDIX A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 17, 1994, among BJ
SERVICES COMPANY ("BJ"), WCNA ACQUISITION CORP., a wholly owned subsidiary of
BJ ("BJ Sub"), and THE WESTERN COMPANY OF NORTH AMERICA ("Western"), each a
Delaware corporation.
WHEREAS, the respective Boards of Directors of BJ, BJ Sub and Western
have approved the merger of Western with and into BJ Sub (the "Merger"), upon
the terms and subject to the conditions set forth herein; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, in consideration of the premises, and the
representations, warranties and covenants contained herein, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
hereof, at the Effective Time (as defined in Section 1.2) and in accordance
with the General Corporation Law of the State of Delaware (the "Delaware
Corporation Law"), Western shall be merged with and into BJ Sub, which shall be
the surviving corporation in the Merger (hereinafter sometimes referred to as
the "Surviving Corporation") whose corporate existence shall continue under the
Delaware Corporation Law. At the Effective Time the separate existence of
Western shall cease.
Section 1.2 Effective Time of the Merger. As soon as practicable
after the Closing (as defined in Section 1.3 hereof), BJ, BJ Sub and Western
shall cause this Agreement to be duly certified and acknowledged in accordance
with the Delaware Corporation Law, and as soon as practicable thereafter BJ
shall cause the Surviving Corporation to file with the Delaware Secretary of
State and the appropriate County Recorder a certificate of merger (the
"Certificate of Merger") in such form as required by, and executed in
accordance with, the Delaware Corporation Law. The Merger shall become
effective as of the time and date of the filing of the Certificate of Merger
with the Delaware Secretary of State, unless otherwise provided in the
Certificate of Merger (the "Effective Time").
Section 1.3 Closing and Closing Date. Unless this Agreement shall
have been terminated and the transactions herein contemplated shall have been
abandoned pursuant to the provisions of Section 10.1, the closing (the
"Closing") of this Agreement shall take place (a) at 10:00 a.m. (New York time)
on the fifth Trading Day (as defined in Section 3.1(b) hereof) immediately
following the date on which the waiting periods under the Hart Scott Act (as
hereinafter defined) shall have expired or otherwise been terminated and all
other conditions to the respective obligations of the parties set forth in
Article IX hereof shall have been satisfied or waived or (b) at such other time
and date as BJ and Western shall agree (such date and time on and at which the
Closing occurs being referred to herein as the "Closing Date"). The Closing
shall take place at such location as BJ and Western shall agree.
Section 1.4 Effects of the Merger. The Merger shall have the effects
set forth in the Delaware Corporation Law. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers and franchises of Western and BJ Sub
A-1
<PAGE> 183
shall vest in the Surviving Corporation, and all debts, liabilities,
obligations and duties of Western and BJ Sub shall become the debts,
liabilities, obligations and duties of the Surviving Corporation.
Section 1.5 Alternative Structure. Notwithstanding anything to the
contrary provided elsewhere in this Agreement, if BJ notifies Western in
writing prior to the Closing Date that BJ prefers to structure the Merger so
that Western merges into BJ and BJ is the Surviving Corporation after the
Effective Time, the parties hereto shall forthwith execute an appropriate
amendment to this Agreement which eliminates BJ Sub as a party hereto and
otherwise reflects the foregoing changes and any other changes required to be
made as a result thereof.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation. The Certificate of
Incorporation of BJ Sub, as in effect immediately prior to the Effective Time,
shall be the Certificate of Incorporation of the Surviving Corporation after
the Effective Time, until amended in accordance with its terms, or as otherwise
provided by law.
Section 2.2 Bylaws. The Bylaws of BJ Sub as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation
unless and until amended in accordance with their terms or the Certificate of
Incorporation of the Surviving Corporation, or as otherwise provided by law.
Section 2.3 Officers and Directors. The officers and directors of BJ
Sub immediately prior to the Effective Time shall be the officers and directors
of the Surviving Corporation until their respective successors are duly elected
and/or appointed and qualify in the manner provided in the Certificate of
Incorporation and Bylaws of the Surviving Corporation, or as otherwise provided
by law. The senior executive officers of Western, Western, BJ and BJ Sub will
enter into the Senior Executive Termination Agreements, dated the date hereof
(the "Senior Executive Termination Agreements").
ARTICLE III
CONVERSION AND EXCHANGE OF SECURITIES
Section 3.1 Conversion of Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of any of the parties hereto or
any holder of any of the following securities:
(a) Western Common Stock. Except as otherwise provided
herein and subject to Section 3.3, each share of common stock, par
value $.10 per share, of Western ("Western Common Stock") issued and
outstanding immediately prior to the Effective Time (other than
Dissenting Shares, as hereinafter defined, and shares of Western
Common Stock owned by BJ, BJ Sub or any other direct or indirect
subsidiary of BJ) shall be converted into, exchanged for and represent
the right to receive (without interest) (i) $20.00 in cash ("Cash
Consideration") and .2 warrants (the "BJ Warrants") to purchase one
share of BJ Common Stock in substantially the form annexed to the
Warrant Agreement (the "Warrant Agreement") attached hereto as Exhibit
A at an exercise price of $30 per share of BJ Common Stock (subject to
adjustment as provided in the Warrant Agreement) ("Warrant
Consideration"), or (ii) Stock Consideration (as defined in Section
3.1(b) (ii)) and Warrant Consideration, in each case as the holder
thereof shall have elected or be deemed to have elected, in accordance
with Section 3.3 (collectively, the "Merger Consideration"); provided,
however, that, in any event, if between the date of this Agreement and
the Effective Time the outstanding shares of BJ Common Stock or
Western Common Stock shall have been changed into a different number
of shares or a different class by reason of any stock dividend,
subdivision, reclassification, recapitalization, split,
A-2
<PAGE> 184
combination or exchange of shares, the Cash Consideration, the Warrant
Consideration and the Stock Consideration shall be correspondingly
adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of
shares. All shares of Western Common Stock so converted or exchanged
shall no longer be outstanding and shall automatically be cancelled
and retired and shall cease to exist, and each certificate previously
evidencing any such shares shall thereafter represent the right to
receive, upon the surrender of such certificate in accordance with the
provisions of Section 3.6, the applicable Merger Consideration and any
cash to be paid in lieu of fractional shares of BJ Common Stock and
associated fractional rights ("BJ Purchase Rights") to purchase one
one-hundredth of a share of Series Two Junior Preferred Stock, without
par value, of BJ ("BJ Junior Preferred Stock") pursuant to the Rights
Agreement, dated as of January 12, 1994, as amended, between BJ and
First Chicago Trust Company of New York, as rights agent, to which
such holder is entitled pursuant to Section 3.4 (without interest
thereon). The holders of such certificates previously evidencing such
shares of Western Common Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such
shares of Western Common Stock except as otherwise provided herein or
by law.
(b) Certain Definitions. As used in this Agreement:
(i) "Closing Price" means the average of the
midpoint of the daily high and low trading prices of BJ Common
Stock, rounded to four decimal places, as reported in The Wall
Street Journal's New York Stock Exchange Composite
Transactions Reports, for each of the first 20 consecutive
Trading Days in the period commencing 25 Trading Days prior to
the Closing Date.
(ii) "Stock Consideration" is (x) if the Closing
Price of BJ Common Stock is $17.25 or lower, 1.1594 shares of
BJ Common Stock, together with a corresponding number of BJ
Purchase Rights; (y) if the Closing Price of BJ Common Stock
is $22.25 or greater, .8989 shares of BJ Common Stock,
together with a corresponding number of BJ Purchase Rights; or
(z) if the Closing Price of the BJ Common Stock is greater
than $17.25 but less than $22.25, that portion of a share of
BJ Common Stock equal to the quotient of $20.00 divided by the
Closing Price of the BJ Common Stock, together with a
corresponding number of BJ Purchase Rights.
(iii) "Trading Day" means a day on which the New
York Stock Exchange, Inc. (the "NYSE") is open for trading.
(c) Western Common Stock Held by Western or BJ; Western
Preferred Stock. Each share of Western Common Stock held in the
treasury of Western or held by BJ, BJ Sub or any other direct or
indirect subsidiary of BJ immediately prior to the Effective Time
shall be cancelled and cease to exist, and no payment or other
consideration shall be made in respect thereof. The Western Preferred
Stock shall be cancelled, and no payment or other consideration shall
be made in respect thereof.
(d) BJ Sub Shares. Each share of common stock, par value
$0.01 per share, of BJ Sub issued and outstanding immediately prior to
the Effective Time shall remain outstanding and shall be unchanged
after the Merger and shall thereafter constitute all of the issued and
outstanding capital stock of the Surviving Corporation.
(e) Convertible Debentures. The 7 1/4% Convertible
Subordinated Debentures due January 15, 2015 of Western (the "Western
Convertible Debentures") which are outstanding at the Effective Time
shall continue to be outstanding subsequent to the Effective Time as
debt instruments of the Surviving Corporation, subject to their
respective terms and conditions and the execution and delivery of a
supplemental indenture in the form required thereby.
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<PAGE> 185
Following the Effective Time of the Merger, each outstanding Western
Convertible Debenture will be convertible into the amount of Stock
Consideration (and cash in lieu of fractional shares of BJ Common
Stock and associated BJ Purchase Rights), Cash Consideration and
Warrant Consideration which the holder thereof would have had the
right to receive after the Effective Time of the Merger if such
Western Convertible Debenture had been converted immediately prior to
the Effective Time of the Merger and the holder thereof had made the
Stock Election (as defined in Section 3.3(b)) with respect to 50% of
such holder's Western Convertible Debentures and the Cash Election (as
defined in Section 3.3(b)) with respect to the remaining 50% of such
holder's Western Convertible Debentures.
(f) Senior Notes. The 12-7/8% Senior Notes due December
1, 2002 of Western ("Western Senior Notes") that are outstanding at
the Effective Time shall continue to be outstanding subsequent to the
Effective Time as debt instruments of the Surviving Corporation,
subject to their respective terms and conditions and the execution and
delivery of a supplemental indenture in the form required thereby.
Section 3.2 Treatment of Western Options. (a) Immediately prior to
the Effective Time, Western shall take such action as may be necessary so that
each outstanding Western Option (as defined in Section 6.2) whether or not then
exercisable, shall be cancelled by Western, and each holder of a cancelled
Western Option shall be entitled to receive, as soon as practicable after the
Effective Time, in consideration for the cancellation of such Western Option an
amount in cash equal to the product (the "Spread") of (i) the total number of
shares of Western Common Stock subject to such holder's Western Option and (ii)
the excess, if any, of (x) $20.00 plus the "Warrant Consideration Value" (as
hereinafter defined) over (y) the exercise price per share of the Western
Common Stock previously subject to such Western Option. The "Warrant
Consideration Value" shall be equal to the greater of (i) $1.00 or (ii) .2
multiplied by the "Warrant Current Market Price" (as defined below).
(b) For the purpose of any computation hereunder, the "Warrant
Current Market Price" means the average of the midpoint of the daily high and
low trading prices of BJ Warrants, rounded to four decimal places, on a
when-issued basis as reported in The Wall Street Journal's New York Stock
Exchange Composite Transactions Reports, for each of the first 20 consecutive
Trading Days in the period commencing 25 Trading Days prior to the Closing Date
or, if the BJ Warrants are not then admitted to trading on the NYSE on a
when-issued basis, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which such securities are admitted to trading on a
when-issued basis or, if the BJ Warrants are not admitted to trading on any
national securities exchange on a when-issued basis, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ"), of BJ Warrants on a when-issued basis. If on any such Trading Day
or Days the BJ Warrants are not quoted on a when-issued basis by any such
organization, the 20 Trading Day period referred to above shall be reduced by
the number of such Trading Days on which the BJ Warrants are not so quoted. If
the BJ Warrants are not quoted on a when-issued basis on any Trading Day during
such 20 Trading Day period, the Warrant Current Market Price shall be deemed to
be $1.00.
Section 3.3 Allocation of Merger Consideration; Election Procedures.
(a) Allocation. Notwithstanding anything in this Agreement to the contrary,
the maximum number of shares of Western Common Stock (the "Cash Election
Number") to be converted into the right to receive Cash Consideration and
Warrant Consideration in the Merger shall be equal to (i) 50% of the number of
shares of Western Common Stock issued and outstanding immediately prior to the
Effective Time of the Merger less (ii) the sum of (A) the number of Dissenting
Shares (as defined in Section 3.5), if any, which are not to be treated as
Non-Election Shares pursuant to Section 3.5, and (B) the number of shares of
Western Common Stock to be cancelled in accordance with Section 3.1(c). The
number of shares of Western Common Stock to be converted into the right to
receive Stock Consideration and Warrant Consideration in the Merger (the "Stock
Election Number") shall be equal to the number of
A-4
<PAGE> 186
shares of Western Common Stock issued and outstanding immediately prior to the
Effective Time of the Merger less the sum of (i) the Cash Election Number, (ii)
the number of Dissenting Shares, if any, which are not to be treated as
Non-Election Shares pursuant to Section 3.5 and (iii) the number of shares of
Western Common Stock to be cancelled in accordance with Section 3.1(c).
(b) Election. Subject to allocation and proration in accordance
with the provisions of this Section 3.1, each record holder of shares of
Western Common Stock (other than Dissenting Shares, if any, which are not to be
treated as Non-Election Shares pursuant to Section 3.5 and shares to be
cancelled in accordance with Section 3.1(c)) issued and outstanding immediately
prior to the Election Deadline (as defined below) shall be entitled to elect to
receive in respect of each such share (in addition to Warrant Consideration)
(i) Cash Consideration (a "Cash Election") or (ii) Stock Consideration (a
"Stock Election") or to indicate that such record holder has no preference as
to the receipt (in addition to Warrant Consideration) of Cash Consideration or
Stock Consideration for such shares (a "Non-Election"). Shares of Western
Common Stock in respect of which a Non-Election is made (including shares in
respect of which such an election is deemed to have been made pursuant to this
Section 3.3 and Section 3.5) (collectively, "Non-Election Shares") shall be
deemed by BJ, in its sole and absolute discretion, to be shares in respect of
which Cash Elections or Stock Elections have been made.
(c) Procedure for Elections. Elections pursuant to Section 3.3(b)
shall be made on a form to be mutually agreed upon by Western and BJ (a "Form
of Election") to be provided by the Exchange Agent (as defined in Section 3.6)
for that purpose to holders of record of Western Common Stock, together with
appropriate transmittal materials, at the time of mailing to holders of record
of Western Common Stock of the Joint Proxy Statement (as defined in Section
4.3) in connection with the Stockholders Meetings referred to in Section 8.3.
Elections shall be made by mailing to the Exchange Agent a duly completed Form
of Election. To be effective, a Form of Election must be (i) properly
completed, signed and submitted to the Exchange Agent at its designated office,
by 5:00 p.m., on the business day that is two Trading Days prior to the Closing
Date (which date shall be publicly announced by BJ as soon as practicable but
in no event less than five Trading Days prior to the Closing Date) (the
"Election Deadline") and (ii) accompanied by the certificates representing the
shares of Western Common Stock as to which the election is being made (or by an
appropriate guarantee of delivery of such certificates by a commercial bank or
trust company in the United States or a member of a registered national
security exchange or of the National Association of Securities Dealers, Inc.,
provided such certificates are in fact delivered to the Exchange Agent within
eight Trading Days after the date of execution of such guarantee of delivery).
Western shall use its best efforts to make a Form of Election available to all
persons who become holders of record of Western Common Stock between the date
of mailing described in the first sentence of this Section 3.3(c) and the
Election Deadline. BJ shall determine, in its sole and absolute discretion,
which authority it may delegate in whole or in part to the Exchange Agent,
whether Forms of Election have been properly completed, signed and submitted or
revoked. The decision of BJ (or the Exchange Agent, as the case may be) in
such matters shall be conclusive and binding. Neither BJ nor the Exchange
Agent will be under any obligation to notify any person of any defect in a Form
of Election submitted to the Exchange Agent. A holder of shares of Western
Common Stock that does not submit an effective Form of Election prior to the
Election Deadline shall be deemed to have made a Non-Election.
(d) Revocation of Election; Return of Certificates. An election
may be revoked, but only by written notice received by the Exchange Agent prior
to the Election Deadline. Any certificate(s) representing shares of Western
Common Stock which have been submitted to the Exchange Agent in connection with
an election shall be returned without charge to the holder thereof in the event
such election is revoked as aforesaid and such holder requests in writing the
return of such certificate(s). Upon any such revocation, unless a duly
completed Election Form is thereafter submitted in accordance with paragraph
(c), such shares shall be Non-Election Shares. In the event that this
Agreement is terminated pursuant to the provisions hereof and any shares of
Western Common Stock
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have been transmitted to the Exchange Agent pursuant to the provisions hereof,
such shares shall promptly be returned without charge to the person submitting
the same.
(e) Proration of Cash Election Shares. In the event that the
aggregate number of shares in respect of which Cash Elections have been made
and, in the case of Non-Election Shares, are deemed to have been made
(collectively, the "Cash Election Shares") exceeds the Cash Election Number,
all shares of Western Common Stock in respect of which Stock Elections have
been made and all Non-Election Shares in respect of which Stock Elections are
deemed to have been made (collectively, the "Stock Election Shares") shall be
converted into the right to receive Stock Consideration (in addition to Warrant
Consideration), and the Cash Election Shares shall be converted into the right
to receive Stock Consideration or Cash Consideration (in addition to Warrant
Consideration) in the following manner:
(i) Cash Election Shares shall be deemed converted to
Stock Election Shares, on a pro-rata basis for each record holder of
Western Common Stock with respect to those shares of Western Common
Stock, if any, of such record holder which are Cash Election Shares,
so that the number of Cash Election Shares so converted, when added to
the other Stock Election Shares, shall equal as closely as practicable
the Stock Election Number, and all such Cash Election Shares so
converted shall be converted into the right to receive Stock
Consideration (and cash in lieu of fractional interests in accordance
with Section 3.4) (in addition to Warrant Consideration); and
(ii) any remaining Cash Election Shares shall be converted
into the right to receive Cash Consideration (in addition to Warrant
Consideration).
(f) Proration of Stock Election Shares. In the event that the
aggregate number of Stock Election Shares exceeds the Stock Election Number,
all Cash Election Shares shall be converted into the right to receive Cash
Consideration (in addition to Warrant Consideration), and all Stock Election
Shares shall be converted into the right to receive Stock Consideration or Cash
Consideration (in addition to Warrant Consideration) in the following manner:
(i) Stock Election Shares shall be deemed converted into
Cash Election Shares, on a pro-rata basis for each record holder of
Western Common Stock with respect to those shares of Western Common
Stock, if any, of such record holder which are Stock Election Shares,
so that the number of Stock Election Shares so converted, when added
to the other Cash Election Shares, shall equal as closely as
practicable the Cash Election Number, and all such shares of Western
Common Stock so converted shall be converted into the right to receive
the Cash Consideration (in addition to Warrant Consideration); and
(ii) the remaining Stock Election Shares shall be
converted into the right to receive the Stock Consideration (and cash
in lieu of fractional interests in accordance with Section 3.4) (in
addition to Warrant Consideration).
(g) No Proration. In the event that neither paragraph (e) nor
paragraph (f) of this Section 3.3 is applicable, all Cash Election Shares shall
be converted into the right to receive Cash Consideration (in addition to
Warrant Consideration) and all Stock Election Shares shall be converted into
the right to receive Stock Consideration (and cash in lieu of fractional
interests in accordance with Section 3.4) (in addition to Warrant
Consideration).
(h) Computations. The Exchange Agent, in consultation with BJ,
shall make all computations to give effect to this Section 3.3.
Section 3.4 Fractional Interests. No certificates or scrip
representing fractional shares of BJ Common Stock and associated BJ Purchase
Rights or fractions of BJ Warrants shall be issued in
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connection with the Merger, and such fractional interests will not entitle the
owner thereof to any rights of a stockholder or warrantholder of BJ. In lieu
of any such fractional securities, each holder of shares of Western Common
Stock exchanged pursuant to Section 3.1(a) who would otherwise have been
entitled to receive a fraction of a share of BJ Common Stock and associated BJ
Purchase Rights or a fraction of a BJ Warrant (after taking into account all
shares of Western Common Stock then held of record by such holder) shall
receive (a) cash (without interest) in an amount equal to the product of such
fractional part of a share of BJ Common Stock multiplied by the Closing Price,
and/or (b) cash (without interest) in an amount equal to the product of such
fraction of a BJ Warrant multiplied by the Warrant Consideration Value.
Section 3.5 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, no share of Western Common Stock, the holder of
which shall have complied with the provisions of Section 262 of the Delaware
Corporation Law as to appraisal rights (a "Dissenting Share"), shall be deemed
converted into and to represent the right to receive Merger Consideration
hereunder; and the holders of Dissenting Shares, if any, shall be entitled to
payment, solely from the Surviving Corporation, of the appraised value of such
Dissenting Shares to the extent permitted by and in accordance with the
provisions of Section 262 of the Delaware Corporation Law; provided, however,
that (i) if any holder of Dissenting Shares shall, under the circumstances
permitted by the Delaware Corporation Law, subsequently deliver a written
withdrawal of his or her demand for appraisal of such Dissenting Shares, or
(ii) if any holder fails to establish his or her entitlement to rights to
payment as provided in such Section 262, or (iii) if neither any holder of
Dissenting Shares nor the Surviving Corporation has filed a petition demanding
a determination of the value of all Dissenting Shares within the time provided
in such Section 262, such holder or holders (as the case may be) shall forfeit
such right to payment for such Dissenting Shares pursuant to such Section 262
and each such Dissenting Share shall thereupon be treated as a Non-Election
Share for purposes of Section 3.3. Western shall give BJ (i) prompt notice of
any written demands for appraisal of any Western Common Stock, attempted
withdrawals of such demands, and any other instruments served pursuant to
applicable law received by Western relating to stockholders' rights of
appraisal and (ii) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal under the Delaware Corporation Law.
Western shall not, except with the prior written consent of BJ, voluntarily
make any payment with respect to any demands for appraisals of Western Common
Stock, offer to settle or settle any such demands or approve any withdrawal of
any such demands.
Section 3.6 Exchange of Certificates. (a) As soon as practicable
after the execution and delivery of this Agreement and, in any event, not less
than five Trading Days prior to the mailing to holders of Western Common Stock
of the Joint Proxy Statement, BJ shall designate a bank or trust company (or
such other person or persons as shall be reasonably acceptable to BJ and
Western) to act as exchange agent (the "Exchange Agent") in effecting the
exchange of certificates (the "Certificates") that, prior to the Effective
Time, represented shares of Western Common Stock for Merger Consideration
pursuant to Section 3.1(a) hereof (and cash in lieu of fractional interests in
accordance with Section 3.4). Upon the surrender of each such Certificate
representing shares of Western Common Stock, the Exchange Agent shall pay the
holder of such Certificate the Merger Consideration multiplied by the number of
shares of Western Common Stock formerly represented by such Certificate in
exchange therefor (and cash in lieu of fractional interests in accordance with
Section 3.4), and such Certificate shall forthwith be cancelled. Until so
surrendered and exchanged, each such Certificate that prior to the Effective
Time represented shares of Western Common Stock (other than Certificates
representing Dissenting Shares which are not to be treated as Non-Election
Shares pursuant to Section 3.3 or shares of Western Common Stock to be
cancelled in accordance with Section 3.1(c)) shall represent solely the right
to receive Merger Consideration (and cash in lieu of fractional interests in
accordance with Section 3.4). No interest shall be paid or accrue on Merger
Consideration.
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(b) As of or promptly after the Effective Time, BJ shall deposit
or cause to be deposited, in trust with the Exchange Agent, for the benefit of
the holders of shares of Western Common Stock, for exchange in accordance with
this Article III, the aggregate Merger Consideration.
(c) The cash portion of the aggregate Merger Consideration shall
be invested by the Exchange Agent, as directed by and for the benefit of the
Surviving Corporation, provided that such investments shall be limited to
direct obligations of the United States of America, obligations for which the
full faith and credit of the United States of America is pledged to provide for
the payment of principal and interest, commercial paper rated of the highest
quality by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Ratings Group, a division of McGraw-Hill, Inc. ("S&P"), and certificates of
deposit issued by a commercial bank whose long-term debt obligations are rated
at least A2 by Moody's or at least A by S&P, in each case having a maturity not
in excess of one year.
(d) Promptly following the date which is six months after the
Effective Time, the Exchange Agent shall deliver to the Surviving Corporation
all cash, shares of BJ Common Stock, Certificates and other documents in its
possession relating to the transactions described in this Agreement, and the
Exchange Agent's duties shall terminate. Thereafter, each holder of a
Certificate may surrender such Certificate to the Surviving Corporation and
(subject to applicable abandoned property, escheat and similar laws and, in the
case of Dissenting Shares, subject to applicable law) receive in exchange
therefor the applicable Merger Consideration (and cash in lieu of fractional
interests in accordance with Section 3.4), without any interest or dividends or
other payments thereon.
(e) After the Effective Time, there shall be no transfers on the
stock transfer books of the Surviving Corporation of any shares of Western
Common Stock. If, after the Effective Time, Certificates formerly representing
shares of Western Common Stock are presented to the Surviving Corporation or
the Exchange Agent, they shall be cancelled and (subject to applicable
abandoned property, escheat and similar laws and, in the case of Dissenting
Shares, subject to applicable law) exchanged for Merger Consideration (and cash
in lieu of fractional interests in accordance with Section 3.4), as provided in
this Article III.
(f) No dividends or other distributions declared or made after the
Effective Time with respect to shares of BJ Common Stock shall be paid to the
holder of any unsurrendered Certificate with respect to the shares of BJ Common
Stock they are entitled to receive and no cash payment in lieu of fractional
interests shall be paid pursuant to Section 3.4 until the holder of such
Certificate shall surrender such Certificate, in accordance with the provisions
of this Agreement.
Section 3.7 No Liability. Neither BJ nor the Surviving Corporation
shall be liable to any holder of shares of Western Common Stock for any Merger
Consideration in respect of such shares (or dividends or distributions with
respect thereto) delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. In the event any Certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Certificate to be lost, stolen or destroyed
and, if required by BJ, the posting by such person of a bond in customary form
and amount as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed Certificate the Merger Consideration (and cash in
lieu of fractional interests in accordance with Section 3.4), without any
interest or dividends or other payments thereon, upon due surrender of and
deliverable in respect of such Certificate pursuant to this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BJ
BJ represents and warrants to Western as follows, except as set forth
in the disclosure letter delivered to Western by BJ on or prior to the date
hereof(the "BJ Disclosure Memorandum"):
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Section 4.1 Organization and Qualification. BJ is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to own its assets
and to carry on its business as it is now being conducted or proposed to be
conducted. BJ is duly qualified as a foreign corporation to do business, and
is in good standing, in each jurisdiction where the character of its properties
owned or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified or be in
good standing is not reasonably likely, individually or in the aggregate, to
have a BJ Material Adverse Effect (as defined below).
As used in this Agreement, the term "BJ Material Adverse Effect" means
a material adverse effect on the business, properties, assets, financial
condition or results of operations of BJ and its subsidiaries taken as a whole;
provided, however, that any change or changes in, or caused by, the prices of
oil, gas or chemical products, general economic conditions or local, regional,
national or international industry conditions shall not be deemed to constitute
a BJ Material Adverse Effect, it also being understood that a BJ Material
Adverse Effect shall not include a change with respect to BJ resulting from any
change in law, rule or regulation or generally accepted accounting principles,
consistently applied, that applies to both BJ and Western.
Section 4.2 Capitalization. As of the date hereof, the authorized
capital stock of BJ consists of 40,000,000 shares of BJ Common Stock and
5,000,000 shares of preferred stock, without par value. As of November 11,
1994, 15,717,270 shares of BJ Common Stock (together with the associated BJ
Purchase Rights) were validly issued and outstanding, fully paid and
nonassessable and no other shares of BJ's capital stock were outstanding. Since
November 11, 1994, no shares of BJ's capital stock have been issued, except for
shares of BJ Common Stock issued pursuant to (i) the exercise of stock options
granted to employees under BJ's 1990 Stock Option Plan ("BJ Options") and (ii)
pursuant to other employee plans disclosed in the BJ SEC Documents (as defined
in Section 4.5 hereof) ("Other Plans"). Except for (i) BJ Options, (ii) the BJ
Purchase Rights and (iii) the Other Plans, as of the date hereof there are no
options, warrants, calls, subscriptions, rights, agreements, commitments or
other obligations outstanding obligating BJ to issue or sell shares of its
capital stock or any securities exercisable or exchangeable for or convertible
into any shares of its capital stock. There are no voting trusts or other
agreements or understandings to which BJ or any of its subsidiaries is a party
or by which BJ or any of its subsidiaries is bound with respect to the voting
of BJ Common Stock or the stock of any subsidiary of BJ. Except as disclosed
prior to the date hereof in the BJ SEC Documents (as defined in Section 4.5),
there are no agreements or other understandings to which BJ or any of its
subsidiaries is a party or by which BJ or any of its subsidiaries is bound with
respect to the repurchase, redemption or other acquisition of or payment in
respect of any shares of capital stock of BJ or any of its subsidiaries. Each
of the shares of BJ Common Stock issuable in accordance with this Agreement in
exchange for Western Common Stock at the Effective Time will be, when so
issued, duly authorized, validly issued, fully paid and nonassessable and free
of preemptive rights, and will include an associated BJ Purchase Right.
Section 4.3 BJ Subsidiaries. Each Significant Subsidiary (as defined
in Rule 12b-1 under the Exchange Act) of BJ is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has the requisite corporate power and authority to own its
assets and to carry on its business as it is now being conducted or proposed to
be conducted. Each such Significant Subsidiary of BJ is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties directly or indirectly owned
or held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified or be in such good
standing is not, individually or in the aggregate, reasonably likely to have a
BJ Material Adverse Effect. Except as disclosed in the BJ SEC Documents and
except for directors' qualifying shares, all the outstanding shares of capital
stock of each such Significant Subsidiary of BJ are directly or indirectly
owned (of record and beneficially) by BJ or a wholly owned subsidiary of BJ.
All the outstanding shares of capital stock of such Significant Subsidiaries of
BJ are
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validly issued, fully paid and nonassessable, and those shares owned by BJ or
by a subsidiary of BJ are owned free and clear of any pledges, liens, claims,
security interests or other encumbrances of any kind other than those arising
pursuant to the certificate of incorporation or bylaws or other organizational
document of such Significant Subsidiary, as required by law or pursuant to an
agreement among the equity owners of such Significant Subsidiary to which BJ,
directly or indirectly through a subsidiary, is a party. As of the date
hereof, there are no options, warrants, calls, subscriptions, rights,
agreements, commitments or other obligations of any character relating to the
issued or unissued capital stock or other securities of any of the Significant
Subsidiaries of BJ other than those arising pursuant to the certificate of
incorporation or bylaws or other organizational document of such Significant
Subsidiary, as required by law pursuant to an agreement among the equity owners
of such Significant Subsidiary to which BJ, directly or indirectly through a
subsidiary, is a party. BJ does not directly or indirectly have any investment
in any corporation, partnership, joint venture or other business association or
entity which equity investment was when initially made, or has a current market
value as of the date hereof, in excess of $750,000, except as disclosed prior
to the date of this Agreement in the BJ SEC Documents.
Section 4.4 Authority Relative to this Agreement. BJ has the
requisite corporate power and authority to enter into this Agreement and the
Warrant Agreement and to carry out its obligations hereunder and thereunder.
The execution and delivery of each of this Agreement and the Warrant Agreement
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by BJ's Board of Directors and, except for the approval of
its stockholders as contemplated in Section 8.3, no other corporate
proceedings on the part of BJ are necessary to authorize any of this Agreement,
the Warrant Agreement and the consummation of the transactions contemplated
hereby and thereby. This Agreement has been duly executed, acknowledged and
delivered by each of BJ and BJ Sub and (assuming the valid authorization,
execution and delivery of this Agreement by Western) is a valid and binding
obligation of BJ and of BJ Sub, enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting creditors'
rights generally or by equitable principles. When executed and delivered by BJ
at the Closing, the Warrant Agreement will be a valid and binding obligation of
BJ, enforceable in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting creditors' rights generally or by general equitable
principles and except that indemnification for certain matters pertaining to
federal and state securities laws may not be enforceable by reason of
applicable public policy. Neither BJ nor BJ Sub is subject to or obligated
under (i) any charter or bylaw provision or (ii) any other contract, indenture,
loan document, license, franchise, permit, order, decree or instrument binding
on BJ or any of its subsidiaries which would be breached or violated by its
executing and performing this Agreement and the transactions contemplated
hereby or, with respect to BJ, the Warrant Agreement (or pursuant to which the
transactions contemplated hereby may give rise to any right of termination,
cancellation, acceleration or payment) other than, in the case of clause (ii)
only, any breaches or violations (or rights of termination, cancellation,
acceleration or payment) which will not, either singly or in the aggregate,
have a BJ Material Adverse Effect or materially impair the ability of BJ to
perform its obligations hereunder or under the Warrant Agreement. Except as
referred to herein or in connection, or in compliance, with the provisions of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "Hart Scott
Act"), the Securities Act of 1933, as amended, and the rules promulgated
thereunder (the "Securities Act"), the Securities Exchange Act of 1934, as
amended, and the rules promulgated thereunder (the "Exchange Act"), applicable
NYSE rules or rules promulgated by the National Association of Securities
Dealers, Inc. ("NASD") and the corporation, securities, takeover or blue sky
laws of the various states, no filing or registration with, or authorization,
consent or approval of, any public body or authority is necessary for the
consummation by BJ of the Merger or the other transactions contemplated by this
Agreement and the Warrant Agreement, other than such as may be required solely
because Western is a party to the Merger, except where the failure to so file
or register or to obtain such authorizations, consents or approvals is not
reasonably likely to have a BJ Material Adverse Effect.
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Section 4.5 Reports and Financial Statements. BJ has filed with the
Securities and Exchange Commission (the "Commission") all prospectuses, proxy
statements and reports (including all exhibits and schedules thereto and
documents incorporated by reference therein) which were required under the
Securities Act or the Exchange Act to be filed with the Commission by BJ since
December 31, 1991, and will file all proxy statements and reports (including
all exhibits and schedules thereto and documents incorporated by reference
therein) required to be filed after the date hereof and prior to the Effective
Time (collectively, the "BJ SEC Documents"). As of their respective dates, the
BJ SEC Documents filed with the Commission prior to the date hereof complied in
all material respects with all material requirements of the Securities Act or
the Exchange Act, as the case may be, and the BJ SEC Documents to be filed with
the Commission after the date hereof will so comply. BJ has made available to
Western copies of all BJ SEC Documents filed with the Commission prior to the
date hereof and will deliver promptly to Western after they are filed with the
Commission all BJ SEC Documents filed after the date hereof. None of the BJ
SEC Documents contained, or will contain, as of its date, any untrue statement
of a material fact or omitted or will omit, to state a material fact required
to be stated therein or necessary to make the statements made, in light of the
circumstances under which they were made, not misleading. The (i) audited
fiscal year end consolidated statements of financial position and related
consolidated statements of operations, stockholders' equity and cash flows,
including the notes thereto, together with the reports thereon of BJ's
independent public accountants, and (ii) unaudited interim consolidated
statements of financial position and the related unaudited interim consolidated
statements of operations, stockholders' equity and cash flows, which are, or
will be, included in the BJ SEC Documents or incorporated by reference therein
present, or will present, in accordance with the books and records of BJ and
its subsidiaries, fairly the financial position, results of operations, cash
flows and financial position of BJ and its subsidiaries as of the dates and for
the periods indicated and are, or will be, in conformity with generally
accepted accounting principles, except, in the case of interim financial
statements, for the lack of explanatory footnote disclosures required by
generally accepted accounting principles, and subject to normal year end audit
adjustments. BJ's consolidated balance sheet at June 30, 1994 included in the
BJ SEC Documents is hereinafter called the "Latest BJ Balance Sheet." There is
no liability or obligation of any kind, whether accrued, absolute, fixed or
contingent, of BJ or any subsidiary of BJ required by generally accepted
accounting principles to be reflected or reserved against or otherwise
disclosed in the Latest BJ Balance Sheet which is not so reflected or reserved
against of which the executive officers of BJ have knowledge, that individually
or in the aggregate is reasonably likely to have a BJ Material Adverse Effect,
except for normal year-end adjustments and other adjustments described in the
Latest BJ Balance Sheet.
