<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[ ] Revised Preliminary Proxy Commission Only (as permitted by
Statement Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
BJ SERVICES COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JANUARY 22, 1998
---------------------
The Annual Meeting of the Stockholders of BJ Services Company (the
"Company") will be held on Thursday, January 22, 1998, at 11:00 a.m. local time,
at The Houstonian Hotel and Conference Center located at 111 North Post Oak
Lane, Houston, Texas, for the following purposes:
1. To elect two Class II directors to serve a three-year term;
2. To approve an amendment to the Company's certificate of incorporation,
as amended (the "Charter"), to increase the total number of shares of
common stock, par value $.10 per share, that the Company has the
authority to issue from 80,000,000 shares to 160,000,000 shares (the
"Common Stock Amendment");
3. To approve the adoption of the BJ Services Company 1997 Incentive Plan
(the "1997 Incentive Plan"); and
4. To transact such other business as may properly come before the
meeting and any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
All stockholders of record at the close of business on December 5, 1997 are
entitled to notice of and to vote at said meeting or any adjournment thereof. At
least a majority of the outstanding shares of the Company are required to be
present at the meeting or represented by proxy to constitute a quorum.
By order of the Board of Directors,
/s/ J.W. STEWART
J. W. Stewart
Chairman of the Board, President
and Chief Executive Officer
Houston, Texas
December 22, 1997
YOUR VOTE IS IMPORTANT
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN YOUR
PROXY AS PROMPTLY AS POSSIBLE. AN ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED
IN THE UNITED STATES, IS ENCLOSED FOR THIS PURPOSE.
<PAGE> 3
BJ SERVICES COMPANY
PROXY STATEMENT
This proxy statement is furnished to stockholders of BJ Services Company, a
Delaware corporation (the "Company"), in connection with the solicitation of
proxies on behalf of the Board of Directors of the Company to be voted at the
Annual Meeting of Stockholders of the Company (the "1998 Annual Meeting"), to be
held at The Houstonian Hotel and Conference Center located at 111 North Post Oak
Lane, Houston, Texas, on Thursday, January 22, 1998, at 11:00 a.m. local time,
and at any and all adjournments thereof. Stockholders of record at the close of
business on December 5, 1997 will be entitled to notice of and to vote at such
meeting and at all adjournments thereof.
When a properly executed proxy is received prior to the meeting, the shares
represented thereby will be voted at the meeting in accordance with the
directions noted thereon. A proxy may be revoked at any time before it is
exercised by submitting a written revocation or a later-dated proxy to the
Secretary of the Company, or by attending the meeting in person and so notifying
the meeting judges.
Management does not intend to present any business for a vote at the
meeting, other than (i) the election of directors; (ii) the proposed amendment
to the Company's amended certificate of incorporation (the "Charter") to effect
an increase in the total number of authorized shares of Common Stock (the
"Common Stock Amendment"); and (iii) the proposed adoption of the BJ Services
Company 1997 Incentive Plan (the "1997 Incentive Plan"). Unless stockholders
specify otherwise in their proxies, proxies will be voted FOR the election of
nominees listed herein as directors, FOR the Common Stock Amendment, and FOR the
approval of the 1997 Incentive Plan. If other matters requiring the vote of
stockholders properly come before the meeting, it is the intention of the
persons named in the attached proxy card to vote proxies held by them in
accordance with their judgment on such matters.
The complete mailing address of the Company's executive offices is 5500
Northwest Central Drive, Houston, Texas 77092. The approximate date on which
this proxy statement and the accompanying proxy card were first sent or given to
the stockholders of the Company is December 22, 1997.
VOTING SECURITIES
On December 5, 1997, the record date, there were outstanding and entitled
to vote 38,666,911 shares of the Company's Common Stock, held of record by
approximately 1,100 persons. Stockholders are entitled to one vote, exercisable
in person or by proxy, for each share of Common Stock held on the record date.
Cumulative voting is not permitted under the Company's Charter or Bylaws.
Abstentions and broker nonvotes will have the effect of a vote against the
proposed amendment to the Charter. Abstentions with respect to the approval of
the 1997 Incentive Plan will have the effect of a vote against such plan; broker
nonvotes will not be counted as a vote against the 1997 Incentive Plan.
Owners of more than 5% of the outstanding voting securities of the Company,
including Common Stock and warrants to purchase Common Stock (the "Warrants"),
are set forth in the following table. At the record date, management knew of no
person that beneficially owned more than 5% of the outstanding voting securities
of the Company, other than as set forth in the table.
<PAGE> 4
<TABLE>
<CAPTION>
NUMBER PERCENT
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNERS OF SHARES OF CLASS
- -------------- ------------------------------------- --------- --------
<S> <C> <C> <C>
Common Stock FMR Corp. 2,591,139(a) 6.7%
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
- ---------------
(a) As of August 8, 1997, based on information filed by FMR Corp. ("FMR"). FMR,
through its wholly owned subsidiary, Fidelity Management & Research Company
("Fidelity"), which acts as investment adviser to various investment company
funds, was the beneficial owner of 2,276,635 shares of Common Stock and,
through its wholly owned subsidiary, Fidelity Management Trust Company
("Fidelity Trust"), was the beneficial owner of 314,504 shares of Common
Stock. Of those shares, FMR and Edward C. Johnson 3d, through their control
of Fidelity and Fidelity Trust, had sole dispositive power with respect to
the entire holding of 2,276,635 shares beneficially owned by Fidelity and
sole voting and dispositive power with respect to the entire holding of
314,504 shares beneficially owned by Fidelity Trust. Voting power with
respect to the shares beneficially owned by Fidelity was held by the boards
of trustees of the various funds.
ELECTION OF DIRECTORS
The Company's Bylaws provide for the Board of Directors to serve in three
classes having staggered terms of three years each. Two Class II directors will
be elected at the 1998 Annual Meeting of Stockholders to serve for a three-year
term expiring at the Annual Meeting of Stockholders in the year 2001. Pursuant
to the Company's Bylaws, in case of a vacancy on the Board of Directors, a
majority of the remaining directors of the class in which the vacancy occurs
will be empowered to elect a successor, and the person so elected will hold
office for the remainder of the full term of the director whose death,
retirement, resignation, disqualification or other cause created the vacancy,
and thereafter until the election of a successor director.
The persons whose names are set forth as proxies in the enclosed proxy card
will vote all shares over which they have control "FOR" the election of the
nominees named below unless otherwise directed. Although the Board of Directors
of the Company does not anticipate that any of the nominees will be unable to
serve, if such a situation should arise prior to the meeting, the appointed
proxies will use their discretionary authority pursuant to the proxy and vote in
accordance with their best judgment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES NAMED
BELOW. THE AFFIRMATIVE VOTE OF HOLDERS OF A MAJORITY OF THE COMMON STOCK PRESENT
OR REPRESENTED BY PROXY AT THE MEETING AND ENTITLED TO VOTE IS REQUIRED TO ELECT
EACH DIRECTOR NOMINEE.
2
<PAGE> 5
The following table sets forth, for each nominee for election as a Class II
director, his name, his principal occupation, his age and the year in which he
first became a director of the Company. The nominees have consented to be named
in this proxy statement and to serve as directors, if elected.
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION AGE SINCE
---- -------------------- --- -----
<S> <C> <C> <C>
Don D. Jordan..................... Chairman, Chief Executive Officer and a 65 1990
director of Houston Industries Incorporated, a
public utility holding company with interests
in the electric utilities, gas distribution,
gas pipeline, 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................... Vice President -- Finance and Chief Financial 65 1990
Officer of the Company. Mr. McShane joined the
Company in 1987 from Reed Tool Company, an
oilfield tool company, where he was employed
for seven years. At Reed Tool Company, he held
various financial management positions.
</TABLE>
INFORMATION CONCERNING OTHER DIRECTORS
The following table sets forth certain information for those directors
whose present terms will continue after the 1998 Annual Meeting. The terms of
the Class III and Class I directors will expire at the 1999 and 2000 Annual
Meetings of Stockholders, respectively.
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION AGE SINCE CLASS
---- -------------------- --- -------- -----
<S> <C> <C> <C> <C>
L. William Heiligbrodt............ President, Chief Operating Officer and a 56 1992 III
director of Service Corporation
International, a funeral services corporation
("SCI"). He has served in various management
positions with SCI since February 1990. Prior
to joining SCI, Mr. Heiligbrodt served as
President of Provident Services, Inc. from
March 1988 to February 1990. Prior to that,
he served for five years as Vice Chairman and
Chief Executive Officer of WEDGE Group,
Incorporated, a multi-industry holding
company.
James E. McCormick................ Mr. McCormick served in various executive 70 1990 III
positions with ORYX Energy Company, a
diversified energy company, including
President, Chief Operating Officer and a
director, from 1977 until his retirement in
1992. Mr. McCormick currently serves on the
board of directors of Lone Star Technology,
Snyder Oil Company, Dallas National Bank and
Tesco Corporation.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION AGE SINCE CLASS
---- -------------------- --- -------- -----
<S> <C> <C> <C> <C>
J. W. Stewart..................... Chairman of the Board, President and Chief 53 1990 III
Executive Officer of the Company. Mr. Stewart
joined Hughes Tool Company in 1969 as Project
Engineer, served as Vice President -- Legal
and Secretary of Hughes Tool Company and as
Vice President-Operations for a predecessor
of the Company prior to being named President
of the Company in 1986.
John R. Huff...................... Chairman, President and Chief Executive 51 1992 I
Officer of Oceaneering International, Inc.,
an oilfield services corporation
("Oceaneering"). Mr. Huff has been President,
Chief Executive Officer and a director of
Oceaneering since 1986 and Chairman of the
Board since 1990. Mr. Huff is also a director
of Triton Energy.
