<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:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
BJ SERVICES COMPANY
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(Name of Registrant as Specified in its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
_________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JANUARY 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 (the "Common Stock") that the Company has the authority
to issue from 80,000,000 shares to 250,000,000 shares;
3. To approve the adoption of the BJ Services Company 1997
Incentive Plan (the "1997 Incentive Plan");
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,
J. W. Stewart
Chairman of the Board, President
and Chief Executive Officer
Houston, Texas
December 19, 1997
YOUR VOTE IS IMPORTANT
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TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN
YOUR PROXY AS PROMPTLY AS POSSIBLE. AN ENVELOPE, WHICH REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES, IS ENCLOSED FOR THIS PURPOSE.
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<PAGE> 3
BJ SERVICES COMPANY
PROXY STATEMENT
This proxy statement is furnished to stockholders of BJ Services
Company, a Delaware corporation (the "Company"), in connection with the
solicitation of proxies on behalf of the Board of Directors of the Company to
be voted at the Annual Meeting of Stockholders of the Company (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
"Authorized Shares Amendment"); and (iii) the proposed adoption of the BJ
Services Company 1997 Incentive Plan (the "1997 Incentive Plan"), and it has no
information others will do so. Unless stockholders specify otherwise in their
proxies, proxies will be voted FOR the election of nominees listed herein as
directors, FOR the Authorized Shares 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 19, 1997.
VOTING SECURITIES
On December 5, 1997, the record date, there were outstanding and
entitled to vote shares of the Company's Common Stock, held of
record by 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.
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<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)
82 Devonshire Street
Boston, Massachusetts 02109
Common Stock T. Rowe Price Associates, Inc. 1,989,000(b)
100 East Pratt Street, 9th Floor
Baltimore, Maryland 21202
</TABLE>
__________________
(a) As of August 8, 1997, based on information filed by FMR Corp. ("FMR").
FMR, through its wholly owned subsidiary Fidelity Management and
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.
(b) As of February 7, 1997, based on information filed by T. Rowe Price
Associates, Inc. ("Price"). Price was the beneficial owner of a total
of 1,989,000 shares of Common Stock, including 1,977,100 shares of the
Company's Common stock and 11,900 Warrants. Of the shares of Common
Stock, Price had sole voting power with respect to 273,900 shares and
sole dispositive power with respect to the entire holding of 1,977,100
shares of Common Stock. Of the Warrants, Price had sole dispositive
power with respect to the entire holding of 11,900 Warrants and,
subject to exercise of the Warrants, sole voting power with respect to
the underlying Common Stock issuable upon exercise of 9,540 Warrants.
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.
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.
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<PAGE> 5
<TABLE>
<CAPTION>
Director
Name Principal Occupation Age Since
---- -------------------- --- -----
<S> <C> <C> <C>
Don D. Jordan . . . . . Chairman, Chief Executive Officer and a director 65 1990
of Houston Industries Incorporated, a public
utility holding company with interests in the
electric utilities, gas distribution,
gas pipelines, 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 43 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 director 56 1992 III
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>
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<PAGE> 6
<TABLE>
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 Officer 51 1992 I
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 positions 67 1994 I
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>
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.
-5-
<PAGE> 7
<TABLE>
<CAPTION>
Number of
Shares
------
Name or Group (1)(2)
------------- ------
<S> <C>
L. William Heiligbrodt . . . . . . . . . . . . . . . . . . . . . .
John R. Huff . . . . . . . . . . . . . . . . . . . . . . . . . . .
Don D. Jordan . . . . . . . . . . . . . . . . . . . . . . . . . . .
R. A. LeBlanc . . . . . . . . . . . . . . . . . . . . . . . . . . .
James E. McCormick . . . . . . . . . . . . . . . . . . . . . . . .
Michael E. Patrick . . . . . . . . . . . . . . . . . . . . . . . .
J. W. Stewart . . . . . . . . . . . . . . . . . . . . . . . . . . .
Michael McShane . . . . . . . . . . . . . . . . . . . . . . . . . .
Kenneth Williams . . . . . . . . . . . . . . . . . . . . . . . . .
Thomas H. Koops . . . . . . . . . . . . . . . . . . . . . . . . . .
Margaret B. Shannon . . . . . . . . . . . . . . . . . . . . . . . .
All current directors and officers as a group (15 persons) (3) . .
</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
-- shares; Mr. Huff -- shares; Mr. Jordan -- shares; Mr. LeBlanc --
shares; Mr. McCormick -- shares; Mr. Patrick -- shares; Mr. Stewart --
shares; Mr. McShane -- shares; Mr. Williams -- shares; Mr. Koops --
shares; Ms. Shannon -- shares.
(3) All current directors and officers as a group owned beneficially an
aggregate of approximately 2% 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
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<PAGE> 8
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 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
At the 1998 Annual Meeting, the Company's stockholders will also be
asked to approve the Authorized Shares Amendment to effect an increase in the
total number of authorized shares of Common Stock from 80,000,000 shares to
250,000,000 shares.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AUTHORIZED SHARES
AMENDMENT INCREASING THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK FROM
80,000,000 SHARES TO 250,000,000 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 Authorized Shares Amendment would increase the total number of
authorized shares of Common Stock from 80,000,000 to 250,000,000 shares and is
being proposed for approval at the 1998 Annual Meeting. The full text of the
proposed Amendment Shares 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.