Section 4.6 Absence of Certain Changes or Events. Except as
disclosed prior to the date of this Agreement in BJ SEC Documents, since
September 30, 1993, the respective businesses of BJ and its subsidiaries have
been conducted only in the ordinary course and consistent with past practice
and there has not been (i) any change in the business, assets, liabilities,
financial condition or results of operations of BJ and its subsidiaries, taken
as a whole, that is reasonably likely to (x) have a BJ Material Adverse Effect
or (y) as of the date hereof, materially impair the ability of BJ to perform
its obligations hereunder or (ii) any material change by BJ or its subsidiaries
in accounting principles or methods except insofar as required by a change in
generally accepted accounting principles or rules of the Commission.
Section 4.7 Tax Matters. Each of BJ and each of its Significant
Subsidiaries, and any consolidated, combined, unitary or aggregate group for
tax purposes of which BJ or any of its Significant Subsidiaries is or has been
a member, has timely filed all material Tax Returns (as hereinafter defined)
required to be filed by it, has paid all Taxes (as hereinafter defined) shown
thereon to be due and has provided adequate reserves in its financial
statements for any Taxes that have not been paid but are properly accruable
under generally accepted accounting principles, whether or not shown as being
due on any returns. Except to the extent that the inaccuracy of any of the
following, individually or in the aggregate, is not reasonably likely to have a
BJ Material Adverse
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Effect, no claim for unpaid Taxes has become a lien or encumbrance of any kind
against the property of BJ or any of its Significant Subsidiaries or is being
asserted against BJ or any of its Significant Subsidiaries; no audit of any Tax
Return of BJ or any of its Significant Subsidiaries is being conducted by a Tax
authority; and no extension of the statute of limitations on the assessment of
any Taxes has been granted by BJ or any of its Significant Subsidiaries and is
currently in effect. As used herein, "Taxes" shall mean any taxes of any kind,
including but not limited to those measured by or referred to as income, gross
receipts, sales, use, ad valorem, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, value
added, property or windfall profits or assessments of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts imposed by any governmental authority, domestic or foreign. Neither BJ
nor any of its Significant Subsidiaries has made an election under Section
341(f) of the Internal Revenue Code. As used herein, "Tax Return" shall mean
any return, report or statement required to be filed with any governmental
authority with respect to Taxes.
Section 4.8 Environmental Matters. (a) Except to the extent that
the inaccuracy of any of the following, individually or in the aggregate, is
not reasonably likely to have a BJ Material Adverse Effect, to the knowledge of
the executive officers of BJ:
(i) BJ and its subsidiaries hold, and are in compliance
with and have been in compliance with for the last two years, all
Environmental Permits (as hereinafter defined), and are otherwise in
substantial compliance and have been in substantial compliance for the
last two years with, all applicable Environmental Laws (as hereinafter
defined) and there is no condition that is reasonably likely to
prevent or materially interfere in the near future with compliance by
BJ and its subsidiaries with Environmental Laws;
(ii) no modification, revocation, reissuance, alteration,
transfer or amendment of any Environmental Permit, or any review by,
or approval of, any third party of any Environmental Permit is
required in connection with the execution or delivery of this
Agreement or the consummation by BJ of the transactions contemplated
hereby or the operation of the business of BJ or any of its
subsidiaries on the Closing Date;
(iii) neither BJ nor any of its subsidiaries has received
any Environmental Claim (as hereinafter defined), nor has any
Environmental Claim been threatened against BJ or any of its
subsidiaries;
(iv) neither BJ nor any of its subsidiaries has entered
into, agreed to or is subject to any outstanding judgment, decree,
order or consent arrangement with any governmental authority under any
Environmental Laws, including without limitation those relating to
compliance with any Environmental Laws or to the investigation,
cleanup, remediation or removal of Hazardous Materials (as hereinafter
defined);
(v) there are no circumstances that are reasonably likely
to give rise to liability under any agreements with any person
pursuant to which BJ or any subsidiary of BJ would be required to
defend, indemnify, hold harmless, or otherwise be responsible for any
violation by or other liability or expense of such person, or alleged
violation by or other liability or expense of such person, arising out
of any Environmental Law; and
(vi) there are no other circumstances or conditions that
are reasonably likely to give rise to liability of BJ or any of its
subsidiaries under any Environmental Laws.
(b) For purposes of this Agreement, the terms below shall have the
following meanings:
"Environmental Claim" means any written complaint, notice,
claim, demand, action, suit or judicial, administrative or arbitral
proceeding by any person to BJ or any of its
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subsidiaries (or, for purposes of Section 6.10, Western or any of its
subsidiaries) asserting liability or potential liability (including
without limitation liability or potential liability for investigatory
costs, cleanup costs, governmental response costs, natural resource
damages, property damage, personal injury, fines or penalties) arising
out of, relating to, based on or resulting from (i) the presence,
discharge, emission, release or threatened release of any Hazardous
Materials at any location, (ii) circumstances forming the basis of any
violation or alleged violation of any Environmental Laws or
Environmental Permits, or (iii) otherwise relating to obligations or
liabilities under any Environmental Law.
"Environmental Permits" means all permits, licenses,
registrations, exemptions and other governmental authorizations
required under Environmental Laws for BJ or any of its subsidiaries
(or, for purposes of Section 6.10, Western or any of its subsidiaries)
to conduct their operations as presently conducted.
"Environmental Laws" means all applicable foreign, federal,
state and local statutes, rules, regulations, ordinances, orders,
decrees and common law relating in any manner to pollution or
protection of the environment, to the extent and in the form that such
exist at the date hereof.
"Hazardous Materials" means all hazardous or toxic substances,
wastes, materials or chemicals, petroleum (including crude oil or any
fraction thereof) and petroleum products, asbestos and
asbestos-containing materials, pollutants, contaminants and all other
materials and substances, including but not limited to radioactive
materials regulated pursuant to any Environmental Laws or that could
result in liability under any Environmental Laws.
Section 4.9 Litigation. Except as disclosed prior to the date hereof
in BJ SEC Documents, there is no suit, action, investigation or proceeding
pending or, to the knowledge of the executive officers of BJ, threatened
against or affecting BJ or any of its subsidiaries at law or in equity before
or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind, that is reasonably likely to have a BJ
Material Adverse Effect or (with respect to such matters that are pending or
threatened as of the date hereof) materially impair the ability of BJ to
perform its obligations hereunder and there is no judgment, decree, injunction,
rule or order of any court, governmental department,commission, board, bureau,
agency, instrumentality or arbitrator outstanding against or applicable to BJ
or any of its subsidiaries that is reasonably likely to have a BJ Material
Adverse Effect or (with respect to such items that are outstanding or
applicable as of the date hereof) materially impair the ability of BJ to
perform its obligations hereunder.
Section 4.10 Governmental Licenses and Permits; Compliance with Law.
Except as disclosed prior to the date hereof in the BJ SEC Documents, since
September 30, 1993 neither BJ nor any of its Significant Subsidiaries has
received notice of any revocation or modification of any federal, state, local
or foreign governmental license, certification, tariff, permit, authorization
or approval the revocation or modification of which has had or is reasonably
likely to have a BJ Material Adverse Effect. To the knowledge of the executive
officers of BJ, the conduct of the business of each of BJ and its subsidiaries
complies with all statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees or arbitration awards applicable thereto, except for violations
or failures to comply, if any, that, individually or in the aggregate, are not
reasonably likely to have a BJ Material Adverse Effect.
Section 4.11 Required Vote of BJ Stockholders. The affirmative vote
of holders of outstanding shares of BJ Common Stock provided for in NYSE Rule
312.05 is required to approve this Agreement and the issuance of BJ Common
Stock and BJ Warrants in the Merger. No other vote of the stockholders of BJ
is required by law, the Restated Certificate of Incorporation or Bylaws of BJ
or otherwise to approve this Agreement and the transactions contemplated
hereby.
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Section 4.12 BJ Action. The Board of Directors of BJ (at a meeting
duly called and held on November 17, 1994) unanimously (a) determined that the
Merger is fair to and in the best interests of BJ and its stockholders, (b)
approved this Agreement and the issuance of BJ Common Stock and BJ Warrants in
the Merger, (c) resolved to recommend approval by BJ's stockholders of this
Agreement and the issuance of BJ Common Stock and BJ Warrants in the Merger and
(d) directed that this Agreement be submitted to BJ's stockholders for their
approval, including approval of the Stock Consideration and Warrant
Consideration to be issued pursuant to this Agreement.
Section 4.13 Opinion of Financial Advisor. On the date hereof, BJ
has received the opinion of Merrill Lynch & Co. to the effect that the Merger
is fair to BJ's stockholders.
Section 4.14 Brokers and Finders. Except for Merrill Lynch & Co, no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with this Agreement or the Merger based
upon arrangements made by or on behalf of BJ or BJ Sub. Except as expressly
set forth in this Agreement, no valid claim against BJ or BJ Sub or, to the
knowledge of the executive officers of BJ, against Western exists for payment
of any fee or other compensation as a result of any of the transactions
contemplated hereby.
Section 4.15 Available Funds. BJ will have available to it at the
Effective Time all funds necessary to satisfy all of its obligations hereunder
and in connection with the transactions contemplated herein.
ARTICLE V
REPRESENTATIONS AND WARRANTIES REGARDING BJ SUB
BJ and BJ Sub jointly and severally represent and warrant to Western
as follows:
Section 5.1 Organization. BJ Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
BJ Sub has not engaged in any business since it was incorporated, except in
connection with the Merger and the other transactions contemplated hereby.
Section 5.2 Capitalization. The authorized capital stock of BJ Sub
consists of 1,000 shares of common stock, par value $0.01 per share, 100 shares
of which are validly issued and outstanding, fully paid and nonassessable and
are owned by BJ free and clear of all liens, claims and encumbrances.
Section 5.3 Authority Relative to this Agreement. BJ Sub has the
requisite corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by BJ Sub's Board of Directors and its sole stockholder
and no other corporate proceedings on the part of BJ Sub are necessary to
authorize this Agreement and the consummation of the transactions contemplated
hereby. Except as referred to herein or in connection, or in compliance, with
the provisions of the Act, the Securities Act, the Exchange Act, applicable
NYSE rules and the corporation, securities, takeover or blue sky laws of the
various states, no filing or registration with, or authorization, consent or
approval of, any public body or authority is necessary for the consummation by
BJ Sub of the Merger or the other transactions contemplated by this Agreement,
other than such as may be required solely because Western is a party to the
Merger.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF WESTERN
Western represents and warrants to BJ and BJ Sub, except as set forth
in the disclosure letter delivered to BJ by Western on or prior to the date
hereof (the "Western Disclosure Memorandum") as follows:
Section 6.1 Organization and Qualification. Western is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to own
its assets and to carry on its business as it is now being conducted or
proposed to be conducted. Western is duly qualified as a foreign corporation
to do business, and is in good standing, in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure to be
so qualified or be in such good standing is not reasonably likely to,
individually or in the aggregate, have a Western Material Adverse Effect (as
defined below).
As used in this Agreement, the term "Western Material Adverse Effect"
means a material adverse effect on the business, properties, assets, financial
condition or results of operations of Western and its subsidiaries taken as a
whole; provided, however, that any change or changes in, or caused by, the
prices of oil, gas or chemical products, general economic conditions or local,
regional, national or international industry conditions shall not be deemed to
constitute a Western Material Adverse Effect, it also being understood that a
Western Material Adverse Effect shall not include a change with respect to
Western resulting from any change in law, rule or regulation or generally
accepted accounting principles, consistently applied, that applies to both BJ
and Western.
Section 6.2 Capitalization. The authorized capital stock of Western
consists of 50,000,000 shares of Western Common Stock and 6,000,000 shares of
preferred stock, without par value ("Western Preferred Stock"). As of November
11, 1994, 18,243,238 shares of Western Common Stock were validly issued and
outstanding, fully paid and nonassessable and no other shares of Western's
capital stock were outstanding. As of November 9, 1994, Western had
outstanding options to purchase, in the aggregate, 1,018,714 shares of Western
Common Stock granted under the Western Plans (as defined in Section 6.7), which
includes options to purchase 268,750 shares of Western Common Stock granted
under an agreement, dated May 12, 1989, with an executive officer of Western,
options to purchase 37,500 shares of Western Common Stock granted under
Western's Non-Employee Directors' Plan and options to purchase 712,464 shares
of Western Common Stock granted under Western's Long-Term Performance Incentive
Plan (collectively, the "Western Options"). As of October 31, 1994, there was
outstanding $88,746,000 principal amount of Western Convertible Debentures
convertible into 5,220,352 shares of Western Common Stock. Since November 11,
1994, no shares of Western's capital stock have been issued. Except for
Western Options, Western Convertible Debentures and the preferred stock
purchase rights (the "Western Rights") issued pursuant to Western's
Stockholders Protection Rights Agreement dated as of March 5, 1990, as amended
(the "Western Rights Agreement"), there are no options, warrants, calls,
subscriptions, rights, agreements, commitments or other obligations outstanding
obligating Western to issue or sell any shares of its capital stock or any
securities exercisable or exchangeable for or convertible into any shares of
its capital stock. There are no voting trusts or other agreements or
understandings to which Western or any of its subsidiaries is a party or by
which Western or any of its subsidiaries is bound with respect to the voting of
Western Common Stock or the stock of any subsidiary of Western. Western has
provided to BJ true and correct lists of the record holders as of November 9,
1994 of all Western Options. Except as disclosed prior to the date hereof in
the Western SEC Documents (as defined in Section 6.5), there are no agreements
or other understandings to which Western or any of its subsidiaries is a party
or by which Western or any of its subsidiaries is bound with respect to the
repurchase, redemption or other acquisition of or payment in respect of any
shares of capital stock of Western or any of its subsidiaries.
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Section 6.3 Western Subsidiaries. Each Significant Subsidiary (as
defined in Rule 12b-1 under the Exchange Act) of Western is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the requisite corporate power and
authority to own its assets and to carry on its business as it is now being
conducted or proposed to be conducted. Each such Significant Subsidiary of
Western is duly qualified as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of its properties
directly or indirectly owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure to be
so qualified or be in such good standing is not, individually or in the
aggregate, reasonably likely to have a Western Material Adverse Effect. Except
as disclosed in the Western SEC Documents all the outstanding shares of capital
stock of each such Significant Subsidiary of Western are directly or indirectly
owned (of record and beneficially) by Western or a wholly owned subsidiary of
Western. All the outstanding shares of capital stock of such Significant
Subsidiaries of Western are validly issued, fully paid and nonassessable, and
those shares owned by Western or by a subsidiary of Western are owned free and
clear of any pledges, liens, claims, security interests or other encumbrances
of any kind other than those arising pursuant to the certificate of
incorporation or bylaws or other organizational document of such Significant
Subsidiary, as required by law or pursuant to an agreement among the equity
owners of such Significant Subsidiary to which Western, directly or indirectly
through a subsidiary, is a party. As of the date hereof, there are no options,
warrants, calls, subscriptions, rights, agreements, commitments or other
obligations of any character relating to the issued or unissued capital stock
or other securities of any of the Significant Subsidiaries of Western other
than those arising pursuant to the certificate of incorporation or bylaws or
other organizational document of such Significant Subsidiary, as required by
law or pursuant to an agreement among the equity owners of such Significant
Subsidiary to which Western, directly or indirectly through a subsidiary, is a
party. Western does not directly or indirectly have any equity investment in
any corporation, partnership, joint venture or other business association or
entity which equity investment was when initially made, or has a current market
value as of the date hereof, in excess of $750,000, except as disclosed prior
to the date of this Agreement in the Western SEC Documents.
Section 6.4 Authority Relative to this Agreement. Subject to the
approval of this Agreement by the holders of at least two-thirds of the
outstanding shares of Western Common Stock, Western has the requisite corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by Western's Board of Directors and, except for the approval of its
stockholders as contemplated in Section 8.3, no other corporate proceedings on
the part of Western are necessary to authorize this Agreement and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed, acknowledged and delivered by Western and (assuming the valid
authorization, execution and delivery of this Agreement and the transactions
contemplated hereby by each of BJ and BJ Sub) is a valid and binding obligation
of Western, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting creditors' rights generally
or by equitable principles and except that indemnification for certain matters
pertaining to federal and state securities laws may not be enforceable by
reason of applicable public policy. Western is not subject to or obligated
under (i) any charter or bylaw provision or (ii) any other contract, indenture,
loan document, license, franchise, permit, order, decree or instrument (except
for master service contracts which are terminable upon no more than 90 days'
notice) binding on Western or any of its subsidiaries which would be breached
or violated by its executing and performing this Agreement and the transactions
contemplated hereby (or pursuant to which the transactions contemplated hereby
may give rise to any right of termination, cancellation, acceleration or
payment) other than, in the case of clause (ii) only, any breaches or
violations (or rights of termination, cancellation, acceleration or payment)
which will not, either singly or in the aggregate, have a Western Material
Adverse Effect or materially impair the ability of Western to perform its
obligations hereunder. Except as referred to herein or in connection, or in
compliance, with the provisions of the Hart Scott Act, the Securities Act, the
Exchange Act, applicable NYSE rules and the
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corporation, securities, takeover or blue sky laws of the various states, no
filing or registration with, or authorization, consent or approval of, any
public body or authority is necessary for the consummation by Western of the
Merger or the other transactions contemplated by this Agreement, other than
such as may be required solely because BJ or BJ Sub is a party to the Merger,
except where the failure to so file or register or to obtain such
authorizations, consents or approvals is not reasonably likely to have a
Western Material Adverse Effect.
Section 6.5 Reports and Financial Statements. Western has filed with
the Commission all prospectuses, proxy statements and reports (including all
exhibits and schedules thereto and documents incorporated by reference therein)
which were required under the Securities Act or the Exchange Act to be filed
with the Commission by Western since December 31, 1991, and will file all proxy
statements and reports (including all exhibits and schedules thereto and
documents incorporated by reference therein) required to be filed after the
date hereof and prior to the Effective Time (collectively, the "Western SEC
Documents"). As of their respective dates, the Western SEC Documents filed with
the Commission prior to the date hereof complied in all material respects with
all material requirements of the Securities Act or the Exchange Act, as the
case may be, and the Western SEC Documents to be filed with the Commission
after the date hereof will so comply. Western has made available to BJ copies
of all Western SEC Documents filed with the Commission prior to the date hereof
and will deliver promptly to BJ after they are filed with the Commission all
Western SEC Documents filed after the date hereof. None of the Western SEC
Documents contained, or will contain, as of its date, any untrue statement of a
material fact or omitted, or will omit, to state a material fact required to be
stated therein or necessary to make the statements made, in light of the
circumstances under which they were made, not misleading. The (i) audited
fiscal year end consolidated balance sheets and related consolidated statements
of operations, stockholders' equity and cash flows, including the notes
thereto, together with the reports thereon of Western's independent public
accountants, and (ii) unaudited interim consolidated balance sheets and the
related unaudited interim consolidated statements of operations, stockholders'
equity and cash flows, which are, or will be, included in Western SEC Documents
or incorporated by reference therein, present, or will present, in accordance
with the books and records of Western and its subsidiaries, fairly the
financial position, results of income, cash flows and financial position of
Western and its subsidiaries as of the dates and for the periods indicated and
are, or will be, in conformity with generally accepted accounting principles,
except, in the case of interim financial statements, for the lack of
explanatory footnote disclosures required by generally accepted accounting
principles, and subject to normal year end audit adjustments. Western's
consolidated balance sheet at September 30, 1994 included in the Western SEC
Documents is hereinafter called the "Latest Western Balance Sheet." There is
no liability or obligation of any kind, whether accrued, absolute, fixed or
contingent, of Western or any subsidiary of Western required by generally
accepted accounting principles to be reflected or reserved against or otherwise
disclosed in the Latest Western Balance Sheet which is not so reflected or
reserved against of which the executive officers of Western have knowledge,
that individually or in the aggregate is reasonably likely to have a Western
Material Adverse Effect, except for normal year-end adjustments and other
adjustments described in the Latest Western Balance Sheet.
Section 6.6 Absence of Certain Changes or Events. Except as
disclosed prior to the date of this Agreement in the Western SEC Documents,
since December 31, 1993, (a) the respective businesses of Western and its
subsidiaries have been conducted only in the ordinary course and consistent
with past practice, (b) there has not been any change in the business, assets,
properties, financial condition or results of operations of Western and its
subsidiaries, taken as a whole, that is reasonably likely to (x) have a Western
Material Adverse Effect (it being acknowledged by BJ that the public
announcement on September 13, 1994 by BJ of its proposal to acquire Western and
subsequent events related thereto, including, without limitation, entering into
this Agreement and the transactions contemplated hereby, could have a negative
impact on operating results prior to the Effective Time) or (y) as of the date
hereof, materially impair the ability of Western to perform its obligations
hereunder and (c) there has not been:
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(i) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital
stock of Western, or any repurchase, redemption or other acquisition
by Western of any outstanding shares of capital stock or other equity
securities of Western or any options, warrants or rights of any kind
to acquire any, or any securities exercisable or exchangeable for or
convertible into shares of, capital stock or other equity securities
of Western (other than the extinguishment of options upon the exercise
of Western Options and other than purchases of Western Common Stock by
the trustee under the Western Retirement Savings Plan);
(ii) any change in any method of accounting or accounting
practice by Western, except for any such change required to be
implemented pursuant to generally accepted accounting principles or
rules of the Commission; or
(iii) any (A) grant of any severance or termination pay to
any director, officer or employee of Western or any of its
subsidiaries (other than settlement arrangements with employees other
than officers in accordance with past practice and pursuant to which
Western or its subsidiaries obtain certain waivers of rights), (B)
entering into of any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement)
with any director, officer or employee of Western or any subsidiary
thereof, (C) any increase in benefits payable under any existing
severance or termination pay policies or employment agreements, or (D)
any increase in compensation, bonus or other benefits payable to
directors, officers or employees of Western or any subsidiary thereof,
other than in the ordinary course (including normal individual
periodic performance reviews and related compensation and benefit
increases and bonus payments and awards under existing plans).
Section 6.7 Benefit Plans. (a) Section 6.7(a) of the Western
Disclosure Memorandum contains a complete list of each "employee benefit plan"
(within the meaning of section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), and all other employee benefit plans,
agreements, programs, policies or other arrangements, whether or not subject to
ERISA (including, without limitation, multiemployer plans within the meaning of
ERISA section 3(37), stock purchase, stock option, severance, employment,
change-in-control, fringe benefit, bonus, incentive or deferred compensation
plans) under which any employee or director or former employee or director of
Western, including any beneficiary thereof, has any present or future right to
benefits or under which Western has any present or future liability (other than
payments by insurance companies under terminated insurance contracts). All
such plans, agreements, programs, policies and arrangements shall be
collectively referred to as the "Western Plans".
(b) With respect to each Western Plan, Western has delivered or,
in the case of clauses (i), (ii) and (iv) below, made available to BJ a
current, accurate and complete copy (or, to the extent no such copy exists, an
accurate description) thereof and, to the extent applicable: (i) any related
trust agreement, annuity contract or other funding instrument; (ii) the most
recent Internal Revenue Service determination letter; (iii) any summary plan
description and other written communications by Western to its employees which
are materially inconsistent with any summary plan description; and (iv) the
most recent (I) Form 5500 and attached schedules; (II) audited financial
statements; (III) actuarial valuation reports; and (IV) attorney's response to
an auditor's request for information.
(c) (i) Each Western Plan has been established and administered in
accordance with its terms, and in substantial compliance with the applicable
provisions of ERISA, the Internal Revenue Code of 1986, as amended (the "Code")
and other applicable laws, rules and regulations; (ii) each Western Plan which
is intended to be qualified within the meaning of Code section 401(a) is so
qualified and has received a favorable determination letter as to its
qualification and nothing has occurred to the knowledge of the executive
officers of Western, whether by action or failure to act, which would cause the
loss of such qualification; and (iii) with respect to any Western Plan, no
actions,
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suits or claims (other than routine claims for benefits in the ordinary course)
are pending or, to the knowledge of the executive officers of Western,
threatened. Western will promptly notify BJ in writing of any pending or
threatened claims arising between the date hereof and the Closing Date (other
than routine claims for benefits in the ordinary course). No event has
occurred and no condition exists with respect to or relating to any Western
Plan that is reasonably likely to subject Western, either directly or by reason
of its affiliation with any member of its Controlled Group (defined as any
organization which is a member of a controlled group of organizations within
the meaning of Code sections 414(b), (c), (m) or (o)), to any material tax,fine
or penalty or other liability imposed by ERISA, the Code or other applicable
laws.
(d) (i) No Western Plan has incurred any "accumulated funding
deficiency" as such term is defined in ERISA section 302 and Code section 412
(whether or not waived); (ii) to the knowledge of the executive officers of
Western, no event or condition exists which could be deemed a reportable event
within the meaning of ERISA section 4043 with respect to any Western Plan that
is subject to Title IV of ERISA where the present value of accrued benefits
exceeds the fair market value of assets available for such benefits by a
material amount; (iii) Western and each member of its Controlled Group have
made all required premium payments when due to the PBGC; (iv) neither Western
nor any member of its Controlled Group is subject to any liability to the PBGC
for any plan termination; (v) no amendment has occurred which has required or
could require Western or any member of its Controlled Group to provide security
pursuant to Code section 401(a)(29); and (vi) neither Western nor any member of
its Controlled Group has engaged in a transaction which is reasonably likely to
subject it to liability under ERISA section 4069.
(e) Section 6.7(e) of the Western Disclosure Memorandum sets
forth, on a plan by plan basis, the present value of benefits payable presently
or in the future to present or former employees of Western under each unfunded
Western Plan which is a pension plan within the meaning of Section 3(2) of
ERISA.
(f) No Western Plan is a multiemployer plan (within the meaning of
Section 3(37) of ERISA) and neither Western nor any member of its Controlled
Group has incurred or is likely to incur any liability to any multiemployer
plan nor is engaged in a transaction which could subject Western to liability
under ERISA section 4212(c).
(g) (i) No Western Plan, by its terms, provides for an increase in
the rate of accrual or the amount of benefits thereunder on or after the
Closing Date (other than increases due to ordinary accruals or contributions
under the plan), (ii) each Western Plan may be amended or terminated under the
terms of such Western Plan without material obligation or liability (other than
those obligations and liabilities for which specific assets have been set aside
in a trust or other funding vehicle or reserved for on Western's balance
sheet); and (iii) except as specifically contemplated by this Agreement, no
Western Plan exists which could result in the payment to any Western employee
of any money or other property or rights or accelerate or provide any other
rights or benefits to any Western employee as a result of the transaction
contemplated by this Agreement, whether or not such payment would constitute a
parachute payment within the meaning of Code section 280G.
Section 6.8 Labor Matters. (i) Neither Western nor any of its
Significant Subsidiaries is party to any collective bargaining agreement or
other material contract or agreement with any labor organization or other
representative of employees nor is any such contract being negotiated; (ii)
there is no material unfair labor practice charge or complaint pending nor, to
the knowledge of the executive officers of Western, threatened, with regard to
employees of Western or any Significant Subsidiary; (iii) there is no labor
strike, material slowdown, material work stoppage or other material labor
controversy in effect, or, to the knowledge of the executive officers of
Western, threatened against Western or any of its Significant Subsidiaries;
(iv) as of the date hereof, no representation question exists, nor to the
knowledge of the executive officers of Western are there any campaigns being
conducted to solicit cards from the employees of Western or any Significant
Subsidiary of Western to
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authorize representation by any labor organization; (v) neither Western nor any
Significant Subsidiary of Western is party to, or is otherwise bound by, any
consent decree with any governmental authority relating to employees or
employment practices of Western or any Significant Subsidiary of Western; and
(vi) Western and each Significant Subsidiary of Western are in compliance with
all applicable agreements, contracts and policies relating to employment,
employment practices, wages, hours and terms and conditions of employment of
the employees except where failure to be in compliance with each such
agreement, contract and policy is not, either singly or in the aggregate,
reasonably likely to have a Western Material Adverse Effect.
Section 6.9 Tax Matters. Each of Western and each of its Significant
Subsidiaries, and any consolidated, combined, unitary or aggregate group for
tax purposes of which Western or any of its subsidiaries is or has been a
member, has timely filed all material Tax Returns required to be filed by it,
has paid all Taxes shown thereon to be due and has provided adequate reserves
in its financial statements for any Taxes that have not been paid but are
properly accruable under generally accepted accounting principles, whether or
not shown as being due on any returns. Except to the extent that the inaccuracy
of any of the following, individually or in the aggregate, is not reasonably
likely to have a Western Material Adverse Effect, no claim for unpaid Taxes has
become a lien or encumbrance of any kind against the property of Western or any
of its Significant Subsidiaries or is being asserted against Western or any of
its Significant Subsidiaries; no audit of any Tax Return of Western or any of
its Significant Subsidiaries is being conducted by a Tax authority; and no
extension of the statute of limitations on the assessment of any Taxes has been
granted by Western or any of its Significant Subsidiaries and is currently in
effect. Neither Western nor any of its Significant Subsidiaries has made an
election under Section 341(f) of the Internal Revenue Code.
Section 6.10 Environmental Matters. Except to the extent that the
inaccuracy of any of the following, individually or in the aggregate, is not
reasonably likely to have a Western Material Adverse Effect, to the knowledge
of the executive officers of Western:
(i) Western and its subsidiaries hold, and are in
compliance with and have been in compliance with for the last two
years, all Environmental Permits, and are otherwise in substantial
compliance and have been in substantial compliance for the last two
years with, all applicable Environmental Laws and there is no
condition that is reasonably likely to prevent or materially interfere
prior to the Effective Time with compliance by Western and its
subsidiaries with Environmental Laws;
(ii) no modification, revocation, reissuance, alteration,
transfer or amendment of any Environmental Permit, or any review by,
or approval of, any third party of any Environmental Permit is
required in connection with the execution or delivery of this
Agreement or the consummation by Western of the transactions
contemplated hereby or the operation of the business of Western or any
of its subsidiaries on the Closing Date;
(iii) neither Western nor any of its subsidiaries has
received any Environmental Claim, nor has any Environmental Claim been
threatened against Western or any of its subsidiaries;
(iv) neither Western nor any of its subsidiaries has
entered into, agreed to or is subject to any outstanding judgment,
decree, order or consent arrangement with any governmental authority
under any Environmental Laws, including without limitation those
relating to compliance with any Environmental Laws or to the
investigation, cleanup, remediation or removal of Hazardous Materials;
(v) there are no circumstances that are reasonably likely
to give rise to liability under any agreements with any person
pursuant to which Western or any subsidiary of Western would be
required to defend, indemnify, hold harmless, or otherwise be
responsible for any
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violation by or other liability or expense of such person, or alleged
violation by or other liability or expense of such person, arising out
of any Environmental Law; and
(vi) there are no other circumstances or conditions that
are reasonably likely to give rise to liability of Western or any of
its subsidiaries under any Environmental Laws.
Section 6.11 Litigation. Except as disclosed prior to the date
hereof in Western SEC Documents, there is no suit, action, investigation or
proceeding pending or, to the knowledge of the executive officers of Western,
threatened against Western or any of its subsidiaries at law or in equity
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind, that is reasonably likely to have a Western
Material Adverse Effect or, with respect to such matters that are pending or
threatened as of the date hereof, materially impair the ability of Western to
perform its obligations hereunder and there is no judgment, decree, injunction,
rule or order of any court, governmental department, commission, board, bureau,
agency, instrumentality or arbitrator to which Western or any of its
subsidiaries is subject that is reasonably likely to have a Western Material
Adverse Effect or, with respect to such items that are outstanding and
applicable as of the date hereof, materially impair the ability of Western to
perform its obligations hereunder.
Section 6.12 Governmental Licenses and Permits; Compliance with Law.
Except as disclosed prior to the date hereof in the Western SEC Documents,
since December 31, 1993 neither Western nor any of its Significant Subsidiaries
has received notice of any revocation or modification of any federal, state,
local or foreign governmental license, certification, tariff, permit,
authorization or approval the revocation or modification of which has had or is
reasonably likely to have a Western Material Adverse Effect. To the knowledge
of the executive officers of Western, the conduct of the business of each of
Western and its subsidiaries complies with all statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees or arbitration awards applicable
thereto, except for violations or failures to comply, if any, that,
individually or in the aggregate, are not reasonably likely to have a Western
Material Adverse Effect.
Section 6.13 Amendment to Western Rights Agreement. (a) The Board
of Directors of Western has taken all necessary action to amend the Western
Rights Agreement so that none of the execution and delivery of this Agreement,
the conversion of shares of Western Common Stock into the right to receive
Merger Consideration in accordance with Article III of this Agreement, and the
consummation of the Merger or any other transaction contemplated hereby will
cause (i) the Western Rights issued pursuant to the Western Rights Agreement to
become exercisable under the Western Rights Agreement, (ii) BJ or any of BJ's
direct or indirect subsidiaries to be deemed an "Acquiring Person" (as defined
in the Western Rights Agreement), (iii) any such event to be deemed a
"Flip-over Transaction or Event" (as defined in the Western Rights Agreement)
or (iv) the "Stock Acquisition Date" (as defined in the Western Rights
Agreement) to occur upon any such event.
(b) The "Expiration Time" (as defined in the Western Rights
Agreement) of the Western Rights will occur immediately prior to the Effective
Time.
(c) The "Separation Time" (as defined in the Western Rights
Agreement) has not occurred.
Section 6.14 Required Vote of Western Stockholders. The affirmative
vote of the holders of not less than 66-2/3% of the outstanding shares of
Western Common Stock is required to adopt this Agreement and approve the Merger
and the other transactions contemplated hereby. No other vote of the
stockholders of Western is required by law, the Restated Certificate of
Incorporation or Bylaws of Western or otherwise to adopt this Agreement and
approve the Merger and the other transactions contemplated hereby.
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Section 6.15 Western Action. The Board of Directors of Western (at a
meeting duly called and held on November 17, 1994) unanimously (a) determined
that the Merger is fair to and in the best interests of Western and its
stockholders, (b) approved this Agreement and the Merger in accordance with the
Delaware Corporation Law, (c) resolved to recommend approval and adoption of
this Agreement and Merger by Western's stockholders and (d) directed that this
Agreement be submitted to Western's stockholders.
Section 6.16 Opinion of Financial Advisor. On the date hereof,
Western has received the opinion of Goldman, Sachs & Co. to the effect that
the consideration to be received in the Merger by Western's stockholders is
fair to such stockholders.
Section 6.17 Brokers and Finders. Except for Goldman, Sachs & Co.
and Alexander Corporate Financial Consulting, Inc., no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with this Agreement or the Merger based upon
arrangements made by or on behalf of Western. Except as expressly set forth in
this Agreement, no valid claim against Western or, to the knowledge of the
executive officers of Western, against BJ or BJ Sub exists for payment of any
fee or other compensation as a result of any of the transactions contemplated
hereby.
Section 6.18 Intellectual Property. Western and each of its
subsidiaries owns, or is licensed to use (in each case, clear of any material
liens or other encumbrances) all patents, trademarks, trade names, copyrights,
technology, know-how and processes used in or necessary for the conduct of its
business as currently conducted which are material to the business of Western.
To the knowledge of the executive officers of Western, the use of such patents,
trademarks, trade names, copyrights, technology, know-how and processes by
Western and its subsidiaries does not infringe on the rights of any person,
subject to such claims and infringements as do not, in the aggregate, give rise
to any liability that is reasonably likely to have a Western Material Adverse
Effect.