R. A. LeBlanc..................... Mr. LeBlanc served in various executive 67 1994 I
positions with Keystone International, Inc.,
a manufacturer of flow control products,
including Chairman of the Board, Chief
Executive Officer and a director, from 1959
until his retirement in 1995.
Michael E. Patrick................ Chief Investment Officer for The Meadows 53 1995 I
Foundation since December 1, 1995; consultant
from 1994 to 1995. Executive Vice President,
Chief Financial Officer and a director of
Lomas Financial Corporation, parent, and
President and Chief Operating Officer of two
subsidiaries, Lomas Mortgage USA and Lomas
Information Systems, Inc., from 1992 to
December 31, 1993. The Lomas companies were
engaged in mortgage banking, real estate and
information systems. Lomas Financial
Corporation and Lomas Mortgage USA filed for
bankruptcy protection in October 1995.
Executive Vice Chancellor for Asset
Management of the University of Texas System,
where Mr. Patrick was responsible for the
investment of all endowment funds, from 1984
to 1991. Mr. Patrick is also currently a
director of Cooper Cameron Corporation.
</TABLE>
4
<PAGE> 7
The following table sets forth the beneficial ownership of Common Stock as
of November 1, 1997 by each current director and nominee, by each executive
officer named in the Summary Compensation Table and by all current directors and
officers as a group.
<TABLE>
<CAPTION>
NUMBER OF
NAME OR GROUP SHARES(1)(2)
------------- ------------
<S> <C>
L. William Heiligbrodt...................................... 16,000
John R. Huff................................................ 14,000
Don D. Jordan............................................... 15,500
R. A. LeBlanc............................................... 10,435
James E. McCormick.......................................... 16,000
Michael E. Patrick.......................................... 7,000
J. W. Stewart............................................... 411,903
Michael McShane............................................. 123,338
Kenneth Williams............................................ 78,712
Thomas H. Koops............................................. 107,609
Margaret B. Shannon......................................... 55,829
All current directors and officers as a group (15
persons)(3)............................................... 1,037,721
</TABLE>
- ---------------
(1) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned by them. As of
November 1, 1997 no officer or director owned in excess of 1% of the
Company's Common Stock.
(2) Includes the following shares subject to options granted pursuant to the BJ
Services Company 1990 Stock Incentive Plan (the "1990 Stock Incentive Plan")
and the BJ Services Company 1995 Incentive Plan (the "1995 Incentive Plan")
and exercisable within 60 days: Mr. Heiligbrodt -- 14,000 shares; Mr.
Huff -- 14,000 shares; Mr. Jordan -- 15,000 shares; Mr. LeBlanc -- 10,000
shares; Mr. McCormick -- 15,000 shares; Mr. Patrick -- 7,000 shares; Mr.
Stewart -- 344,937 shares; Mr. McShane -- 89,695 shares; Mr.
Williams -- 59,629 shares; Mr. Koops -- 89,876 shares; Ms. Shannon -- 39,834
shares.
(3) All current directors and officers as a group owned beneficially an
aggregate of approximately 3% of the Company's Common Stock.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
During fiscal 1997, the Board of Directors held seven meetings of the full
Board and nine meetings of committees. During such fiscal year, or such portion
of such year during which such director served, each director attended at least
75% of the aggregate number of meetings of the Board of Directors and meetings
of committees of the Board on which he served. During fiscal 1997, directors who
were not employees of the Company were paid a monthly retainer of $2,500 for
service on the Board, an attendance fee of $1,250 for the first meeting of the
Board or any of its committees attended in one day, and $800 for each additional
meeting attended in the same day. Committee chairmen who are not Company
employees receive an additional 50% of the meeting fee. In addition, pursuant to
the terms of the 1990 Stock Incentive Plan and the 1995 Incentive Plan, the
non-employee directors receive annual automatic grants of options to purchase
4,000 shares of Common Stock effective the fourth Thursday of October each year.
Employees of the Company are not paid any directors' fees. No member of the
Board of Directors was paid any compensation in the Company's 1997 fiscal year
for his service as a director of the Company other than pursuant to the standard
compensation arrangement for directors and expenses.
On January 23, 1997, the Board of Directors appointed members to serve on
the Audit Committee, the Executive Compensation Committee and the Nominating
Committee. The Nominating Committee held two meetings during fiscal 1997. The
Executive Compensation Committee met four times and the Audit Committee met
three times during that period.
The responsibilities of the Audit Committee, comprised of Messrs. McCormick
(Chairman), Jordan, Huff, LeBlanc and Patrick, include reviewing the scope and
results of the annual audit of the Company's
5
<PAGE> 8
consolidated financial statements with the independent auditors, internal
auditors and management; reviewing the independence of the independent auditors
and the internal auditors; reviewing actions by management on the independent
and internal auditors' recommendations; and meeting with management, the
internal auditors and the independent auditors to review the effectiveness of
the Company's system of internal control and internal audit procedures. To
promote the independence of the audit, the Audit Committee consults separately
and jointly with the independent auditors, the internal auditors and management.
The responsibilities of the Executive Compensation Committee, comprised of
Messrs. Jordan (Chairman), McCormick, Heiligbrodt, Huff and Patrick, include
reviewing the Company's executive salary and bonus structure; reviewing the
Company's employee stock incentive plans, thrift plan and employee stock
purchase plan as well as other incentive alternatives; reviewing the Company's
perquisite program; and recommending directors' fees.
The responsibilities of the Nominating Committee, comprised of Messrs.
Heiligbrodt (Chairman), McCormick and LeBlanc, include selecting candidates to
fill vacancies on the Board of Directors; reviewing the structure and
composition of the Board; and considering qualifications required for continued
Board service. The Committee also considers nominees recommended by
stockholders. Stockholders desiring to make such recommendations should submit
the candidate's name, together with biographical information and the candidate's
written consent to be nominated and, if elected, to serve to: Chairman,
Nominating Committee of the Board of Directors of BJ Services Company, P.O. Box
4442, Houston, Texas 77210-4442.
PROPOSED INCREASE IN AUTHORIZED
SHARES OF COMMON STOCK
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE COMMON STOCK AMENDMENT
INCREASING THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK FROM 80,000,000
SHARES TO 160,000,000 SHARES AND UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS VOTE FOR APPROVAL OF SUCH AMENDMENT. THE AFFIRMATIVE VOTE OF A
MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK IS REQUIRED TO APPROVE THIS
AMENDMENT.
DESCRIPTION OF THE PROPOSED AMENDMENT TO THE CHARTER
The Common Stock Amendment would increase the total number of authorized
shares of Common Stock from 80,000,000 to 160,000,000 shares and is being
proposed for approval at the 1998 Annual Meeting. The full text of the proposed
Common Stock Amendment is set forth in Appendix A to this Proxy Statement. The
additional shares of Common Stock would constitute additional shares of the
existing class of Common Stock and, if and when issued, would have the same
rights and privileges as the shares of Common Stock currently authorized.
At a meeting held on December 11, 1997, the Board of Directors voted to
recommend to the stockholders that the number of authorized shares of the Common
Stock of the Corporation be increased from 80,000,000 shares to 160,000,000
shares. At the same meeting the Board announced its intention, if the Common
Stock Amendment is approved by the stockholders, to declare a stock split
effected in the form of a stock dividend (the "Stock Split") on the Common
Stock, whereby one new share of Common Stock would be issued for each existing
share of Common Stock outstanding on January 30, 1998, the proposed record date
for the Stock Split (the "Stock Split Record Date"). The increased number of
authorized shares will also provide the Company with flexibility for future
financings and acquisitions approved by the Board of Directors. The Company has
no other present plans for the issuance of the additional authorized shares
contemplated by this proposal. The Board of Directors anticipates that the
increase in the number of outstanding shares of Common Stock effected through
the Stock Split may place the market price of the Common Stock in a range more
attractive to investors, particularly individual investors, and may result in a
broader market for the Common Stock. If the Common Stock Amendment is approved,
the Company will apply to the New York Stock Exchange (the "NYSE") for the
listing of additional shares of Common Stock in connection with the Stock Split.
6
<PAGE> 9
The Charter currently authorizes the issuance of 80,000,000 shares of
Common Stock. Of such shares, as of December 5, 1997 38,666,911 shares were
issued and outstanding and approximately 5,800,000 shares were reserved for
issuance upon exercise of the Warrants and pursuant to the Company's stock
option and employee benefits plans, leaving only approximately 35,500,000 shares
of Common Stock currently unreserved and available for future use. The current
number of authorized and unreserved shares of Common Stock is insufficient to
effect the Stock Split.
If the Common Stock Amendment is approved, stockholders of record as of the
close of business on the Stock Split Record Date, will receive, as a stock
dividend, one additional share of Common Stock for every share owned as of that
date. The Company's stockholders as of the Stock Split Record Date will not pay,
and the Company will not receive, any payment or other consideration for the
additional shares that would be issued pursuant to the Stock Split. A
stockholder's equity interest in the Company would not increase as a result of
the Stock Split; however, any sale of the Stock Split shares by a stockholder
would reduce such stockholder's proportional equity in the Company.
If the Common Stock Amendment is approved, an amount equal to the par value
of shares issued in relation to the Stock Split would be transferred from the
Company's retained earnings account to the Company's stated capital account. The
$.10 par value of the Common Stock would not change. Stockholders would retain
their Common Stock certificates issued prior to the Stock Split Record Date, and
those certificates issued prior to that date would continue to represent the
number of shares of Common Stock evidenced thereby. Certificates for the
additional shares of Common Stock would be mailed to stockholders of record by
the Company's transfer agent. The Company anticipates that the transfer agent
would mail the certificates for the new shares of Common Stock to holders of
record on or about February 20, 1998. STOCKHOLDERS SHOULD NOT SEND THEIR CURRENT
CERTIFICATES TO THE COMPANY OR TO THE TRANSFER AGENT.
The additional shares of Common Stock that would be authorized by the
Common Stock Amendment and not reserved to effect the Stock Split could be
issued at the direction of the 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 the Company's
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 Common Stock
do not presently have preemptive rights to subscribe for any of the Company's
securities and will not have any such rights to subscribe for the additional
shares of Common Stock proposed to be authorized. If the Common Stock Amendment
is approved, the Board of Directors will not solicit stockholder approval to
issue additional authorized shares of Common Stock, except to the extent that
such approval may be required by law or the rules of the New York Stock Exchange
(the "NYSE"), and such shares may be issued for such consideration, cash or
otherwise, at such times and in such amounts as the Board of Directors, in its
discretion, may determine. Under the NYSE's current rules, stockholder approval
is required in connection with certain issuances of shares of Common Stock or
securities convertible into or exercisable or exchangeable therefor, including
issuance of shares of Common Stock that would result in an increase of at least
20% of the shares of Common Stock outstanding before such issuance.
Stockholders of the Company should recognize that, although the Board of
Directors will authorize the further issuance of Common Stock only when it
considers such issuance to be in the best interests of the Company, the issuance
of additional shares of Common Stock may, among other things, have a dilutive
effect on the earnings per share of Common Stock and on the equity and voting
rights of holders of shares of Common Stock. Furthermore, the Common Stock
Amendment could permit the Board of Directors to issue shares of Common Stock to
persons supportive of management's position. Such persons might then be in a
position to vote to prevent or delay a proposed business combination that is
deemed unacceptable to the Board of Directors, although perceived to be
desirable by some stockholders. Any such issuance 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 Charter.
The Board of Directors has no current plans to issue additional shares of
Common Stock, except for (i) shares of Common Stock reserved for issuance under
the Company's current employee benefit plans and
7
<PAGE> 10
(ii) subject to stockholder approval at the 1998 Annual Meeting, shares of
Common Stock that would be issued or reserved for issuance upon payment of the
Stock Split and under the 1997 Incentive Plan. However, the Board of Directors
believes that the benefits of providing it with the flexibility to issue shares
without delay for any proper business purpose, including in connection with any
financing or any acquisition of another business, outweigh the possible
disadvantages of dilution and delaying or preventing a change of control, and
that it is prudent and in the best interests of the Company and the stockholders
to provide the advantage of greater flexibility that will result from the
adoption of the Common Stock Amendment.
Upon the effectiveness of the Stock Split, appropriate adjustments will be
made to stock options and performance units and other stock-based instruments
awarded and to be awarded under the Company's compensation and benefit programs,
as well as to the number of shares of Common Stock purchasable under the
Company's Employee Stock Purchase Plan. Such adjustments will also be made in
respect of the outstanding Warrants to purchase Common Stock and the Preferred
Share Purchase Rights (the "Rights") attached to the shares of Common Stock
currently outstanding and to be attached to the shares of Common Stock issued
pursuant to the Stock Split. The Rights are not currently exercisable.
PROPOSED ADOPTION OF THE
1997 INCENTIVE PLAN
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE 1997 INCENTIVE PLAN AND
UNANIMOUSLY RECOMMENDS THAT THE COMPANY STOCKHOLDERS VOTE FOR APPROVAL OF THE
PROPOSED PLAN. THE AFFIRMATIVE VOTE OF HOLDERS OF A MAJORITY OF THE SHARES OF
COMMON STOCK PRESENT IN PERSON OR REPRESENTED BY PROXY AND ENTITLED TO VOTE AT
THE 1998 ANNUAL MEETING IS REQUIRED TO APPROVE THE PROPOSED PLAN.
GENERAL
The purpose of the 1997 Incentive Plan is to promote the interests of the
Company and its stockholders by encouraging employees of the Company, its
subsidiaries and affiliated entities and its non-employee directors to acquire
or increase their equity interest in the Company, and, with respect to
employees, to enable them to relate incentive compensation to performance goals
of the Company, thereby giving them an added incentive to work toward the
continued growth and success of the Company. The Board of Directors also
contemplates that through the 1997 Incentive Plan, the Company, 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 1997 Incentive
Plan shall operate or be construed to prevent the Company from granting awards
outside of such plan. In the opinion of the Company, the 1997 Incentive Plan is
not subject to any of the provisions of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
The full text of the 1997 Incentive Plan is set forth in Appendix B to this
Proxy Statement. Certain features of the 1997 Incentive Plan are summarized
below, but such summary is qualified in its entirety by reference to the full
text of the 1997 Incentive Plan. All capitalized terms not defined herein shall
have the meanings set forth in the 1997 Incentive Plan.
TYPES OF AWARDS
The 1997 Incentive Plan would permit the granting of the following types of
awards: stock options ("Options") to purchase shares of Common Stock to
employees, officers and non-employee directors ("Optionees"), which may be
either incentive stock options ("Incentive Stock Options") within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
options that do not constitute Incentive Stock Options ("Nonqualified Options");
stock-based awards ("Performance Stock," "Performance Units" and "Bonus Stock")
to employees and officers ("Employee Grantees") and cash awards ("Tandem Cash
Tax Rights," "Performance Cash Awards" or "Bonus Cash Awards," collectively
referred to as "Cash Awards") to Employee Grantees. Options, Performance Stock,
Performance Units, Bonus Stock and Cash Awards are collectively referred to
herein as "Awards."
8
<PAGE> 11
ELIGIBILITY FOR PARTICIPATION
Incentive Stock Options may be granted only to individuals who are
employees and officers (whether or not they are directors) of the Company or any
"Parent Corporation" or any "Subsidiary Corporation" (as defined in Section 424
of the Code) of the Company, and Nonqualified Options, Performance Stock,
Performance Units, Bonus Stock and Cash Awards may be granted only to
individuals who are employees and officers (whether or not they are directors)
of the Company, 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 Proxy
Statement, approximately 230 employees and six non-employee directors are
eligible to participate in the 1997 Incentive Plan.
ADMINISTRATION
Under the terms of the 1997 Incentive Plan, the 1997 Incentive Plan will be
administered by the Executive Compensation Committee of the Board of Directors,
consisting of two or more directors of the Company appointed by the Board of
Directors. The members of the Executive Compensation Committee, as of the date
of this Proxy Statement, are Messrs. Don D. Jordan, James E. McCormick, L.
William Heiligbrodt, John R. Huff and Michael E. Patrick. No person shall be
eligible to serve on the Executive Compensation Committee unless such person is
a "Non-Employee Director" as defined in Rule 16b-3 promulgated under the
Exchange Act of 1934, as amended (the "Exchange Act"), if and as such is 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 1997 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, within the limits of the 1997 Incentive Plan, the exercise price of
Options (other than Options granted to non-employee directors), to interpret the
1997 Incentive Plan and all Options and Awards and to administer the 1997
Incentive Plan. The Executive Compensation Committee, in its sole discretion,
may delegate any or all of its powers and duties under the 1997 Incentive Plan
to the President of the Company, subject to such limitations on such delegated
powers and duties as the committee may impose, except that the President may not
grant Awards to, or take any action with respect to any Award previously granted
to, a person who is an officer or a director of the Company or otherwise subject
to Section 16(b) of the Securities Act of 1933, as amended. Such delegation
shall not limit the President's right to receive Awards under the 1997 Incentive
Plan.
AMENDMENT AND TERMINATION
The Board of Directors in its discretion may amend, suspend or terminate
the 1997 Incentive Plan; provided that any amendment that would (i) extend the
period within which Awards may be granted under the 1997 Incentive Plan, (ii)
increase the aggregate number of shares of Common Stock to be optioned or
awarded under the 1997 Incentive Plan (other than as prescribed for changes in
capitalization as described herein), (iii) reduce the Option exercise prices per
share of Common Stock provided in the 1997 Incentive Plan, (iv) change the class
of persons to whom Awards may be made under the 1997 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 1997 Incentive Plan would require the approval of the
stockholders of the Company; and provided, further, that no amendment,
suspension or termination of the 1997 Incentive Plan may cause the 1997
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 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
of an Incentive Stock Option increasing the number of shares of Common Stock
subject to the Incentive Stock Option or reducing the exercise price per share
of Common Stock (other than as prescribed for changes in capitalization as
described herein) will be subject to the approval of the stockholders of the
Company in order for the Incentive Stock Option to remain qualified under the
Code. The Executive Compensation Committee may at any time or from time to time,
in its discretion (other than for
9
<PAGE> 12
Options granted to non-employee directors), accelerate the time or times at
which such Option may be exercised to any earlier time or times.
TERM OF THE 1997 INCENTIVE PLAN
The 1997 Incentive Plan was adopted by the Board of Directors on December
11, 1997, subject to approval by the Company's stockholders. No Awards will be
exercisable or payable prior to approval of the 1997 Incentive Plan by the
Company's stockholders. Except with respect to Awards then outstanding, if not
sooner terminated, the 1997 Incentive Plan will terminate on December 11, 2007,
and no further Awards may be granted after such date.
SHARES SUBJECT TO THE 1997 INCENTIVE PLAN
The 1997 Incentive Plan provides for the issuance upon the purchase of
Common Stock acquired through the 1997 Incentive Plan's Awards of up to an
aggregate of 1,500,000 shares of Common Stock (3,000,000 shares as of the Stock
Split Record Date if the Common Stock Amendment is approved), subject to
adjustment in the event of stock splits and certain other corporate events; see
"-- Adjustments to Shares." Such shares of Common Stock may be authorized but
unissued shares or reacquired shares. Each share of Common Stock issued pursuant
to the 1997 Incentive Plan will be fully paid and nonassessable and will include
an associated Right (one-half of a Right as of the Stock Split Record Date if
the Common Stock Amendment is approved).