ARTICLE VII
CONDUCT OF BUSINESS PENDING THE MERGER
Section 7.1 Conduct of Business by Western Pending the Merger. Prior
to the Effective Time, unless BJ shall otherwise consent in writing (it being
understood that BJ must act in good faith whenever it withholds such consent),
Western shall, and shall cause its subsidiaries to, carry on their respective
businesses only in the ordinary course and consistent with past practice and,
to the extent consistent therewith and with the specific terms of this
Agreement, use all commercially reasonable efforts to preserve intact their
current business organizations, keep available the services of their current
employees and preserve their relationships with customers, suppliers and others
having business dealings with them. Without limiting the generality of the
foregoing, prior to the Effective Time, except as expressly contemplated by
this Agreement or unless BJ shall otherwise agree in writing, Western shall
not, and shall cause each of its subsidiaries not to:
(i) (A) sell or pledge or otherwise encumber or agree to
sell or pledge any stock owned by it in any direct or indirect
subsidiary of Western; (B) redeem, purchase or otherwise acquire any
shares of, or any options, warrants or rights of any kind to acquire
any shares of or any securities exercisable or exchangeable for or
convertible into shares of, the capital stock of Western or any of its
subsidiaries, other than the extinguishment of options outstanding as
of the date hereof upon the exercise of such options and other than
purchases of Western Common Stock by the trustee under the Western
Retirement Savings Plan; (C) amend the Restated Certificate of
Incorporation or Bylaws of Western or the certificate of incorporation
or bylaws or other governing documents of any of Western's
subsidiaries; (D) split, combine or reclassify any of Western's
capital stock or the capital stock of any of Western's subsidiaries;
or (E) declare, set aside or pay any dividend on, or make any other
distributions in respect of, any of Western's
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capital stock or the capital stock of any of Western's subsidiaries,
other than dividends and distributions by a direct or indirect
subsidiary of Western to its stockholder or stockholders;
(ii) (A) issue, authorize the issuance of or agree to
issue any shares of, or any options, warrants or rights of any kind to
acquire any shares of, or any securities exercisable or exchangeable
for or convertible into shares of, Western's capital stock or the
capital stock of any of Western's subsidiaries (except to issue shares
of Western Common Stock (including associated Western Rights) upon the
due exercise of Western Options, or the due conversion of Western
Convertible Debentures, outstanding on the date hereof or the due
exercise of outstanding Western Rights) or issue or agree to issue any
other equity securities; (B) acquire or dispose of any business or
line of business or any assets, other than in the ordinary course of
business and consistent with past practice (or pursuant to the
agreement dated November 1, 1994 with respect to the sale of the
Alaskan Star Rig), or engage in any negotiations with any person or
entity concerning any such transaction (other than negotiations with
respect to the possible sale of offshore drilling rigs); (C) make any
(1) capital expenditures which have not been expressly provided for in
the list of currently authorized financial expenditures as of October
31, 1994 (a copy of which has been delivered to BJ), or (2) capital
expenditures in excess of $3,000,000 in the fourth calendar quarter of
1994 or in any calendar quarter of 1995, in addition to those
permitted by clause (1) above; (D) enter into any other transaction
not in the ordinary course of business and consistent with past
practice; (E) amend or modify any of the terms of any Western Option
or grant any stock option, stock appreciation rights or stock bonuses;
(F) amend or modify the Western Rights Agreement or redeem any Western
Rights; or (G) merge or consolidate with another corporation, other
than the merger of a wholly-owned subsidiary of Western with and into
Western or another wholly-owned subsidiary;
(iii) (A) lease, license, mortgage or otherwise encumber or
subject to any consensual lien any material assets other than in the
ordinary course of business and consistent with past practice; (B)
incur any indebtedness for borrowed money (other than letters of
credit entered into, or short-term borrowings for working capital
purposes incurred, in each case in the ordinary course of business and
consistent with past practice) or guarantee any such indebtedness of
another person or entity; or (C) make any loans, advances or capital
contributions to, or investments in, any other person or entity, other
than to Western or any direct or indirect subsidiary of Western, other
than as required under existing agreements with third parties and
other than in connection with the relocation of employees under
existing Western policies and consistent with past practice;
(iv) (A) pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), except for the payment, discharge or
satisfaction of its liabilities or its obligations in the ordinary
course of business or in accordance with their terms as in effect on
the date hereof; (B) adopt a plan of complete or partial liquidation
or resolutions providing for or authorizing such a liquidation or a
dissolution, restructuring, recapitalization or reorganization, other
than a plan or resolution authorizing the dissolution of a subsidiary
of Western with less than $100,000 in assets; (C) enter into any
collective bargaining agreement, successor collective bargaining
agreement or amended collective bargaining agreement; (D) change any
accounting principle used by it, except for such changes required to
be implemented prior to the Effective Time pursuant to generally
accepted accounting principles or rules of the Commission; or (E)
settle or compromise any litigation brought against it other than
settlements or compromises of any litigation where the amount paid in
settlement or compromise (including without limitation the cost to
Western and its subsidiaries of complying with any provision of such
settlement or compromise other than cash payments) does not exceed
$500,000, exclusive of amounts covered by insurance;
(v) (A) enter into any new, or amend any existing,
severance agreement or arrangement (other than settlement arrangements
with employees other than officers in
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accordance with past practice and pursuant to which Western obtains
certain waivers of rights from such employees), deferred compensation
arrangement or employment agreement with any current officer, director
or employee, (B) adopt any new, or amend any existing, incentive,
retirement or welfare benefit arrangements, plans or programs for the
benefit of current, former or retired employees of Western and its
subsidiaries and their respective predecessors that would increase the
cost of aggregate benefits available by more than 1% (other than
amendments required by law or to maintain the tax qualified status of
such plans under the Code), or (C) grant any increases in employee
compensation, other than in the ordinary course or pursuant to
promotions, in each case consistent with past practice (which shall
include normal individual periodic performance reviews and related
compensation and benefit increases and bonus payments and awards under
existing plans and forgiveness of employee indebtedness incurred in
connection with relocation loans made under existing Western
policies); or
(vi) authorize or enter into any agreement to do any of
the foregoing.
ARTICLE VIII
ADDITIONAL AGREEMENTS
Section 8.1 Access and Information. Subject to the Confidentiality
Agreements (as defined in Section 10.2), upon reasonable notice, Western and BJ
shall each afford to the other and to the other's accountants, counsel and
other authorized representatives reasonable access during normal business hours
throughout the period prior to the Effective Time to all of its properties,
books, contracts, commitments and records (including but not limited to tax
returns) and, during such period, each shall furnish promptly to the other (i)
a copy of each report and other document filed by it pursuant to the
requirements of federal or state securities laws and (ii) all other information
concerning its business, properties and personnel as such other party may
reasonably request, provided that the foregoing shall not require Western or BJ
to permit any inspection, or to disclose any information, that in the
reasonable judgment of Western or BJ, as the case may be, would result in the
disclosure of any trade secrets of third parties or violate any obligation of
Western or BJ, as the case may be, with respect to confidentiality if Western
or BJ, as the case may be, shall have used reasonable efforts to obtain the
consent of such third party to such inspection or disclosure. All requests for
information made pursuant to this Section 8.1 shall be directed to an executive
officer of Western or BJ or such person as may be designated by either of their
respective officers, as the case may be. No investigation pursuant to this
Section 8.1 shall affect any representation or warranty in this Agreement of
any party hereto or any condition to the obligations of the parties hereto.
Section 8.2 Stock Exchange Listing. BJ shall use its best efforts to
list on the NYSE, prior to the Effective Time, subject to official notice of
issuance, (a) the BJ Common Stock (including associated BJ Purchase Rights) and
the BJ Common Stock issuable upon exercise of the BJ Warrants to be issued
pursuant to the Merger, and (b) the BJ Warrants to be issued pursuant to the
Merger. If the BJ Warrants are not so listed on the NYSE, BJ shall use its
best efforts to have the BJ Warrants listed on NASDAQ.
Section 8.3 Stockholders' Approval. Each of BJ and Western shall
take, in accordance with applicable law and their respective certificates of
incorporation and bylaws, all action necessary to convene a meeting of its
stockholders (collectively, the "Stockholders Meetings") as promptly as
practicable after the registration statement on Form S-4 to be filed with the
Commission by BJ in connection with the issuance of shares of BJ Common Stock
(including associated BJ Purchase Rights) and BJ Warrants (including shares of
BJ Common Stock issuable upon the exercise thereof) in the Merger (the "S-4")
is declared effective for the purpose of voting, in the case of Western, to
adopt this Agreement and approve the Merger and the other transactions
contemplated hereby and, in the case of BJ, to approve this Agreement and the
issuance of BJ Common Stock and BJ Warrants in the
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Merger and, in each case, such other matters as may be appropriate at such
meetings and are consented to in writing by BJ and Western (which consent shall
not be unreasonably withheld), provided that no proxy statement for use in
connection with the stockholders' meeting of each of BJ and Western referred to
in Section 8.3 hereof (the "Joint Proxy Statement") shall be mailed by Western
or BJ without the prior approval of the other party hereto. Each of BJ and
Western will use its best efforts to hold such meetings no later than April 30,
1995, unless otherwise agreed by the parties hereto, and will use its best
efforts to hold such meetings on the same day. Unless otherwise required by
applicable law because of the fiduciary duties of the directors of Western to
its stockholders as determined by such directors in good faith after
consultation with and based upon the advice of Sullivan & Cromwell, as legal
counsel to Western, the Board of Directors of Western shall recommend to its
stockholders approval of the transactions contemplated by this Agreement,
Western shall use its best efforts to solicit from its stockholders proxies in
favor of the adoption of this Agreement and the approval of the Merger and the
other transactions contemplated hereby, and Western shall not take any actions
that are inconsistent with such best efforts obligation. BJ shall recommend to
its stockholders approval of the transactions contemplated by this Agreement,
shall use its best efforts to solicit from its stockholders proxies in favor of
the approval of this Agreement and the issuance of the Stock Consideration and
Warrant Consideration in the Merger as required by NYSE Rule 312.05, and shall
not take any actions that are inconsistent with such best efforts obligation.
Each of Western and BJ shall take all other action necessary or advisable to
secure the vote or consent of its stockholders required by Delaware Corporation
Law or NYSE rules, as the case may be, to obtain such approvals. Western will
cause its transfer agent to make stock transfer records relating to Western
available to the extent reasonably necessary to effectuate the intent of this
Agreement.
Section 8.4 No Solicitation. (a) Except with respect to BJ and its
affiliates, on or after the date hereof, Western shall not, and shall cause its
subsidiaries and its and its subsidiaries' officers, directors, affiliates,
agents and representatives (including without limitation any investment banker,
attorney or accountant retained by Western or any of its subsidiaries), and
shall use its best efforts to cause its and its subsidiaries' employees not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal with respect to an Alternative Transaction (as
hereinafter defined), participate in any negotiations concerning, or provide to
any other person any information or data relating to Western or its
subsidiaries for the purpose of, or have any substantive discussions with, any
person relating to, or otherwise cooperate with or assist or participate in, or
facilitate, any inquiries or the making of any proposal which constitutes, or
would reasonably be expected to lead to, any effort or attempt by any other
person to seek to effect an Alternative Transaction, or agree to or endorse any
Alternative Transaction; provided, however, that nothing contained in this
Section 8.4 shall prohibit Western or its Board of Directors from taking and
disclosing to the stockholders of Western a position with respect to any such
Alternative Transaction that, in the judgment of the Board of Directors of
Western, as determined in good faith by such directors after consultation with
and based upon the advice of Sullivan & Cromwell, as counsel to Western, is
required by applicable law; and provided, further, that (x) the Board of
Directors of Western may (i) upon the unsolicited request of a third party
which executes a confidentiality agreement with Western in customary form,
furnish information or data (including without limitation confidential
information or data relating to Western or its subsidiaries) in order to allow
such third party to consider making a proposal with respect to, or entering
into, an Alternative Transaction involving such third party and Western, (ii)
participate in negotiations or have substantive discussions with a third party
who makes an unsolicited, bona fide proposal regarding an Alternative
Transaction, and (iii) in connection therewith, cooperate with or assist or
facilitate such third party in its attempt to effect such Alternative
Transaction, and (y) following receipt of an unsolicited, bona fide proposal
from a third party regarding an Alternative Transaction, the Board of Directors
of Western may withdraw or modify its recommendation referred to in Section
8.3, in each case to the extent that the Board of Directors of Western
determines in good faith, after consultation with and based upon the advice of
Sullivan & Cromwell, as counsel to Western, that such action may be required in
order for the Board of Directors to act in a manner that is consistent with its
fiduciary obligations under applicable law.
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Western shall promptly advise BJ of any such request or proposal that Western
may receive. Prior to taking any such action, if Western intends to participate
in any such discussions or negotiations or provide any such information to any
such third party, Western shall give reasonable prior notice to BJ of each such
action. Nothing in this Section 8.4 shall (A) permit Western to terminate this
Agreement or (B) permit Western to enter into any written agreement with
respect to an Alternative Transaction during the term of this Agreement (it
being agreed that during the term of this Agreement Western shall not enter
into any written agreement with any person that provides for, or in any way
facilitates, an Alternative Transaction, other than a confidentiality agreement
in the form referred to above), it being understood that Section 10.1(f) sets
forth the rights of Western to terminate this Agreement in the circumstances
specified in clause (y) above.
(b) Western will immediately, and will cause its subsidiaries and
its and its subsidiaries' officers, directors, agents and representatives
(including without limitation any investment banker, attorney or accountant
retained by Western or any of its subsidiaries), and will use its best efforts
to cause its and its subsidiaries' employees, to immediately, cease and cause
to be terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any possible Alternative
Transactions.
(c) Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the first sentence of Section 8.4(a)
by any officer or director or authorized employee, agent or representative of
Western or any of its subsidiaries (including, without limitation, any
investment banker, attorney or accountant retained by Western or any of its
subsidiaries), or otherwise shall be deemed to be a breach of Section 8.4(a) by
Western.
(d) As used herein, "Alternative Transaction" means (i) any
merger, consolidation or other business combination transaction involving
Western in which another corporation, partnership, person, other entity or
group (as defined in Section 13(d)(3) of the Exchange Act) would acquire
beneficial ownership of at least 20% of the aggregate voting power of all
voting securities of Western or the Surviving Corporation, as the case may be;
(ii) any tender offer or exchange offer for any securities of Western which, if
consummated, would result in another corporation, partnership, person, other
entity or group (as defined in Section 13(d)(3) of the Exchange Act) becoming
the beneficial owner of at least 20% or more of the aggregate voting power of
all voting securities of Western; (iii) any sale or other disposition of assets
of Western or any of its subsidiaries (excluding the offshore drilling rigs) in
a single transaction or in a series of related transactions if the fair market
value of such assets exceeds 20% of the aggregate fair market value of the
assets of Western and its subsidiaries taken as a whole before giving effect to
such sale or other disposition; (iv) the adoption by Western of a plan of
liquidation, the declaration or payment by Western of an extraordinary dividend
on any of its shares of capital stock or the effectuation by Western of a
recapitalization or other type of transaction which would involve either a
change in Western's outstanding capital stock or a distribution of assets of
any kind to the holders of such capital stock; or (v) the repurchase by Western
or any of its subsidiaries of shares of Western Common Stock representing at
least 20% or more of the aggregate voting power of all voting securities of
Western.
Section 8.5 Antitrust Filing and Divestitures. (a) Within two
Trading Days after the date hereof, Western and BJ shall file notification and
report forms under the Hart Scott Act with the Federal Trade Commission (the
"FTC") and the Antitrust Division of the Department of Justice (the "Antitrust
Division") and shall promptly make all other necessary, proper or advisable
filings with the applicable federal, state or local government or any court,
administrative agency or commission or other governmental authority or agency,
domestic or foreign (a "Governmental Entity"), related to the transactions
contemplated by this Agreement and shall use their best efforts to respond as
promptly as practicable to all inquiries received from the FTC or the Antitrust
Division or such other Governmental Entities for additional information or
documentation. Each of the parties hereto agrees to furnish the others with
copies of all correspondence, filings and communications (and memoranda setting
forth the substance thereof) between it and its affiliates and their respective
representatives,
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on the one hand, and the FTC the Antitrust Division or any other Governmental
Entity or members of their respective staffs, on the other hand, with respect
to this Agreement and the transactions contemplated hereby. Each party hereto
agrees to furnish the others with such necessary information and reasonable
assistance as such other parties and their respective affiliates may reasonably
request in connection with their preparation of necessary filings,
registrations or submissions of information to any Governmental Entities,
including without limitation any filings necessary under the provisions of the
Hart Scott Act.
(b) Without limiting the generality of the undertakings pursuant
to this Section 8.5 and Section 8.14, BJ shall promptly take or cause to be
taken all actions as it may determine to be reasonably appropriate in order to
avoid the commencement of a proceeding by any Governmental Entity to restrain,
enjoin or to otherwise prohibit consummation of the Merger so as to permit
consummation of the Merger on a schedule as close as possible to that
contemplated by this Agreement.
Section 8.6 Indemnification and Insurance. (a) From and after the
Effective Time, BJ agrees that it or the Surviving Corporation will indemnify
and hold harmless each present and former director and officer of Western and
its subsidiaries (the "Indemnified Parties") against any and all costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages or liabilities (collectively, "Costs") incurred in connection
with any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of or pertaining to
matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent allowed by law (and BJ or the Surviving Corporation will also advance
expenses as incurred to the fullest extent permitted under applicable law
provided the person to whom expenses are advanced provides an undertaking to
repay such advances if it is ultimately determined that such person is not
entitled to indemnification).
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 8.6, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify BJ and the Surviving
Corporation thereof, but the failure to so notify shall not relieve BJ or the
Surviving Corporation of any liability it may have to such Indemnified Party
except to the extent that such failure materially prejudices the indemnifying
party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) BJ or
the Surviving Corporation shall have the right to assume the defense thereof
(which it shall, in cooperation with the Indemnified Parties, vigorously
defend) and neither BJ nor the Surviving Corporation shall be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if neither BJ nor the Surviving Corporation
elects to assume such defense or there is a conflict of interest between BJ or
the Surviving Corporation, on the one hand, and the Indemnified Parties,
including situations in which there are one or more legal defenses available to
the Indemnified Party that are different from or additional to those available
to BJ or the Surviving Corporation, the Indemnified Parties may retain counsel
satisfactory to them, and BJ or the Surviving Corporation shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, however, that neither
BJ nor the Surviving Corporation shall, in connection with any one such action
or proceeding or separate but substantially similar actions or proceedings
arising out of the same general allegations, be liable for the fees and
expenses of more than one separate firm of attorneys at any time for all
Indemnified Parties except to the extent that local counsel, in addition to
such parties' regular counsel, is required in order to effectively defend
against such action or proceeding, (ii) the Indemnified Parties will cooperate
in the defense of any such matter and (iii) neither BJ nor the Surviving
Corporation shall be liable for any settlement effected without its prior
written consent, and provided, further, that neither BJ nor the Surviving
Corporation shall have any obligation hereunder to any Indemnified Party when
and if a court of competent jurisdiction shall ultimately determine, and such
determination shall have become
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final, that the indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law.
(c) For a period of three years after the Effective Time, the
Surviving Corporation shall use its best efforts to maintain in effect the
current policies of directors' and officers' liability insurance maintained by
Western (the "Current D&O Policy") (provided that the Surviving Corporation may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are no less advantageous ("Substitute
Coverage") and will, to the extent available, provide such Substitute Coverage
if the Current D&O Policy is not available) with respect to claims arising from
facts or events occurring at or prior to the Effective Time; provided, however,
if the Current D&O Policy expires, is terminated or cancelled during such three
year period and Substitute Coverage cannot be obtained, the Surviving
Corporation shall use its best efforts to obtain as much insurance as can be
obtained for the remainder of such period up to a maximum of the coverage
amount of the Current D&O Policy; provided further, that in no event shall the
Surviving Corporation be required to expend for insurance premiums pursuant to
this Section 8.6(b) more than 150% of the current annual premiums paid by
Western for such insurance (which premiums Western represents and warrants to
be $421,000 in the aggregate).
(d) If the Surviving Corporation or any of its successors or
assigns (i) shall consolidate with or merge into any other corporation or
entity and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) shall transfer all or substantially all of
its properties and assets to any individual, corporation or other entity, then
and in each such case, proper provisions shall be made so that the successors
and assigns of the Surviving Corporation shall assume all of the obligations of
the Surviving Corporation set forth in this Section 8.6.
(e) The provisions of this Section 8.6 are intended to be for the
benefit of, and shall be enforceable by, each of the directors and officers of
Western who are the beneficiaries of the indemnification arrangements specified
herein and their heirs and their representatives.
Section 8.7 Amendment of Western Plans. Western shall take such
action as is necessary to amend, as of the Effective Time, each Western Plan
providing for the issuance of, or related to, the securities of Western or the
Surviving Corporation to provide that on and after the Effective Time, no
option or other right shall be outstanding to acquire any security of Western
or the Surviving Corporation.
Section 8.8 Employee Arrangements. (a) The Surviving Corporation
agrees that, during the period commencing at the Effective Time and ending on
the first anniversary thereof, the employees of Western will continue to be
provided with benefits under employee benefit plans that are no less favorable
in the aggregate than those currently provided by Western to such employees;
provided, however, that nothing herein shall (i) prevent the amendment or
termination of any Western Plan, (ii) require the Surviving Corporation to
provide or permit investment in the securities of BJ, BJ Sub, Western or the
Surviving Corporation, or (iii) limit or restrict the ability of BJ,Western or
the Surviving Corporation to terminate the employment of any officer or
employee.
(b) Notwithstanding anything to the contrary in Section 8.8(a), BJ
will, and will cause the Surviving Corporation to honor all employee benefit
obligations to current and former employees and directors under the Western
Plans, under the Retirement Plan for Non-Employee Directors and, to the extent
set forth in Western SEC Documents or the Western Disclosure Memorandum, the
Special Severance Policy in existence on the date hereof and all employment or
severance agreements or indemnification agreements entered into by Western or
adopted by the Board of Directors of Western prior to the date hereof;
provided, however, that nothing shall prevent BJ or the Surviving Corporation
from taking any action with respect to such plans, obligations or agreements or
refraining from taking any such action which is permitted or provided for under
the terms thereof.
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(c) Employees of the Surviving Corporation shall be given credit
for all service with Western and its subsidiaries under all employee benefit
plans, programs and policies of the Surviving Corporation or BJ in which they
become participants for all purposes thereunder; provided, however, that
employees of the Surviving Corporation who become participants in a defined
benefit pension plan sponsored by BJ or in a defined benefit pension plan
sponsored by the Surviving Corporation which is adopted on or after the
Effective Time shall not be given credit for benefit accrual purposes to the
extent such credit would result in a duplication of benefits under more than
one defined benefit pension plan.
(d) A special committee of the Board of Directors of BJ shall be
established (the "Special Committee") consisting of two current outside
directors of BJ and two current outside directors of Western who will become
directors of BJ after the Closing Date as specified in Section 8.16. Except as
otherwise specified in the last sentence of this Section 8.8(d), the provisions
of this Section 8.8 shall be enforceable exclusively by the Special Committee
for the benefit of the officers and employees of the Surviving Corporation and
its subsidiaries who were officers and employees of Western and its
subsidiaries prior to the Effective Time. If any such officer or employee has
any claim that the provisions of this Section 8.8 have not been complied with,
such officer or employee shall be required to submit such claim to the Special
Committee, and any decision rendered by a majority of the members of the
Special Committee shall be binding upon such officer or employee and shall be
dispositive of such claim for all purposes whatsoever. If (and only if) the
Special Committee is unable to reach a majority decision with respect to the
disposition of such claim, such officer or employee may pursue his claim in any
other appropriate manner.
Section 8.9 Publicity. Except with respect to matters concerning an
Alternative Transaction, the parties hereto shall consult with each other
concerning any proposed press release or public announcement pertaining to the
transactions contemplated by this Agreement and shall use their best efforts to
agree upon the text of any such press release or the making of such public
announcement prior to the public dissemination thereof and prior to making any
filings with any Governmental Entity or national securities exchange with
respect thereto, except as may be required by law or by obligations pursuant to
any listing agreement with or rules of any national securities exchange.
Section 8.10 Fees and Expenses. (a) Except as provided in Sections
8.10(b) through Section 8.10(g), whether or not the Merger is consummated, all
costs and expenses incurred in connection with the Merger, this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
cost or expense.
(b) If (i) Western terminates this Agreement pursuant to Section
10.1(f); (ii) BJ terminates this Agreement pursuant to Section 10.1(e)(i); or
(iii) either Western or BJ terminates this Agreement pursuant to Section
10.1(h) and, prior to such failure of Western stockholders to adopt this
Agreement and approve the Merger, another party shall have made a proposal to
effectuate an Alternative Transaction and such proposal shall have been
publicly announced, then in any such event Western shall pay to BJ, in
immediately available funds, (A) on the date on which such Alternative
Transaction is consummated, $16,000,000 (the "Topping Fee") and (B) within one
Trading Day after requested by BJ (accompanied by reasonably detailed
documentation) from time to time, all of BJ's Expenses up to a maximum payment
pursuant to this clause (B) of $3,500,000. The term "BJ's Expenses" shall
include all out-of-pocket expenses and fees (including without limitation fees
and expenses payable to all banks, investment banking firms and other financial
institutions and their respective agents and counsel for arranging or
providing, or agreeing to arrange or provide, financing for, or financing
advice with respect to, the Merger and all fees of counsel, accountants,
experts and consultants to BJ or BJ Sub) actually incurred by BJ and BJ Sub or
on their behalf in connection with the consummation of all transactions
contemplated by this Agreement, including the Merger.
(c) If the provisions of Section 8.10(b) are not applicable and BJ
terminates this Agreement pursuant to Section 10.1(e) (ii), then Western shall
pay to BJ, within one Trading Day after requested
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by BJ (accompanied by reasonably detailed documentation) from time to time, all
of BJ's Expenses up to a maximum payment pursuant to this Section 8.10(c) of
$3,500,000.
(d) If Western terminates this Agreement pursuant to Section
10.1(g) and if (and only if) such termination occurs on or after the date of
consummation of the BJ Alternative Transaction which gave rise to such right of
termination under Section 10.1(g) then in such event BJ shall pay to Western,
in immediately available funds, (i) on the date of such termination,
$16,000,000 and (ii) within one Trading Day after requested by Western
(accompanied by reasonably detailed documentation) from time to time, all of
Western's Expenses up to a maximum payment pursuant to this clause (ii) of
$3,500,000. The term "Western's Expenses" shall include all out-of-pocket
expenses and fees (including without limitation fees and expenses payable to
all investment banking firms, counsel, accountants, experts and consultants to
Western) actually incurred by Western or on its behalf in connection with the
consummation of the transactions contemplated by this Agreement, including the
Merger.
(e) If either BJ or Western terminates this Agreement pursuant to
Section 10.1(j), then BJ shall pay to Western, within one Trading Day after
requested by Western (accompanied by reasonably detailed documentation) from
time to time, all of Western's Expenses up to a maximum payment pursuant to
this Section 8.10(e) of $3,500,000; provided, however, that BJ shall pay to
Western a termination fee of $20,000,000 and shall not make any additional
payment to Western in reimbursement of Western's Expenses, if either BJ or
Western terminates this Agreement pursuant to Section 10.1(j) and both of the
following conditions shall have been satisfied: (i) the meeting of BJ
stockholders shall have been held subsequent to the receipt of the first
Antitrust Termination Notice (as defined in Section 8.10(f)) sent by Western at
the end of the 100-day period referred to in Section 10.1(l) (the "Antitrust
Approval Period") (without regard to any extensions thereof) and (ii) BJ shall
have elected to extend the Antitrust Approval Period pursuant to clause (i) of
Section 8.10(f) rather than pursuant to clause (ii) of Section 8.10(f).
(f) If either BJ or Western terminates this Agreement pursuant to
Sections 10.1(i) or 10.1(l) (but only if, in the case of a termination pursuant
to Section 10.1(i), the action giving rise to an order or injunction sought to
enjoin or otherwise prohibit the Merger for alleged violations of the federal
or state antitrust laws), then BJ shall pay to Western a termination fee of
$20,000,000 within five Trading Days after written notice of termination under
Sections 10.1(i) or 10.1(l) (the "Antitrust Termination Notice") is received by
BJ from Western or received by Western from BJ; provided, however, that BJ
shall have the option to require Western to rescind any such Antitrust
Termination Notice sent by Western under Section 10.1(l) if either of the
conditions set forth below shall have been satisfied, in which event such
Antitrust Termination Notice shall be rescinded and the Antitrust Approval
Period shall be deemed to have been changed to 130 days:
(i) if at the time such Antitrust Termination Notice is
received, BJ has been engaged in active and continuous negotiations
with the Antitrust Division or the FTC with respect to the Consent
Decree Final Agreement (as defined in Section 10.1(l)), provided that
prior to the tenth day after receipt by BJ of the Western Compliance
Certificates (as defined in Section 10.1(l)), BJ and its outside
counsel each delivered to Western certificates that to the best of
their knowledge BJ is in "substantial compliance" with the Antitrust
Division's or FTC's "second request" for information from BJ under the
Act, or
(ii) if the foregoing clause (i) is not applicable, if BJ
shall have paid a fee of $2,500,000 to Western on or prior to the
fifth Trading Day after BJ's receipt of such Antitrust Termination
Notice;
provided, further, that at the end of such extended Antitrust Approval Period
BJ shall have the option to extend the Antitrust Approval Period for a second
30-day period by (x) paying a fee of $5,000,000 to Western if the Antitrust
Approval Period was extended pursuant to clause (i) above, or (y) paying an
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additional fee of $2,500,000 to Western if the Antitrust Approval Period was
extended pursuant to clause (ii) above, in which event upon such payment the
Antitrust Approval Period shall be deemed to have been changed to 160 days.
(g) If either BJ or Western terminates this Agreement pursuant to
Section 10.1(m), then BJ shall pay to Western a termination fee of $20,000,000;
provided, however, that if Western's stockholders shall fail to have approved
the Merger or BJ's stockholders shall fail to have approved the issuance of BJ
Common Stock and BJ Warrants in the Merger and this Agreement at a meeting of
stockholders held to vote thereon and BJ is not in breach of its obligations
contained in this Agreement, BJ shall have no obligation to pay any termination
fee to Western pursuant to this Section 8.10(g).
Section 8.11 Preparation of Form S-4 and Joint Proxy Statement. As
promptly as practicable following the date of this Agreement, Western and BJ
shall prepare and file with the Commission the Joint Proxy Statement, and BJ
shall prepare and file with the Commission the S-4, in which the Joint Proxy
Statement will be included. Each of Western and BJ shall use its best efforts
to have the S-4 declared effective under the Securities Act as promptly as
practicable after such filing. Western will use its best efforts to cause the
Joint Proxy Statement to be mailed to Western's stockholders, and BJ will use
its best efforts to cause the Joint Proxy Statement to be mailed to BJ's
stockholders, in each case as promptly as practicable after the S-4 is declared
effective under the Securities Act. BJ shall also take any action required to
be taken under any applicable state securities laws in connection with the
issuance of BJ Common Stock (including associated BJ Purchase Rights) and BJ
Warrants (including the BJ Common Stock issuable upon exercise thereof) in the
Merger, and Western shall furnish all information concerning Western and the
holders of Western Common Stock as may be reasonably requested in connection
with any such action. BJ, BJ Sub and Western each covenant and agree that the
information provided and to be provided by such party for inclusion or
incorporation by reference in the S-4 shall not, at the time the S-4 becomes
effective and on the date of each Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. Western, BJ
and BJ Sub each agree to correct promptly any information provided by it for
use in the S-4 which shall have become false or misleading prior to the times
referred to above.
Section 8.12 Affiliates. Prior to the Closing Date, Western shall
deliver to BJ a letter identifying all persons who are, at the time this
Agreement is submitted for approval to the stockholders of Western,
"affiliates" of Western for purposes of Rule 145 under the Securities Act.
Western shall use its reasonable best efforts to cause each such person to
deliver to BJ on or prior to the Closing Date an affiliates' agreement
substantially in the form attached hereto as Exhibit B.
Section 8.13 Conveyance Taxes. BJ and Western shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated hereby that are required or
permitted to be filed on or before the Effective Time. Any liability with
respect to the transfer of the property of Western arising out of the New York
State Real Property Transfer Gains Tax, the New York State Real Estate Transfer
Tax or the New York City Real Property Transfer Tax shall be borne by BJ and
expressly shall not be the liability of the stockholders of Western.
Section 8.14 Additional Agreements. Subject to the terms and
conditions set forth herein, each of the parties hereto agrees to use its best
efforts to take, or cause to be taken, all action and to use its best efforts
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations and to otherwise use its best efforts to
consummate and make effective the transactions contemplated by this Agreement,
including using its best efforts to satisfy the conditions
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precedent to the obligations of any of the parties hereto, to obtain all
necessary waivers, consents and approvals, to obtain waivers or consents from
holders of, or to arrange to pay or for the prepayment of, indebtedness which
would be the subject of an event of default as a result of the Merger, to
effect all necessary registrations and filings (including but not limited to
filings under the Hart Scott Act), and to cause to be lifted any injunction or
other legal bar to the Merger (and, in such case, to proceed with the Closing
and the Merger as expeditiously as possible), subject, however, to the
requisite vote of the stockholders of Western and BJ.
Section 8.15 Dividends. BJ shall not declare, set aside or pay any
dividend payable in cash, stock or property with respect to any capital stock
prior to the Effective Time.
Section 8.16 Election to BJ's Board of Directors. At the Effective
Time of the Merger, BJ shall promptly increase the size of its board of
directors in order to enable the three current outside directors of Western
listed on Exhibit C hereto (the "Western Representatives") to be appointed to
BJ's Board of Directors and for at least one year after the next annual meeting
of stockholders of BJ, subject to fiduciary obligations under applicable law,
shall use its best efforts to cause the Western Representatives to be elected
to BJ's Board of Directors by the stockholders of BJ.
Section 8.17 BJ Vote. BJ will vote (or consent with respect to) or
cause to be voted (or a consent to be given with respect to) any Western Common
Stock and any shares of common stock of BJ Sub beneficially owned by it or any
of its subsidiaries or with respect to which it or any of its subsidiaries has
the power (by agreement, proxy or otherwise) to cause to be voted (or to
provide a consent), in favor of the adoption and approval of this Agreement at
any meeting of stockholders of Western or BJ Sub, respectively, at which this
Agreement shall be submitted for adoption and approval and at all adjournments
or postponements thereof (or, if applicable, by any action of stockholders of
either Western or BJ Sub by consent in lieu of a meeting).
Section 8.18 Warrant Agreement; Reservation of BJ Common Stock.
Prior to the Effective Time, BJ shall execute and deliver to Western the
Warrant Agreement and shall reserve for issuance such number of shares of BJ
Common Stock to be issued upon conversion of the Western Convertible
Debentures.
Section 8.19 Supplemental Indentures. BJ Sub will use its best
efforts to execute and deliver to Western supplemental indentures with respect
to each of the Western Senior Notes and the Western Convertible Debentures.
Section 8.20 BJ Standstill. If this Agreement is terminated (a)
under the circumstances specified in Section 8.10(f) and BJ is thereby
obligated to pay to Western the $20 million fee specified in Section 8.10(f),
(b) pursuant to Section 10.1(j), or (c) pursuant to Section 10.1(k), then for
five years after the date of such termination in the case of a termination
under the circumstances specified in Section 8.10(f) or pursuant to Section
10.1(j), and for two years after the date of such termination in the case of a
termination pursuant to Section 10.1(k), BJ and each of its successors will
not, and will cause its affiliates not to:
(i) acquire, offer or propose to acquire, or agree to
acquire, directly or indirectly, by merger, purchase or otherwise,
beneficial ownership of any assets or voting securities of Western or
its affiliates or any direct rights or options to acquire (through
purchase, exchange, conversion or otherwise) any assets or voting
securities of Western or its affiliates;
(ii) make, or in any way participate in, directly or
indirectly, any "solicitation" of "proxies" (as such terms are defined
in Rule 14a-1 of Regulation 14A promulgated by the Commission,
disregarding clause (iv) of Rule 14a-1(1)(2), but including any
solicitation exempted pursuant to Rule 14a-2(b)(1)) to vote (including
by the execution of actions by written
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consent), or seek to advise, encourage or influence any person or
entity with respect to the voting of, any voting securities of
Western;
(iii) call, or in any way participate in a call for, any
meeting of stockholders of Western (or take any action with respect to
stockholders acting by written consent);
(iv) form, join or in any way participate in a "group"
(within the meaning of Section 13(d)(3) of the Exchange Act) with
respect to any voting securities of Western; or
(v) otherwise act to control or influence, or seek to
control or influence, Western or the management, Board of Directors,
policies or affairs of Western, including, without limitation, (A)
making any offer or proposal to acquire any securities or assets of
Western or any of its affiliates or soliciting or proposing to effect
or negotiate any form of business combination, restructuring,
recapitalization or other extraordinary transaction involving Western,
its affiliates or any of their respective securities or assets, (B)
seeking Board representation or the removal of any directors or a
change in the composition or size of the Board of Directors of
Western, (C) making any request to amend or waive any provision of
this Section 8.20, (D) disclosing any intent, purpose, plan or
proposal with respect to this Section 8.20 or Western, its affiliates
or the boards of directors, management, policies or affairs or
securities or assets of Western or its affiliates that is inconsistent
with this Section 8.20, including an intent, purpose, plan or proposal
that is conditioned on, or would require, waiver, amendment,
nullification or invalidation of any provision of this Section 8.20,
or take any action that could require Western or any of its affiliates
to make any public disclosure relating to any such intent, purpose,
plan, proposal or condition, or (E) assisting, advising or encouraging
any person with respect to, or seeking to do, any of the foregoing.