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 1997 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 the
Company, 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;
provided, however, only employees of the Company, its Parent Corporation or a
Subsidiary Corporation (as such terms are defined in Section 424 of the Code)
may be granted Incentive Stock Options. No Employee Optionee may receive more
than 250,000 Options under the 1997 Incentive Plan during any calendar year.
To exercise an Option granted under the 1997 Incentive Plan, the person
entitled to exercise the Option must deliver to the Company 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 the Company of
shares of Common Stock already owned by the person (provided that if such shares
were acquired pursuant to the prior exercise of a Company-granted option, such
shares must have been owned for at least six months) or sale through broker, or
by any combination thereof. The value of each share of Common Stock delivered
will 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 price at which shares of Common Stock may be purchased upon the
exercise of a Nonqualified Option shall be equal to the fair market value per
share of Common Stock at the time of the grant as determined by the Executive
Compensation Committee, based on the composite transactions in the Common Stock
as reported by The Wall Street Journal, and shall not be less than the per share
price of the last sale of Common Stock on the trading day prior to the grant of
such Option.
In the case of Options granted to non-employee directors, the exercise
price of each Option shall be equal to 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.
10
<PAGE> 13
In the case of the exercise of an Incentive Stock Option, the purchase
price per share of Common Stock will be equal to the fair market value per share
of Common Stock at the time the Incentive Stock Option is granted as determined
by the Executive Compensation Committee, based on the composite transactions in
the Common Stock as reported by The Wall Street Journal, and shall not be less
than the per share price of the last sale of Common Stock on the trading day
prior to the date of grant; provided, however, that the exercise price per share
of Common Stock shall be at least 110% of the fair market value per share of
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 the
Company 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 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 Executive Compensation Committee may, in its discretion, provide in an
option agreement (other than an Incentive Stock Option agreement) that the
option right granted to the individual may be transferred as provided in such
option agreement.
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
Common Stock subject to a Performance Period (as defined below), in the case of
Performance Units will represent a phantom share of Common Stock subject to a
Performance Period, and in the case of Bonus Stock will be shares of 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
1997 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, and subject to acceleration upon a Change of Control, no
shares of Performance Stock or Performance Units granted under the 1997
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 1997 Incentive Plan, each share of
Performance Stock and each Performance Unit shall be subject to becoming vested
upon the achievement of such performance goals (by the Company and/or
individual), if any, 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 Award 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 may 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 may 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. With respect to any
outstanding Performance Stock or Performance Unit, the Executive Compensation
Committee may, at any time or times, without the consent of the
Employee-Grantee, amend the performance objectives and/or the Performance Period
for earning such Award. Upon the occurrence of a Change of Control, each share
of Performance Stock and each Performance Unit that was previously granted under
the 1997 Incentive Plan and
11
<PAGE> 14
that is not then immediately vested in full will be immediately vested in full.
Bonus Stock represents shares of Common Stock that are not subject to a
Performance Period under the 1997 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 the Company 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 paid prior to six months from the beginning of 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 may 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 may 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. With respect to any outstanding Performance Cash Award, the
Executive Compensation Committee may, at any time or times, without the consent
of the Employee-Grantee, amend the performance objectives and/or the Performance
Period for earning such Award. No individual may receive a Performance Cash
Award in excess of $2 million under the 1997 Incentive Plan during any calendar
year.
The Executive Compensation Committee may, from time to time and subject to
the provisions of the 1997 Incentive Plan, grant Bonus Cash Awards to employees
and officers (whether or not they are directors) of the Company, its
subsidiaries and affiliated entities. Bonus Cash Awards are cash payments that
are not subject to a Performance Period.
NON-EMPLOYEE DIRECTORS' OPTIONS
Subject in each case to the limitation on the number of shares of Common
Stock included in the 1997 Incentive Plan, each director of the Company who is
neither an employee nor officer of the Company, 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 the
Company on or after the date director options may no longer be granted under the
terms of either the Company's 1990 Stock Incentive Plan or the 1995 Incentive
Plan will be granted, as of the date of his initial election, a Nonqualified
Option under the 1997 Incentive Plan to purchase 1,000 shares of Common Stock.
Annually, beginning on the fourth Thursday of October of 1997 and each year
thereafter until the expiration of the 1997 Incentive Plan, each person who is a
non-employee director on such date will receive a grant of a Nonqualified Option
to purchase 4,000 shares of Common Stock, subject to reduction by the number of
shares subject to annual grants made to each nonemployee director on such date
under the Company's 1990 Stock Incentive Plan and 1995 Incentive Plan. 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 1997 Incentive Plan is in
effect, there are not sufficient shares of Common Stock available under the 1997
Incentive Plan to allow for the grant to each non-employee director of an Option
for the number of shares provided for in the 1997 Incentive Plan, then 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 1997 Incentive
Plan.
12
<PAGE> 15
CHANGE IN CONTROL
Upon the occurrence of a Change of Control (defined generally as certain
acquisitions by a person, entity or group of 25% or more of Common Stock or 25%
of the combined voting power of the then outstanding voting securities of the
Company or certain reorganizations, mergers, consolidations or liquidations),
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 1997 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 Common Stock are changed into or
exchanged for a different number or kind of shares of the Company or other
securities of the Company 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 Common Stock subject to
the 1997 Incentive Plan (including shares of Common Stock as to which all
outstanding Options, or portions thereof then unexercised, are exercisable) so
that after such event the shares of Common Stock subject to the 1997 Incentive
Plan and the proportionate interest of each Option or Award will be maintained
as before the occurrence of such event. If the Common Stock Amendment is
approved, the shares of Common Stock subject to the 1997 Incentive Plan will be
adjusted to provide for an issuance of up to 3,000,000 shares in aggregate, or
two shares for each share authorized for issuance prior to the Stock Split. Any
such adjustment made by the Executive Compensation Committee will be final and
binding upon the Company 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 of the Code. Additional
provisions apply to adjustments related to Options received by non-employee
directors.
FEDERAL INCOME TAX CONSEQUENCES OF THE 1997 INCENTIVE PLAN
In General
The 1997 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.
Status of Options
Options granted under the 1997 Incentive Plan may be either Incentive Stock
Options or Nonqualified Options. Under certain circumstances, an Incentive Stock
Option may be treated as a Nonqualified Option. The tax consequences both to the
Optionee and to the Company differ depending on whether an Option is an
Incentive Stock Option or a Nonqualified Option.
Nonqualified Options
No federal income tax is imposed on the Optionee upon the grant of a
Nonqualified Option. Upon the exercise of a Nonqualified Option, the Optionee
will be treated as receiving compensation, taxable as ordinary income in the
year of exercise. The amount recognized as ordinary income upon exercise is the
excess of the fair market value of the shares of Common Stock at the time of
exercise over the exercise price paid for such Common Stock. At the time Common
Stock received upon exercise of a Nonqualified Option is disposed of, any
difference between the fair market value of the shares of Common Stock at the
time of exercise and the amount realized on the disposition would be treated as
capital gain or loss. The gain, if any, realized upon such a disposition will be
treated as long-term, mid-term or short-term capital gain, depending on the
holding period of the shares of Common Stock. Any loss realized upon such a
disposition will be treated as a long-term or short-term capital loss, depending
on the holding period of the shares of Common Stock.
13
<PAGE> 16
Upon an Optionee's exercise of a Nonqualified Option, the Company may claim
a business expense deduction for the compensation paid at the same time and in
the same amount as compensation is treated as being received by the Optionee, if
and to the extent that the amount is an ordinary expense and satisfies the test
of reasonable compensation. The Company is required to withhold income tax with
respect to such compensation. The Company is not entitled to any tax deduction
in connection with a subsequent disposition by the Optionee of the shares of
Common Stock.
Incentive Stock Options
No federal income tax is imposed on the Optionee upon the grant of an
Incentive Stock Option. The Optionee would recognize no taxable income upon
exercise of an Incentive Stock Option if the Optionee (a) does not dispose of
the shares of Common Stock acquired pursuant to the exercise of an Incentive
Stock Option within two years from the date the Option was granted or within one
year after the shares of Common Stock were transferred to the Optionee (the
"Holding Period") and (b) is an employee of either (i) the company granting the
Option, (ii) the parent company or a subsidiary of such corporation or (iii) a
corporation which has assumed such Option of another corporation as a result of
a corporate reorganization, merger or similar transaction. Such employment must
continue for the entire time from the date the Option was granted until three
months before the date of exercise, or 12 months before the date of exercise if
employment ceases due to permanent and total disability. If Common Stock
received upon exercise of an Incentive Stock Option is disposed of after
completion of the Holding Period, any difference between the exercise price paid
for such Common Stock and the amount realized on the disposition would be
treated as a capital gain or loss. The gain, if any, realized upon such a
disposition will be treated as long-term or mid-term capital gain, depending on
the holding period. Any loss realized upon such a disposition will be treated as
a long-term capital loss.
The Company would not be entitled to any business expense deduction in
connection with the grant or exercise of the Option or the disposition of the
shares of Common Stock so acquired.
If, however, an Optionee disposes of shares of Common Stock acquired
pursuant to exercise of an Incentive Stock Option before the Holding Period has
expired (a "Disqualifying Disposition"), the Optionee would be treated as having
received, at the time of disposition, compensation taxable as ordinary income.
In such event the Company may claim a deduction for compensation paid at the
same time and in the same amount as compensation is treated as being received by
the Optionee. The amount treated as compensation is the lesser of (i) the excess
of the fair market value of the Common Stock at the time of exercise over the
exercise price or (ii) the excess of the amount realized on disposition over the
exercise price. The balance of the gain, if any, realized upon such a
disposition will generally be treated as short-term capital gain. If the amount
realized at the time of the disposition is less than the exercise price, the
Optionee will not be required to treat any amount as ordinary income, provided
that the disposition is of a type that would give rise to a recognizable loss.