Section 8.21 Western Standstill. If this Agreement is terminated
under the circumstances specified in Section 8.10(f) and BJ pays to Western the
$20 million fee specified in Section 8.10(f), then for five years after the
date of such termination Western and each of its successors will not, and will
cause its affiliates not to:
(i) acquire, offer or propose to acquire, or agree to
acquire, directly or indirectly, by merger, purchase or otherwise,
beneficial ownership of any assets or voting securities of BJ or its
affiliates or any direct rights or options to acquire (through
purchase, exchange, conversion or otherwise) any assets or voting
securities of BJ or its affiliates;
(ii) make, or in any way participate in, directly or
indirectly, any "solicitation" of "proxies" (as such terms are defined
in Rule 14a-1 of Regulation 14A promulgated by the Commission,
disregarding clause (iv) of Rule 14a-1(1)(2), but including any
solicitation exempted pursuant to Rule 14a-2(b)(1)) to vote (including
by the execution of actions by written consent), or seek to advise,
encourage or influence any person or entity with respect to the voting
of, any voting securities of BJ;
(iii) call, or in any way participate in a call for, any
meeting of stockholders of BJ (or take any action with respect to
stockholders acting by written consent);
(iv) form, join or in any way participate in a "group"
(within the meaning of Section 13(d)(3) of the Exchange Act) with
respect to any voting securities of BJ; or
(v) otherwise act to control or influence, or seek to
control or influence, BJ or the management, Board of Directors,
policies or affairs of BJ, including, without limitation, (A) making
any offer or proposal to acquire any securities or assets of BJ or any
of its affiliates or soliciting or proposing to effect or negotiate
any form of business combination, restructuring, recapitalization or
other extraordinary transaction involving BJ, its affiliates or any of
their
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respective securities or assets, (B) seeking Board representation or
the removal of any directors or a change in the composition or size of
the Board of Directors of BJ, (C) making any request to amend or waive
any provision of this Section 8.21, (D) disclosing any intent,
purpose, plan or proposal with respect to this Section 8.21 or BJ, its
affiliates or the boards of directors, management, policies or affairs
or securities or assets of BJ or its affiliates that is inconsistent
with this Section 8.21, including an intent, purpose, plan or proposal
that is conditioned on, or would require, waiver, amendment,
nullification or invalidation of any provision of this Section 8.21,
or take any action that could require BJ or any of its affiliates to
make any public disclosure relating to any such intent, purpose, plan,
proposal or condition, or (E) assisting, advising or encouraging any
person with respect to, or seeking to do, any of the foregoing.
ARTICLE IX
CONDITIONS PRECEDENT
Section 9.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) This Agreement and the Merger and the other
transactions contemplated hereby shall have been adopted and approved
by the requisite vote of the holders of Western Common Stock.
(b) The waiting periods applicable to the consummation of
the Merger under the Hart Scott Act shall have expired or been earlier
terminated.
(c) No preliminary or permanent injunction or other
order, decree or ruling by any United States federal or state court of
competent jurisdiction or by any United States federal or state
governmental, regulatory or administrative agency or authority which
prevents the consummation of the Merger shall have been issued and
remain in effect.
(d) No statute, rule or regulation shall have been
enacted by any United States federal or state governmental, regulatory
or administrative agency or authority that makes the consummation of
the Merger illegal or would otherwise prevent the consummation of the
Merger.
(e) The S-4 shall have become effective, and any required
post-effective amendment shall have become effective, under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order, and any material "blue sky" and
other state securities laws applicable to the registration of the BJ
Common Stock (including associated BJ Purchase Rights) and BJ Warrants
(including the BJ Common Stock issuable upon exercise thereof) to be
exchanged for Western Common Stock shall have been complied with.
(f) The shares of BJ Common Stock (including associated
BJ Purchase Rights) issuable to Western's stockholders pursuant to
this Agreement shall have been approved for listing on the NYSE,
subject to official notice of issuance.
(g) The issuance of BJ Common Stock and BJ Warrants in
the Merger and this Agreement shall have been approved by the
affirmative vote of holders of BJ Common Stock required by NYSE Rule
312.05.
Section 9.2 Condition to Obligations of Western to Effect the Merger.
The obligations of Western to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following additional
conditions:
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(a) BJ and BJ Sub shall have performed or complied with
in all material respects their agreements and covenants contained in
this Agreement and the Senior Executive Termination Agreements
required to be performed or complied with at or prior to the Closing
Date, and the representations and warranties of BJ and BJ Sub
contained in this Agreement shall be true in all respects when made
and on and as of the Closing Date with the same force and effect as if
made on and as of such date, except as expressly contemplated or
otherwise expressly permitted by this Agreement and except that any
representation and warranty not modified by reference to a BJ Material
Adverse Effect that is not true in all respects shall nevertheless be
deemed, for purposes of this Section 9.2(a), to be true in all
respects unless the failure of such representation or warranty to be
so true has had, or is reasonably likely to have, a BJ Material
Adverse Effect.
(b) The Warrant Agreement shall have been executed and
delivered by BJ.
Section 9.3 Conditions to Obligations of BJ and BJ Sub to Effect the
Merger. The obligations of BJ and BJ Sub to effect the Merger shall be subject
to the fulfillment at or prior to the Closing Date of the following additional
conditions:
(a) Western shall have performed or complied with in all
material respects its agreements and covenants contained in this
Agreement required to be performed or complied with at or prior to the
Closing Date, and the representations and warranties of Western
contained in this Agreement shall be true in all respects when made
and on and as of the Closing Date with the same force and effect as if
made on and as of such date, except as expressly contemplated or
otherwise expressly permitted by this Agreement and except that any
representation and warranty not modified by reference to a Western
Material Adverse Effect that is not true in all respects shall
nevertheless be deemed, for purposes of this Section 9.3(a), to be
true in all respects unless the failure of such representation or
warranty to be so true has had, or is reasonably likely to have, a
Western Material Adverse Effect.
(b) The amendment to the Western Rights Agreement
referred to in Section 6.13(a) shall be in full force and effect and
shall be binding, valid and enforceable.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.1 Termination. Except as provided in the concluding
sentence of this Section 10.1, this Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
stockholders of Western:
(a) by mutual written consent of the Board of Directors
of BJ and the Board of Directors of the Western;
(b) by either BJ or Western, if the Merger shall not have
been consummated on or before August 31, 1995, which date may be
extended by the mutual written consent of the Board of Directors of BJ
and the Board of Directors of Western; provided, however, that such
right to terminate this Agreement shall not be available to any party
that has breached in any material respect its obligations under this
Agreement in any manner that shall have proximately contributed to the
failure of the Merger to occur on or before such date; provided,
further, that BJ shall have no right to terminate this Agreement
pursuant to this Section 10.1(b) if BJ shall have exercised its rights
under Sections 8.10(f) or 10.1(m) to extend either the Antitrust
Approval Period or the Section 10.1(m) Period (as defined below) until
after the Antitrust Approval Period and the Section 10.1(m) Period
shall have expired;
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(c) by Western, if any of the conditions specified in
Sections 9.1(d) and 9.2 have not been met or waived by Western, but
only at and after such time as such condition can no longer be
satisfied;
(d) by BJ, if any of the conditions specified in Sections
9.1(d) and 9.3 have not been met or waived by BJ, but only at and
after such time as such condition can no longer be satisfied;
(e) by BJ, if (i) the Board of Directors of Western shall
have (A) withdrawn or modified, in any manner which is adverse to BJ
or BJ Sub, its recommendation or approval of the Merger or this
Agreement and the transactions contemplated hereby and (B) recommended
to stockholders of Western any proposal involving an Alternative
Transaction, or shall have resolved to do both of the foregoing, (ii)
the Board of Directors of Western shall have withdrawn or modified, in
any manner which is adverse to BJ or BJ Sub, its recommendation or
approval of the Merger or this Agreement and the transactions
contemplated hereby under any circumstances other than those specified
in clause (i) above, or (iii) any corporation, partnership, person,
other entity or group (as defined in Section 13(d)(3) of the Exchange
Act) other than BJ or any of its subsidiaries (collectively, "Third
Persons") shall have become an "Acquiring Person" (as defined in the
Western Rights Agreement);
(f) by Western, if it shall exercise the right specified
in clause (y) of Section 8.4(a), provided that Western may not effect
such termination pursuant to this Section 10.1(f) unless and until it
gives BJ at least three Trading Days' prior notice of its intention to
effect such termination pursuant to this Section 10.1(f);
(g) by Western, if BJ shall have entered into an
agreement to effectuate a BJ Alternative Transaction;
(h) by either BJ or Western, if the stockholders of
Western shall have failed to adopt this Agreement and approve the
Merger at the meeting of Western's stockholders referred to in Section
8.3;
(i) by either BJ or Western, if either is prohibited by a
final and nonappealable order or injunction of a United States federal
or state court of competent jurisdiction from consummating the Merger;
(j) by either BJ or Western, if the stockholders of BJ
shall have failed to approve the issuance of the Stock Consideration
and Warrant Consideration in the Merger at the meeting of BJ's
stockholders referred to in Section 8.3;
(k) by Western, if the Closing Price is below $14.00,
provided that Western may not effect such termination pursuant to this
Section 10.1(k) if BJ should offer to amend Section 3.1(b)(ii) so that
"Stock Consideration" will be defined so that each share of Western
Common Stock which is the subject of a Stock Election will be
converted into, exchangeable for and represent the right to receive,
together with a corresponding number of BJ Purchase Rights, a number
of shares of BJ Common Stock having the same aggregate value based on
the actual Closing Price as the aggregate value of the number of
shares of BJ Common Stock into which such share of Western Common
Stock would have been converted if the Closing Price had been $14.00;
(l) by either BJ or Western, if the final terms of a
consent decree between BJ and the Antitrust Division or the FTC (the
"Consenting Parties") with respect to the Merger (the "Consent Decree
Final Agreement") have not been agreed to by the Consenting Parties
(as confirmed by Western), or an order of a Federal District Court
adjudging that the Merger does
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not violate the Federal antitrust laws shall not have been issued
(such Consent Decree Final Agreement or court order being collectively
referred to as the "Antitrust Disposition Action"), by 100 days after
Western and its outside counsel have each certified to BJ (the
"Western Compliance Certificates") that to the best of their knowledge
Western has "substantially complied" with the Antitrust Division's or
FTC's "second request" for information from Western under the Hart
Scott Act, provided that such 100-day period may be extended for two
successive 30-day periods in the manner specified in Section 8.10(f)
(but in no event longer than a total of 160 days);
(m) by either BJ or Western, if the Merger shall not have
occurred by the thirtieth day after the later of (i) the date of the
Antitrust Disposition Action, (ii) the date on which Western's
stockholders shall have approved the Merger, or (iii) the date on
which BJ's stockholders shall have approved the Merger (provided the
meeting of BJ's stockholders shall have initially been scheduled to be
held prior to the thirtieth day after the date of the Antitrust
Disposition Action and adjourned for good reason to no later than the
Final Adjournment Date (as defined below)); provided, however, that BJ
and Western shall not have the right to terminate this Agreement
pursuant to this Section 10.1(m) if the Merger shall not have occurred
by such thirtieth day due to the existence of a preliminary or
permanent injunction or other order, decree or ruling by any United
States federal or state court of competent jurisdiction or by any
United States federal or state governmental, regulatory or
administrative agency or authority which prevents the consummation of
the Merger (unless the action giving rise to such injunction, order,
decree or ruling sought to enjoin or otherwise prohibit the Merger for
alleged violations of the federal or state antitrust laws or such
action was initiated by BJ); provided, further, that in the event any
such injunction, order, decree or ruling shall cause the 30-day period
referred to at the beginning of this Section 10.1(m) (the "Section
10.1(m) Period") to be delayed, the parties hereto shall use their
best efforts to cause such injunction, order, decree or ruling to be
lifted at the earliest practicable date; provided, further, that BJ
shall have the option to extend the Section 10.1(m) Period for a
period of 30 additional days (but in no event later than the Final
Adjournment Date) if either of the following conditions shall have
been satisfied:
(A) if the Antitrust Approval Period was not
extended pursuant to Section 8.10(f), by the delivery of
written notice of such extension by BJ to Western; or
(B) if the Antitrust Approval Period was not
extended for more than 30 days pursuant to Section 8.10(f), by
(i) paying a fee of $5,000,000 to Western if the Antitrust
Approval Period was extended pursuant to clause (i) of the
first sentence of Section 8.10(f), or (ii) by paying a fee of
$2,500,000 to Western if the Antitrust Approval Period was
extended pursuant to clause (ii) of the first sentence of
Section 8.10(f).
If the Antitrust Approval Period was not extended pursuant to Section 8.10(f),
the date of BJ's stockholders' meeting may not be adjourned for more than 60
days after the Antitrust Disposition Action (the "Final Adjournment Date"). If
the Antitrust Approval Period was extended for 30 days pursuant to Section
8.10(f), the Final Adjournment Date may not be more than 30 days after the
Antitrust Disposition Action; provided, however, that BJ may extend the Final
Adjournment Date for up to 60 days after the date of the Antitrust Disposition
Action by (x) paying a fee of $5,000,000 to Western if the Antitrust Approval
Period was extended pursuant to clause (i) of the first sentence of Section
8.10(f), or (y) by paying a fee of $2,500,000 to Western if the Antitrust
Approval Period was extended pursuant to clause (ii) of the first sentence of
Section 8.10(f). If the Antitrust Approval Period was extended for 60 days
pursuant to Section 8.10(f), the Final Adjournment Date may not be more than 30
days after the Antitrust Disposition Action. Notwithstanding anything to the
contrary provided elsewhere in this Section 10.1, BJ may not terminate this
Agreement pursuant to Sections 10.1(d) or 10.1(e)(iii) after the 100-day
Antitrust Approval Period.
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Section 10.2 Effect of Termination. In the event of termination of
this Agreement by either BJ or Western, as provided above, this Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of either Western or BJ or BJ Sub or their respective officers or directors
(except for this Section 10.2 and Sections 8.10, 8.20 and 8.21, which shall
survive termination of this Agreement and except as set forth in the
confidentiality agreements between BJ and Western dated October 7, 1994
(collectively with the confidentiality agreements among Collier, Shannon, Rill
& Scott, Sullivan & Cromwell and Simpson Thacher & Bartlett, the
"Confidentiality Agreements"), each of which Confidentiality Agreements shall
survive such termination) and except that nothing herein shall relieve any
party from liability for any breach of this Agreement; provided, however, that
the payment of any fees and expense reimbursements specified in Sections
8.10(b),(d) or (f) upon the termination of this Agreement under any of the
circumstances specified in Sections 8.10(b),(d) or (f) shall constitute the
parties' sole remedy for any breach of this Agreement which may have occurred
prior to such termination.
Section 10.3 Amendment. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective Boards of Directors,
at any time before or after approval hereof by the stockholders of Western but,
after any such approval, no amendment shall be made which changes the way in
which the Merger Consideration is calculated under Article III or which in any
way alters or changes any of the other terms or conditions of this Agreement if
such alteration or change would materially adversely affect the rights of such
stockholders, without the further approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed and
acknowledged on behalf of each of the parties hereto.
Section 10.4 Waiver. At any time prior to the Closing Date, each of
the parties hereto may (i) extend the time of the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, (iii) waive compliance with any of the
agreements or conditions contained herein which may legally be waived and (iv)
grant any consents hereunder. Any agreement on the part of any party hereto to
any such extension or waiver shall be valid if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE XI
GENERAL PROVISIONS
Section 11.1 Notice of Breach. Each party will promptly give written
notice to each other party upon becoming aware of the occurrence of any breach
of any of its representations, warranties and covenants contained in this
Agreement and will use its best efforts to prevent or promptly remedy the same.
Section 11.2 Survival of Representations and Warranties. The
covenants of Western, BJ and BJ Sub contained in Sections 3.6, 8.6, 8.8, 8.10,
8.13 and 8.16 shall survive the consummation of the Merger. None of the
representations and warranties in this Agreement shall survive the Merger.
Section 11.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given (i) on the date delivered, if
delivered personally, (ii) on the first Trading Day following the deposit
thereof with Federal Express, if sent by Federal Express, and (iii) on the
fourth Trading Day following the mailing thereof with postage prepaid, if
mailed by registered or certified mail (return receipt requested), in each case
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
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(a) If to BJ or BJ Sub, to:
BJ Services Company
5500 Northwest Central Drive
Houston, Texas 77092
Attention: Mr. J.W. Stewart
Chairman and President
with copies to:
Andrews & Kurth
4200 Texas Commerce Tower
Houston, Texas 77002
Attention: G. Michael O'Leary, Esq.
and
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Robert L. Friedman, Esq.
(b) if to Western, to:
The Western Company of North America
515 Post Oak Boulevard
Houston, Texas 77027
Attention: Mr. Sheldon R. Erikson
Chairman and Chief Executive Officer
with a copy to:
Graham L. Adelman, Senior Vice
President, General Counsel and Secretary
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: James C. Morphy, Esq.
Section 11.4 Definitions. (a) For purposes of this Agreement, (i)
when a reference is made in this Agreement to subsidiaries of BJ or Western,
the term "subsidiaries" means any domestic or foreign corporation more than 50%
of whose outstanding voting securities are directly or indirectly owned by BJ
or Western, as the case may be, and (ii) the term "affiliate" shall have the
meaning set forth in Rule 12b-2 under the Exchange Act. The headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
(b) As used herein, "BJ Alternative Transaction" means (i) any
merger, consolidation or other business combination transaction involving BJ in
which another corporation, partnership, person, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act) would acquire beneficial
ownership of at least 50% of the aggregate voting power of all voting
securities of BJ or the
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Surviving Corporation, as the case may be; (ii) any tender offer or exchange
offer for any securities of BJ which, if consummated, would result in another
corporation, partnership, person, other entity or group (as defined in Section
13(d)(3) of the Exchange Act) becoming the beneficial power of at least 50% or
more of the aggregate voting power of all voting securities of BJ; (iii) any
sale or other disposition of assets of BJ or any of its subsidiaries in a
single transaction or in a series of related transactions if the fair market
value of such assets exceeds 50% of the aggregate fair market value of the
assets of BJ and its subsidiaries taken as a whole before giving effect to such
sale or other disposition; (iv) the adoption by BJ of a plan of liquidation; or
(v) the repurchase by BJ or any of its subsidiaries of shares of BJ Common
Stock representing at least 50% or more of the aggregate voting power of all
voting securities of BJ.
Section 11.5 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
Section 11.6 Entire Agreement; Assignment. This Agreement, together
with the Senior Executive Termination Agreements, the Warrant Agreement and the
Confidentiality Agreements, constitutes the entire agreement among the parties
with respect to the subject matter hereof and supersedes all prior agreements
and undertakings, both written and oral, among the parties, or any of them,
with respect to the subject matter hereof (except for the Senior Executive
Termination Agreements, the Warrant Agreement and the Confidentiality
Agreements). This Agreement shall not be assigned by operation of law or
otherwise, except that BJ and BJ Sub may assign all or any of their respective
rights and obligations hereunder to any direct or indirect wholly owned
subsidiary or subsidiaries of BJ, provided that no such assignment shall
relieve the assigning party of its obligations hereunder if such assignee does
not perform such obligations.
Section 11.7 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement, except as provided in Section 8.6(e) and, to the
limited extent provided for therein, Section 8.8(d).
Section 11.8 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
Section 11.9 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect
in any way the meaning or interpretation of this Agreement.
Section 11.10 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, BJ, BJ Sub and Western have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
BJ SERVICES COMPANY
By: /s/ J.W. STEWART
__________________________________
Name: J.W. Stewart
Title: Chairman and President
WCNA ACQUISITION CORP.
By: /s/ J.W. STEWART
__________________________________
Name: J.W. Stewart
Title: President
THE WESTERN COMPANY
OF NORTH AMERICA
By: /s/ SHELDON R. ERICKSON
__________________________________
Name: Sheldon R. Erickson
Title: Chairman and
Chief Executive Officer
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APPENDIX A:
EXHIBIT A
WARRANT AGREEMENT
FOR THE FORM OF AMENDED
WARRANT AGREEMENT,
SEE ANNEX I
TO APPENDIX B
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<PAGE> 224
Appendix A:
Exhibit B
AFFILIATES' AGREEMENT
WHEREAS, BJ Services Company ("BJ"), Western Acquisition Corp. ("BJ
Sub") and The Western Company of North America ("Western") have entered into an
Agreement and Plan Merger dated as of November __, 1994 (the "Merger
Agreement"), pursuant to which, among other things, Western will be merged (the
"Merger") into BJ Sub (all capitalized terms used and not defined herein shall
have the meanings ascribed to them in the Merger Agreement); and
WHEREAS, upon the effectiveness of the Merger, each outstanding share
of Western common stock will be converted into the right to receive (without
interest) Warrant Consideration and either (i) Cash Consideration or (ii) Stock
Consideration, in each case as the holder thereof shall have elected or be
deemed to have elected in accordance with Section 3.3 of the Merger Agreement,
and certain outstanding stock options and stock appreciation rights of Western
will be assumed by BJ and each assumed option will become exercisable for
shares of BJ common stock; and
WHEREAS, a registration statement covering the shares of BJ common
stock and warrants to purchase BJ common stock to be issued in connection with
the Merger has been filed with the Securities and Exchange Commission as
required by the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act"); and
WHEREAS, the issuance of BJ common stock and warrants to purchase BJ
common stock pursuant to the Merger Agreement constitutes a transaction subject
to Rule 145 under the Securities Act; and
WHEREAS, the undersigned may be considered to be an "affiliate" of
Western for the purpose of Rule 145 in connection with the Merger (an
"Affiliate"), and may be subject to restrictions in connection with the sale or
other disposition of the BJ common stock and warrants to purchase BJ common
stock which may be issued to the undersigned pursuant to the Merger Agreement
in exchange for the shares of Western common stock which the undersigned then
owns.
NOW, THEREFORE, the undersigned hereby agrees for the benefit of BJ,
BJ Sub and Western that: (i) the undersigned will not offer to sell, sell,
transfer or otherwise dispose of any of the BJ common stock and warrants to
purchase BJ common stock which may be issued to the undersigned in the Merger
other than (a) pursuant to an effective registration statement under the
Securities Act covering such sale, transfer or other disposition by the
undersigned of such BJ securities or (b) in compliance with Rule 145 under the
Securities Act or another exemption from the registration requirements of the
Securities Act; (ii) the undersigned will not offer to sell, sell, transfer or
otherwise dispose of any of the BJ common stock and warrants to purchase BJ
common stock which may be issued to the undersigned in the Merger (other than
pursuant to an effective registration statement under the Securities Act)
without prior written notice to BJ specifying the manner of compliance with
this Agreement (including, in the case of a sale pursuant to Rule 145, a
statement to the effect that such sale of such securities is to be made
pursuant to a "brokers' transaction" as defined in Rule 144 under the
Securities Act); provided, however, that if two years shall have elapsed from
the date the undersigned acquired the above-mentioned BJ securities and the
two-year limitation of Rule 145(d)(2) is then available to the undersigned, no
such notice shall be required; (iii) BJ is under no obligation to register the
sale, transfer or other disposition of the BJ securities received by the
undersigned as a result of the Merger or to take any other action necessary for
the purpose of making an exemption from registration available; provided,
however, that in order to permit the undersigned to effect sales pursuant to
Rule 145, BJ will use its best efforts to make available adequate current
public information with respect to BJ within the meaning of paragraph (c) of
Rule 144; and (iv) the undersigned will not offer to sell, sell, transfer or
otherwise dispose of any of the BJ securities which may be issued to the
undersigned in the Merger prior to BJ publishing consolidated financial
statements which reflect at least thirty days of post-merger combined
operations of BJ and Western.
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IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
executed as of this ____ day of_______________, 1995.
________________________________
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<PAGE> 226
Appendix A:
Exhibit C
WESTERN REPRESENTATIVES ON BJ BOARD
David A. B. Brown
William J. Johnson
Michael E. Patrick
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<PAGE> 227
APPENDIX B
FIRST AMENDMENT TO AGREEMENT
AND PLAN OF MERGER
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER, dated as of March 7,
1995, among BJ SERVICES COMPANY ("BJ"), WCNA ACQUISITION CORP., a wholly owned
subsidiary of BJ ("BJ Sub"), and THE WESTERN COMPANY OF NORTH AMERICA
("Western"), each a Delaware corporation.
WHEREAS, BJ, BJ Sub and Western have entered into an Agreement and
Plan of Merger, dated as of November 17, 1994 (the "Merger Agreement"); and
WHEREAS, pursuant to Section 1.5 of the Merger Agreement, BJ hereby
notifies Western of its desire to structure the Merger so that Western merges
into BJ and BJ is the Surviving Corporation after the Effective Time;
NOW, THEREFORE, in consideration of the foregoing premises, and other
good and valuable consideration, the parties hereto agree as follows:
ARTICLE I
AMENDMENTS
1.1 As of the date hereof, BJ Sub shall cease to be a party to the
Merger Agreement and shall henceforth have no rights or obligations thereunder.
1.2 Sections 1.1, 1.4, 2.1, 2.2, and 8.19 of the Merger Agreement
are hereby amended by deleting each reference to "BJ Sub" therein and inserting
"BJ" in place thereof.
1.3 Section 1.2 of the Merger Agreement is hereby amended by
deleting the words ", BJ Sub" and "cause the Surviving Corporation to" in the
first sentence of such section.
1.4 Section 2.3 of the Merger Agreement is hereby amended by (i)
deleting the word "The" in the first sentence of such section and inserting the
words "Subject to Section 8.16, the" in place thereof and (ii) deleting the
reference to "BJ Sub" in the same sentence and inserting "BJ" in place thereof.
1.5 Sections 3.1(a) and 3.1(c) of the Merger Agreement are hereby
amended by deleting the references to ", BJ Sub" therein.
1.6 Section 3.1(d) of the Merger Agreement is hereby deleted in
its entirety, and the following is inserted in place thereof:
"(d) BJ Shares. Each share of common stock, par value
$0.10 per share, of BJ ("BJ Common Stock") issued and outstanding
immediately prior to the Effective Time shall remain outstanding after
the Merger and, together with BJ Common Stock issued pursuant to the
Merger, thereafter shall constitute all of the common stock of the
Surviving Corporation issued and outstanding immediately after the
Effective Time."
1.7 Section 3.2(b) of the Merger Agreement is hereby amended by
deleting the reference to "$1.00" at the end thereof and inserting in place
thereof "$5.00".
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1.8 Section 3.4 of the Merger Agreement is hereby amended by
deleting the words "Warrant Consideration Value" and inserting in place thereof
the words "Warrant Current Market Price".
1.9 Section 3.7 of the Merger Agreement is hereby amended by (i)
deleting from the first sentence thereof the words "Neither BJ nor" and
capitalizing the first letter of the following word and (ii) inserting the word
"not" between the words "shall be" in the same sentence.
1.10 Section 4.2 of the Merger Agreement is hereby amended by
deleting from the first sentence thereof the word "without" and inserting the
words "$1 per share" after the words "par value" in the same sentence.
1.11 Section 4.4 of the Merger Agreement is hereby amended by (i)
deleting from the third sentence thereof the words "each of", "and BJ Sub" and
"and of BJ Sub", (ii) deleting from the fifth sentence thereof the words
"Neither", "nor BJ Sub" and ", with respect to BJ," and (iii) inserting the
word "not" between the words "is subject" in the fifth sentence thereof.
1.12 Section 4.11 of the Merger Agreement is hereby amended by
deleting the first sentence of such section and inserting the following in
place thereof: "The affirmative vote of the holders of a majority of the
outstanding shares of BJ Common Stock entitled to vote thereon is required to
approve this Agreement and the issuance of BJ Common Stock and BJ Warrants in
the Merger."
1.13 Sections 4.14, 10.1(e), 10.2, and 11.3(a) of the Merger
Agreement are hereby amended by deleting the words "or BJ Sub" in each such
section.
1.14 Article V of the Merger Agreement is hereby deleted in its
entirety.
1.15 Article VI of the Merger Agreement is hereby amended by
deleting from the first line thereof the words "and BJ Sub".
1.16 Section 6.4 of the Merger Agreement is hereby amended by (i)
deleting from the third sentence thereof the words "each of" and "and BJ Sub"
and (ii) deleting from the fifth sentence thereof the words "or BJ Sub".
1.17 Section 8.3 of the Merger Agreement is hereby amended by (i)
deleting from the fourth sentence thereof the words "NYSE Rule 312.05" and
inserting in place thereof the words "applicable Delaware Corporation Law" and
(ii) deleting from the penultimate sentence thereof the words "or NYSE rules,
as the case may be,".
1.18 Section 8.6(a) of the Merger Agreement is hereby amended by
(i) deleting the words "BJ agrees that it or" and (ii) deleting from the
parenthetical at the end of such section the words "BJ or".
1.19 Section 8.6(b) of the Merger Agreement is hereby deleted in
its entirety and the following is inserted in place thereof:
"(b) Any Indemnified Party wishing to claim
indemnification under paragraph (a) of this Section 8.6, upon learning
of any such claim, action, suit, proceeding or investigation, shall
promptly notify the Surviving Corporation thereof, but the failure to
so notify shall not relieve the Surviving Corporation of any liability
it may have to such Indemnified Party except to the extent that such
failure materially prejudices the Surviving Corporation. In the event
of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) the Surviving
Corporation shall have the right to assume the defense thereof (which
it shall, in cooperation with the Indemnified Parties, vigorously
defend)
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and the Surviving Corporation shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if the Surviving Corporation elects
not to assume such defense or there is a conflict of interest between
the Surviving Corporation and the Indemnified Parties, including
situations in which there are one or more legal defenses available to
the Indemnified Party that are different from or additional to those
available to the Surviving Corporation, the Indemnified Parties may
retain counsel satisfactory to them, and the Surviving Corporation
shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received;
provided, however, that the Surviving Corporation shall not, in
connection with any one such action or proceeding or separate but
substantially similar actions or proceedings arising out of the same
general allegations, be liable for the fees and expenses of more than
one separate firm of attorneys at any time for all Indemnified Parties
except to the extent that local counsel, in addition to such parties'
regular counsel, is required in order to effectively defend against
such action or proceeding, (ii) the Indemnified Parties will cooperate
in the defense of any such matter and (iii) the Surviving Corporation
shall not be liable for any settlement effected without its prior
written consent, and provided, further, that the Surviving Corporation
shall not have any obligation hereunder to any Indemnified Party when
and if a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated
hereby is prohibited by applicable law."
1.20 Section 8.8(a) of the Merger Agreement is hereby amended by
(i) deleting from clause (ii) of such section the words "BJ, BJ Sub, Western
or" and (ii) deleting from clause (iii) of such section the words "BJ, Western
or".
1.21 Section 8.8(b) of the Merger Agreement is hereby amended by
(i) deleting the words ", and will cause the Surviving Corporation to" and (ii)
deleting from the proviso thereof the words "or the Surviving Corporation".
1.22 Section 8.8(c) of the Merger Agreement is hereby amended by
(i) deleting the words "or BJ" and (ii) deleting the proviso in such section
and inserting the following in place thereof: "provided, however, that
employees of the Surviving Corporation who become participants in a defined
benefit pension plan that was sponsored by BJ prior to the Effective Time or in
a defined benefit pension plan sponsored by the Surviving Corporation which is
adopted on or after the Effective Time shall not be given credit for benefit
accrual purposes to the extent such credit would result in a duplication of
benefits under more than one defined benefit pension plan."
1.23 Section 8.10(b) of the Merger Agreement is hereby amended by
deleting the words "or BJ Sub" and "and BJ Sub".
1.24 Section 8.11 of the Merger Agreement is hereby amended by (i)
deleting from the fifth sentence of such section the reference to ", BJ Sub"
and (ii) deleting from the last sentence of such section the words ", BJ and BJ
Sub" and inserting the words "and BJ" in place thereof.
1.25 Section 8.17 of the Merger Agreement is hereby amended by (i)
deleting the words "and any shares of common stock of BJ Sub" and "or BJ Sub,
respectively," and (ii) deleting the words "either Western or BJ Sub" and
inserting the word "Western" in place thereof.
1.26 Section 9.1(g) of the Merger Agreement is hereby amended by
(i) deleting the word "affirmative" and inserting in place thereof the word
"requisite" and (ii) deleting the words "required by NYSE Rule 312.05".
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1.27 Section 9.2(a) of the Merger Agreement is hereby amended by
(i) deleting the words "and BJ Sub" where it appears in two places and (ii)
deleting the word "their" and inserting the word "its" in place thereof.
1.28 Section 9.3 of the Merger Agreement is hereby amended by
deleting the words "and BJ Sub" from the heading (with a corresponding change
to the index) and the first line thereof.
1.29 Section 10.1(j) of the Merger Agreement is hereby amended by
inserting between the words "approve the" the words "this Agreement and".
1.30 Section 11.2 of the Merger Agreement is hereby amended by
deleting from the first sentence of such section the words ", BJ and BJ Sub"
and inserting the words "and BJ" in place thereof.
1.31 Section 11.4(b) of the Merger Agreement is hereby amended by
deleting from clause (i) thereof the words "or the Surviving Corporation, as
the case may be".
1.32 Section 11.6 of the Merger Agreement is hereby amended by (i)
deleting the words "and BJ Sub" and (ii) deleting the words "their respective"
and inserting the word "its" in place thereof.
1.33 The form of Warrant Agreement attached as Exhibit A to the
Merger Agreement shall be deleted and replaced in its entirety with Amended
Exhibit A which is attached as Annex I to this First Amendment.
ARTICLE II
MISCELLANEOUS
2.1 Terms used in this First Amendment without definition shall
have the meanings ascribed to such terms in the Merger Agreement.
2.2 This First Amendment may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
2.3 Except as expressly amended and modified by the terms of this
First Amendment, the terms and provisions of the Merger Agreement shall remain
in full force and effect.
2.4 This First Amendment shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws
thereof.
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IN WITNESS WHEREOF, BJ, BJ Sub and Western have caused this First
Amendment to be executed as of the date first written above by their respective
officers thereunto duly authorized.
BJ SERVICES COMPANY
By: /s/ J. W. STEWART
____________________________________
Name: J. W. Stewart
Title: President and
Chief Executive Officer
WCNA ACQUISITION CORP.
By: /s/ J. W. STEWART
____________________________________
Name: J. W. Stewart
Title: President
THE WESTERN COMPANY OF
NORTH AMERICA
By: /s/ GRAHAM L. ADELMAN
____________________________________
Name: Graham L. Adelman
Title: Senior Vice President
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APPENDIX B:
ANNEX I
_______________________________________________________________________________
[FORM OF WARRANT AGREEMENT]
BJ SERVICES COMPANY
and
FIRST CHICAGO TRUST COMPANY OF NEW YORK,
Warrant Agent
_______________________________________________________________________________
Warrant Agreement
Dated as of , 1995 [the Closing Date]
_______________________________________________________________________________
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Table of Contents
<TABLE>
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Section 1. Certain Definitions . . . . . . . . . . . . . . . . . .
Section 2. Appointment of Warrant Agent . . . . . . . . . . . . .
Section 3. Form of Warrant Certificates . . . . . . . . . . . . .
Section 4. Countersignature and Registration . . . . . . . . . . .
Section 5. Transfer, Split Up, Combination and Exchange of
Warrant Certificates; Mutilated, Destroyed, Lost
or Stolen Warrant Certificates . . . . . . . . . . . .
Section 6. Exercise of BJ Warrants; Exercise Price;
Expiration Date of BJ Warrants . . . . . . . . . . . .