In such event, the loss will be treated as a long-term or short-term capital
loss depending upon the holding period. A disposition generally includes a sale,
exchange or gift, but does not include certain other transfers, such as by
reason of death or a pledge or exchange of shares described in Section 424(c) of
the Code.
Alternative Minimum Tax
Although the exercise of an Incentive Stock Option does not result in
current taxable income, there are implications with regard to the Alternative
Minimum Tax ("AMT"). The excess of the fair market value of shares of Common
Stock acquired upon exercise of an Incentive Stock Option over the exercise
price paid for such shares of Common Stock is an adjustment to AMT income for
the Optionee's taxable year in which such exercise occurs (unless the shares of
Common Stock are disposed of in the same taxable year).
Payment of Option Price in Shares
In the case of a Nonqualified Option, if the Option price is paid by the
delivery of shares of Common Stock previously acquired by the Optionee having a
fair market value equal to the Option price ("Previously
14
<PAGE> 17
Acquired Shares"), no gain or loss would be recognized on the exchange of the
Previously Acquired Shares for a like number of shares of Common Stock. The
Optionee's basis and holding period in the number of shares of Common Stock
received (to the extent equal to the number of Previously Acquired Shares used)
would be the same as his or her basis and holding period in the Previously
Acquired Shares used. The Optionee would treat the fair market value of the
number of shares of Common Stock received in excess of the number of Previously
Acquired Shares used as ordinary compensation income. The Optionee's basis in
such excess shares of Common Stock would be equal to their fair market value at
the time of exercise. The Optionee's holding period in such excess shares of
Common Stock begins on the date the Optionee acquires those shares of Common
Stock.
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 depends 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 expiration of the applicable 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 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 and holding period in
the number of shares of Common Stock received (to the extent equal to the number
of Previously Acquired Shares used) would be the same as his or her basis and
holding period in the Previously Acquired Shares used, increased by any income
recognized to the Optionee upon the Disqualifying Disposition of the Previously
Acquired Shares, (ii) the Optionee's basis in the number of shares of Common
Stock received in excess of the number of Previously Acquired Shares used would
be zero, (iii) the Optionee's holding period in such excess shares of Common
Stock begins on the date the Optionee acquires those shares of Common Stock and
(iv) the other incentive stock option rules would apply. Upon a subsequent
Disqualifying Disposition of the shares of Common Stock so received, the shares
with the lowest basis would be treated as disposed of first.
Performance Stock and Performance Units
In general, a Company employee who receives either a Performance Stock
Award or a Performance Unit Award will not be taxed on receipt of the Award, but
instead the fair market value of the Common Stock will be taxable as ordinary
compensation income (i) with respect to a Performance Stock Award, on the date
that the shares of Common Stock cease to be subject to forfeiture and (ii) with
respect to a Performance Unit Award, on the date that the shares of Common Stock
are received in payment of the Award. The Company will be entitled to a business
expense 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 Common Stock, the employee
receives proceeds more or less than his or her basis in the shares of Common
Stock, any gain will be long-term, mid-term or short-term capital gain, whereas
any loss will be long-term or short-term capital loss, depending on the holding
period of the shares of Common Stock, measured from the date that the receipt of
the shares of Common Stock was a taxable event to such employee.
Bonus Stock
In general, a person will treat the fair market value of Bonus Stock Awards
on the date such amount is received as compensation, taxable as ordinary income.
The Company will be entitled to a business expense 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 compensation income, subject to tax at
ordinary income tax rates when paid. The Company will be entitled to a business
expense deduction for the corresponding amount if and to the extent that the
amount is an ordinary expense and satisfies the test of reasonable compensation.
15
<PAGE> 18
Withholding for Taxes
No issuance of Common Stock under the 1997 Incentive Plan shall be made
until arrangements satisfactory to the Company have been made for the
withholding of taxes. As to Awards that are payable in shares of Common Stock,
to the extent provided in the Award agreement, an Optionee or Employee Grantee
may direct the Company to withhold a number of shares of Common Stock from such
Award having an aggregate fair market value equal to the amount of any tax
required to be withheld with respect to such Award. Such withholding of shares
of Common Stock shall otherwise be allowed only at the discretion of the
Executive Compensation Committee.
Additional Tax Consequences
Code Section 4999 golden parachute provisions may apply to a participant
who receives any payment in the nature of compensation contingent on the change
of ownership or effective control of the Company. In the event that the
acceleration of vesting or any payment, distribution or issuance of stock is
subject to a golden parachute excise tax pursuant to Section 4999(a) of the
Code, the participant whose benefit is subject to such tax (generally, officers
or highly compensated employees) is entitled to receive a gross-up payment from
the Company so that the amount of the "net" benefit received by such participant
shall equal the amount of the benefit that would have been received in the
absence of a golden parachute tax. Section 280G of the Code disallows a
deduction to the Company for amounts subject to the excise tax under Code
Section 4999.
Section 162(m) of the Code places a $1 million cap on the deductible
compensation that may be paid to certain executives of publicly traded
corporations. Amounts that qualify as "performance based" compensation under
Section 162(m)(4)(C) of the Code are exempt from the cap and do not count toward
the $1 million limit. Generally, options granted with an exercise price at least
equal to the fair market value of the stock on the date of grant will qualify as
performance based. Other awards may or may not so qualify, depending on their
terms.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION COMMITTEE REPORT
The Executive Compensation Committee of the Board of Directors consists of
five directors who are not employees of the Company. The Committee reviews the
Company's executive compensation program and policies each year and determines
the compensation of the executive officers.
The Committee's overall policy regarding compensation of the Company's
executive officers is to provide competitive salary levels and compensation
incentives that (i) attract and retain individuals of outstanding ability in
these key positions, (ii) recognize individual performance and the performance
of the Company relative to the performance of other companies of comparable
size, complexity and quality, and (iii) support both the short-term and
long-term goals of the Company. The Executive Compensation Committee believes
this approach closely links the compensation of the Company's executives to the
accomplishment of Company goals that coincide with shareholder objectives.
In addition, the Executive Compensation Committee considers the anticipated
tax treatment of the Company's executive compensation program. Section 162(m) of
the Code generally limits the corporate tax deduction for compensation paid to
executive officers named in the Summary Compensation Table to $1 million, unless
certain conditions are met. The Company's policy is to qualify all executive
compensation for deduction under applicable tax laws to the maximum extent
possible.
The executive compensation program includes four elements that, taken
together, constitute a flexible and balanced method of establishing total
compensation for the Company's executive officers. These elements are (i) base
salary, (ii) annual bonus plan awards, (iii) long-term incentive awards, and
(iv) stock option grants. These elements are further discussed below.
16
<PAGE> 19
Providing Competitive Levels of Compensation. The Executive Compensation
Committee attempts to provide the Company's executives with a total compensation
package that is targeted at the 75th percentile of the market for executives
holding comparable positions when the Company's performance justifies the
payment of compensation at such levels. The Committee determines a competitive
level of compensation for each executive based on information drawn from a
variety of sources, including proxy statements of other companies and surveys
conducted by compensation consultants. An independent consultant periodically
reviews and provides survey data to the chief executive officer and the
Executive Compensation Committee to compare the Company's executive compensation
with compensation levels at companies in an industry peer group.
While the targeted value of an executive's compensation package may be
competitive, its actual value may exceed or fall below competitive levels
depending on performance, as discussed below.
Base Salaries. The Committee periodically reviews and establishes executive
base salaries. Generally, base salaries are determined according to the
following factors: the individual's experience level, scope and complexity of
the position held and annual performance of the individual. In addition, the
Committee obtained an independent survey in the fall of 1996 for the purpose of
determining 1997 base salaries. The survey data compares the Company's
executives with those from both general industry and an industry peer group.
Based on the survey and 1996 performance, all executives received increases,
including Mr. Stewart.
The Annual Bonus Plan. The purpose of the Annual Bonus Plan is to provide
motivation toward and reward the accomplishment of corporate annual objectives
and to provide a competitive compensation package that will attract, reward and
retain individuals of the highest quality. As a pay-for-performance plan, cash
bonus awards are paid based upon the achievement of corporate performance
objectives established for the fiscal year.
Targeted bonus award levels for the Company's executive officers are
established by the Committee each year. The Company's annual performance
measures are established jointly by the Committee and management. For 1997,
bonus targets for the Company's Chief Executive Officer and its other executive
officers were based on earnings per share objectives and value added profits
("VAP") objectives. These objectives are established at three levels: entry
level, expected value (target level) and overachievement level. The bonus for
the Company's Vice President and President, U.S. Division was based in part on
VAP objectives relating to his area of responsibility. The Committee chooses not
to disclose the specific earnings per share and VAP objectives because it
believes such disclosure would be detrimental to the Company's position with
respect to the industry. Since the Company's 1997 earnings per share and VAP
exceeded the overachievement level, each of the named executive officers,
including Mr. Stewart, received the maximum eligible bonus.
Long-Term Incentive Program. The long-term incentive program was introduced
in fiscal 1993 to focus management attention on Company performance over a
period of time longer than one year in recognition of the long-term horizons for
return on investments and strategic decisions in the energy services industry.
The program is designed to motivate management to assist the Company in
achieving a high level of long-term performance and serves to link this portion
of executive compensation to long-term stockholder value. Pursuant to the
long-term incentive program, the Executive Compensation Committee may award
performance awards to executive officers on an annual basis. The numbers of
shares represented by such awards are designed to place the Chief Executive
Officer and other executive officers at the 75th percentile of the market for
total compensation when expected performance is met. Aggregate stock or option
holdings of the executive have no bearing on the size of a performance award.