Section 7. Cancellation and Destruction of Warrant Certificates . .
Section 8. Reservation and Availability of Shares of BJ
Common Stock or Cash . . . . . . . . . . . . . . . . .
Section 9. BJ Common Stock Record Date . . . . . . . . . . . . . .
Section 10. Adjustment of Exercise Price, Number of Shares
of BJ Common Stock or Number of BJ Warrants . . . . . .
Section 11. Certification of Adjusted Exercise Price or
Number of Shares of BJ Common Stock . . . . . . . . . .
Section 12. Reclassification, Consolidation, Merger, Combination,
Sale or Conveyance . . . . . . . . . . . . . . . . . .
Section 13. Fractional BJ Warrants and Fractional Shares
of BJ Common Stock . . . . . . . . . . . . . . . . . .
Section 14. Right of Action . . . . . . . . . . . . . . . . . . . .
Section 15. Agreement of Warrant Certificate Holders . . . . . . .
Section 16. Warrant Certificate Holder Not Deemed a Stockholder . .
Section 17. Concerning the Warrant Agent . . . . . . . . . . . . .
Section 18. Merger or Consolidation or Change of Name
of Warrant Agent . . . . . . . . . . . . . . . . . . .
Section 19. Duties of Warrant Agent . . . . . . . . . . . . . . . .
Section 20. Change of Warrant Agent . . . . . . . . . . . . . . . .
</TABLE>
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<TABLE>
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Section 21. Issuance of New Warrant Certificates . . . . . . . . . .
Section 22. Purchase of BJ Warrants by BJ . . . . . . . . . . . . . .
Section 23. Notice of Proposed Actions . . . . . . . . . . . . . . .
Section 24. Notices . . . . . . . . . . . . . . . . . . . . . . . . .
Section 25. Supplements and Amendments . . . . . . . . . . . . . . .
Section 26. Successors . . . . . . . . . . . . . . . . . . . . . . .
Section 27. Benefits of this Agreement . . . . . . . . . . . . . . .
Section 28. Governing Law . . . . . . . . . . . . . . . . . . . . . .
Section 29. Counterparts . . . . . . . . . . . . . . . . . . . . . .
Section 30. Captions . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
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<PAGE> 235
WARRANT AGREEMENT
This Agreement, dated as of ________ __, 1995 [the Closing Date],
between BJ SERVICES COMPANY, a Delaware corporation ("BJ"), and FIRST CHICAGO
TRUST COMPANY OF NEW YORK, a New York limited purpose trust company (the
"Warrant Agent").
W I T N E S S E T H
WHEREAS, BJ has entered into an Agreement and Plan of Merger,
dated as of November 17, 1994, as amended (the "Merger Agreement"), with The
Western Company of North America, a Delaware corporation ("Western"), providing
for the merger of Western into BJ (the "Merger") pursuant to the terms of the
Merger Agreement; and
WHEREAS, the Merger Agreement provides that all of the
outstanding shares of common stock, par value $.10 per share, of Western,
except as provided in the Merger Agreement, shall be converted into, exchanged
for and represent the right to receive consideration specified in the Merger
Agreement, which consideration is to include warrants (the "BJ Warrants") to
purchase BJ Common Stock (as hereinafter defined) upon the terms and subject to
the conditions hereinafter set forth; and
WHEREAS, BJ wishes the Warrant Agent to act on behalf of BJ, and
the Warrant Agent is willing so to act, in connection with the issuance,
transfer, exchange and exercise of BJ Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement,
the following terms have the meanings indicated:
(a) "BJ Common Stock" shall mean the Common Stock, par value
$.10 per share, of BJ.
(b) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in New York are
authorized or obligated by law or executive order to close.
(c) "Close of Business" on any given date shall mean 5:00
P.M., New York City time, on such date; provided, however, that if
such date is not a Business Day it shall mean 5:00 P.M., New York City
time, on the next succeeding Business Day.
(d) "Closing Date" shall have the meaning ascribed to it in
the Merger Agreement.
(e) "Person" shall mean an individual, corporation,
association, partnership, joint venture, trust, unincorporated
organization, government or political subdivision thereof or
governmental agency or other entity.
Section 2. Appointment of Warrant Agent. BJ hereby appoints
the Warrant Agent to act as agent for BJ in accordance with the terms and
conditions hereof, and the Warrant Agent hereby accepts such appointment.
BJ may from time to time appoint such Co-Warrant Agents as it may, in its sole
discretion, deem necessary or desirable.
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Section 3. Form of Warrant Certificates. The Warrant
Certificates (together with the form of election to purchase Common Stock and
the form of assignment to be printed on the reverse thereof) shall be
substantially in the form of Exhibit 1 hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as BJ may deem appropriate and as are not inconsistent with the
provisions of this Agreement and the Merger Agreement or as may be required to
comply with any law or with any rule or regulation made pursuant thereto, or to
conform to usage. Subject to the provisions of Section 21 hereof, the Warrant
Certificates, whenever issued, shall be dated the Closing Date and on their
face shall entitle the holders thereof to purchase such number of shares of
Common Stock as shall be set forth therein at $30 per share (the "Exercise
Price"), but the number of such shares and the Exercise Price shall be subject
to the adjustments as provided herein.
Section 4. Countersignature and Registration. The Warrant
Certificates shall be executed on behalf of BJ by its Chairman, its President
or a Vice President, either manually or by facsimile signature, and have
affixed thereto BJ's seal or a facsimile thereof which shall be attested by the
Secretary or an Assistant Secretary of BJ, either manually or by facsimile
signature. The Warrant Certificate shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so countersigned.
In case any officer of BJ who shall have signed any of the Warrant Certificates
shall cease to be such officer of BJ before countersignature by the Warrant
Agent and issuance and delivery by BJ, such Warrant Certificates, nevertheless,
may be countersigned by the Warrant Agent, issued and delivered with the same
force and effect as though the person who signed such Warrant Certificate had
not ceased to be such officer of BJ; and any Warrant Certificate may be signed
on behalf of BJ by any person who, at the actual date of the execution of such
Warrant Certificate, shall be a proper officer of BJ to sign such Warrant
Certificate, although at the date of the execution of this Warrant Agreement
any such person was not such an officer.
The Warrant Agent will keep or cause to be kept, at one of its
offices in New York City, books for registration and transfer of the Warrant
Certificates issued hereunder. Such books shall show the names and addresses
of the respective holders of the Warrant Certificates, the number of BJ
Warrants evidenced on its face by each of the Warrant Certificates and the date
of each of the Warrant Certificates.
Section 5. Transfer, Split Up, Combination and Exchange of
Warrant Certificates; Mutilated, Destroyed, Lost or Stolen Warrant
Certificates. Subject to the provisions of Section 13 hereof, at any time
after the close of business on the date hereof, and at or prior to the close of
business on the Expiration Date (as such term is hereinafter defined), any
Warrant Certificate or Warrant Certificates may be transferred, split up,
combined or exchanged for another Warrant Certificate or Warrant Certificates,
entitling the registered holder to purchase a like number of shares of BJ
Common Stock as the Warrant Certificate or Warrant Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Warrant Certificate shall make such
request in writing delivered to the Warrant Agent, and shall surrender the
Warrant Certificate or Warrant Certificates to be transferred, split up,
combined or exchanged at the principal office of the Warrant Agent. Thereupon
the Warrant Agent shall countersign and deliver to the person entitled thereto
a Warrant Certificate or Warrant Certificates, as the case may be, as so
requested. BJ may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Warrant Certificates, together with
reimbursement to BJ and the Warrant Agent of all reasonable expenses incidental
thereto.
Upon receipt by BJ and the Warrant Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security in customary form and amount, and reimbursement to BJ and the Warrant
Agent of all reasonable expenses incidental thereto, and upon surrender to the
Warrant
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<PAGE> 237
Agent and cancellation of the Warrant Certificate if mutilated, BJ will make
and deliver a new Warrant Certificate of like tenor to the Warrant Agent for
delivery to the registered holder in lieu of the Warrant Certificate so lost,
stolen, destroyed or mutilated.
Section 6. Exercise of BJ Warrants; Exercise Price; Expiration
Date of BJ Warrants. (a) Subject to Section 6(c) below, the registered holder
of any Warrant Certificate may exercise the BJ Warrants evidenced thereby in
whole or in part upon surrender of the Warrant Certificate, with the form of
election to purchase on the reverse side thereof duly executed, to the Warrant
Agent at the principal office of the Warrant Agent in New York City, together
with payment of the Exercise Price in immediately available funds for each
share of BJ Common Stock as to which the BJ Warrants are exercised, at any time
prior to the close of business on , 2000 [fifth
anniversary of Closing Date] (the "Expiration Date").
(b) The Exercise Price for each share of BJ Common Stock
pursuant to the exercise of BJ Warrants shall initially be $30, subject to
adjustment from time to time as provided in Section 10 hereof. The Exercise
Price shall be payable in lawful money of the United States of America.
(c) Upon receipt of a Warrant Certificate, with the form of
election to purchase duly executed, accompanied by payment of the Exercise
Price for the shares to be purchased and an amount equal to any applicable tax
or governmental charge referred to in Section 8 in cash, or by certified check
or bank draft payable to the order of BJ, the Warrant Agent shall thereupon
promptly (i) requisition from any transfer agent of the BJ Common Stock
certificates for the number of whole shares of BJ Common Stock to be purchased,
and BJ hereby irrevocably authorizes its transfer agent to comply with all such
requests, (ii) when appropriate, requisition from BJ the amount of cash to be
paid in lieu of the issuance of fractional shares and (iii) after receipt of
such certificates, cause the same to be delivered to or upon the order of the
registered holder of such Warrant Certificate, registered in such name or names
as may be designated by such holder, and, when appropriate, after receipt
promptly deliver such cash to or upon the order of the registered holder of
such Warrant Certificate. Upon receipt by BJ of a Warrant Certificate at the
principal office of the Warrant Agent, in proper form for exercise, and payment
of the applicable Exercise Price as required hereby, the holder of such Warrant
Certificate shall be deemed to be the holder of record of the shares of BJ
Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of BJ shall then be closed or that certificates representing
such shares of BJ Common Stock shall not then be actually delivered to the
holder of such Warrant Certificate.
(d) In case the registered holder of any Warrant Certificate
shall exercise less than all BJ Warrants evidenced thereby, a new Warrant
Certificate evidencing BJ Warrants equivalent to the BJ Warrants remaining
unexercised shall be issued by the Warrant Agent to the registered holder of
such Warrant Certificate or to his duly authorized assigns, subject to the
provisions of Section 13 hereof.
Section 7. Cancellation and Destruction of Warrant Certificates.
All Warrant Certificates surrendered for the purpose of exercise, transfer,
split up, combination or exchange shall, if surrendered to BJ or to any or its
agents, be delivered to the Warrant Agent for cancellation or in cancelled
form, or, if surrendered to the Warrant Agent, shall be cancelled by it, and no
Warrant Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Warrant Agreement. BJ shall deliver
to the Warrant Agent for cancellation and retirement, and the Warrant Agent
shall so cancel and retire, any other Warrant Certificate purchased or acquired
by BJ otherwise then upon the exercise thereof. The Warrant Agent shall
deliver all cancelled Warrant Certificates to BJ, or shall, at the written
request of BJ, destroy such cancelled Warrant Certificates, and in such case
shall deliver a certificate of destruction thereof to BJ.
Section 8. Reservation and Availability of Shares of BJ Common
Stock or Cash. BJ covenants and agrees that it will cause to be reserved and
kept available out of its authorized and
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unissued shares of Common Stock or its authorized and issued shares of Common
Stock held in its treasury, free from preemptive rights, the number of shares
of BJ Common Stock that will be sufficient to permit the exercise in full of
all outstanding BJ Warrants or keep sufficient cash available for payment in
lieu of BJ Common Stock.
BJ covenants and agrees that it will use its best efforts to
cause the BJ Common Stock issuable upon the exercise of the BJ Warrants to be
listed on the NYSE (as defined below). In addition, BJ covenants and agrees to
use its best efforts to cause the BJ Warrants to be listed on the NYSE. To the
extent that the BJ Warrants cannot be listed on the NYSE, BJ shall use its best
efforts to cause the BJ Warrants to be listed on the NASDAQ (as defined below).
BJ covenants and agrees that it will take all such actions as may
be necessary to insure that all shares of BJ Common Stock delivered upon
exercise of BJ Warrants shall, at the time of delivery of the certificates for
such shares (subject to payment of the Exercise Price as contemplated by
Section 6(c)), be duly authorized, validly issued, fully paid and
nonassessable.
BJ further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the original issuance or delivery of the Warrant
Certificates or certificates evidencing BJ Common Stock upon exercise of the
Warrant Certificate. BJ shall not, however, be required to pay any tax or
governmental charge which may be payable in respect of any transfer involved in
the transfer or delivery of Warrant Certificates or the issuance or delivery of
certificates for BJ Common Stock in a name other than that of the registered
holder of the Warrant Certificate evidencing BJ Warrants surrendered for
exercise or to issue or deliver any certificate for shares of BJ Common Stock
upon the exercise of any BJ Warrants until any such tax or governmental charge
shall have been paid (any such tax or governmental charge being payable by the
holder of such Warrant Certificate at the time of surrender) or until it has
been established to BJ's satisfaction that no such tax or governmental charge
is due.
Section 9. BJ Common Stock Record Date. Each person in whose
name any certificate for shares of BJ Common Stock is issued upon the exercise
of BJ Warrants shall for all purposes be deemed to have become the holder of
record for the BJ Common Stock represented thereby on, and such certificate
shall be dated, the date upon which the Warrant Certificate evidencing such BJ
Warrants was duly surrendered and payment of the Exercise Price (and any
applicable transfer taxes) was made; provided, however, that if the date of
such surrender and payment is a date upon which the BJ Common Stock transfer
books of BJ are closed, such person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated, the next
succeeding business day on which the BJ Common Stock transfer books of BJ are
open.
Section 10. Adjustment of Exercise Price, Number of Shares of BJ
Common Stock or Number of BJ Warrants. The Exercise Price, the number of
shares covered by such BJ Warrant and the number of BJ Warrants outstanding are
subject to adjustment from time to time as provided in this Section 10.
(a) In the event BJ shall at any time after the date of this
Agreement (i) declare a dividend on shares of BJ Common Stock payable in shares
of any class of capital stock of BJ, (ii) subdivide the outstanding shares of
BJ Common Stock into a greater number of shares of BJ Common Stock, (iii)
combine the outstanding shares of BJ Common Stock into a smaller number of
shares, or (iv) issue any shares of capital stock in a reclassification of
shares of the BJ Common Stock (including any such reclassification in
connection with a consolidation or merger in which BJ is the continuing
corporation), the Exercise Price in effect at the time of the record date for
such dividend or distribution or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of capital
stock issuable on such date, shall be proportionately adjusted so that the
holder of any BJ Warrant exercised after such time shall be entitled to receive
the aggregate number and kind of shares of capital stock which, if such BJ
Warrant had been exercised immediately prior to such date
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and at a time when the BJ Common Stock transfer books of BJ were open, such
holder would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification.
(b) In case BJ shall fix a record date for the issuance of
rights, options or warrants to all holders of BJ Common Stock (such rights,
options or warrants not being available to holders of BJ Warrants) entitling
them (for a period expiring within 45 calendar days after such date of issue)
to subscribe for or purchase BJ Common Stock (or securities convertible into or
exercisable or exchangeable for BJ Common Stock), other than Permitted
Issuances (as defined below), at a price per share of BJ Common Stock (or
having a conversion, exercise or exchange price per share of BJ Common Stock,
in the case of a security convertible into or exercisable or exchangeable for
BJ Common Stock) less than the Current Market Price (as defined in Section
10(f)) per share of BJ Common Stock on such record date, the Exercise Price to
be in effect after such record date shall be determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction of
which the numerator shall be the number of shares of BJ Common Stock
outstanding on such record date plus the number of shares of BJ Common Stock
which the aggregate offering price of the total number of shares of BJ Common
Stock so to be offered (or the aggregate initial conversion, exercise or
exchange price of the convertible, exercisable or exchangeable securities so to
be offered) would purchase at such Current Market Price and of which the
denominator shall be the number of shares of BJ Common Stock outstanding on
such record date plus the number of additional shares of BJ Common Stock to be
offered for subscription or purchase (or into which the convertible,
exercisable or exchangeable securities so to be offered are initially
convertible, exercisable or exchangeable). In case such subscription price may
be paid in a consideration part or all of which shall be in a form other than
cash, the value of such consideration shall be as determined in good faith by
the Board of Directors of BJ, whose determination shall be described in a
statement filed with the Warrant Agent. Such adjustment shall be made
successively whenever such a record date is fixed, and in the event that such
rights or warrants are not so issued the Exercise Price shall be adjusted to be
the Exercise Price which would then be in effect if such record date had not
been fixed. For purposes of this paragraph (b), "Permitted Issuances" shall
mean any and all issuances of shares of BJ Common Stock or rights, options or
warrants entitling the holders thereof to subscribe for or purchase BJ Common
Stock (or securities convertible into or exercisable or exchangeable for BJ
Common Stock) pursuant to any stock option, stock purchase or other employee or
director benefit plan of BJ or any of its subsidiaries approved by
stockholders.
(c) In case BJ shall fix a record date for the making of a
dividend or distribution (other than aggregate cash dividends and distributions
not in excess of $.25 per share of BJ Common Stock for the fiscal year ended
September 30, 1995, and then $1.50 for each 12-month period thereafter, payable
out of retained earnings or earned surplus) to all holders of BJ Common Stock
(including any distribution made in connection with a consolidation or merger
in which BJ is the continuing corporation) or evidences of indebtedness or
assets or subscription rights or warrants (excluding those referred to in
Section 10(b)), the Exercise Price to be in effect after such record date shall
be determined by multiplying the Exercise Price in effect immediately prior to
such record date by a fraction of which the numerator shall be the Current
Market Price (as defined in Section 10(f)) per share of BJ Common Stock on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of BJ, whose determination shall be described in a statement
filed with the Warrant Agent) of such distribution applicable to one share of
BJ Common Stock, and of which the denominator shall be such Current Market
Price per share of BJ Common Stock. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that such distribution
is not so made the Exercise Price shall again be adjusted to be the Exercise
Price which would then be in effect if such record date had not been fixed.
(d) In case a tender offer (a "Tender Offer") made by BJ or
any of its subsidiaries for all or any portion of the BJ Common Stock shall
expire (the "Expiration Time") and the Tender Offer (as amended upon the
expiration thereof) shall require the payment to stockholders based on the
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acceptance (up to any maximum specified in the terms of the Tender Offer) of
Purchased Shares (as defined below) of an aggregate of the cash plus other
consideration having a fair market value (as determined by the Board of
Directors) as of the Expiration Time of such Tender Offer that combined with
the aggregate of the cash plus the fair market value (as determined by the
Board of Directors) of consideration payable in respect of any other tender
offer (determined as of the Expiration Time of such other tender offer) by BJ
or any of its subsidiaries for all or any portion of the BJ Common Stock
expiring within the 12 months preceding the expiration of the Tender Offer and
in respect of which no adjustment pursuant to this clause (d) has been made
exceeds 12.5% of the product of the Current Market Price per share of the BJ
Common Stock as of the Expiration Time of the Tender Offer multiplied by the
number of shares of BJ Common Stock outstanding (including any tendered shares)
at the Expiration Time of the Tender Offer, then, and in each such case,
immediately prior to the opening of business on the next Trading Day after the
date of the Expiration Time of the Tender Offer, the Exercise Price shall be
adjusted so that the same shall equal the price determined by multiplying the
Exercise Price immediately prior to close of business on the date of the
Expiration Time of the Tender Offer by a fraction (A) the numerator of which
shall be equal to (x) the product of (i) the Current Market Price per share of
the BJ Common Stock as of the Expiration Time of the Tender Offer and (ii) the
number of shares of BJ Common Stock outstanding (including any tendered shares)
at the Expiration Time of the Tender Offer less (y) the amount of cash plus the
fair market value (determined as aforesaid) of the aggregate consideration
payable to stockholders based on the acceptance (up to any maximum specified in
the terms of the Tender Offer) of Purchased Shares (as defined below), and (B)
the denominator of which shall be equal to the product of (x) the Current
Market Price per share of the BJ Common Stock as of the Expiration Time of the
Tender Offer and (y) the number of shares of BJ Common Stock outstanding
(including any tendered shares) as of the Expiration Time of the Tender Offer
less the number of all shares validly tendered and not withdrawn as of the
Expiration Time of the Tender Offer, and accepted for purchase up to any
maximum. For purposes of this Section 10, the term "Purchased Shares" shall
mean such shares as are deemed so accepted up to any such maximum.
(e) If the rights (the "BJ Rights") outstanding under the
Stockholder Rights Agreement, dated as of January 12, 1994, as amended, between
BJ and First Chicago Trust Company of New York, as amended (the "Rights
Agreement"), shall become exercisable for shares of Series Two Junior
Participating Preferred Stock, par value $1.00 per share, of BJ ("BJ Preferred
Stock") or other property, the Exercise Price and the number of and kind of
securities or other property issuable upon exercise of each BJ Warrant shall be
appropriately adjusted so that the holder of any BJ Warrant exercised after
such time shall be entitled to receive the aggregate number and kind of shares
of BJ Preferred Stock or other property which would have been issuable under
the BJ Rights that would have been attached to the shares of BJ Common Stock
for which such BJ Warrant was exercisable immediately prior to the BJ Rights
having become exercisable, upon payment of the same consideration, if any,
payable under such BJ Rights for such shares or other property.
(f) For the purpose of any computation hereunder, the "Current
Market Price" per share of BJ Common Stock (or per BJ Warrant, for purposes of
Section 13(a) hereof) on any date shall be deemed to be the average of the
daily Closing Prices per share of such BJ Common Stock (or BJ Warrant, as the
case may be) for the 20 consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date. The "Closing Price" for each day
shall be the last sale price, regular way, or, in case no such sale takes place
on such day, the average closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to trading on the New York Stock
Exchange, Inc. ("NYSE") or, if such securities are not listed or admitted to
trading on the NYSE, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which such securities are listed or admitted to trading
or, if such securities are not listed or admitted to trading on any national
securities exchange, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ"). If on any such Trading
Day or Days such securities are not quoted by any such organization, such
Trading Day or Days shall be replaced for purposes of
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the foregoing calculation by the requisite Trading Day or Days preceding the
commencement of such 20 Trading Day period on which such securities are so
quoted. The term "Trading Day" shall mean a day on which the principal
national securities exchange on which such securities are listed or admitted to
trading is open for the transaction of business or, if such securities are not
listed or admitted to trading on any national securities exchange, a Monday,
Tuesday, Wednesday, Thursday or Friday on which banking institutions in the
State of New York are not authorized or obligated by law or executive order to
close. If the BJ Common Stock (or BJ Warrant, as the case may be) is not so
listed or traded, the "Current Market Price" per share shall be deemed to be
the fair value per share as determined in good faith by the Board of Directors
of BJ, whose determination shall be described in a statement filed with the
Warrant Agent. For the purpose of any computation hereunder, the "Warrant
Merger Price" means the average of the midpoint of the daily high and low
trading prices of BJ Warrants, rounded to four decimal places, on a when-issued
basis as reported in The Wall Street Journal's New York Stock Exchange
Composite Transactions Reports, for each of the first 20 consecutive Trading
Days in the period commencing 25 Trading Days prior to the Closing Date or, if
the BJ Warrants are not then admitted to trading on the NYSE on a when-issued
basis, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which such securities are admitted to trading on a when-issued basis or, if
the BJ Warrants are not admitted to trading on any national securities exchange
on a when-issued basis, the average of the high bid and low asked prices in
the over-the-counter market, as reported by the NASDAQ, of BJ Warrants on a
when-issued basis. If on any such Trading Day or Days the BJ Warrants are not
quoted on a when-issued basis by any such organization, the 20 Trading Day
period referred to above shall be reduced by the number of such Trading Days on
which the BJ Warrants are not so quoted. If the BJ Warrants are not quoted on
a when-issued basis on any Trading Day during such 20 Trading Day period, the
Warrant Merger Price shall be deemed to be $5.00.
(g) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
such price; provided, however, that any adjustments which by reason of this
Section 10(g) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
10 shall be made to the nearest cent or the nearest ten-thousandth of a share,
as the case may be. Notwithstanding the first sentence of this Section 10(g),
any adjustment required by this Section 10 shall be made no later than the
earlier of (i) three years from the date of the transaction which mandates such
adjustment or (ii) the date of the expiration of the right to exercise any BJ
Warrant.
(h) In the event that at any time, as a result of an
adjustment made pursuant to Section 10(a), the holder of any BJ Warrant
thereafter exercised shall become entitled to receive any shares of capital
stock of BJ other than shares of BJ Common Stock, thereafter the number of such
other shares so receivable upon exercise of any BJ Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the shares contained in Section
10(a) through (d) inclusive, and the provisions of Sections 6, 8, 9 and 12 with
respect to the shares of BJ Common Stock shall apply on like terms to any such
other shares.
(i) All BJ Warrants originally issued by BJ subsequent to any
adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of shares of BJ Common
Stock purchasable from time to time hereunder upon exercise of the BJ Warrants,
all subject to further adjustment as provided herein.
(j) Unless BJ shall have exercised its election as provided in
Section 10(k), upon each adjustment of the Exercise Price as a result of the
calculations made in Section 10(b), each BJ Warrant outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Exercise Price, that number of shares (calculated to
the nearest ten-thousandth) obtained by (i) multiplying (x) the number of
shares covered by a BJ Warrant immediately prior to such adjustment by (y) the
Exercise Price in effect immediately prior to such
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adjustment of the Exercise Price and (ii) dividing the product so obtained by
the Exercise Price in effect immediately after such adjustment of the Exercise
Price.
(k) BJ may elect on or after the date of any adjustment of the
Exercise Price to adjust the number of BJ Warrants, in substitution for any
adjustment in the number of shares of BJ Common Stock purchasable upon the
exercise of a BJ Warrant. Each of the BJ Warrants outstanding after such
adjustment of the number of BJ Warrants shall be exercisable for one share of
BJ Common Stock. Each BJ Warrant held of record prior to such adjustment of
the number of BJ Warrants shall become that number of BJ Warrants (calculated
to the nearest ten-thousandth) obtained by dividing the Exercise Price in
effect prior to adjustment of the Exercise Price by the Exercise Price in
effect after adjustment of the Exercise Price. BJ shall notify each of the
record holders of BJ Warrants of its election to adjust the number of BJ
Warrants, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. Such record date may be the
date on which the Exercise Price is adjusted or any day thereafter, but shall
be at least 10 days later than the date of the public announcement. Upon each
adjustment of the number of BJ Warrants pursuant to this Section 10(k), BJ
shall, as promptly as practicable, cause to be distributed to holders of record
of Warrant Certificates on such record date Warrant Certificates evidencing,
subject to Section 13, the additional BJ Warrants to which such holders shall
be entitled as a result of such adjustment, or, at the option of BJ, shall
cause to be distributed to such holders of record in substitution and
replacement for the Warrant Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by BJ, new Warrant
Certificates evidencing all the BJ Warrants to which such holders shall be
entitled after such adjustment. Warrant Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for herein
(and may bear, at the option of BJ, the adjusted Exercise Price) and shall be
registered in the names of the holders of record of Warrant Certificates on the
record date specified in the public announcement.
(l) Irrespective of any adjustment or change in the Exercise
Price or the number of shares of BJ Common Stock issuable upon the exercise of
the BJ Warrants, the Warrant Certificates theretofore and thereafter issued may
continue to express the Exercise Price per share and the number of shares which
were expressed upon the initial Warrant Certificates issued hereunder.
(m) BJ agrees that it will not, by amendment of its
Certificate of Incorporation or through reorganization, consolidation, merger,
dissolution or sale of assets, or by any other voluntary act, avoid or seek to
avoid the observance or performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by BJ. Before taking any
action that would cause an adjustment reducing the Exercise Price below the
then par value, if any, of the shares of BJ Common Stock issuable upon exercise
of the BJ Warrants, BJ shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that BJ may, at the option of BJ
in its sole discretion, either (i) validly and legally issue fully paid and
nonassessable shares of such BJ Common Stock or (ii) pay the equivalent amount
of cash, at such adjusted Exercise Price.
(n) In any case in which this Section 10 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, BJ may elect to defer until the occurrence of such event the
issuance to the holder of any BJ Warrant exercised after such record date of
the shares of BJ Common Stock and other capital stock of BJ issuable upon such
exercise over and above the shares of BJ Common Stock and other capital stock
of BJ, if any, issuable upon such exercise on the basis of the Exercise Price
in effect prior to such adjustment; provided, however, that BJ shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares upon the occurrence of the event
requiring such adjustment.
(o) Anything in this Section 10 to the contrary
notwithstanding, BJ shall be entitled to make such reductions in the Exercise
Price, in addition to those adjustments expressly required by this Section 10,
as and to the extent that it in its sole discretion shall determine to be
advisable in
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order that any event treated for federal income tax purposes as a distribution
of stock or stock rights shall not be taxable to the recipients.
Section 11. Certification of Adjusted Exercise Price or Number
of Shares of BJ Common Stock. Whenever the Exercise Price or the number of
shares of BJ Common Stock issuable upon the exercise of each BJ Warrant is
adjusted as provided in Sections 10 or 12, BJ shall (a) promptly prepare a
certificate setting forth the Exercise Price as so adjusted and/or the number
of shares of BJ Common Stock issuable upon exercise of each BJ Warrant as so
adjusted, and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Warrant Agent and with each transfer agent for the
BJ Common Stock a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Warrant Certificate in accordance with Section 23.
Section 12. Reclassification, Consolidation, Merger,
Combination, Sale or Conveyance. In case any of the following shall occur
while any BJ Warrants are outstanding: (i) any reclassification or change of
the outstanding shares of BJ Common Stock (other than a change in par value, or
from par value to no par value, or as covered by Section 10(a)), or (ii) any
consolidation, merger or combination of BJ with or into another corporation as
a result of which holders of BJ Common Stock shall be entitled to receive
stock, securities or other property or assets (including cash) with respect to
or in exchange for such BJ Common Stock, or (iii) any sale or conveyance of the
property or assets of BJ as, or substantially as, an entirety to any other
entity as a result of which holders of BJ Common Stock shall be entitled to
receive stock, securities or other property or assets (including cash) with
respect to or in exchange for such BJ Common Stock, then BJ, or such successor
corporation or transferee, as the case may be, shall make appropriate provision
by amendment of this Agreement or by the successor corporation or transferee
executing with the Warrant Agent an agreement so that the holders of the BJ
Warrants then outstanding shall have the right at any time thereafter, upon
exercise of such BJ Warrants, to receive the kind and amount of securities,
cash and other property receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance as would be received by
a holder of the number of shares of BJ Common Stock issuable upon exercise of
such Warrant immediately prior to such reclassification, change, consolidation,
merger, sale or conveyance.
If the holders of the BJ Common Stock may elect from choices the
kind or amount of securities, cash and other property receivable upon such
reclassification, consolidation, merger, combination, sale or conveyance, then
for the purpose of this Section 12 the kind and amount of securities, cash and
other property receivable upon such reclassification, consolidation, merger,
combination, sale or conveyance shall be deemed to be the choice specified by
the holder of the BJ Warrant, which specification shall be made by the holder
of the BJ Warrant by the later of (A) 15 Trading Days after the holder of the
BJ Warrant is provided with a final version of all information required by law
or regulation to be furnished to holders of BJ Common Stock concerning such
choice, or if no such information is required, 15 Trading Days after BJ
notified the holder of the BJ Warrant of all material facts concerning such
specification and (B) the last time at which holders of BJ Common Stock are
permitted to make their specification known to BJ. If the holder of the BJ
Warrant fails to make any specification, the holder's choice shall be deemed to
be whatever choice is made by a plurality of holders of BJ Common Stock not
affiliated with BJ or any other party to the reclassification, consolidation,
merger, combination, sale or conveyance. Such new BJ Warrants shall provide
for adjustments which, for events subsequent to the effective date of such new
BJ Warrants, shall be as nearly equivalent as may be practicable to the
adjustments provided for in Section 10 and this Section 12. The above
provisions of this Section 12 shall similarly apply to successive
reclassifications, consolidations, mergers, combinations, sales or conveyances.
BJ shall mail by first-class mail, postage prepaid, to each
registered holder of a BJ Warrant, written notice of the execution of any such
amendment or agreement. Any new agreement entered into by the successor
corporation or transferee shall provide for adjustments, which shall be as
nearly equivalent as may be practicable to the adjustments provided for in
Section 10. The Warrant
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Agent shall be under no responsibility to determine the correctness of any
provisions contained in such agreement relating either to the kind or amount of
securities or other property receivable upon exercise of BJ Warrants or with
respect to the method employed and provided therein for any adjustments and
shall be entitled to rely upon the provisions contained in any such agreement.
The provisions of this Section 12 shall similarly apply to successive
reclassifications, changes, consolidations, mergers, sales and conveyances of
the kind described above.
Section 13. Fractional BJ Warrants and Fractional Shares of BJ
Common Stock. (a) BJ shall not be required to issue fractions of BJ Warrants
or to distribute Warrant Certificates which evidence fractional BJ Warrants.
In lieu of such fractional BJ Warrants, there shall be paid to the persons to
whom Warrant Certificates representing such fractional BJ Warrants would
otherwise be issuable an amount in cash (without interest) equal to the product
of such fraction of a BJ Warrant multiplied by the following: (i) with respect
to all fractions of BJ Warrants issued in the Merger, the Warrant Merger Price
and (ii) with respect to all the other fractions of BJ Warrants, the Current
Market Price per whole BJ Warrant (as defined in Section 10(f)).
(b) BJ shall not be required to issue fractions of shares of
BJ Common Stock upon exercise of BJ Warrants or to distribute stock
certificates which evidence fractional shares of BJ Common Stock. In lieu of
fractional shares, there shall be paid to the registered holders of Warrant
Certificates at the time such Warrant Certificates are exercised as herein
provided an amount in cash (without interest) equal to the product of such
fractional part of a share of BJ Common Stock multiplied by the Current Market
Price per share of BJ Common Stock (as defined in Section 10(f)).
(c) The holder of a BJ Warrant by the acceptance of the BJ
Warrant expressly waives his right to receive any fractional BJ Warrant or any
fractional share of BJ Common Stock upon exercise of a BJ Warrant.
Section 14. Right of Action. All rights of action in respect of
this Agreement are vested in the respective registered holders of the Warrant
Certificates, and any registered holder of any Warrant Certificate, without the
consent of the Warrant Agent or of the holder of any other Warrant Certificate,
may, on such holder's own behalf and for such holder's own benefit, enforce,
and may institute and maintain any suit, action or proceeding against BJ to
enforce, or otherwise act in respect of, such holder's right to exercise the BJ
Warrants evidenced by such Warrant Certificate in the manner provided in such
Warrant Certificate and in this Agreement.
Section 15. Agreement of Warrant Certificate Holders. Every
holder of a Warrant Certificate by accepting the same consents and agrees with
BJ and the Warrant Agent and with every other holder of a Warrant Certificate
that:
(a) the Warrant Certificates are transferable only on the
registry books of the Warrant Agent if surrendered at the principal
office of the Warrant Agent, duly endorsed or accompanied by a proper
instrument of transfer; and
(b) BJ and the Warrant Agent may deem and treat the person
in whose name the Warrant Certificate is registered as the absolute
owner thereof and of the BJ Warrants evidenced thereby
(notwithstanding any notations of ownership or writing on the Warrant
Certificates made by anyone other than BJ or the Warrant Agent) for
all purposes whatsoever, and neither BJ nor the Warrant Agent shall be
affected by any notice to the contrary.
Section 16. Warrant Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Warrant Certificate shall be entitled
to vote, receive dividends or distributions on, or be deemed for any purpose
the holder of, BJ Common Stock or any other securities of BJ which may at any
time be issuable on the exercise or conversion of the BJ Warrants represented
thereby, nor shall anything contained herein or in any Warrant Certificate be
construed to confer upon the holder of any Warrant
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Certificate, as such, any of the rights of a stockholder of BJ or any right to
vote for the election of directors or upon any matter submitted to stockholders
at any meeting thereof, or to give or withhold consent to any corporate action,
or to receive notice of meetings or other actions affecting stockholders
(except as provided in Section 24), or to receive dividends or distributions or
subscription rights, or otherwise, until the BJ Warrant or BJ Warrants
evidenced by such Warrant Certificate shall have been exercised in accordance
with the provisions hereof.
Section 17. Concerning the Warrant Agent. BJ agrees to pay to
the Warrant Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Warrant Agent, its
reasonable expenses and counsel fees and other disbursements incurred in the
administration and execution of this Agreement and the exercise and performance
of its duties hereunder. BJ also agrees to indemnify the Warrant Agent for,
and to hold it harmless against, any loss, liability or expense, incurred
without gross negligence, bad faith or willful misconduct on the part of the
Warrant Agent, for anything done or omitted by the Warrant Agent in connection
with the acceptance and administration of this Agreement, including the costs
and expenses of defending against any claim of liability in the premises.
The Warrant Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Warrant
Certificate or certificate for BJ Common Stock or for other securities of BJ,
instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper person or persons.
Section 18. Merger or Consolidation or Change of Name of Warrant
Agent. Any corporation into which the Warrant Agent or any successor Warrant
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Warrant Agent or any
successor Warrant Agent shall be a party, or any corporation succeeding to the
corporate trust business of the Warrant Agent or any successor Warrant Agent,
shall be the successor to the Warrant Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that such corporation would be eligible for
appointment as a successor Warrant Agent under the provisions of Section 21. In
case at the time such successor Warrant Agent shall succeed to the agency
created by this Agreement any of the Warrant Certificates shall have been
countersigned but not delivered, any such successor Warrant Agent may adopt the
countersignature of the predecessor Warrant Agent and deliver such Warrant
Certificates so countersigned; and in case at that time any of the Warrant
Certificates shall not have been countersigned, any successor Warrant Agent may
countersign such Warrant Certificates either in the name of the predecessor
Warrant Agent or in the name of the successor Warrant Agent; and in all such
cases such Warrant Certificates shall have the full force provided in the
Warrant Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrant Certificates shall have been
countersigned but not delivered, the Warrant Agent may adopt the
countersignature under its prior name and deliver Warrant Certificates so
countersigned; and in case at that time any of the Warrant Certificates shall
not have been countersigned, the Warrant Agent may countersign such Warrant
Certificates either in its prior name or in its changed name; and in all such
cases such Warrant Certificates shall have the full force provided in the
Warrant Certificates and in this Agreement.
Section 19. Duties of Warrant Agent. The Warrant Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which BJ and the holders of Warrant
Certificates, by their acceptance thereof, shall be bound:
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(a) The Warrant Agent may consult with legal counsel (who
may be legal counsel for BJ), and the opinion of such counsel shall
be full and complete authorization and protection to the Warrant
Agent as to any action taken or omitted by it in good faith and in
accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Warrant Agent shall deem it necessary or desirable that
any fact or matter be proved or established by BJ prior to taking or
suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate
signed by the Chairman, President or any Vice President of BJ and by
the Treasurer or any Assistant Treasurer or the Secretary of BJ and
delivered to the Warrant Agent; and such certificate shall be full
authentication to the Warrant Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance
upon such certificate.
(c) The Warrant Agent shall be liable hereunder only for its
own gross negligence, bad faith or willful misconduct.
(d) The Warrant Agent shall not be liable for or by reason
of any of the statements of fact or recitals contained in this
Agreement or in the Warrant Certificates (except its countersignature
thereof) or be required to verify the same, but all such statements
and recitals are and shall be deemed to have been made by BJ only.
(e) The Warrant Agent shall not be under any responsibility
in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Warrant Agent)
or in respect of the validity or execution of any Warrant Certificate
(except its countersignature thereof); nor shall it be responsible for
any breach by BJ of any covenant or condition contained in this
Agreement or in any Warrant Certificate; nor shall it be responsible
for the adjustment of the Exercise Price or the making of any change
in the number of shares of BJ Common Stock required under the
provisions of Sections 10 or 12 or responsible for the manner, method
or amount of any such change or the ascertaining of the existence of
facts that would require any such adjustment or change (except with
respect to the exercise of BJ Warrants evidenced by Warrant
Certificates after actual notice of any adjustment of the Exercise
Price); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of
any shares of BJ Common Stock to be issued pursuant to this Agreement
or any Warrant Certificate or as to whether any shares of BJ Common
Stock will, when issued, be duly authorized, validly issued, fully
paid and nonassessable.
(f) BJ agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered
all such further and other acts, instruments and assurances as may
reasonably be required by the Warrant Agent for the carrying out or
performing by the Warrant Agent of the provisions of this Agreement.
(g) The Warrant Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties
hereunder from the Chairman or the President or any Vice President or
the Secretary of BJ, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable
for any action taken or suffered to be taken by it in good faith in
accordance with instructions of any such officer.
(h) The Warrant Agent and any shareholder, director, officer
or employee of the Warrant Agent may buy, sell or deal in any of the
BJ Warrants or other securities of BJ or become pecuniarily interested
in any transaction in which BJ may be interested, or contract with or
lend money to BJ or otherwise act as fully and freely as though it
were not Warrant
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Agent under this Agreement. Nothing herein shall preclude the Warrant
Agent from acting in any other capacity for BJ or for any other legal
entity.
(i) The Warrant Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorney or agents, and the Warrant
Agent shall not be answerable or accountable for any act, default,
neglect or misconduct of any such attorneys or agents or for any loss
to BJ resulting from any such act, default, neglect or misconduct,
provided reasonable care was exercised in the selection and continued
employment thereof.
Section 20. Change of Warrant Agent. The Warrant Agent may
resign and be discharged from its duties under this Agreement upon 30 days'
notice in writing mailed to BJ and to each transfer agent of the BJ Common
Stock by registered or certified mail, and to the holders of the Warrant
Certificates by first-class mail. BJ may remove the Warrant Agent or any
successor Warrant Agent upon 30 days' notice in writing, mailed to the Warrant
Agent or successor Warrant Agent, as the case may be, and to each transfer
agent of the BJ Common Stock by registered or certified mail, and to the
holders of the Warrant Certificates by first-class mail. If the Warrant Agent
shall resign or be removed or shall otherwise become incapable of acting, BJ
shall appoint a successor to the Warrant Agent. If BJ shall fail to make such
appointment within a period of 30 days after such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent or by the holder of a Warrant Certificate (who
shall, with such notice, submit his Warrant Certificate for inspection by BJ),
then the registered holder of any Warrant Certificate may apply to any court of
competent jurisdiction for the appointment of a new Warrant Agent. Any
successor Warrant Agent, whether appointed by BJ or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of a state thereof, in good standing, which is authorized under such laws to
exercise corporate trust powers and is subject to supervision or examination by
federal or state authority and which has at the time of its appointment as
Warrant Agent a combined capital and surplus of at least $50,000,000. After
appointment, the successor Warrant Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Warrant Agent without further act or deed; but the predecessor Warrant Agent
shall deliver and transfer to the successor Warrant Agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment, BJ shall file notice thereof in writing with the
predecessor Warrant Agent and each transfer agent of the BJ Common Stock, and
mail a notice thereof in writing to the registered holders of the Warrant
Certificates. However, failure to give any notice provided for in this Section
20, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Warrant Agent or the appointment of the successor
Warrant Agent, as the case may be.
Section 21. Issuance of New Warrant Certificates.
Notwithstanding any of the provisions of this Agreement or of the BJ Warrants
to the contrary, BJ may, at its option, issue new Warrant Certificates
evidencing BJ Warrants in such form as may be approved by its Board of
Directors to reflect any adjustment or change in the Exercise Price per share
and the number or kind or class of shares of stock or other securities or
property purchasable under the several Warrant Certificates made in accordance
with the provisions of this Agreement.
Section 22. Purchase of BJ Warrants by BJ. BJ shall have the
right, except as limited by applicable law or other agreements, to purchase or
otherwise acquire BJ Warrants at such time, in such manner and for such
consideration as it may deem appropriate.
Section 23. Notice of Proposed Actions. In case BJ shall
propose (a) to declare a dividend on shares of BJ Common Stock payable in
shares of capital stock of any class or to make any other distribution (other
than aggregate cash dividends and distributions not in excess of $.25 per share
of BJ Common Stock for the fiscal year ended September 30, 1995, and then $1.50
for each 12-month
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period thereafter, payable out of retained earnings or earned surplus) to all
holders of BJ Common Stock (including any distribution made in connection with
a consolidation or merger in which BJ is the continuing corporation), or (b) to
offer rights, options or warrants to all holders of BJ Common Stock entitling
them to subscribe for or purchase BJ Common Stock (or securities convertible
into or exercisable or exchangeable for BJ Common Stock or any other
securities), or (c) to offer any shares of capital stock in a reclassification
of shares of the BJ Common Stock (including any such reclassification in
connection with a consolidation or merger in which BJ is the continuing
corporation), or (d) to effect any consolidation or merger into or with, or to
effect any sale or other transfer (or to permit one or more of its subsidiaries
to effect any sale or other transfer), in one or more transactions, of more
than 50% of the assets or net income of BJ and its subsidiaries (taken as a
whole) to, any other Person, or (e) to effect the liquidation, dissolution or
winding up of BJ, then, in each such case, BJ shall give to each registered
holder of a BJ Warrant, in accordance with Section 24, a notice of such
proposed action, which shall specify the record date for the purpose of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of BJ Common Stock, if any such date is to be fixed, and
such notice shall be so given in the case of any action covered by clause (a)
or (b) above at least 20 days prior to the record date for determining holders
of the BJ Common Stock for purposes of such action, and in the case of any such
other action, at least 20 days prior to the date of the taking of such proposed
action or the date of participation therein by the holders of BJ Common Stock,
whichever shall be the earlier. The failure to give notice required by this
Section 23 or any defect therein shall not affect the legality or validity of
the action taken by BJ or the vote upon any such action. Unless specifically
required by Section 10, the Exercise Price, the number of shares of BJ Common
Stock covered by each BJ Warrant and the number of BJ Warrants outstanding
shall not be subject to adjustment as a result of BJ being required to give
notice pursuant to this Section 23.
Section 24. Notices. Notices or demands authorized by this
Agreement to be given or made (i) by the Warrant Agent or by the holder of any
Warrant Certificate to or on BJ, (ii) subject to the provisions of Section 20,
by BJ or by the holder of any Warrant Certificate to or on the Warrant Agent or
(iii) by BJ or the Warrant Agent to the holder of any Warrant Certificate,
shall be deemed given (x) on the date delivered, if delivered personally, (y)
on the first Trading Day following the deposit thereof with Federal Express or
another recognized overnight courier, if sent by Federal Express or another
recognized overnight courier, and (z) on the fourth Trading Day following the
mailing thereof with postage prepaid, if mailed by registered or certified mail
(return receipt requested), in each case to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) If to BJ, to:
BJ Services Company
5500 Northwest Central Drive
Houston, Texas 77092
Attention: President
(b) If to the Warrant Agent, to:
First Chicago Trust Company of New York
525 Washington Boulevard
Jersey City, New Jersey 07310
Attention: Joann Gorostiola
Assistant Vice President
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<PAGE> 249
(c) If to the holder of any Warrant Certificate, to the address
of such holder as shown on the registry books of BJ.
Section 25. Supplements and Amendments. (a) BJ and the
Warrant Agent may from time to time supplement or amend this Agreement without
the approval of any holders of BJ Warrant Certificates in order to cure any
ambiguity, to correct or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein, or to make any
other provisions with regard to matters or questions arising hereunder which BJ
and the Warrant Agent may deem necessary or desirable and which shall not
adversely affect the interests of the holders of Warrant Certificates.
(b) In addition to the foregoing, with the consent of holders
of not less than a majority in number of the then outstanding BJ Warrants, BJ
and the Warrant Agent may modify this Agreement for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Warrant Agreement or modifying in any manner the rights of the holders of
the BJ Warrant Certificates; provided, however, that no modification of the
terms (including but not limited to the adjustments described in Section 10)
upon which the BJ Warrants are exercisable or reducing the percentage required
for consent to modification of this Agreement may be made without the consent
of the holder of each outstanding BJ Warrant affected thereby.
Section 26. Successors. All covenants and provisions of this
Agreement by or for the benefit of BJ or the Warrant Agent shall bind and inure
to the benefit of their respective successors and assigns hereunder.
Section 27. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give any Person other than BJ, the Warrant
Agent and the registered holders of the Warrant Certificates any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of BJ, the Warrant Agent and the
registered holders of the Warrant Certificates.
Section 28. Governing Law. This Agreement and each Warrant
Certificate issued hereunder shall be governed by, and construed in accordance
with, the laws of the State of New York, without giving effect to the conflicts
of law principles thereof.
Section 29. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 30. Captions. The caption of the sections of this
Agreement have been inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
B-23
<PAGE> 250
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and their respective corporate seals to be hereunder
affixed and attested, all as of the day and year first above written.
BJ SERVICES COMPANY
By:_______________________________________
Name:_____________________________________
Title:____________________________________
By:_______________________________________
Title:____________________________________
FIRST CHICAGO TRUST COMPANY
OF NEW YORK, as Warrant Agent
By:_______________________________________
Name:_____________________________________
Title:____________________________________
B-24
<PAGE> 251
Exhibit 1 to Warrant Agreement
[Form of Warrant Certificate]
Certificate No. M- _______________ Warrants
NOT EXERCISABLE AFTER ________ __, 2000
Warrant Certificate
BJ SERVICES COMPANY
This certifies that __________________________, or registered
assigns, is the registered owner of the number of BJ Warrants set forth above,
each of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Warrant Agreement dated as of ________ __, 1995 [the Closing
Date] (the "Warrant Agreement") between BJ Services Company, a corporation
organized under the laws of the State of Delaware ("BJ"), and First Chicago
Trust Company of New York, a New York limited purpose trust company (the
"Warrant Agent"), to purchase or receive from BJ at any time after ________ __,
1995 [the Closing Date] and prior to 5:00 P.M. (New York City time) on
________ __, 2000 [fifth anniversary of the Closing Date] at the principal
office of the Warrant Agent, or its successors as Warrant Agent, in New York
City, the number of shares of common stock, par value $.10 per share, of
BJ ("BJ Common Stock") represented hereby to be purchased at $30 per share
of BJ Common Stock (the "Exercise Price"), in each case upon presentation and
surrender of this Warrant Certificate with the Form of Election to Purchase
duly executed. The number of BJ Warrants evidenced by this Warrant Certificate
(and the number of shares of BJ Common Stock which may be purchased upon
exercise thereof) set forth above and the Exercise Price set forth above are
the number and Exercise Price as of __________________, 1995, based on the
shares of BJ Common Stock as constituted at such date. As provided in the
Warrant Agreement, the Exercise Price and the number of shares of BJ Common
Stock which may be purchased upon the exercise of the BJ Warrants evidenced by
this Warrant Certificate are subject to modification and adjustment upon the
occurrence of certain events.
This Warrant Certificate is subject to all of the terms,
provisions and conditions of the Warrant Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Warrant Agreement reference is hereby made for a full description
of the rights, limitations of rights, obligations, duties and immunities
hereunder of the Warrant Agent, BJ and the holders of the Warrant Certificates.
Copies of the Warrant Agreement are on file at the above-mentioned office of
the Warrant Agent.
This Warrant Certificate, with or without other Warrant
Certificates, upon surrender at the principal office of the Warrant Agent, may
be exchanged for another Warrant Certificate or Warrant Certificates of like
tenor and date evidencing BJ Warrants entitling the holder to purchase a like
aggregate number of shares of BJ Common Stock, in each case as the BJ Warrants
evidenced by the Warrant Certificate or Warrant Certificates surrendered shall
have entitled such holder to purchase or receive. If this Warrant Certificate
shall be exercised in part, the holder hereof shall be entitled to receive upon
surrender hereof another Warrant Certificate or Warrant Certificates for the
number of BJ Warrants not exercised.
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<PAGE> 252
BJ shall make a cash payment in lieu of issuing fractional BJ
Warrants or fractional shares of BJ Common Stock, as provided in the Warrant
Agreement.
No holder of this Warrant Certificate shall be entitled to vote,
receive dividends or distributions on, or be deemed for any purpose the holder
of, BJ Common Stock or of any other securities of BJ which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of BJ or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Warrant Agreement), or to receive dividends or subscription rights, or
otherwise, until the BJ Warrant or BJ Warrants evidenced by this Warrant
Certificate shall have been exercised as provided in the Warrant Agreement.
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
WITNESS the facsimile signature of the proper officers of BJ and
its corporate seal. Dated as of ________, 199__.
ATTEST: BJ SERVICES COMPANY
_____________________________ By:___________________________
Secretary Name:_________________________
Title:________________________
Countersigned:
_____________________________
By___________________________
Authorized signature
B-26
<PAGE> 253
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Warrant Certificate.)
To First Chicago Trust Company of New York, as Warrant Agent:
The undersigned hereby irrevocably elects to exercise
___________________ BJ Warrants represented by this Warrant Certificate to
purchase the shares of BJ Common Stock issuable upon the exercise of such BJ
Warrants and requests that Certificates for such shares be issued in the name
of and delivered to:
Please insert social security
or other identifying number
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
If such number of BJ Warrants shall not be all the BJ Warrants evidenced by
this Warrant Certificate, a new Warrant Certificate for the balance remaining
of such BJ Warrants shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
Dated: ____________________
________________________________
Signature
(Signature must conform in all
respects to name of holder as
specified on the face of this
Warrant Certificate)
Signature Guaranteed:
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<PAGE> 254
Annex A to Warrant Agreement
ASSIGNMENT FORM
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificates)
FOR VALUE RECEIVED, ________________________________________________
hereby sells, assigns and transfers unto
Name:__________________________________________________________________________
(please typewrite or print in block letters)
Address:_______________________________________________________________________
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________ Attorney, to
transfer within the Warrant Certificate the same on the books of the Company,
with full power of substitution in the premises.
Date ________, 19__
Signature
____________________________________________
Signature Guaranteed:
Notice
The signature to the foregoing assignment must correspond to the
name as written upon the face of this Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever.
B-28
<PAGE> 255
APPENDIX C
November 17, 1994
Board of Directors
BJ Services Company
5500 Northwest Central
Houston, TX 77210-4442
Attention: Mr. J.W. Stewart
Chairman of the Board
Gentlemen:
BJ Services Company (the "Company"), WCNA Acquisition Corp., a wholly
owned subsidiary of the Company (the "Purchaser"), and The Western Company of
North America (the "Subject Company") propose to enter into an agreement (the
"Agreement") pursuant to which the Subject Company will be merged with the
Purchaser in a transaction (the "Merger") in which each share of the Subject
Company's then outstanding common stock, par value $.10 per share (the
"Shares", which Shares exclude dissenting shares as defined in the Agreement
and certain shares of the Subject Company owned by the Company, the Purchaser
or any other direct or indirect subsidiary of the Company), will, at the
election of the holder of such Shares, be converted into (subject to proration)
(i) $20.00 in cash ("Cash Consideration") and 0.2 warrants to purchase one
share of the Company s common stock (the "Company Shares") subject to the terms
of a warrant agreement (the "Warrant Agreement" and such warrants referred to
as the "Warrants"), or (ii) stock consideration of (x) 1.1594 Company Shares if
the Closing Price (as defined in the Agreement) of the Company Shares is $17.25
or lower, (y) 0.8989 Company Shares if the Closing Price is $22.25 or greater,
or (z) the quotient of $20.00 divided by the Closing Price if the Closing Price
is greater than $17.25 but less than $22.25 (the "Stock Consideration") and 0.2
Warrants. The Subject Company s 7 1/4% Convertible Subordinated Debentures due
January 15, 2015 (the "Convertible Debentures"), except to the extent converted
prior to the Merger, will continue to be outstanding following the Merger and
will be convertible into the consideration the holder of the Convertible
Debentures would have had the right to receive if such holder had made a cash
election with respect to 50% of such holder s Convertible Debentures and made a
stock election with respect to 50% of such holder s Convertible Debentures
immediately prior to the Merger. The holders of the Subject Company s employee
stock options ("Stock Options") will receive cash equal to the difference
between $20.00 plus the value of 0.2 Warrants (based on the Warrants
when-issued trading prices prior to the closing of the Merger) and the exercise
price of the holder s Stock Options multiplied by the number of shares issuable
upon exercise of the Stock Options. The Merger is expected to be considered by
the shareholders of the Subject Company at a special shareholders meeting to be
held no later than April 30, 1995 and be consummated promptly after such
meeting.
You have asked us whether, in our opinion, the proposed consideration
to be paid by the Company pursuant to the Merger, taken as a whole, is fair to
the Company from a financial point of view.
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<PAGE> 256
BJ Services Company
November 17, 1994
Page 2
In arriving at the opinion set forth below, we have, among other
things:
(1) Reviewed the Subject Company's Annual Reports, Forms 10-K and
related financial information for the three fiscal years ended
December 31, 1993 and the Subject Company's Forms 10-Q and the
related unaudited financial information for the quarterly
periods ending March 31, 1994, June 30, 1994 and September 30,
1994;
(2) Reviewed the Company's Annual Reports, Forms 10-K and related
financial information for the three fiscal years ended
September 31, 1993 and the Company's Forms 10-Q and the
related unaudited financial information for the quarterly
periods ending December 31, 1993, March 31, 1994 and June 30,
1994;
(3) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets and
prospects of the Subject Company and the Company, furnished to
us by the Subject Company and the Company, respectively;
(4) Conducted discussions with members of senior management of the
Subject Company and the Company concerning their respective
businesses and prospects;
(5) Reviewed the historical market prices and trading activity for
the Shares and the Company Shares and compared them with that
of certain publicly traded companies which we deemed to be
reasonably similar to the Subject Company and the Company,
respectively;
(6) Compared the results of operations of the Subject Company and
the Company with that of certain companies which we deemed to
be reasonably similar to the Subject Company and the Company,
respectively;
(7) Compared the proposed financial terms of the transactions
contemplated by the Agreement with the financial terms of
certain other mergers and acquisitions which we deemed to be
relevant;
(8) Considered the pro forma effect of the Merger, taken as a
whole, on the Company's capitalization ratios and earnings and
cash flow per share;
(9) Reviewed a draft of the Agreement dated November 17, 1994;
(10) Reviewed a draft of the Warrant Agreement dated November 17,
1994; and
(11) Reviewed such other financial studies and analyses and
performed such other investigations and took into account such
other matters as we deemed necessary, including our assessment
of general economic, market and monetary conditions.
In preparing our opinion, we have relied on the accuracy and
completeness of all information supplied or otherwise made available to us by
the Subject Company and the Company, and we have not independently verified
such information or undertaken an independent appraisal of the assets of the
Subject Company or the Company. With respect to the financial forecasts
furnished by the Subject Company and the Company (including estimates of
consolidation benefits from the Merger), we have assumed that they have been
reasonably prepared and reflect the best currently available estimates and
judgment of the Subject Company's or the Company's management as to the
expected future financial performance of the Subject Company or the Company, as
the case may be.
We have, in the past, provided financial advisory and financing
services to the Company and have received fees for the rendering of such
services.
C-2
<PAGE> 257
BJ Services Company
November 17, 1994
Page 3
On the basis of and subject to the foregoing, we are of the opinion
that the proposed consideration to be paid by the Company pursuant to the
Merger, taken as a whole, is fair to the Company from a financial point of
view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By_________________________________
Mr. Samuel R. Dodson III
Managing Director
Investment Banking Group
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<PAGE> 258
APPENDIX D
PERSONAL AND CONFIDENTIAL
December 5, 1994
Board of Directors
The Western Company of North America
515 Post Oak Boulevard
Houston, Texas 77027
Gentlemen:
You have requested that we confirm our oral opinion of November 17, 1994 as to
the fairness to the holders of the outstanding shares of Common Stock, par
value $0.10 per share, of The Western Company of North America (the "Company")
(the "Shares") of the consideration to be received for Shares pursuant to the
Agreement and Plan of Merger dated as of November 17, 1994, among BJ Services
Company ("BJ Services"), WCNA Acquisition Corp., a wholly-owned subsidiary of
BJ Services, and the Company (the "Agreement"). Under the terms of the
Agreement, each Share shall be converted into the right to receive
consideration (the "Consideration") consisting of (a) $20.00 in cash (the "Cash
Consideration") and 0.2 warrants to purchase one share of the common stock, par
value $0.10 per share, of BJ Services (together with the associated stock
purchase right, a "share of BJ Common Stock") at an exercise price of $30.00
per share and having such terms as set forth in the Warrant Agreement attached
as Exhibit A to the Agreement (each whole warrant being referred to as a
"Warrant") or (b) the Stock Consideration (as defined below) and 0.2 Warrants.
The Agreement further provides that the holders of Shares shall be entitled to
elect to receive the Cash Consideration, the Stock Consideration or express no
preference and the Cash Consideration and the Stock Consideration will be
allocated among holders of Shares in accordance with such elections, subject to
allocation and proration procedures ensuring that the number of Shares to be
converted into the right to receive the Cash Consideration and 0.2 Warrants
does not exceed the number specified in the Agreement. The Stock Consideration
is (x) if the Closing Price (as defined in the Agreement) of BJ Common Stock is
$17.25 or lower, 1.1594 shares of BJ Common Stock, (y) if the Closing Price of
BJ Common Stock is $22.25 or greater, 0.8989 shares of BJ Common Stock; or (z)
if the Closing Price of BJ Common Stock is greater than $17.25 but less than
$22.25, that portion of a share of BJ Common Stock equal to the quotient of
$20.00 divided by the Closing Price of BJ Common Stock.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having acted as its financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Agreement. We have also provided certain investment banking services to BJ
Services from time to time and may provide investment banking services in the
future. In the course of the trading activities of Goldman, Sachs & Co. prior
to our retention in connection with this matter, the Firm accumulated a long
position of 135,000 Company Shares as well as a short position of 241 shares of
BJ Common Stock.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of
the Company for the five years ended December 31, 1993, certain interim reports
to stockholders and Quarterly Reports on Form 10-Q; certain other
communications from the Company to its stockholders; and certain internal
financial analyses and forecasts for the Company prepared by its management.
We have also reviewed Annual Reports to Stockholders and Annual Reports on Form
10-K of BJ Services for the three fiscal years ended September 30, 1993;
certain interim reports to stockholders and Quarterly Reports on Form 10-Q,
certain other communications from BJ Services to its stockholders, and certain
internal financial analyses and forecasts for BJ Services prepared by its
management. We also have held discussions with members of the senior
management of the Company and BJ Services regarding the past and current
business operations, financial condition and future prospects of their
respective companies and as combined in the merger contemplated in the
Agreement (the "Merger"). In addition, we have reviewed the reported price and
trading activity for the Shares and for BJ Common Stock, compared certain
financial and stock market information for the Company and BJ Services with
similar information for certain other companies the securities of which are
publicly traded, reviewed the financial terms of certain recent
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<PAGE> 259
business combinations in the oilfield services industry specifically and in
other industries generally and performed such other studies and analyses as we
considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion, and have assumed that the financial forecasts
provided to us and discussed with us have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
respective managements of BJ Services and the Company as to the expected future
financial performance of their respective companies and as combined in the
Merger. In addition, we have not made an independent evaluation or appraisal of
the assets and liabilities of the Company or BJ Services or any of their
subsidiaries and we have not been furnished with any such evaluation or
appraisal.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, we confirm our oral opinion that, as of November 17, 1994,
the Consideration to be received by the holders of Shares pursuant to the
Agreement is fair to the holders of Shares.
Very truly yours,
GOLDMAN, SACHS & CO.
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<PAGE> 260
Appendix E
SECTION 262 OF THE DELAWARE
GENERAL CORPORATION LAW
The following is a reproduction of Section 262 of the General
Corporation Law, as amended, of the State of Delaware (Title 8, Chapter 1 of
the Delaware Code):
262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds
shares of stock on the date of the making of a demand pursuant to subsection
(d) of this section with respect to such shares, who continuously holds such
shares through the effective date of the merger or consolidation, who has
otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any
class or series of stock of a constituent corporation in a merger or
consolidation to be effected pursuant to Section 251, 252, 254, 257, 258, 263
or 264 of this title:
(1) Provided, however, that no appraisal rights under
this section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect thereof, at
the record date fixed to determine the stockholders entitled to receive
notice of and to vote at the meeting of stockholders to act upon the
agreement of merger or consolidation, were either (i) listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000
holders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation
surviving a merger if the merger did not require for its approval the
vote of the holders of the surviving corporation as provided in
subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the shares
of any class or series of stock of a constituent corporation if the
holders thereof are required by the terms of an agreement of merger or
consolidation pursuant to Sections 251, 252, 254, 257, 258, 263 and
264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving
or resulting from such merger or consolidation, or depository
receipts in respect thereof;
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<PAGE> 261
b. Shares of stock of any other corporation,
or depository receipts in respect thereof, which shares of
stock or depository receipts at the effective date of the
merger or consolidation will be either listed on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by
more than 2,000 holders;
c. Cash in lieu of fractional shares or
fractional depository receipts described in the foregoing
subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock,
depository receipts and cash in lieu of fractional shares or
fractional depository receipts described in the foregoing
subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary
Delaware corporation party to a merger effected under Section 253 of
this title is not owned by the parent corporation immediately prior to
the merger, appraisal rights shall be available for the shares of the
subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be available for
the shares of any class or series of its stock as a result of an amendment to
its certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or substantially
all of the assets of the corporation. If the certificate of incorporation
contains such a provision, the procedures of this section, including those set
forth in subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be submitted
for approval at a meeting of stockholders, the corporation, not less
than 20 days prior to the meeting, shall notify each of its
stockholders who was such on the record date for such meeting with
respect to shares for which appraisal rights are available pursuant to
subsection (b) or (c) hereof that appraisal rights are available for
any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of his shares. A proxy or vote
against the merger or consolidation shall not constitute such a
demand. A stockholder electing to take such action must do so by a
separate written demand as herein provided. Within 10 days after the
effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has
not voted in favor of or consented to the merger or consolidation of
the date that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant
to Section 228 or 253 of this title, the surviving or resulting
corporation, either before the effective date of the merger or
consolidation or within 10 days thereafter, shall notify each of the
stockholders entitled to appraisal rights of the effective date of the
merger or consolidation and that appraisal rights are available for
any or all of the shares of the constituent corporation, and shall
include in such notice a copy of this section. The notice shall be
sent by certified or registered mail, return receipt requested,
addressed to the stockholder at his address as it appears on the
records of the corporation. Any stockholder entitled to appraisal
rights may, within 20 days after the date of mailing of the notice,
demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder
and that the stockholder intends thereby to demand the appraisal of
his shares.
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(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise entitled
to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the
merger or consolidation, any stockholder who has complied with the requirements
of subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10
days after his written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service
of a copy thereof shall be made upon the surviving or resulting corporation,
which shall within 20 days after such service file in the office of the
Register in Chancery in which the petition was filed a duly verified list
containing the names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the surviving or resulting corporation. If the
petition shall be filed by the surviving or resulting corporation, the petition
shall be accompanied by such a duly verified list. The Register in Chancery,
if so ordered by the Court, shall give notice of the time and place fixed for
the hearing of such petition by registered or certified mail to the surviving
or resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal,
the Court shall appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to subsection
(f) of this section and who has submitted his certificates of stock to the
Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple or
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and
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the case of holders of shares represented by certificates upon the surrender to
the corporation of the certificates representing such stock. The Court's
decree may be enforced as other decrees in the Court of Chancery may be
enforced, whether such surviving or resulting corporation be a corporation of
this State or of any state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded his appraisal rights as provided
in subsection (d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the stock
(except dividends or other distributions payable to stockholders of record at a
date which is prior to the effective date of the merger of consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal of
his demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or consolidation
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which
the shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation. (Last amended by
Ch. 262, L. '94, eff. 7-1-94.)
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Appendix F
PROPOSED TEXT OF ARTICLE FOURTH OF
THE BJ SERVICES CHARTER
The text of the proposed amended Article FOURTH of the BJ Services Charter is
as follows:
"FOURTH: The total number of shares of stock which the Corporation
shall have the authority to issue is 85,000,000 shares of capital stock
consisting of 5,000,000 shares of preferred stock, par value $1.00 per share
(the "Preferred Stock") and 80,000,000 shares of common stock, par value $0.10
per share (the "Common Stock").
The designations, powers, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions of the Preferred Stock shall be established by resolution of the
Board of Directors pursuant to Section 151 of the General Corporation Law of
the State of Delaware."
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APPENDIX G
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
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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.
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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
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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
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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
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(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
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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
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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
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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:
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(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
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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
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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.
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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).
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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
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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
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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)
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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
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(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.
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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.
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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:
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(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
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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.
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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.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
BJ Services Company ("BJ Services") is governed by Section 145 of
the DGCL which permits a corporation to indemnify certain persons, including
officers and directors, who are (or are threatened to be made) parties to any
threatened, pending or completed action or suit (other than an action by or in
the right of the corporation) by reason of their being directors, officers or
other agents of the corporation.
BJ Services' Restated Certificate of Incorporation provides that
no director of BJ Services shall be held personally liable to BJ Services or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to BJ Services or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
the law, (iii) under Section 174 of the DGCL or (iv) for any transaction from
which the director derived an improper personal benefit. BJ Services' Restated
Certificate of Incorporation also provides that if the DGCL is amended to
authorize further limitation or elimination of the personal liability of
directors, then the liability of BJ Services' directors shall be limited or
eliminated to the full extent permitted by the DGCL.
Section 16 of Article III of BJ Services' Bylaws provides as
follows: (a) BJ Services shall indemnify every person who is or was a party
or is or was threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a director, officer, employee or agent of BJ Services or any
of its direct or indirect wholly-owned subsidiaries or, while a director,
officer, employee or agent of BJ Services or any of its direct or indirect
wholly-owned subsidiaries, is or was serving at the request of BJ Services or
any of its direct or indirect wholly-owned subsidiaries, as a director,
officer, employee, agent or trustee of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, against expenses
(including counsel fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding, to the full extent permitted by applicable laws provided that BJ
Services shall not be obligated to indemnify any such person against any such
action, suit or proceeding which is brought by such person against BJ Services
or any of its direct or indirect wholly owned subsidiaries or the directors of
BJ Services or any of its direct or indirect wholly owned subsidiaries, other
than an action brought by such person to enforce his rights to indemnification
hereunder, unless a majority of the Board of Directors of BJ Services shall
have previously approved the bringing of such action, suit or proceeding. BJ
Services shall indemnify every person who is or was a party or is or was
threatened to be made a party to any action, suit, or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
is or was licensed to practice law and an employee (including an employee who
is or was an officer) of BJ Services or any of its direct or indirect
wholly-owned subsidiaries and, while acting in the course of such employment
committed or is alleged to have committed any negligent acts, errors or
omissions in rendering professional legal services at the request of BJ
Services or pursuant to his employment (including, without limitation,
rendering written or oral legal opinions to third parties) against expenses
(including counsel fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding, to the full extent permitted by applicable law; provided that BJ
Services shall not be obligated to indemnify any such person against any
action, suit or proceeding arising out of any adjudicated criminal, dishonest
or fraudulent acts, errors or omissions of such person or any adjudicated
willful, intentional or malicious acts, errors or omissions of such person.
(b) Expenses incurred by an officer or director of BJ Services
or any of its direct or indirect wholly-owned subsidiaries in defending a
civil or criminal action, suit or proceeding shall be paid by BJ Services in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such director or officer to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by BJ Services as authorized in this Section 16. Such expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
(c) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Section 16 shall not be deemed exclusive of
any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any provision of law, BJ Services' Certificate
of Incorporation, the Certificate of Incorporation or Bylaws or other governing
documents of any direct or indirect wholly-owned subsidiary of BJ Services, or
any agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity
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and as to action in another capacity while holding any of the positions or
having any of the relationships referred to in this Section 16.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a complete list of Exhibits filed as part
of this Registration Statement:
Exhibit
*2.1 Agreement and Plan of Merger dated as of November 17, 1994
("Merger Agreement", among BJ Services Company ("BJ
Services"), WCNA Acquisition Corp. ("BJ Sub") and The
Western Company of North America ("Western") (included as
Appendix A to the Joint Proxy Statement/Prospectus
included herein).