The awards generally vest over a three-year period of time, based on Company
performance over such time period measured against pre-established objectives.
Awards made in November 1997 under the long-term incentive program
consisted of performance units granted under the 1995 Incentive Plan. These
awards will vest at the end of three years according to the Company's three-year
stock price performance. Notwithstanding the foregoing, the Executive
Compensation Committee is permitted by the terms of the 1995 Incentive Plan to
amend the performance objectives or the vesting period for any performance award
with the consent of the employee grantee. In addition, the performance awards
will vest in full upon the occurrence of a "change of control." Mr. Stewart was
awarded performance units in November 1997 based on the criteria described
above.
17
<PAGE> 20
Stock Option Grants. Pursuant to the 1990 Stock Incentive Plan and the 1995
Incentive Plan, the Committee may make grants of stock options to the Company's
executive officers. These plans allow the Committee to promote the interests of
the Company and its stockholders by encouraging the executive officers to
increase their equity interest in the Company, thereby giving them added
incentive to work toward the continued growth and success of the Company. Stock
option grants to each executive officer for 1997 were made under the 1995
Incentive Plan and were primarily based on the executive's degree of
responsibility for and contribution to the growth and success of the Company, as
well as on survey data provided by an independent consultant to the Committee
regarding stock option grants at companies of similar size and in an industry
peer group. Aggregate stock or option holdings of the executive officers have
not been considered in determining the size of the option grants. For fiscal
1997, Mr. Stewart was granted options to purchase shares of Common Stock, based
on the criteria described above.
Key Employee Share Option Plan. In 1997, the Committee approved the BJ
Services Company Key Employee Share Option Plan, called the "Keysop Plan," which
allows participants to elect to receive, in lieu of salary and bonus, options to
purchase certain designated mutual funds. An executive will not be taxed on the
value of the mutual funds until the Keysop option is exercised, and the Company
does not deduct such amount as compensation until the option is exercised.
This report of the Executive Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, except to the
extent that the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such acts.
Don D. Jordan, Chairman
L. William Heiligbrodt
John R. Huff
James E. McCormick
Michael E. Patrick
November 25, 1997
18
<PAGE> 21
PERFORMANCE GRAPH -- TOTAL STOCKHOLDER RETURN
SEPTEMBER 1992 THROUGH SEPTEMBER 1997
The Securities and Exchange Commission (the "SEC") requires that the
Company include in its proxy statement a line graph presentation comparing
cumulative, five-year total shareholder return with a general market index (S&P
500) and either an industry index or custom group of peers as selected by the
Company. In the past, the Company has compared its performance against a group
of companies (the "Former Peer Group") that for 1996 included: Baker-Hughes
Incorporated; Camco International, Inc.; Dresser Industries, Inc.; Halliburton
Company; Schlumberger N.V.; Smith International, Inc. and Western Atlas Inc. The
Company has added Weatherford International Incorporated ("Weatherford") to its
peer group because it believes that the larger peer group is more representative
of the industry in which it operates (the Former Peer Group, with the addition
of Weatherford, being hereinafter referred to as the "Current Peer Group").
As required by the SEC, both the Former Peer Group and the Current Peer
Group data are presented in the following charts. The graph assumes investments
of $100 on September 30, 1992, and reinvestment of all dividends.
This performance graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such acts.
INDEXED TOTAL STOCKHOLDER RETURN
SEPTEMBER 1992 -- SEPTEMBER 1997
<TABLE>
<CAPTION>
MEASUREMENT PERIOD BJ SERVICES CURRENT PEER FORMER PEER
(FISCAL YEAR COVERED) COMPANY S&P 500 GROUP GROUP
<S> <C> <C> <C> <C>
9/92 100.00 100.00 100.00 100.00
9/93 125.90 112.94 104.74 103.83
9/94 112.95 117.14 90.76 89.74
9/95 145.32 151.86 110.42 109.55
9/96 208.63 182.63 147.69 147.68
9/97 477.34 256.41 273.64 273.55
</TABLE>
19
<PAGE> 22
The following information relates to compensation paid by the Company for
fiscal 1995, 1996 and 1997 to the Company's Chief Executive Officer and each of
the other four (4) most highly compensated executive officers in 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------ ----------------------- ----------
(A) (B) (C) (D) (E) (G) (H)
OTHER (F) SECURITIES (I)
ANNUAL RESTRICTED UNDERLYING ALL OTHER
COMPENSA- STOCK OPTIONS/ LTIP COMPENSA-
NAME AND SALARY BONUS(1) TION(2) AWARDS(3) SARS(4) PAYOUTS(5) TION(6)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
------------------ ---- ------- -------- --------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. W. Stewart.................... 1997 568,340 778,960 32,224 0 39,480
President and Chief 1996 504,168 708,750 42,787 0 34,563
Executive Officer 1995 400,008 560,000 165,865 1,803,511 27,500
Michael McShane.................. 1997 255,838 273,004 10,890 0 15,225
Vice President -- Finance 1996 231,674 246,750 14,364 0 13,800
and Chief Financial Officer 1995 213,338 229,000 61,749 986,070 11,684
Kenneth A. Williams.............. 1997 210,000 159,750 7,434 0 12,801
Vice President and 1996 191,834 146,250 9,932 0 8,813
President, U.S. Division 1995 174,670 50,000 42,239 606,489 --
Thomas H. Koops.................. 1997 204,840 140,405 7,260 0 13,992
Vice President -- Technology 1996 186,334 127,575 9,627 0 12,025
and Logistics 1995 171,504 152,850 41,934 589,466 11,099
Margaret B. Shannon.............. 1997 202,174 138,380 7,156 0 13,049
Vice President -- General 1996 185,270 126,900 9,576 0 11,944
Counsel 1995 169,668 151,950 40,962 547,786 10,781
</TABLE>
- ---------------
(1) Includes bonuses earned in the reported fiscal year and paid in the
following fiscal year.
(2) Perquisites and other personal benefits paid or distributed during 1997 to
the persons listed in the compensation table above did not exceed, with
respect to any individual, the lesser of $50,000 or 10 percent of such
individual's total salary and bonus.
(3) See table entitled "Long-Term Incentive Plans -- Awards in Last Fiscal Year"
for information regarding performance units granted for fiscal years 1996
and 1997.
(4) Includes options earned in the reported fiscal year and granted subsequent
to the end of the fiscal year.
(5) Reflects payments with respect to performance awards granted under the 1990
Stock Incentive Plan. Also includes cash awards to offset the federal income
tax payable by the recipients of such payments with respect to performance
awards.
(6) The amount shown in this column is the annual Company contribution to the
Company's 401(k) defined contribution plan on behalf of each executive
officer.
20
<PAGE> 23
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
- ------------------------------------------------------------------------------------------------- ---------------------
(A) (B) (C) (D) (E) (F) (G)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/
UNDERLYING SARS EXERCISE
OPTIONS/ GRANTED TO OR BASE
SARS EMPLOYEES PRICE EXPIRATION
NAME GRANTED(#)(1) IN FISCAL YEAR(2) ($/SH) DATE 5%($) 10%($)
---- -------------- ----------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
J.W. Stewart......................... 32,224 15.0% 71.63 11/24/07 1,451,516 3,678,428
Michael McShane...................... 10,890 5.1% 71.63 11/24/07 490,535 1,243,113
Kenneth A. Williams.................. 7,434 3.5% 71.63 11/24/07 334,861 848,605
Thomas H. Koops...................... 7,260 3.4% 71.63 11/24/07 327,024 828,742
Margaret B. Shannon.................. 7,156 3.3% 71.63 11/24/07 322,339 816,870
</TABLE>
- ---------------
(1) All options reflected in this table were earned in fiscal 1997. No stock
appreciation rights ("SARs") were granted in tandem with the options
reflected in this table. The options reflected in this table do not include
options earned in fiscal 1996 and granted on December 12, 1996. For 1996
grants, the target stock price was reached, and accordingly all options
awarded in 1996 have vested.
(2) Reflects options granted on November 24, 1997. Such options will become
exercisable ratably over a three-year period, with one-third of each grant
vesting on each of the first, second and third anniversaries of the date of
grant.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
SHARES AT FY-END(#) AT FY-END($)
ACQUIRED VALUE ------------------------------ ------------------------------
NAME ON EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE(1) EXERCISABLE UNEXERCISABLE(1)
---- ----------- ----------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
J.W. Stewart................. 89,064 3,825,884 317,000 74,423 16,516,245 2,254,641
Michael McShane.............. 69,789 2,348,103 79,642 25,731 4,058,701 794,184
Kenneth A. Williams.......... 9,523 511,092 52,729 17,645 2,681,970 546,094
Thomas H. Koops.............. 19,247 722,800 83,077 17,268 4,364,521 535,546
Margaret B. Shannon.......... 18,511 824,168 33,155 17,027 1,576,859 527,918
</TABLE>
- ---------------
(1) Includes options earned in fiscal 1997 and granted on November 24, 1997.
21
<PAGE> 24
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE-BASED PLANS
-------------------------------------
(A) (B) (C) (D) (E) (F)
NUMBER OF PERFORMANCE
SHARES, UNITS OR OTHER
OR OTHER PERIOD UNTIL
RIGHTS MATURATION
NAME (#)(1)(2) OR PAYOUT(3) THRESHOLD(#) TARGET(#) MAXIMUM(#)
---- ------------- ------------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
J.W. Stewart........................ 4,028 3 Years 644 2,658 4,028
Michael McShane..................... 1,815 3 Years 290 1,198 1,815
Kenneth A. Williams................. 1,487 3 Years 238 981 1,487
Thomas H. Koops..................... 1,452 3 Years 232 958 1,452
Margaret B. Shannon................. 1,424 3 Years 228 940 1,424
</TABLE>
- ---------------
(1) Awards reflected in this table represent performance units awarded under the
Company's 1995 Incentive Plan. These awards were earned during fiscal 1997
and granted on November 24, 1997. For additional information regarding these
awards, see "Executive Compensation -- Executive Compensation Committee
Report -- Long-Term Incentive Program."