*2.2 First Amendment to Agreement and Plan of Merger dated
March 7, 1995, among BJ Services Company, WCNA
Acquisition Corp. and The Western Company of North America
(included as Appendix B to the Joint Proxy
Statement/Prospectus included herein).
3.1 Restated Certificate of Incorporation of BJ Services, as
amended (filed as Exhibit 3.1 to BJ Services' Registration
Statement on Form S-1 (Reg. No. 33-35187) and
incorporated herein by reference).
3.2 Certificate of Designation of Series Two Junior
Participating Preferred Stock of BJ Services (included in
exhibit 1 to BJ Services' Registration Statement on Form
8-A dated January 12, 1994, and incorporated herein by
reference).
*3.3 Bylaws of BJ Services.
3.4 Restated Certificate of Incorporation of Western, as
amended (filed as Exhibit to Western's Report on
Form 10-Q for the three months ended March 31, 1989
and incorporated herein by reference).
3.5 Bylaws of Western (filed as Exhibit 3 to Western's
Current Report on Form 8-K dated February 16, 1995, and
incorporated herein by reference).
*4.1 Form of Amended Warrant Agreement (included as Annex I
to the First Amendment to Agreement and Plan of Merger
that is included as Appendix B to the Joint Proxy
Statement/Prospectus included herein).
4.2 Stockholder Rights Agreement dated as of January 12, 1994,
between BJ Services and First Chicago Trust Company of New
York, as Rights Agent (filed as Exhibit 1 to BJ Services'
Registration Statement on Form 8-A dated January 12, 1994,
and incorporated herein by reference).
4.3 First Amendment to Stockholder Rights Agreement dated as
of June 22, 1994, between BJ Services and First Chicago
Trust Company of New York, as Rights Agent (filed as
Exhibit 2 to BJ Services' Registration Statement on Form
8-A/A dated August 26, 1994 and incorporated herein by
reference).
4.4 Stockholder Protection Rights Plan of Western, dated March
5, 1990, amended as of April 6, 1990 and as of November
23, 1994 (filed with the Commission as Exhibit 1 to
Registration Statement on Form 8-A filed March 7, 1990, as
Exhibit 2 to Amendment No. 1 on Form 8 filed April 9,
1990, to Registration Statement on Form 8-A filed March 7,
1990 and Exhibit 3 to Registration Statement on Form 8-A/A
filed November 23, 1994 and incorporated herein by
reference).
*5.1 Opinion of Andrews & Kurth L.L.P. as to the legality of
the securities being registered.
*8.1 Opinion of Sullivan & Cromwell as to certain federal
income tax matters.
*23.1 Consent of Deloitte & Touche LLP.
*23.2 Consent of Price Waterhouse LLP.
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23.3 Consent of Andrews & Kurth L.L.P. (included in Exhibit
5.1).
*23.4 Consent of Sullivan & Cromwell.
*23.5 Consent of Merrill Lynch & Co. (included in Exhibit 99.1).
*23.6 Consent of Goldman, Sachs & Co. (included in Exhibit 99.2).
*24.1 Powers of Attorney (included in Part II of this
Registration Statement).
*99.1 Opinion of Merrill Lynch & Co. (included as Appendix C to
the Joint Proxy Statement/Prospectus included herein).
*99.2 Opinion of Goldman, Sachs & Co. (included as Appendix D to
the Joint Proxy Statement/Prospectus included herein).
*99.3 Management's Discussion and Analysis of Financial
Condition and Results of Operations of Western.
*99.4 Form of Proxy of BJ Services.
*99.5 Form of Proxy of Western.
- -------------------
* Filed herewith.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or section 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to supplement the
prospectus, after the expiration of the subscription period, to set forth the
results of the subscription offer, the transactions by the underwriters during
the subscription period, the amount of unsubscribed securities to be purchased
by the underwriters, and the terms of any subsequent reoffering thereof. If
any public offering by the underwriters is to be made on terms differing from
those set forth on the cover page of the prospectus, a post-effective amendment
will be filed to set forth the terms of such offering.
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(1) The undersigned registrant hereby undertakes as follows:
that, prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement, by
any person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The registrant hereby undertakes that every prospectus:
(i) that is filed pursuant to paragraph (1) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF HOUSTON,
STATE OF TEXAS, ON THE 9TH DAY OF MARCH, 1995.
BJ SERVICES COMPANY
/s/ J. W. STEWART
By:_________________________________
J. W. Stewart
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints J. W. Stewart and
Margaret Barrett Shannon, and each of them acting alone, as his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign
any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto, and
all other documents in connection therewith, with the Securities and Exchange
Commission, and grants unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or would
do in person, hereby ratifying and confirming all that said attorney-in-fact
and agent, or his or her substitute and substitutes, may lawfully do or cause
to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ J. W. Stewart Chairman of the Board, President March 9, 1995
----------------------------- and Chief Executive Officer; Director
J. W. Stewart (Principal Executive Officer)
/s/ Michael McShane Vice President-Finance March 9, 1995
----------------------------- and Chief Financial Officer; Director
Michael McShane (Principal Financial Officer)
/s/ Matthew D. Fitzgerald Controller March 9, 1995
----------------------------- (Principal Accounting Officer)
Matthew D. Fitzgerald
/s/ L. William Heiligbrodt Director March 9, 1995
-----------------------------
L. William Heiligbrodt
/s/ John R. Huff Director March 9, 1995
-----------------------------
John R. Huff
</TABLE>
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<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Don D. Jordan Director March 9, 1995
-----------------------------
Don D. Jordan
/s/ R.A. LeBlanc Director March 9, 1995
-----------------------------
R.A. LeBlanc
/s/ James E. McCormick Director March 9, 1995
-----------------------------
James E. McCormick
</TABLE>
II-6
<PAGE> 294
Exhibit Index
*2.1 Agreement and Plan of Merger dated as of November 17, 1994
("Merger Agreement", among BJ Services Company ("BJ
Services"), WCNA Acquisition Corp. ("BJ Sub") and The
Western Company of North America ("Western") (included as
Appendix A to the Joint Proxy Statement/Prospectus
included herein).
*2.2 First Amendment to Agreement and Plan of Merger dated
March 7, 1995, among BJ Services Company, WCNA
Acquisition Corp. and The Western Company of North America
(included as Appendix B to the Joint Proxy
Statement/Prospectus included herein).
3.1 Restated Certificate of Incorporation of BJ Services, as
amended (filed as Exhibit 3.1 to BJ Services' Registration
Statement on Form S-1 (Reg. No. 33-35187) and
incorporated herein by reference).
3.2 Certificate of Designation of Series Two Junior
Participating Preferred Stock of BJ Services (included in
exhibit 1 to BJ Services' Registration Statement on Form
8-A dated January 12, 1994, and incorporated herein by
reference).
*3.3 Bylaws of BJ Services.
3.4 Restated Certificate of Incorporation of Western, as
amended (filed as Exhibit to Western's Report on
Form 10-Q for the three months ended March 31, 1989
and incorporated herein by reference).
3.5 Bylaws of Western (filed as Exhibit 3 to Western's
Current Report on Form 8-K dated February 16, 1995, and
incorporated herein by reference).
*4.1 Form of Amended Warrant Agreement (included as Annex I
to the First Amendment to Agreement and Plan of Merger
that is included as Appendix B to the Joint Proxy
Statement/Prospectus included herein).
4.2 Stockholder Rights Agreement dated as of January 12, 1994,
between BJ Services and First Chicago Trust Company of New
York, as Rights Agent (filed as Exhibit 1 to BJ Services'
Registration Statement on Form 8-A dated January 12, 1994,
and incorporated herein by reference).
4.3 First Amendment to Stockholder Rights Agreement dated as
of June 22, 1994, between BJ Services and First Chicago
Trust Company of New York, as Rights Agent (filed as
Exhibit 2 to BJ Services' Registration Statement on Form
8-A/A dated August 26, 1994 and incorporated herein by
reference).
4.4 Stockholder Protection Rights Plan of Western, dated March
5, 1990, amended as of April 6, 1990 and as of November
23, 1994 (filed with the Commission as Exhibit 1 to
Registration Statement on Form 8-A filed March 7, 1990, as
Exhibit 2 to Amendment No. 1 on Form 8 filed April 9,
1990, to Registration Statement on Form 8-A filed March 7,
1990 and Exhibit 3 to Registration Statement on Form 8-A/A
filed November 23, 1994 and incorporated herein by
reference).
*5.1 Opinion of Andrews & Kurth L.L.P. as to the legality of
the securities being registered.
*8.1 Opinion of Sullivan & Cromwell as to certain federal
income tax matters.
*23.1 Consent of Deloitte & Touche LLP.
*23.2 Consent of Price Waterhouse LLP.
<PAGE> 295
23.3 Consent of Andrews & Kurth L.L.P. (included in Exhibit
5.1).
*23.4 Consent of Sullivan & Cromwell.
*23.5 Consent of Merrill Lynch & Co. (included in Exhibit 99.1).
*23.6 Consent of Goldman, Sachs & Co. (included in Exhibit 99.2).
*24.1 Powers of Attorney (included in Part II of this
Registration Statement).
*99.1 Opinion of Merrill Lynch & Co. (included as Appendix C to
the Joint Proxy Statement/Prospectus included herein).
*99.2 Opinion of Goldman, Sachs & Co. (included as Appendix D to
the Joint Proxy Statement/Prospectus included herein).
*99.3 Management's Discussion and Analysis of Financial
Condition and Results of Operations of Western.
*99.4 Form of Proxy of BJ Services.
*99.5 Form of Proxy of Western.
- -------------------
* Filed herewith.
<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
BJ SERVICES COMPANY
AS ADOPTED
JULY 13, 1990
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
---------
<S> <C>
ARTICLE I - Offices . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 1. Registered Office . . . . . . . . . . . . . . . . . .
Section 2. Other Offices . . . . . . . . . . . . . . . . . . . .
ARTICLE II - Meetings of Stockholders . . . . . . . . . . . . . . . . . .
Section 1. Place of Meetings . . . . . . . . . . . . . . . . . .
Section 2. Annual Meeting of Stockholders . . . . . . . . . . .
Section 3. Quorum; Adjourned Meetings and Notice Thereof . . . .
Section 4. Voting . . . . . . . . . . . . . . . . . . . . . . .
Section 5. Proxies . . . . . . . . . . . . . . . . . . . . . . .
Section 6. Special Meetings . . . . . . . . . . . . . . . . . .
Section 7. Notice of Stockholders' Meetings . . . . . . . . . .
Section 8. Waiver of Notice . . . . . . . . . . . . . . . . . .
Section 9. Maintenance and Inspection of Stockholder List . . .
Section 10. Stockholder Action by Written Consent
Without a Meeting . . . . . . . . . . . . . . . .
Section 11. Inspectors of Election . . . . . . . . . . . . . . .
Section 12. Procedure for Stockholders' Meetings . . . . . . . .
Section 13. Order of Business . . . . . . . . . . . . . . . . .
Section 14. Procedures for Bringing Business before
an Annual Meeting . . . . . . . . . . . . . . . .
Section 15. Procedures for Nominating Directors . . . . . . . .
ARTICLE III - Directors . . . . . . . . . . . . . . . . . . . . . . . .
Section 1. Number and Qualification of Directors . . . . . . .
Section 2. Election and Term of Office . . . . . . . . . . . .
Section 3. Resignation and Removal of Directors . . . . . . . .
Section 4. Vacancies . . . . . . . . . . . . . . . . . . . . .
Section 5. Powers . . . . . . . . . . . . . . . . . . . . . . .
Section 6. Place of Directors' Meetings . . . . . . . . . . . .
Section 7. Regular Meetings . . . . . . . . . . . . . . . . . .
Section 8. Special Meetings . . . . . . . . . . . . . . . . . .
Section 9. Quorum . . . . . . . . . . . . . . . . . . . . . . .
Section 10. Action Without Meeting . . . . . . . . . . . . . . .
Section 11. Telephonic Meetings . . . . . . . . . . . . . . . .
Section 12. Meetings and Action of Committees . . . . . . . . .
Section 13. Special Meetings of Committees . . . . . . . . . . .
Section 14. Minutes of Committee Meetings . . . . . . . . . . .
Section 15. Compensation of Directors . . . . . . . . . . . . .
Section 16. Indemnification . . . . . . . . . . . . . . . . . .
</TABLE>
i
<PAGE> 3
ARTICLE IV - Officers . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 1. Officers . . . . . . . . . . . . . . . . . . . . . .
Section 2. Election of Officers . . . . . . . . . . . . . . . .
Section 3. Subordinate Officers . . . . . . . . . . . . . . . .
Section 4. Removal and Resignation of Officers . . . . . . . .
Section 5. Vacancies in Offices . . . . . . . . . . . . . . . .
Section 6. Chairman of the Board . . . . . . . . . . . . . . .
Section 7. Vice Chairman of the Board . . . . . . . . . . . . .
Section 8. President . . . . . . . . . . . . . . . . . . . . .
Section 9. Vice President . . . . . . . . . . . . . . . . . . .
Section 10. Secretary . . . . . . . . . . . . . . . . . . . . .
Section 11. Chief Financial Officer . . . . . . . . . . . . . .
Section 12. Treasurer and Controller . . . . . . . . . . . . . .
ARTICLE V - Certificates of Stock . . . . . . . . . . . . . . . . . . .
Section 1. Certificates . . . . . . . . . . . . . . . . . . . .
Section 2. Signatures on Certificates . . . . . . . . . . . . .
Section 3. Statement of Stock Rights, Preferences, Privileges . .
Section 4. Lost Certificates . . . . . . . . . . . . . . . . .
Section 5. Transfers of Stock . . . . . . . . . . . . . . . . .
Section 6. Fixing Record Date . . . . . . . . . . . . . . . . .
Section 7. Registered Stockholders . . . . . . . . . . . . . .
ARTICLE VI - General Provisions - Dividends . . . . . . . . . . . . . .
Section 1. Dividends . . . . . . . . . . . . . . . . . . . . .
Section 2. Payment of Dividends; Directors' Duties . . . . . .
Section 3. Checks . . . . . . . . . . . . . . . . . . . . . . .
Section 4. Corporate Contracts and Instruments . . . . . . . .
Section 5. Fiscal Year . . . . . . . . . . . . . . . . . . . .
Section 6. Manner of Giving Notice . . . . . . . . . . . . . .
Section 7. Waiver of Notice . . . . . . . . . . . . . . . . . .
Section 8. Annual Statement . . . . . . . . . . . . . . . . . .
ARTICLE VII - Amendments . . . . . . . . . . . . . . . . . . . . . . . .
Section 1. Amendment by Directors . . . . . . . . . . . . . . .
Section 2. Amendment by Stockholders . . . . . . . . . . . . .
ii
<PAGE> 4
BYLAWS
OF
BJ SERVICES COMPANY
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
Section 2. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders shall be held at
such place either within or without the State of Delaware as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting.
Section 2. An annual meeting of stockholders shall be
held on the fourth Thursday in January in each year, if not a legal holiday,
and if a legal holiday, then on the next business day following, at 2:00 p.m.
or at such other date and time as may be determined from time to time by
resolution adopted by the Board of Directors, for the purpose of electing,
subject to Article III, Section 17 hereof, one class of the directors of the
Corporation, and transacting such other business as may properly be brought
before the meeting.
Section 3. A majority of the stock issued and outstanding and
entitled to vote at any meeting of stockholders, the holders of which are
present in person or represented by proxy, without regard to class or series,
shall constitute a quorum for the transaction of business except as otherwise
provided by law, by the Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation"), or by these Bylaws. A quorum, once
established, shall not be broken by the withdrawal of enough votes to leave
less than a quorum and the votes present may continue to transact business
until adjournment provided that any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
If, however, such quorum shall not be present or represented at any meeting of
the stockholders, a majority of the voting stock represented in person or by
proxy may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented.
At such adjourned meeting at which a quorum shall be present or represented,
any business may be transacted which might have been transacted at the meeting
as originally noticed. If the adjournment
<PAGE> 5
is for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote thereat.
Section 4. When a quorum is present at any meeting, the vote
of the holders of a majority of the stock having voting power present in person
or represented by proxy and entitled to vote shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of the statutes or the Certificate of Incorporation or these Bylaws, a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 5. At each meeting of the stockholders, each
stockholder having the right to vote may vote in person or may authorize
another person or persons to act for him by proxy appointed by an instrument in
writing subscribed by such stockholder and bearing a date not more than three
years prior to said meeting, unless said instrument provides for a longer
period. All proxies must be filed with the Secretary of the Corporation at the
beginning of each meeting in order to be counted in any vote at the meeting. A
proxy shall be deemed signed if the stockholder's name is placed on the proxy
(whether by manual signature, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney in fact. Except as otherwise set
forth in the Certificate of Incorporation, each stockholder shall have one vote
for each share of stock having voting power, registered in his name on the
books of the Corporation on the record date set by the Board of Directors as
provided in Article V, Section 6 hereof.
Section 6. Special meetings of the stockholders, for any
purpose, or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called at any time by the Board of
Directors or by a committee of the Board of Directors which has been duly
designated by the Board of Directors and whose powers and authority, as
provided in a resolution of the Board of Directors or in these Bylaws, include
the power to call such meetings. Special meetings of stockholders of the
corporation may not be called by any other person or persons. Business
transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice.
Section 7. Any notice requested to be given to stockholders
by statute, the Certificate of Incorporation or these Bylaws, including notice
of any meeting of stockholders, shall be given personally, by first-class mail
or by telegraphic communication, charges prepaid, addressed to the stockholder
at the address of such stockholder appearing on the books of the Corporation or
given by the stockholder to the Corporation for the purpose of notice. If no
such address appears on the Corporation's books or has been so given, notice
shall be deemed to have been given if sent by first-class mail or telegraphic
communication to the Corporation's principal executive office, or if published
at least once in a newspaper of general circulation in the county where such
principal executive office is located. Notice shall be deemed to have been
given at the time when delivered personally or deposited in the mail or sent by
telegram.
-2-
<PAGE> 6
If any notice addressed to a stockholder at the address of
such stockholder appearing on the books of a Corporation is returned to the
Corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the stockholder
at such address, all further notices shall be deemed to have been duly given
without further mailing if the same shall be available to the stockholder upon
written demand of the stockholder at the principal executive office of the
Corporation for a period of one year from the date of the giving of such
notice.
Section 8. Attendance of a person at a meeting shall
constitute a waiver of notice to such person of such meeting, except when the
person objects at the beginning of the meeting to the transaction of any
business because the meeting is not lawfully called or convened, or objects to
the consideration of matters not included in the notice of the meeting.
Section 9. The officer or agent who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where their meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept open at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine such list or
to vote at any meetings of stockholders.
Section 10. No action shall be taken by stockholders except
at an annual or special meeting of stockholders, and stockholders may not act
by written consent.
Section 11. Before any meeting of stockholders, the Board of
Directors may appoint any persons other than nominees for office to act as
inspectors of election at the meeting or its adjournment. If no inspectors of
election are so appointed, the chairman of the meeting may, and on the request
of any stockholder or a stockholder's proxy shall, appoint inspectors of
election at the meeting. The number of inspectors shall be either one or
three. If inspectors are appointed at a meeting on the request of one or more
stockholders or proxies, the holders of a majority of shares or their proxies
present at the meeting shall determine whether one or three inspectors are to
be appointed. If any person appointed as inspector fails to appear or fails or
refuses to act, the chairman of the meeting may, and upon the request of any
stockholder or a stockholder's proxy shall, appoint a person to fill such
vacancy.
-3-
<PAGE> 7
The duties of these inspectors shall be as follows:
(a) Determine the number of shares outstanding and
validity voting power of each, the shares represented at the meeting,
the existence of a quorum, and the authenticity,
(b) Receive votes or ballots;
(c) Hear and determine all challenges and questions in
any way arising in connection with the right to vote;
(d) Count and tabulate all votes;
(e) Determine when the polls shall close;
(f) Determine the results; and
(g) Do any other acts that may be proper to conduct the
election or vote with fairness to all stockholders.
Section 12. Meetings of the stockholders shall be presided
over by the Chairman of the Board of Directors, or in his absence, by the Vice
Chairman, the President or by any Vice President, or, in the absence of any of
such officers, by a chairman to be chosen by a majority of the stockholders
entitled to vote at the meeting who are present in person or by proxy. The
Secretary, or, in his absence, any person appointed by the Chairman, shall act
as secretary of all meetings of the stockholders.
Section 13. The order of business at all meetings of
stockholders shall be as determined by the chairman of the meeting.
Section 14. Notwithstanding anything in these Bylaws to the
contrary, no business shall be conducted at an annual meeting of the
stockholders except in accordance with the procedures hereinafter set forth in
this Section 14; provided, however, that nothing in this Section 14 shall be
deemed to preclude discussion by any stockholder of any business properly
brought before the annual meeting in accordance with said procedures.
At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To
be properly brought before an annual meeting, business must be (1) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the business, (2) otherwise properly brought before the meeting by or at the
direction of the business, or (3) otherwise properly brought before the meeting
by a stockholder. In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice must be delivered to
or mailed
-4-
<PAGE> 8
and received at the principal executive offices of the Corporation
not less than 30 days not more than 60 days prior to the meeting as originally
scheduled; provided, however, that in the event that less than 40 days notice
of public notice disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the day
on which such notice of the date of the annual meeting was mailed or such
public disclosure was made. Any adjournment(s) or postponement(s) of the
original meeting whereby the meeting will reconvene within 30 days from the
original date shall be deemed for purposes of notice to be a continuation of
the original meeting and no business may be brought before any such reconvened
meeting unless timely notice of such business was given to the Secretary of the
Corporation for the meeting as originally scheduled. A stockholder's notice to
the Secretary shall set forth as to each matter the stockholder proposes to
bring before the annual meeting (i) a brief description of the business desired
to be brought before the annual meeting and their reasons for conducting such
business at the annual meeting, (ii) the name and record address of the
stockholder proposing such business, (iii) the class and number of shares of
the Corporation which are beneficially owned by the stockholder, and (iv) any
material interest of the stockholder in such business.
The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 14, and if
he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
Section 15. Notwithstanding anything in these Bylaws to the
contrary, only persons who are nominated in accordance with the procedures
hereinafter set forth in this Section 15 shall be eligible for election as
directors of the Corporation.
Nominations of persons for election to the Board of Directors
of the Corporation may be made at a meeting of stockholders only (1) by or at
the direction of the Board of Directors of (2) by any stockholder of the
Corporation entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this Section 15. Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered to
or mailed and received at the principal executive offices of the Corporation
not less than 30 days nor more than 60 days prior to the meeting; provided,
however, that in the event that less than 40 days notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than the close of
business on the 10th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Any adjournment(s)
or postponement(s) of the original meeting whereby the meeting will reconvene
within 30 days from the original date shall be deemed for purposes of notice to
be a continuation of the original meeting and no nominations by a shareholder
of persons to be elected directors of the Corporation may be made at any such
reconvened meeting other than pursuant to a notice that was timely for the
meeting on the date originally scheduled. Such stockholder's notice shall set
forth: (i) as to each person whom the stockholder proposes to nominate for
election or re-election as a director, all information relating to such person
that is required to be
-5-
<PAGE> 9
disclosed in solicitations of proxies for election of directors, or is
otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended, or any successor
regulation thereto (including such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if elected); and
(ii) as to the stockholder giving the notice (A) the name and address, as they
appear on the Corporation's books, of such stockholder, and (B) the class and
number of shares of the Corporation which are beneficially owned by such
stockholder. At the request of the Board of Directors, any person nominated by
the Board of Directors for election as a director shall furnish to the
Secretary of the Corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee.
The Chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by this Section 15, and if he should
so determine, he shall so declare to the meeting and the defective nomination
shall be disregarded.
ARTICLE III
DIRECTORS
Section 1. The Board of Directors shall consist of a minimum
of four (4) and a maximum of nine (9) directors. The number of directors shall
be fixed from time to time within the minimum and the maximum number
established by the then elected Board of Directors. The number of directors
until changed by resolution of the Board shall be four (4). The maximum
number of directors may not be increased by the Board of Directors to exceed
nine without the affirmative vote of 75% of the members of the entire Board.
The directors need not be stockholders. No officer of the Corporation may
serve on a board of directors of any company having a present or retired
employee on the Corporation's Board of Directors. No person may stand for
election as a director if within the previous one (1) year he has resigned from
the Board as a result of the tenure provisions of Article III, Section 3 hereof
regarding service for more than 10, 11 or 12 consecutive years on the Board.
No person associated with an organization whose services are contracted by the
Corporation shall serve on the Corporation's Board of Directors, provided
however that this prohibition may be waived by a majority of the members of the
whole Board if the Board in its judgment determines that such waiver would be
in the best interest of the Corporation.
Section 2. The Board of Directors shall be divided into three
classes, Class I, Class II and Class III. The number of directors in each
class shall be the whole number contained in the quotient arrived at by
dividing the authorized number of directors by three, and if a fraction is also
contained in such quotient then if such fraction is one-third (1/3), the extra
director shall be a member of Class III, and if the fraction is two-thirds
(2/3), one of the extra directors shall be a number of Class III and the other
a member of Class II. Each director shall serve for a term ending on the date
of the third annual meeting following the annual meeting at which such director
was elected; provided, however, that the directors initially appointed to Class
I shall serve for a term ending on the date of the first annual meeting next
following September 30, 1990, the directors initially appointed to Class II
shall serve for a term ending on the date of the second annual meeting
-6-
<PAGE> 10
next following September 30, 1990, and the directors initially appointed to
Class III shall serve for a term ending on the date of the third annual meeting
next following September 30, 1990. One class of the directors shall be elected
at each annual meeting of the stockholders. If any such annual meeting is not
held for the directors are not elected thereat, the directors may be elected at
any special meeting of stockholders held for that purpose. All directors shall
hold office until their respective successors are elected and qualified or
until their earlier death, resignation or removal.
Section 3. Directors who are employees of the Corporation
must resign from the Board of Directors at the time of any diminution in their
duties or responsibilities as an officer, at the time they leave the employ of
the Corporation for any reason or on their 70th birthday. A director's term of
office shall automatically terminate on the date of the annual meeting of
stockholders following: (i) his 70th birthday; (ii) the third anniversary of
his retirement from his principal occupation; (iii) unless he is an officer of
the Corporation, the date on which he has served on the Corporation's Board of
Directors for a consecutive period of (a) twelve (12) complete years or more
prior to the Corporation's 1991 annual meeting of stockholders, (b) eleven (11)
complete years or more prior to the Corporation's 1992 annual meeting of
stockholders, or (c) commencing with the 1993 annual meeting of stockholders, a
total of ten (10) complete years or more thereafter; (iv) any fiscal year in
which he has failed to attend at least 66% of the meetings of the Board of
Directors and any committees of the Board of Directors on which such director
serves; or (v) the first anniversary of any change in his employment (other
that a promotion or lateral movement within the same organization). The
requirements of Section 3(v) of Article III may be waived by a majority of the
members of the whole Board (excluding the director whose resignation would
otherwise be required) if the Board in its judgment determines that such waiver
would be in the best interest of the Corporation. Any director may be removed
for cause by the holders of a majority of the shares of the Corporation
entitled to vote in the election of directors; stockholders may not remove any
director without cause. The Board of Directors may not remove any director for
or without cause, and no recommendation by the Board of Directors that a
director be removed for cause may be made to the stockholders except by the
affirmative vote of not less than 75% of the members of the whole Board;
provided that the Board may remove any director who fails to resign as required
by the provisions of these Bylaws.
Section 4. Except as otherwise provided by statute or the
Certificate of Incorporation, in the case of any increase in the number of
directors, such additional director or directors shall be proposed for election
to terms of office that will most nearly result in each Class of directors
containing one-third of the entire number of members of the whole Board, and,
unless such position is to be filled by a vote of the stockholders at an annual
or special meeting, shall be elected by a majority vote of the directors in
such Class or Classes, voting separately by Class. In the case of any vacancy
in the Board of Directors, however created, the vacancy or vacancies shall be
filled by a majority vote of the directors remaining in the Class in which the
vacancy occurs or, if only one such director remains, by such director. In the
event one or more directors shall resign, effective at a future date, such
vacancy or vacancies shall be filled as provided herein. Directors so chosen
or elected shall hold office for the remaining term of the directorship to
which appointed. Any director elected or chosen as provided herein shall
serve for the unexpired term of office or until his successor is elected and
qualified or until his earlier death, resignation or removal.
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In the event of any decrease in the authorized number of
directors, (a) each director then serving as such shall nevertheless continue
as a director of the class of which he is a member until the expiration of this
current term, or his prior death, resignation or removal, and (b) the newly
eliminated directorships resulting from such decrease shall be apportioned by
the board of directors to such class or classes as shall, so far as possible,
bring the number of directors in the respective classes into conformity with
the formula in Section 2 hereof as applied to the new authorized number of
directors.
Section 5. The property and business of the Corporation shall
be managed by or under the direction of its Board of Directors. In addition to
the powers and authorities by these Bylaws expressly conferred upon them, the
Board may exercise all such powers of the corporation and do all such lawful
acts and things as are not by statute, by the Certificate of Incorporation or
by these Bylaws directed or required to be exercised or done by the
stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 6. The directors may hold their meetings and have one
or more office, and keep the books of the Corporation outside the state of
Delaware.
Section 7. Regular meetings of the Board of Directors may be
held without notice at such time and place as shall from time to time be
determined by the Board. Except as otherwise provided by statute, any business
may be transacted at any regular meeting of the Board of Directors.
Section 8. Special meetings of the Board of Directors may be
called by the Chairman of the Board, the Vice Chairman or the President on at
least forty-eight hours notice to each director. Special meetings shall be
called by the President or the Secretary in like manner and on like notice on
the written request of any two directors unless the Board consists of only one
director, in which case special meetings shall be called by the President or
Secretary in like manner and on like notice on the written request of the sole
director.
Section 9. At all meetings of the Board of Directors a
majority of the authorized number of directors shall be necessary and
sufficient to constitute a quorum for the transaction of business, and the vote
of a majority of the directors present at any meeting at which there is a
quorum, shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute, by the Certificate of Incorporation or by
these Bylaws. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present. If only one director is authorized, such sole director shall
constitute a quorum. A meeting at which a quorum is initially present may
continue to transact business notwithstanding the withdrawal of directors, if
any action is approved by at least a majority of the required quorum for such
meeting.
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<PAGE> 12
Section 10. Unless otherwise restricted by statute, the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
thereof may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of committee.
Section 11. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such meeting.
COMMITTEES OF DIRECTORS
Section 12. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each such
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. If no alternate members have been appointed, the committee
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any absent or disqualified member. The Board of Directors shall, by resolution
passed by a majority of the whole Board, designate one member of each committee
as chairman of such committee. Each such chairman shall hold such office for a
period not in excess of five years, and shall upon surrender of such
chairmanship resign from membership on such committee. Any such committee, to
the extent provided in the resolution of the Board of Directors, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, but no such
committee shall have the power or authority to authorize an amendment to the
Certificate of Incorporation, adopt an agreement of merger or consolidation,
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommend to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amend the Bylaws of the Corporation; and, unless the resolution or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock.
Section 13. Special meetings of committees may be called by
the Chairman of such committee, the Chairman of the Board or the
President, on at least 48 hours notice to each member and alternate member.
Alternate members shall have the right to attend all meetings of the committee.
The Board of Directors may adopt rules for the government of any committee
not inconsistent with the provisions of these Bylaws. If a committee is
comprised of an odd number of members, a quorum shall consist of a majority of
that number. If the committee is comprised of an even number of meetings, a
quorum shall consist of one-half of that number. If a committee is comprised
of two members, a quorum shall consist of both members.
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Section 14. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors when requested.
COMPENSATION OF DIRECTORS
Section 15. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be
allowed like compensation for attending committee meetings.
INDEMNIFICATION
Section 16. (a) The Corporation shall indemnify every person
who is or was a party or is or was threatened to be made a party to any action,
suit, or proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that he is or was a director, officer, employee or agent
of the Corporation or any of its direct or indirect wholly-owned subsidiaries
or, while a director, officer, employee or agent of the Corporation or any of
its direct or indirect wholly-owned subsidiaries, is or was serving at the
request of the Corporation or any of its direct or indirect wholly-owned
subsidiaries, as a director, officer, employee, agent or trustee of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including counsel fees), judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding, to the full extent permitted
by applicable laws provided that the Corporation shall not be obligated to
indemnify any such person against any such action, suit or proceeding which is
brought by such person against the Corporation or any of its direct or indirect
wholly-owned subsidiaries or the directors of the Corporation or any of its
direct or indirect wholly-owned subsidiaries, other than an action brought by
such person to enforce his rights to indemnification hereunder, unless a
majority of the Board of Directors of the Corporation shall have previously
approved the bringing of such action, suit or proceeding. The Corporation
shall indemnify every person who is or was a party or is or was threatened to
be made a party to any action, suit, or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is or was
licensed to practice law and an employee (including an employee who is or was
an officer) of the Corporation or any of its direct or indirect wholly-owned
subsidiaries and, while acting in the course of such employment committee or is
alleged to have committed any negligent acts, errors or omissions in rendering
professional legal services at the request of the Corporation or pursuant
to his employment (including, without limitation, rendering written or oral
legal opinions to third parties) against expenses (including counsel fees),
judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding, to the full
extent permitted by applicable law; provided that the Corporation shall not be
obligated to indemnify any such person against any action, suit or proceeding
arising out of any adjudicated criminal, dishonest or fraudulent acts, errors
or omissions of such person or any adjudicated willful, intentional or
malicious acts, errors or omissions of such person.
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<PAGE> 14
(b) Expenses incurred by an officer or director of the
Corporation or any of its direct or indirect wholly-owned subsidiaries in
defending a civil or criminal action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the Corporation as authorized in this Section
16. Such expenses incurred by other employees and agents may be so paid upon
such terms and conditions, if any, as the Board of Directors deems appropriate.
(c) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Section 16 shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any provision of law, the
Corporation's Certificate of Incorporation, the Certificate of Incorporation or
bylaws or other governing documents of any direct or indirect wholly-owned
subsidiary of the Corporation, or any agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding any of the
positions or having any of the relationships referred to in this Section 16.
ARTICLE IV
OFFICERS
Section 1. The officers of the Corporation shall be a
Chairman of the Board, a President, a Chief Financial Officer, a Vice
President, a Secretary, a Treasurer and a Controller. The Corporation may also
have, at the discretion of the Board of Directors, a Vice Chairman of the
Board, one or more additional Vice Presidents, and such other officers as may
be appointed in accordance with the provisions of Section 3 of this Article.
Section 2. The officers of the Corporation, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article, shall be chosen by the Board of Directors, and each
shall serve at the pleasure of the Board, subject to the rights, if any, of any
officer under any contract of employment.
Section 3. The Board of Directors may appoint, and may
empower the President to appoint, such other officers as the business of the
Corporation may require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in the Bylaws or as the
Board of Directors may from time to time determine.
Section 4. Any officer may be removed, either with or without
cause, by the Board of Directors, at any regular or special meeting thereof, or
except in case of an officer chosen by the Board of Directors, by any officer
upon whom such power of removal may be conferred by the Board of Directors,
provided that such removal shall not prejudice the remedy of such officer for
breach of any contract of employment.
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<PAGE> 15
Any officer may resign at any time by giving written notice to
the Corporation. Any such resignation shall take effect on receipt of such
notice or at any later time specified therein. Unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective. Any such resignation is without prejudice to the rights, if any, of
the Corporation under any contract to which the officer is a party.
Section 5. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in
the manner prescribed in these Bylaws for regular appointments to such office.
Section 6. The Chairman of the Board shall, if present,
preside at all meetings of the Board of Directors and of the stockholders, and
shall exercise and perform such other powers and duties as may be from time to
time assigned to him by the Board of Directors or prescribed by the Bylaws.
Section 7. The Vice Chairman of the Board shall exercise and
perform such powers and duties as may be from time to time assigned to him by
the Board of Directors or prescribed in these Bylaws. In the absence of the
Chairman of the Board, the Vice Chairman of the Board shall preside at all
meetings of the stockholders and the Board of Directors.