(2) Excludes the following awards earned during fiscal 1996 and granted on
December 12, 1996: Mr. Stewart -- 5,570 units; Mr. McShane -- 2,493 units;
Mr. Williams -- 2,069 units; Mr. Koops -- 2,005 units; Ms. Shannon -- 1,995
units.
(3) Under the terms of the grant, the performance period is deemed to begin on
October 1, 1997. The performance period is three fiscal years unless a
change of control occurs, in which case the performance units would vest
immediately.
SEVERANCE AGREEMENTS
The Company has severance agreements with certain executive officers,
including each of the named executive officers shown in the Summary Compensation
Table, as well as with Matthew D. Fitzgerald, Taylor M. Whichard III, David
Dunlap and Stephen A. Wright. The severance agreements were effective August 27,
1993, except for Ms. Shannon's agreement, which was effective February 14, 1994
and Mr. Dunlap's agreement which was effective November 27, 1995. The agreements
have initial terms of approximately three years and are automatically extended
for an additional year at the end of each year of the agreements unless the
Company has given one year's prior notice of termination. These agreements are
intended to provide for continuity of management in the event of a change in
control of the Company. The agreements provide that covered executive officers
could be entitled to certain severance benefits following a change in control of
the Company. If, following a change in control, the executive is terminated by
the Company for any reason, other than for death, disability or for cause, or if
such executive officer terminates his or her employment for good reason (as this
term is defined in the agreements), then the executive officer is entitled to a
severance payment that will be three times the sum of the executive officer's
base salary and bonus amount, as defined in the agreements. The severance
payment is generally made in the form of a lump sum. For a period of up to one
year, the Company would also provide life, disability, accident and health
insurance coverage substantially similar to the benefits provided before
termination.
If a change in control occurs, the severance agreements are effective for a
period of two years from the date of such change in control. Under the severance
agreements, a change in control would generally include any of the following
events: (i) any "person" as defined in the Securities Exchange Act of 1934, as
amended, acquires 25 percent or more of the Company's voting securities; (ii) a
majority of the Company's directors are replaced during a two-year period; (iii)
stockholders approve a merger, resulting in (a) 60% or less of the common stock
and voting securities of the surviving corporation being owned by the same
persons that owned the Common Stock of the Company immediately prior to such
merger, (b) a person owning 25% or more of the surviving corporation's common
stock or voting securities, or (c) replacement of a majority of the members of
the Board of Directors; or (iv) the Company's stockholders approve a liquidation
or sale of the
22
<PAGE> 25
Company's assets. In the event that any payments made in connection with a
change in control would be subject to the excise tax imposed by Section 4999 of
the Code, the Company would pay an additional payment (a "gross-up" payment)
sufficient to satisfy such excise tax obligations and any additional taxes
imposed with respect to such gross-up payment.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of reports on Forms 3 and 4 and amendments
thereto furnished to the Company during its most recent fiscal year and reports
on Form 5 and amendments thereto furnished to the Company with respect to its
most recent fiscal year, and written representations from reporting persons that
no Form 5 was required, the Company believes that all filing requirements
applicable to its officers, directors and beneficial owners under Section 16(a)
of the Exchange Act were complied with during fiscal 1997, except that a late
report was filed on Form 5 for Mr. Stewart, Mr. McShane, Mr. Williams, Mr.
Koops, Ms. Shannon, Mr. Dunlap, Mr. Fitzgerald, Mr. Whichard and Mr. Wright,
each an officer of the Company, with respect to the grant of stock options in
December 1996, and the purchase of 1,000 shares by Mr. LeBlanc in December 1996
was inadvertently reported late in February 1997.
SOLICITATION
The Company will bear the cost of the solicitation of proxies. In addition
to solicitation by mail, certain of the directors, officers or regular employees
of the Company may, without extra compensation, solicit the return of proxies by
telephone or telegram. Arrangements will be made with brokerage houses,
custodians and other fiduciaries to send proxy material to their principals, and
they will be reimbursed by the Company for any out-of-pocket expenses.
VOTING PROCEDURES
A majority of the outstanding shares of Common Stock present or represented
by proxy at the meeting constitutes a quorum for the transaction of business.
The inspector of elections appointed by the Company will count all votes cast,
in person or by submission of a properly executed proxy, before the closing of
the polls at the meeting. The affirmative vote of holders of a majority of the
Common Stock present or represented by proxy at the meeting and entitled to vote
is required for the election of each director nominee. Therefore, abstentions
have the effect of a negative vote. In accordance with Delaware law, broker
non-votes will not be treated as entitled to vote with respect to the election
of directors.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, independent public accountants, audited the
Company's consolidated financial statements for fiscal 1997, and have advised
the Company that they will have a representative available at the 1998 Annual
Meeting to respond to appropriate questions. Such representative will be
permitted to make a statement if he desires to do so. The Company has not yet
selected independent public accountants to audit its 1998 consolidated financial
statements; however, the Company intends to engage its accountants for such
purpose in May 1998.
23
<PAGE> 26
PROPOSALS OF STOCKHOLDERS
Pursuant to the Company's Bylaws, proposals of stockholders intended to be
presented at the 1999 Annual Meeting of Stockholders must be received by the
Secretary of the Company by August 24, 1998 to be considered for inclusion in
the proxy statement and form of proxy relating to the 1999 Annual Meeting.
The Annual Report of the Company for the year ended September 30, 1997,
including audited financial statements, is enclosed with this proxy statement
but does not constitute a part of the proxy soliciting material. Additional
copies of the Annual Report are available without charge, upon request.
BJ SERVICES COMPANY WILL FURNISH A COPY OF ITS ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED SEPTEMBER 30, 1997, WITHOUT EXHIBITS, WITHOUT CHARGE TO EACH
PERSON WHO FORWARDS A WRITTEN REQUEST TO ROBERT C. COONS, CORPORATE
COMMUNICATIONS MANAGER, BJ SERVICES COMPANY, 5500 NORTHWEST CENTRAL DRIVE,
HOUSTON, TEXAS 77092-2036.
24
<PAGE> 27
APPENDIX A
PROPOSED TEXT OF ARTICLE FOURTH OF
THE BJ SERVICES COMPANY CHARTER
The text of the proposed amended Article FOURTH of the BJ Services Company
Charter is as follows:
"FOURTH: The total number of shares of stock which the Corporation
shall have the authority to issue is 165,000,000 shares of capital stock,
consisting of 5,000,000 shares of preferred stock, par value $1.00 per
share (the "Preferred Stock"), and 160,000,000 shares of common stock, par
value $0.10 per share (the "Common Stock").
The designations, powers and 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."
A-1
<PAGE> 28
APPENDIX B
BJ SERVICES COMPANY
1997 INCENTIVE PLAN
ARTICLE I
INTRODUCTION
1. Purpose. The BJ SERVICES COMPANY 1997 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.
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 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.
No person shall be eligible to serve on the Committee unless he is a
"Non-Employee Director" as defined in 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").
Notwithstanding any provision in the Plan to the contrary, other than options
granted to Non-Employee Directors pursuant to Article IV, no options,
Performance Stock, Performance Units, Bonus Stock, Cash Awards, or Other Stock-
Based Awards (collectively, "Awards") may be granted under the Plan to any
member of the Committee during the term of his membership on the Committee.
Subject to the following, the Committee, in its sole discretion, may delegate
any or all of its powers and duties under the Plan, including the power to grant
Awards under the Plan, to the President of the Company, subject to such
limitations on such delegated powers and duties as the Committee may impose.
Upon any such delegation all references in the Plan to the
<PAGE> 29
"Committee" shall be deemed to include the President; provided, however, that
such delegation shall not limit the President's right to receive Awards under
the Plan. Notwithstanding the foregoing, the President may not grant Awards to,
or take any action with respect to any Award previously granted to, a person who
is an officer or a director of the Company or otherwise subject to Section 16(b)
of the Act.
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
price per share provided in the Plan, (d) modifying the provisions of Article
IV, (e) changing the class of persons to whom Awards may be made under the Plan,
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.
5. Granting of Discretionary Awards. The Committee shall have the authority
to grant, prior to the expiration date of the Plan, to such 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; provided, however, only employees of the
Company, its Parent Corporation or a Subsidiary Corporation (as such terms are
defined in Section 424 of the Code) may be granted options pursuant to Article
III. 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
individual, the Committee may consider such factors which it may consider
relevant.
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 canceled. 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 the tenth anniversary
of the date the Plan is adopted by the Board.
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 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
2
<PAGE> 30
(c) 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 1, 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 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, or (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 (c) of this Paragraph 10 are satisfied; (b) the
approval by the Company's stockholders of the sale or disposition of all or
substantially all of the Company's assets or the dissolution or liquidation of
the Company; or (c) 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 (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.
3
<PAGE> 31
ARTICLE II
NONQUALIFIED STOCK OPTIONS
1. Eligible Individuals. 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 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 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. 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. No
nonqualified option shall be exercisable later than the date which is ten
years after the date of grant. To the extent not prohibited by other
provisions of the Plan, each nonqualified option granted under Article II
shall be exercisable no later than the date which is ten years after the
date of grant (the "Nonqualified Option Expiration Date") and at such time
or times as the Committee, in its discretion, may establish in the option
agreement.
(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. Unless otherwise provided
in the Option Agreement, upon an Employee Optionee's termination of
employment 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
his employment is terminated because he is discharged for (A) fraud,
theft or embezzlement committed against the Company or a subsidiary,
affiliated entity or customer of the Company, (B) Employee's willful
misconduct in performance of the duties of Employee's employment or (C)
Employee's final conviction of a felony (collectively, Cause); or
(ii) 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
(iii) 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
(iv) 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
4
<PAGE> 32
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 (but in no event longer than one year after the
Employee Optionee's employment is terminated); or
(v) 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 (ii), (iii), (iv) or (vi) provides a longer period for the
exercise of such options (but in no event later than the Nonqualified
Option Expiration Date); or
(vi) 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 XI. 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 if such shares were acquired
pursuant to the prior exercise of a Company granted option, such shares
must have been owned for at least six months, and provided further, 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 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. Except as provided in Article IX, 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.
5
<PAGE> 33
(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 whole or in part unless
such listing, registration, qualification, consent or approval 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. 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.
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.
(d) The Committee, in its discretion, may permit any Employee Optionee
to surrender unexercised any nonqualified option for the receipt of another
Award or other arrangement in order to defer the "spread" on exercise of
such option.
6
<PAGE> 34
ARTICLE III
INCENTIVE STOCK OPTIONS
1. Eligible Employees. 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.
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 (the "Market Value Per Share") 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. No
incentive stock option granted under Article III shall be exercisable 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.
(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. Unless otherwise provided
in the Option Agreement, upon an Employee Optionee's termination of
employment 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:
(i) At the time the Employee Optionee's employment is terminated if
his employment is terminated due to Cause; or
(ii) 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
7
<PAGE> 35
(iii) 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
(iv) 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 (but in
no event longer than one year after the Employee Optionee's employment
is terminated); or
(v) 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 (ii), (iii), (iv) or (vi) provides a longer period for the
exercise of such options (but in no event later than the ISO Expiration
Date); or
(vi) 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 termination of employment 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, whichever is
applicable, 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 ceases to
be employed by the Company, its Parent Corporation or any Subsidiary
Corporation, but continues to be employed by an affiliate, then, to the
extent an incentive stock option granted under Article III is not exercised
within three months after the date of such cessation of employment with the
Company, its Parent Corporation or any Subsidiary Corporation, 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 if such shares were acquired
pursuant to the prior exercise of a Company granted option, such shares
must have been owned for at least six months, and provided further, 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
8
<PAGE> 36
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 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 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 listings
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. 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, upon the occurrence
9
<PAGE> 37
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.
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 1995
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 either the Company's 1990 Stock Incentive Plan or
the 1995 Incentive Plan, 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 4,000 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) is
hereby granted, effective the fourth Thursday of October of 1997 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); provided, however, the number of shares of Common Stock
subject to such annual grant shall be reduced by the number of shares subject to
annual grants made to each Non-Employee Director on such date under the
Company's 1990 Stock Incentive Plan and 1995 Incentive Plan.
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 fair market value per share of Common Stock at
the time of grant 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. The exercise price for each option granted under Article IV shall
be subject to adjustment as provided in Article IV, Paragraph 5(e).
10
<PAGE> 38
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 times in
whole or in part, at any time after 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 his directorship is terminated as a result of his removal
from the Board for (A) fraud, theft or embezzlement committed against
the Company or a Subsidiary, affiliated entity or customer of the
Company, (B) Non-Employee Director's willful misconduct in performance
of his duties as Non-Employee Director or (C) Non-Employee Director's
final conviction of a felony; or
(ii) 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). 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
(iii) At the expiration of a period of three years after the
Non-Employee Director's directorship is terminated if such person's
directorship is terminated 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
(iv) 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 for any reason other than the reasons
specified in Article IV, Paragraphs 5(b)(i), 5(b)(ii) or 5(b)(iii).
(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 XI. The payment of the exercise price for each option granted under
Article 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 if such shares were acquired
pursuant to the prior exercise of a Company granted option, such shares
must have been owned for at least six months, and provided further, 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
11
<PAGE> 39
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. Except as provided in Article IX, 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 NonEmployee 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 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 IV, or portions
thereof then unexercised, shall be exercisable and with any necessary
corresponding adjustment in exercise price per shares to the end that after
such event the shares subject to Article IV 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 listings
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.
12
<PAGE> 40
(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 Individuals. 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) 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 individual (an
"Employee Grantee") shall be, with respect to Performance Stock, a share of
Common Stock and, with respect to a Performance Unit, 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), if any, 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
13
<PAGE> 41
(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
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, the Committee may, at any time or times, without the consent
of the Employee-Grantee, amend the performance objectives and/or the Performance
Period for earning such Award.
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.
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 1997 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
14
<PAGE> 42
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.
(c) Notwithstanding any provision of the Plan or the terms of any
nonqualified Award granted under Article V, 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 VI
BONUS STOCK
The Committee may, from time to time and subject to the provisions of the
Plan, grant shares of Bonus Stock to 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 Individuals. Employees and 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.
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 grants 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
15
<PAGE> 43
("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:
(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 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, the
Committee may, at any time or times, without the consent of the
Employee-Grantee, amend the performance objectives and/or the Performance Period
for earning such Award.
5. Acceleration upon a Change of Control. Notwithstanding any provision in
Article VII or in any document or instrument evidencing Performance Cash Awards
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.
16
<PAGE> 44
6. Other Provisions.
(a) No grant of a Performance Cash Award under Article VII 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 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
ADJUSTMENT OF AWARDS
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 to all outstanding Awards or portions
thereof then unexercised, and with any necessary corresponding adjustment in
exercise price per share, to the end that after such event the Awards and each
Employee'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 Employees, the Company, and all other interested persons.
ARTICLE IX
TRANSFERABLE OPTIONS
The Committee may, in its discretion, provide in an option agreement (other
than an incentive stock option) that the option right granted to the individual
may be transferred (in whole or in part and shall be subject to such terms and
conditions as the Committee may impose thereon) by the individual to (i) the
spouse, children or grandchildren of the individual ("Immediate Family
Members"), (ii) a trust or trusts for the exclusive benefit of the Immediate
Family Members and, if applicable, the individual, (iii) a partnership in which
such Immediate Family Members and, if applicable, the individual are the only
partners, or (iv) as otherwise provided for in the option agreement. Following
transfer, any such transferred option rights shall continue to be subject to the
same terms and conditions as were applicable to the option rights immediately
prior to transfer; provided, however, that no transferred option rights shall be
exercisable unless arrangements satisfactory to the Company have been made to
satisfy any tax withholding obligations the Company may have with respect to the
option rights.
ARTICLE X
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
17
<PAGE> 45
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 or, to the extent provided in the Award
agreement to direct, 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.
ARTICLE XI
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 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.
18
<PAGE> 46
BJ SERVICES COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS - JANUARY 22, 1998
The Annual Meeting of the Stockholders of BJ Services Company (the
"Company") will be held on Thursday, January 22, 1998 at 11:00 a.m. local time,
at The Houstonian Hotel and Conference Center located at 111 North Post Oak
Lane, Houston, Texas, for the following purposes:
1. To elect two Class II directors to serve a three-year term;
2. To approve an amendment to the Company's certificate of incorporation,
as amended (the "Charter"), to increase the total number of shares of
common stock, par value $.10 per share, that the Company has the
authority to issue from 80,000,000 shares to 160,000,000 shares;
3. To approve the adoption of the BJ Services Company 1997 Incentive
Plan;
4. To transact such other business as may properly come before the
meeting and any adjournment thereof.
All stockholders of record at the close of business on December 5,
1997 are entitled to notice of and to vote at said meeting or any adjournment
thereof. At least a majority of the outstanding shares of the Company are
required to be present at the meeting or represented by proxy to constitute a
quorum.
YOUR VOTE IS IMPORTANT
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN YOUR
PROXY AS PROMPTLY AS POSSIBLE. AN ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES, IS ENCLOSED FOR THIS PURPOSE.
(Continued and to be dated and signed on the reverse side.)
BJ SERVICES COMPANY
P.O. BOX 11093
NEW YORK, N.Y. 10203-0093
-2-
<PAGE> 47
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS NOS. 2 AND 3
AND FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 2 AND 3 AND FOR
THE ELECTION OF THE NOMINEES FOR DIRECTOR.
<TABLE>
<S> <C> <C> <C>
1. To elect two Class II FOR all nominees [ ] WITHHOLD AUTHORITY [ ] *EXCEPTIONS [ ]
directors to serve a three- listed below to vote for all nominees listed
year term. below
</TABLE>
Nominees for election as Class II directors: Don D. Jordan and Michael McShane
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED
BELOW.)
*Exceptions
---------------------------------------------------------------------
2. To approve an amendment to the Company's certificate of incorporation,
as amended (the "Charter"), to increase the total number of shares of
common stock, par value $.10 per share, that the Company has the
authority to issue from 80,000,000 shares to 160,000,000 shares.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To approve the adoption of the BJ Services Company 1997 Incentive
Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. To transact such other business as may Change of Address and
properly come before the meeting and any Comments Mark Here [ ]
adjournment thereof.
NOTE: Please sign, date and return your
instruction promptly in the enclosed envelope.
Sign exactly as name(s) appear(s) hereon. Joint
owners should each sign. When signing as
attorney, executor, administrator, trustee or
guardian or other fiduciary, please give full
title as such.
Dated: 199
--------------------------------------- -------
--------------------------------------------------
Signature(s)
--------------------------------------------------
Signature(s)
(PLEASE SIGN, DATE AND RETURN THIS PROXY IN VOTES MUST BE INDICATED (X) IN
THE ENCLOSED POSTAGE PREPAID ENVELOPE.) BLACK OR BLUE INK. [ ]