Section 8. The President shall be the chief executive officer
of the Corporation and shall, subject to the control of the Board of Directors,
have general supervision, direction and control of the business and the
officers of the Corporation. In the absence of the Chairman of the Board and
the Vice Chairman of the Board, the President shall preside at all meetings of
the stockholders and the Board of Directors. He shall have the general powers
and duties of management usually vested in the office of President of a
Corporation, and shall have such other powers and duties as may be prescribed
by the Board of Directors or the Bylaws.
Section 9. In the absence or disability of the President, the
Vice Presidents, if any, in order of their rank as fixed by the Board of
Directors, or if not ranked, the Vice President designated by the President,
shall perform all the duties of the President, and when so acting shall have
all the powers of, and be subject to all the restrictions upon, the President.
The Vice Presidents shall have such other powers and perform such other duties
as from time to time may be prescribed for them respectively by the Board of
Directors, these Bylaws or the President.
Section 10. The Secretary shall keep or cause to be kept, at
the principal office or such other place as the Board of Directors may order, a
book of minutes of all meetings and actions or directors, committees of
directors and stockholders, with the time and place of holding, whether
regular or special, and, if special, how authorized, the notice thereof
given, the names of those present at directors' and committee meetings, the
number of shares present or represented at stockholders' meetings, and the
proceedings thereof.
The Secretary shall keep, or cause to be kept, at the
principal office or at the office of the Corporation's transfer agent or
registrar, a share register, or a duplicate share register, showing
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<PAGE> 16
the names of all stockholders and their addresses, the number and classes of
shares by each, the number and date of certificates issued for the same, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and of the Board of Directors required by these
Bylaws or by law to be given, and he shall keep the seal of the Corporation, if
one be adopted, in safe custody, and shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors or by the
Bylaws.
Section 11. The Chief Financial Officer shall keep and
maintain, or cause to be kept and maintained, adequate and correct books and
records of accounts of the properties and business transactions of the
Corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings and shares. The books
of account shall be open at all times to inspection by any director.
The Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such
depositaries as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation as may be ordered by the Board of Directors, shall
render to the President and Directors, whenever they request it, an account of
all of his transactions as Chief Financial Officer and of the financial
condition of the Corporation, and shall have other powers and perform such
other duties as may be prescribed by these Board of Directors or these Bylaws.
Section 12. The Treasurer and the Controller shall each have
such powers and perform such duties as from time to time may be prescribed for
him by the Board of Directors, the President or these Bylaws.
ARTICLE V
CERTIFICATE OF STOCK
Section 1. Every holder of stock of the Corporation shall be
entitled to have a certificate signed by, or in the name of the Corporation by,
the Chairman or Vice Chairman of the Board of Directors, or the President or a
Vice President, and by the Secretary or an Assistant Secretary, if one be
appointed, or the Treasurer or an Assistant Treasurer, if one be appointed,
of the Corporation, certifying the number of shares represented by the
certificate owned by such stockholder in the Corporation.
Section 2. Any or all of the signatures on the certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
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<PAGE> 17
Section 3. If the Corporation shall be authorized to issue
more than one class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualification,
limitations or restrictions of such preferences and/or rights shall be set
forth in full or summarized on the face or back of the certificate which the
Corporation shall issue to represent such class or series or stock, provided
that, except as otherwise provided by statute, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock, a
statement that the Corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
LOST, STOLEN OR DESTROYED CERTIFICATES
Section 4. The Board of Directors, the Secretary and the
Treasurer each may direct a new certificate or certificates to be issued in
place of any certificate or certificates theretofore issued by the Corporation
alleged to have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the owner of such certificate, or his legal representative.
When authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to furnish the Corporation a bond in such form and
substance and with such surety as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the Corporation
alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
Section 5. Upon surrender to the Corporation, or the transfer
agent of the Corporation, of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
FIXING RECORD DATE
Section 6. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of the
stockholders, or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may fix a
record date which shall not be more than 60 nor less than 10 days before the
date of such meeting, nor more than 60 days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
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<PAGE> 18
REGISTERED STOCKHOLDER
Section 7. The Corporation shall be entitled to treat the
holder of record of any share or shares of stock as the holder in fact thereof
and, accordingly, shall not be bound to recognize any equitable or other claim
or interest in such share on the part of any other person, whether or not it
shall have express or other notice thereof, save as expressly provided by the
laws of the State of Delaware.
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property or in
shares of the Corporation's capital stock, subject to the provisions of the
Certificate of Incorporation.
Section 2. Before declaration of any dividend, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, thinks proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the Corporation, and the Board of Directors may
thereafter abolish any such reserve in its absolute discretion.
CHECKS
Section 3. All checks, drafts or other orders for payment of
money, notes or other evidences of indebtedness, issued in the name of or
payable to the Corporation shall be signed by such officer or officers as the
Board of Directors or the President or any Vice President, acting jointly, may
from time to time designate.
Section 4. The President, any Vice President, the Secretary
or the Treasurer may enter into contracts and execute instruments on behalf of
the Corporation. The Board of Directors, the President or any Vice President
may authorize any officer or officers, and any employee or employees or agent
or agents of the Corporation or any of its subsidiaries, to enter into any
contract or execute any instrument in the name of and on behalf of the
Corporation, and such authority may be general or confined to specific
instances.
FISCAL YEAR
Section 5. The fiscal year of the Corporation shall be
October 1 through September 30, unless otherwise fixed by resolution of the
Board of Directors.
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<PAGE> 19
NOTICES
Section 6. Whenever, under the provisions of the statutes,
the Certificate of Incorporation or these Bylaws, notice is required to be
given to any director, it shall not be construed to require personal notice,
but such notice may be given in writing, by mail, addressed to such director,
at his address as it appears on the records of the Corporation (unless prior to
the mailing of such notice he shall have filed with the Secretary a written
request that notices intended for him be mailed to some other address, in which
case such notice shall be mailed to the address designated in the request) with
postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail; provided,
however, that, in the case of notice of a special meeting of the Board of
Directors, if such meeting is to be held within seven calendar days after the
date of such notice, notice shall be deemed given as of the date such notice
shall be accepted for delivery by a courier service that provides "opening of
business next day" delivery, so long as at least one attempt shall have been
made, on or before the date such notice is accepted for delivery by such
courier service, to provide notice by telephone to each director at his
principal place of business and at his principal residence. Notice to
directors may also be given by telegram, by personal delivery or telephone.
Section 7. Whenever any notice is required to be given under
the provisions of the statutes, the Certificate of Incorporation or these
Bylaws, a waiver thereof in writing, or by telegraph, cable or other written
form of recorded communication, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ANNUAL STATEMENT
Section 8. The Board of Directors shall present at each
annual meeting, and at any special meeting of the stockholders when called for
by vote of the stockholders, a full and clear statement of the business and
condition of the Corporation.
ARTICLE VII
AMENDMENTS
Section 1. Except any amendment to this Article VII and to
Article II, Section 6, Article II, Section 10, Article III, Section 1 (as it
relates to increases in the number of directors), Article III, Section 2, the
last sentence of Article III, Section 3 (as it relates to removal of
directors), Article III, Section 4, Article III, Section 16 and Article VI,
Section 6 of these Bylaws, or any of such provisions, which shall require
approval by the affirmative vote of directors representing at least 75% of the
number of directors provided for in accordance with Article III, Section 1, and
except as otherwise expressly provided in a bylaw adopted by the stockholders
as hereinafter provided, the directors, by the affirmative vote of a majority
of the whole Board and without the assent or vote of the stockholders, may at
any meeting, make, repeal, alter, amend or rescind any of these Bylaws,
provided the substance of the proposed amendment or other action shall have
been stated in a notice of the meeting.
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<PAGE> 20
Section 2. These Bylaws may not be altered, amended or
rescinded, and new Bylaws may not be adopted, by the stockholders of the
Corporation except by the vote of the holders of not less than 75% of the total
voting power of all shares of stock of the Corporation entitled to vote in the
election of directors, considered for such purpose as one class.
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<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF ANDREWS & KURTH L.P.]
March 9, 1995
Board of Directors
BJ Services Company
5500 Northwest Central Drive
Houston, Texas 77092
Gentlemen:
We have acted as special counsel to BJ Services Company, a
Delaware corporation (the "Company"), in connection with the offer by the
Company of up to 19,090,000 shares of Common Stock, par value $0.10 per share,
of the Company (the "Common Stock") and up to 4,897,000 warrants to purchase
Common Stock of the Company (the "Warrants"). As used herein, the term
"Shares" includes 4,897,000 shares of Common Stock subject to issuance upon
exercise of the Warrants. Each Share includes an associated preferred share
purchase right to be issued pursuant to the Stockholder Rights Agreement dated
as of January 12, 1994, as amended on June 22, 1994, and on September 22, 1994,
between the Company and First Chicago Trust Company of New York as rights
agent. This opinion is being delivered in connection with the Company's
Registration Statement on Form S-4 (the "Registration Statement") relating to
registration of the offering and sale of the Shares and the Warrants under the
Securities Act of 1933, as amended. The Shares and Warrants are being offered
to certain holders of common stock of The Western Company of North America
("Western") in connection with the merger of Western into the Company and the
acquisition of all of the outstanding shares of common stock of Western by the
Company pursuant to the Agreement and Plan of Merger dated November 17, 1994,
as amended, between the Company, WCNA Acquisition Corp. and Western (the
"Merger Agreement").
As the basis for the opinion hereinafter expressed, we have
examined such statutes, regulations, corporate records and documents,
certificates of corporate and public officials and other instruments as we have
deemed necessary or advisable for the purposes of this opinion. In such
examination, we have assumed the authenticity of all documents submitted to us
as originals and the conformity with the original documents of all documents
submitted to us as copies.
Based on the foregoing and on such legal considerations as we
deem relevant, we are of the opinion that the Shares and the Warrants to be
issued by the Company to certain stockholders of Western as described in the
Merger Agreement, and the Shares that will be subject to issuance upon exercise
of the Warrants, have been validly authorized. The Shares and Warrants will be
validly issued, fully paid and non-assessable (i) in the case of Shares and
Warrants to be issued upon consummation of the Merger, upon delivery of such
Shares and Warrants and payment of consideration in accordance with the Merger
Agreement and (ii) in the case of Shares subject to issuance upon exercise of
the Warrants, upon delivery of such Shares and payment of the exercise price in
accordance with the Warrant Agreement.
We hereby consent to the use of this opinion as an exhibit to
the Registration Statement and to the use of our name under the heading "Legal
Opinions" in the Registration Statement.
Very truly yours,
Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
Houston, TX 77002
<PAGE> 1
EXHIBIT 8.1
[Sullivan & Cromwell Letterhead]
March 9, 1995
The Western Company of North America
515 Post Oak Boulevard, Suite 1200
Houston, Texas 77027
Ladies and Gentlemen:
We have acted as tax counsel to The Western Company of North
America (the "Company") in connection with the merger of the Company with and
into BJ Services Company ("BJ"), a Delaware corporation, as further described
in the Agreement and Plan of Merger dated as of November 17, 1994, as amended
as of March 7, 1995 (the "Merger Agreement"). Capitalized terms not defined
herein have the meanings specified in the Merger Agreement.
In connection with this opinion, we have assumed with your
consent and the consent of BJ the following:
As of the Effective Time:
(1) The Merger will be effected in accordance with the Agreement.
(2) The fair market value of the BJ Warrants, and the BJ Common
Stock or cash, received by each holder of
<PAGE> 2
The Western Company of North America -2-
shares of Western Common Stock will be approximately equal to the fair market
value of the shares of Western Common Stock surrendered by each holder in
connection with the Merger.
(3) There is and will be no plan or intention on the part of shareholders
of Western to sell, exchange or otherwise dispose of a number of shares of
BJ Common Stock received in the Merger that would reduce such shareholders'
ownership of BJ Common Stock received in the Merger to a number of shares of
BJ Common Stock having a value, as of the Effective Date, of less than forty
percent (40%) of the value of all the formerly outstanding shares in Western as
of the same time. For purposes of this assumption, shares in Western sold,
redeemed, or otherwise disposed of prior or subsequent to and as part of the
overall transaction, including shares in Western exchanged for cash or BJ
Warrants or exchanged for cash in lieu of fractional shares in BJ or fractional
BJ Warrants and dissenters' shares, will be considered outstanding shares in
Western as of the Effective Date. For purposes of this assumption, shares in
Western received on the conversion of Western Convertible Debentures
immediately before the Merger will not be treated as outstanding shares in
Western on the Effective Date.
<PAGE> 3
-3-
The Western Company Of North America
(4) The BJ Common Stock received by shareholders of Western in the
Merger will have a value, as of the Effective Time, of not less than forty
percent (40%) of the value of all the formerly outstanding shares in Western as
of the same time. For purposes of this assumption, shares in Western sold,
redeemed, or otherwise disposed of prior or subsequent to and as part of the
overall transaction, including shares in Western exchanged for cash or BJ
Warrants or exchanged for cash in lieu of fractional shares in BJ or fractional
BJ Warrants and dissenters' shares, will be considered outstanding shares in
Western as of the Effective Date. For purposes of this assumption, shares in
Western received on the conversion of Western Convertible Debentures
immediately before the Merger will not be treated as outstanding shares in
Western on the Effective Date.
(5) BJ (i) will not be under any obligation and will not have entered
into any agreement or understanding to reacquire any of its stock issued in the
Merger and (ii) will have no plan or intention to reacquire any of its stock
issued in the Merger.
(6) BJ will have no plan or intention to sell or otherwise dispose of
any of the assets of Western acquired in the transaction, except for
dispositions made in the
<PAGE> 4
The Western Company of North America -4-
ordinary course of business or transfers described in Section 368(a)(2)(C) of
the Internal Revenue Code of 1986, as amended (the "Code").
(7) The liabilities of Western to be assumed by BJ in the Merger and the
liabilities to which the transferred assets are subject will have been incurred
by Western in the ordinary course of its business.
(8) BJ will, following the Merger, continue the "historic business" of
Western or will use a "significant portion" of Western's "historic business
assets" in its business (as such terms are defined in Treas. Reg. Section
1.368-1(d)(2)).
(9) BJ, Western and the shareholders of Western will pay (or will have
paid) their respective expenses, if any, incurred in connection with the
Merger.
(10) There will be no intercorporate indebtedness existing between Western
and BJ that will have been issued or acquired, or that is to be settled, at a
discount.
(11) Neither Western nor BJ will be an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
<PAGE> 5
-5-
The Western Company of North America
(12) Western will not be under the active jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the
Code.
(13) The fair market value of the assets of Western that will be
transferred to BJ in the Merger will equal or exceed the amount of Western's
liabilities that will be assumed by BJ in the Merger plus the amount of
Western's liabilities (if any) to which the transferred assets may be subject
at the time of the Merger and which will not be assumed by BJ in the Merger.
Based upon and subject to the foregoing, and our consideration of such
other matters of fact and law as we have considered necessary or appropriate,
it is our opinion, under presently applicable United States federal income tax
law, that:
(1) The Merger will constitute a reorganization under Section 368(a)
of the Code,
<PAGE> 6
The Western Company of North America -6-
(2) The Company and BJ will each be a party to the reorganization
pursuant to Section 368(b) of the Code, and
(3) No income, gain or loss will be recognized for federal income tax
purposes by either the Company or BJ as a result of the consummation of the
Merger.
Very truly yours,
SULLIVAN & CROMWELL
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of BJ Services Company on
Form S-4 of our reports dated November 22, 1994, appearing and incorporated
by reference in the Prospectus, which is a part of this Registration Statement,
and to the reference to us under the heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Houston, Texas
March 9, 1995
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of
this Registration Statement on Form S-4 of BJ Services Company of our report
dated February 22, 1995 relating to the financial statements of The Western
Company of North America, which appears in such Prospectus. We also consent to
the incorporation by reference in such Prospectus of our report dated March 3,
1994, which appears on page 39 of the 1993 Annual Report to Stockholders of The
Western Company of North America, which is incorporated by reference in its
Annual Report on Form 10-K for the year ended December 31, 1993, and our
report dated February 22, 1995, which appears in exhibit number 21.4 of its
Current Report on Form 8-K dated February 24, 1995. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Houston, Texas
March 9, 1995
<PAGE> 1
EXHIBIT 23.4
[SULLIVAN & CROMWELL LETTERHEAD]
March 9, 1995
The Western Company of North America
515 Post Oak Boulevard, Suite 1200,
Houston, Texas 77027.
Ladies and Gentlemen:
As United States counsel to The Western Company of North America in
connection with the Registration Statement on Form S-4 of BJ Services Company
filed with the Securities and Exchange Commission on March 9, 1995 (the
"Registration Statement"), we hereby consent to the filing with the Securities
and Exchange Commission of the form of the Tax Opinion (as defined in the
Registration Statement) and this letter each as an exhibit to the Registration
Statement. In giving such consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933.
Very truly yours,
/s/ SULLIVAN & CROMWELL
--------------------------
Sullivan & Cromwell
<PAGE> 1
EXHIBIT 99.3
THE WESTERN COMPANY OF NORTH AMERICA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS CONDITIONS
Demand for pressure pumping services, offshore drilling and production
chemicals provided by the Company is significantly affected by the level of oil
and gas well drilling activity. This activity, in turn, is influenced by
current and expected oil and natural gas prices.
Most indicators of well drilling activity, including oil and natural gas
prices, were lower in 1994 than in 1993 as shown in the following table.
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Average Domestic Rig Count
Total 775 754 721
Oil 335 373 373
Natural gas 427 364 331
Average natural gas price ($/MMBtu) $ 1.72 $ 1.97 $ 1.61
Average oil price ($/barrel) $17.27 $18.39 $20.59
Domestic natural gas well completions 7,868 8,761 7,945
Domestic oil well completions 6,080 8,035 8,703
</TABLE>
Negative year-over-year changes in these indicators adversely affected
1994 operating performance of the Company's pressure pumping business.
A 10% decline in domestic natural gas well completions in 1994, in
response to weak natural gas prices throughout most of the year, compared
negatively to the 10% increase in 1993. Domestic oil well completions fell 24%
in 1994 following a decline of 8% in 1993.
In international markets, where activity is affected by the level and
trend of oil prices, results were below expectations. Oil price improvement in
the second half of the year did not occur soon enough to offset the effects of
low oil prices earlier in the year. An unstable political environment in
certain of the Company's international locations also contributed to
unfavorable operating results.
The Company believes that the current weakness in natural gas prices may
continue to have a negative effect on domestic performance in 1995.
ACQUISITIONS AND DISPOSITIONS
In February 1995, the Company sold its last remaining drilling rig,
the semi-submersible Western Pacesetter IV, for $37.2 million. In December
1994, the semi-submersible drilling rig, Alaskan Star, was sold for $11.8
million, of which $6.3 million is a bankers' acceptance drawn on a U.S. bank
due within one year, and in 1993 eleven jack-up rigs were sold for $169.3
million. The offshore drilling business has been accounted for as a
discontinued operation. See Note 4 of Notes to Consolidated Financial
Statements for additional information.
The Company completed the acquisition in February 1994, of substantially
all of the assets of the production and process chemical business of Unichem
International, Inc. ("Unichem") for $19.8
<PAGE> 2
million in cash and in June 1994, of substantially all of the oilfield
chemicals business and assets of Betz Energy Chemicals, Inc. ("Betz") for
$4.8 million in cash. The businesses acquired from Unichem and Betz are
substantially the same and are affected primarily by oil, rather than natural
gas, prices. In July 1994, the Company completed the acquisition of the
coiled tubing business of Coiltech, Inc. ("Coiltech") for $3.1 million in
cash. All three acquisitions were accounted for using the purchase method of
accounting. See Note 3 of Notes to Consolidated Financial Statements for
additional information.
MERGER AGREEMENT
In November 1994, the Company and BJ Services Company ("BJ Services")
entered into a definitive merger agreement. Subject to certain conditions and
to appraisal rights under Delaware law, this agreement provides that
stockholders of the Company will receive $20 in cash or in shares of BJ
Services common stock for each outstanding share of Company Common Stock they
own. Additionally, for each share of Common Stock they hold, each stockholder
will receive .2 of a five-year warrant to purchase one share of BJ common stock
for $30 per share. Pursuant to the merger agreement, stockholders may elect to
receive any proportion of cash and BJ Services common stock, provided that the
total number of shares of Common Stock for which such elections are made will
be adjusted so that the total shares for which each type of election is made
will be approximately equal. The transaction is subject to the approval of
both companies' stockholders, antitrust review and other customary closing
conditions, and is expected to close during the first half of 1995.
RESULTS OF OPERATIONS
Revenue. Pressure pumping revenues for 1994 were $307.5 million as
compared to $294.1 million and $225.4 million for 1993 and 1992, respectively.
The $13.4 million (5%) increase in 1994 was due primarily to a 5% increase in
domestic revenues from $278.1 million to $291.4 million. The Company was able
to increase revenues due to increased demand for certain of its services as
well as improved pricing despite a deterioration in most business condition
indicators. International revenues increased slightly in 1994 over 1993 as a
result of higher business volumes in Eastern Europe and the former
Soviet Union offset by lower export sales of equipment and products.
In 1993, pressure pumping revenues were $68.7 million (31%) higher than
1992 reflecting a $66.6 million increase in domestic revenues and a $2.1
million increase in international revenues. Contributing to this increase were
significantly higher levels of business volume resulting from increased demand
and, to a lesser extent, improved pricing. This increased volume was primarily
the result of increased demand for well stimulation services commensurate with
higher levels of natural gas drilling and completion activity brought about by
sustained higher natural gas prices. The $2.1 million increase in 1993 over
1992 in international revenues resulted from higher export sales of equipment
and products partially offset by lower business volumes in Nigeria.
Demand for the Company's pressure pumping services is tied closely to
the seasonality of drilling and completion activity. The pressure pumping
business historically experiences its lowest level of activity during the first
quarter due in part to weather conditions which reduce drilling and completion
activity.
Operating Costs. Pressure pumping operating costs as a percent of
revenue were 88% in 1994 as compared to 85% in 1993. The 3% deterioration was
related primarily to domestic pressure pumping where operating costs increased
from 83% to 85%. The domestic change in operating costs was due primarily to
increased staffing levels and associated costs, environmental remediation costs
and equipment costs partially offset by improved pricing. Foreign pressure
pumping contributed to the 1994 margin decline due to lower levels of activity
in Nigeria caused by political instability and increased operating costs
related to the Company's well stimulation vessel, Western Renaissance. In July
1994, the Company relocated the Western Renaissance from the North Sea to the
U.S. Gulf of
- 2 -
<PAGE> 3
Mexico due to the relatively low level of stimulation activity that
occurred during 1994 in the North Sea. Pressure pumping operating costs as a
percent of revenue were 85% in 1993 as compared to 89% for 1992. Domestic
pressure pumping operating costs as a percentage of revenues decreased from 89%
in 1992 to 83% in 1993. This total improvement was due primarily to increased
volumes and lower variable operating costs but was somewhat offset by start-up
costs relating to the Western Renaissance and lower levels of business activity
in Nigeria and Indonesia.
Depreciation and Amortization. Depreciation and amortization expense
for 1994 increased $4.2 million (29%) primarily as a result of two factors. The
1994 acquisitions of Unichem, Betz and Coiltech resulted in additional
depreciation and amortization expense of $2.3 million. Also, depreciation on
the Western Renaissance increased by $2.1 million in 1994 due primarily to a
full year of operations in 1994 versus only one month in 1993. Depreciation
and amortization expense in 1993 of $14.6 million was slightly lower than 1992
depreciation and amortization expense of $14.9 million resulting from lower
depreciation on certain pressure pumping equipment that had been fully
depreciated partially offset by depreciation expense on new equipment.
Utilization of the Western Renaissance, and opportunities therefor, will
continue to be assessed in determining whether future undiscounted net cash
flows will be adequate to cover its cost.
General and Administrative. General and administrative expense for 1994
was substantially the same as 1993. General and administrative expense for
1993 was $0.9 million higher than 1992 due primarily to increased data
processing costs related to a systems conversion and increased training costs.
Interest Expenses, Net of Interest Capitalized. Interest expense for
1994 decreased $3.5 million (26%) over 1993 primarily as a result of the
purchase and retirement in March 1994 of $97.8 million face value of the
Company's $100 million 12 7/8% Senior Notes Due 2002 (the "Notes"). This
decrease was partially offset by reduced capitalized interest and the impact
of an interest rate swap. See Note 5 of Notes to Consolidated Financial
Statements. The Company recorded interest expense of $0.8 million in 1994
related to the interest rate swap compared to interest expense being reduced
by $1.1 million in 1993. The effect upon interest expense of the interest
rate swap is dependent upon changes in the six month London Interbank Offering
Rate. The estimated differential to be paid or received at each semiannual
settlement date is charged or credited to interest expense as interest rates
change. The Company capitalizes interest applicable to significant capital
projects which require a period of time to construct. No interest was
capitalized in 1994. Capitalized interest which relates principally to the
Western Renaissance, which was placed in service late in the fourth quarter of
1993, amounted to $5.8 million in 1993 and $2.3 million in 1992. Interest
expense in 1993 increased by $3.1 million (30%) over 1992 due primarily to
interest associated with issuance of the Notes in November 1992. Proceeds
from issuance of the Notes were used to retire all outstanding institutional
debt which had lower interest rates. Increased amounts of interest capitalized
and the impact of the interest rate swap partially offset this higher
interest cost.
Interest Income. Interest income for 1994 was $3.4 million (73%) lower
than in 1993 due primarily to decreased average cash balances in 1994 and the
receipt in 1993 of interest income associated with the settlement of a long-
standing drilling contract dispute. Interest income in 1993 increased $3.6
million (339%) from 1992 due primarily to higher interest rates and average
cash balances and the 1993 receipt of interest income associated with the
previously mentioned drilling contract dispute.
Merger Related Expenses. Expenses of $21.1 million were recorded in
1994 for costs associated with the expected merger with BJ Services and
includes investment banker, legal and accounting fees, certain severance costs
and other miscellaneous fees. In addition to the expense recorded in 1994,
additional legal fees and certain other merger related expenses are expected to
be incurred and recorded in 1995.
- 3 -
<PAGE> 4
Writedown of Pressure Pumping Assets and Other. The writedown of
pressure pumping assets and other totaled $7.1 million in 1993 and included the
writedown of older pressure pumping equipment and idle facilities to net
realizable value in anticipation of disposal and various other non-operating
costs.
Income Taxes. Provision for income taxes from continuing operations was
substantially the same in 1994 as 1993. Provision for income taxes from
continuing operations increased $0.3 million in 1993 compared to 1992 primarily
as a result of increased profitability in domestic operations in 1993. Total
provision for income taxes, including discontinued operations, decreased by
$9.8 million in 1994 compared to 1993 and increased by $6.9 million in 1993
compared to 1992 primarily as a result of the U.S. tax provision associated
with the sale of certain offshore drilling rigs in 1993. The increase in 1993
was partially offset by the tax benefit associated with offshore drilling rig
writedowns and decreased foreign income taxes. As a result of the Company's
chapter 11 reorganization and subsequent changes in ownership of Common Stock,
the Company is subject to an annual limitation with respect to the realization
of U.S. net operating loss carryforwards. See Note 7 of Notes to Consolidated
Financial Statements.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"),
which requires an asset and liability approach for financial accounting and
reporting of income taxes. The Company adopted SFAS No. 109 prospectively and
the initial adoption did not materially affect 1993 results of operations. The
consolidated financial statements for 1992 were prepared in accordance with the
provisions of Accounting Principles Board Opinion No. 11, "Accounting for
Income Taxes."
Discontinued Operations. In November 1994, the Company formalized a
plan to dispose of the remaining assets of its offshore drilling segment.
These assets consisted primarily of two semi-submersible offshore drilling rigs
and related equipment and inventory. As a result, the offshore drilling
segment has been classified in the consolidated statements of operations as
discontinued operations.
The following table summarizes the results of the discontinued operation:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Revenues.................................... $22,609 $64,676 $89,613
======= ======= =======
Income from discontinued operations,
net of income tax expense in 1994 -
$152, 1993 - $9,673, and 1992 - $3,076.... $ 2,277 35,321 9,510
Loss on disposal, net of income tax
benefit in 1994 of $(152)................. (6,474) -- --
------- ------- -------
$ 4,197 $35,321 $ 9,510
======= ======= =======
</TABLE>
See Note 4 of Notes to Consolidated Financial Statements for additional
information.
Extraordinary Losses. During March 1994, the Company purchased through
a tender offer $97.8 million face amount of Notes. The aggregate purchase
price of these Notes was $117.3 million, resulting in an extraordinary loss of
$25.7 million ($1.38 per share) including unamortized original debt issue costs
of $3.2 million, unamortized original issue discount of $2.3 million and
offering costs of $0.7 million. This extraordinary loss was recognized in
December 1993. During 1992, the Company issued the Notes and used the
- 4 -
<PAGE> 5
proceeds to prepay secured debt totaling $94.6 million. As a result, it
incurred a $1.2 million ($0.07 per share) extraordinary loss primarily
representing prepayment penalties and the write-off of unamortized debt
issuance costs.
FINANCIAL CONDITION
Capital Requirements. Capital expenditures, exclusive of acquisitions,
decreased $32.0 million (60%) in 1994 compared to 1993 primarily due to lower
1994 capital expenditures associated with the Western Renaissance and lower
capital expenditures in the offshore drilling business as a result of the sales
in 1993 of eleven offshore jack-up drilling rigs. Partially offsetting this
decrease was an increase in capital expenditures in the domestic pressure
pumping business. Capital expenditures, exclusive of acquisitions, increased
$14.5 million (38%) in 1993 over 1992 due primarily to increased capital
expenditures related to the domestic pressure pumping business. The 1994
capital expenditures for acquisitions are associated with the purchase of
Unichem, Betz and Coiltech. In 1993, substantially all the assets of Smith
Energy Services were acquired.
During certain periods in the last few years, the Company has utilized
nearly all of the service capacity of its pressure pumping equipment.
Consequently, substantial capital expenditures may be needed for the Company to
meet any sustained demand significantly greater than it experienced during
those periods. Net revenues, however, could improve substantially without
significant capital expenditures if price discounting improves. In the short
term, the majority of capital expenditures for domestic pressure pumping
equipment is expected to be a function of demand for related services as well
as normal replacement needs. If additional operating facilities are needed,
the Company believes inactive facilities that it already owns can be
reactivated, or that new facilities can be leased, thereby limiting future
capital expenditures for facilities.
Additional capital expenditures will be required in order for the
Company to continue the expansion of its pressure pumping services into
international markets and to take advantage of opportunities to acquire on
favorable terms businesses which complement or extend the Company's existing
operations.
Capital Resources and Liquidity. The decrease in the Company's cash
position from $141.3 million to $12.7 million during 1994 was primarily due to
the purchase and retirement of the Notes and capital expenditures partially
offset by proceeds from sales of marketable securities and cash generated from
operations. In 1993 the increase in the Company's cash position from $13.2
million to $141.3 million was primarily due to proceeds from sales of offshore
drilling rigs and cash generated from operations offset by 1993 capital
expenditures. Net cash provided by operating activities decreased $31.8
million (71%) in 1994 due primarily to lower operating results, merger related
expenses and unfavorable changes in accounts payable and accounts receivable
balances. Accounts payable was unusually high at year end 1993 and accounts
receivable was unusually high at year end 1992. Net cash generated by
operations increased $20.1 million (82%) in 1993 principally as a result of
improved operating results within the domestic pressure pumping segment and
favorable changes in accounts payable and accounts receivable balances.
Sources of liquidity to meet the Company's planned capital expenditure
and working capital needs during 1995 include cash on hand at December 31,
1994, cash proceeds of $37.2 million received in February 1995 from the sale of
the Western Pacesetter IV, anticipated 1995 cash flow from operations and the
$30 million available at December 31, 1994 under the Company's $30 million
revolving credit facility. Based on management's current operating capital
plan, these sources should provide the Company sufficient liquidity.
- 5 -
<PAGE> 1
EXHIBIT 99.4
<TABLE>
<S> <C>
BJ SERVICES COMPANY SPECIAL MEETING APRIL 13, 1995. Proxy No. .
--------------
The undersigned having received the notice and accompanying Proxy Statement for said meeting hereby constitutes
P and appoints J.W. Stewart, Michael McShane and Margaret B. Shannon (the "Proxy Committee"), and each of
them, his true and lawful agents and proxies with power of substitution and resubstitution in each, to
R represent and vote at the Special Meeting scheduled to be held on April 13, 1995 or at any adjournment or
postponement thereof on all matters coming before said meeting, all shares of BJ SERVICES COMPANY ("BJ
O Services") which the undersigned may be entitled to vote. The above proxies are hereby instructed to vote as
shown on the reverse side of this card.
X
This proxy must be dated and signed exactly as shown hereon.
Y REGISTRATION,
Dated: , 1995
------------------------------------
ADDRESS,
-----------------------------------------------------------------------
Signature(s)
CITY, STATE
-----------------------------------------------------------------------
Executors, administrators, trustees, etc. should give full title as such. If the
signer is a corporation, please sign full corporate name by duly authorized
officer. Joint owners should each sign personally.
</TABLE>
<TABLE>
<S> <C>
BJ SERVICES COMPANY SPECIAL MEETING APRIL 13, 1995. CONTINUED FROM OTHER SIDE
This proxy when properly executed will be voted in the manner directed herein by the above signed stockholder
P of Common Stock. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2) AND (3). PLEASE
SIGN, DATE, MARK AND PROMPTLY MAIL THIS PROXY IN THE ENCLOSED ENVELOPE.
R
THE BOARD OF DIRECTORS OF BJ SERVICES UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSALS (1), (2) AND (3).
O
(1) APPROVAL OF AGREEMENT AND PLAN OF MERGER FOR / / AGAINST / / ABSTAIN / /
X AND ISSUANCE OF COMMON STOCK AND WARRANTS
(2) APPROVAL OF AMENDMENT TO BJ SERVICES CHARTER FOR / / AGAINST / / ABSTAIN / /
Y (3) APPROVAL OF 1995 INCENTIVE PLAN FOR / / AGAINST / / ABSTAIN / /
(4) In the discretion of the Proxy Committee, the proxies are authorized to vote in their discretion upon
other matters as may properly come before the meeting or any adjournments or postponements thereof.
Neither Proposal (2) nor Proposal (3) will be implemented unless the Merger contemplated in Proposal (1)
is consummated.
PLEASE MARK THIS BOX IF YOU WILL PERSONALLY BE ATTENDING THE MEETING. / /
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES ABOVE, BUT YOU NEED NOT MARK
ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXY
COMMITTEE CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF BJ SERVICES.
</TABLE>
<PAGE> 1
EXHIBIT 99.5
<TABLE>
<S> <C>
THE WESTERN COMPANY OF NORTH AMERICA
SPECIAL MEETING OF STOCKHOLDERS, APRIL 13, 1995
P
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF WESTERN.
R
The undersigned having received the notice and accompanying Proxy Statement for said meeting hereby constitutes and
O appoints Sheldon R. Erickson, William J. Johnson and Graham L. Adelman, and each of them, his true and lawful agents and
proxies with power of substitution and resubstitution in each, to represent and vote at the Special Meeting scheduled to be
X held on April 13, 1995 or at any adjournment or postponement thereof on all matters coming before said meeting, all shares
of THE WESTERN COMPANY OF NORTH AMERICA ("Western") which the undersigned may be entitled to vote. The above proxies are
Y hereby instructed to vote as shown on the reverse side of this card.
(continued on reverse side)
</TABLE>
<TABLE>
<S> <C>
THE WESTERN COMPANY OF NORTH AMERICA
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
THE BOARD OF DIRECTORS OF WESTERN UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL (1).
P
(1) Approval of Agreement and Plan of Merger FOR / / AGAINST / / ABSTAIN / /
R (2) The proxies are authorized to vote in their discretion upon other matters as may properly come before the
meeting or any adjournments or postponements thereof.
O
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES ABOVE, BUT YOU NEED NOT MARK ANY
X BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE
YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
Y
NOTE: Please sign exactly as name appears hereon. For joint
accounts both owners should sign. For corporations, duly
authorized officer must sign and show full corporate name. When
signing as executor, administrator, attorney, trustee or
guardian, etc. please sign your full title.
Dated , 1995
--------------------------------------------------
--------------------------------------------------------------
Signature
--------------------------------------------------------------
Signature
This proxy when properly executed will be voted in the manner directed herein by the above signed stockholder of Common
Stock. If no direction is made, this proxy will be voted FOR Proposal (1).
</TABLE>