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<PAGE> 9
The Board of Directors has recommended to the stockholders that the
number of authorized shares of the Common Stock of the Corporation be increased
from 80,000,000 shares to 250,000,000 shares. The increased number of
authorized shares will provide the Company with flexibility for future
financings and acquisitions approved by the Board of Directors. The Company has
no present plans for the issuance of the additional shares contemplated by this
proposal.
The Charter currently authorizes the issuance of 80,000,000 shares of
Common Stock. Of such shares, as of December 5, 1997, _________ shares were
outstanding and _________ shares were reserved for issuance pursuant to the
Company's stock option employee benefit plans, leaving only approximately
_________ shares currently unreserved and available for future use.
The additional shares of Common Stock that would be authorized by the
Authorized Shares Amendment 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 Authorized Share 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
Authorized Shares 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 a proposed business combination
that is deemed unacceptable to the Board of Directors, although perceived to be
desirable by some stockholders. This could provide management with a means to
block any two-thirds vote that might be used to effect a business combination
in accordance with the 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 (ii) subject to
stockholder approval at the 1998 Annual Meeting, shares of Common Stock that
would be issued or reserved for issuance 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 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's
stockholders to provide the advantage of greater flexibility that will result
from the adoption of the Authorized Shares Amendment.
-8-
<PAGE> 10
PROPOSED ADOPTION OF THE
1997 INCENTIVE PLAN
At the 1998 Annual Meeting, stockholders of the Company will also be
asked to approve the 1997 Incentive Plan and to authorize 1,500,000 shares of
Common Stock for issuance thereunder.
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."
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 ____ employees and six non-employee
directors are eligible to participate in the 1997 Incentive Plan.
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<PAGE> 11
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 or the Executive Compensation Committee 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. The Executive Compensation Committee may at any
time or from time to time, in its discretion (other than for Options granted to
non-employee directors), 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.
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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, 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.
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 is determined by the Executive Compensation
Committee at the time the Option is granted; provided, however, that the
exercise price 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.
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
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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 (provided that Awards intended to qualify under
Section 162(m) of the Code may be amended only to the extent permitted by such
Section), and subject to acceleration upon a Change of Control, no shares of
Performance Stock or Performance Units granted under the 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. 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. 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 exercisable prior to six months from 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
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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. 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 non-
employee 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.
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 or
consolidations), each Option that is not then immediately exercisable in full
shall be immediately exercisable in full. In addition, upon the occurrence of
a Change of Control, each share of Performance Stock and each Performance Unit
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
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<PAGE> 15
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. 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(h)(3) 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. It is recommended that before exercising an Option
or disposing of shares of Common Stock acquired pursuant to the exercise of an
Option, through vesting of Performance Stock or Performance Units, or through
the grant of Bonus Stock, the Optionee or Employee Grantee consult his or her
tax advisor about the federal, state and local income tax consequences of such
an exercise or disposition.
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.
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
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<PAGE> 16
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 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
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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.
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.
Federal Income Tax Rates
Compensation taxable as ordinary income will be subject to the
applicable ordinary income tax rates then in effect. Capital gains realized
upon disposition of Common Stock held 12 months or less are treated as
short-term capital
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<PAGE> 18
gains and taxed as ordinary income. As of the date of this Proxy Statement,
ordinary income is subject to a maximum tax rate of 39.6%. Capital gains
realized upon disposition of Common Stock held more than 12 months but not more
than 18 months are treated as mid-term capital gains subject to a maximum tax
rate of 28%. Capital gains realized upon disposition of Common Stock held more
than 18 months are treated as long-term capital gains subject to a maximum tax
rate of 20%.
Additional Tax Consequences
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 prevents the deductibility of 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.
Providing Competitive Levels of Compensation. The Committee attempts
to provide the Company's executives with a total compensation package that is
targeted at the 75th percentile of the market for executives holding comparable
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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 other executives in
comparison 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 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.
For fiscal 1997, awards under the long-term incentive program
consisted of performance units granted under the 1990 Stock Incentive Plan.
These awards will vest at the end of three years according to the Company's
three-year stock price performance by predetermined percentages in order for
the performance units to vest in full. Notwithstanding the foregoing, the
Executive Compensation Committee is permitted by the terms of the 1990 Stock
Incentive Plan to amend the performance objectives or the vesting period for
any performance award with the consent of the employee grantee. In addition,
the performance awards will vest in full upon the occurrence of a "change of
control." For fiscal 1997, Mr. Stewart was awarded performance units, based on
the criteria described above.
-18-
<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 any increase in the value of the mutual funds until the Keysop option
is exercised, and the Company does not deduct such amount or 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
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.
-19-
<PAGE> 21
INDEXED TOTAL STOCKHOLDER RETURN
SEPTEMBER 1992 - SEPTEMBER 1997
[GRAPHICS HERE]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
9/92 9/93 9/94 9/95 9/96 9/97
- ---------------------------------------------------------------------------------------------------------------
BJ Services Company 100.00 125.90 112.95 145.32 208.63 477.34
- ---------------------------------------------------------------------------------------------------------------
S&P 500 100.00 112.94 117.14 151.86 182.63 256.41
- ---------------------------------------------------------------------------------------------------------------
Current Peer Group 100.00 104.74 90.76 110.42 147.69 273.64
- ---------------------------------------------------------------------------------------------------------------
Former Peer Group 100.00 103.83 89.74 109.55 147.68 273.55
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
-20-
<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) (F) (G) (H) (I)
OTHER
ANNUAL RESTRICTED SECURITIES ALL OTHER
COMPENSA- STOCK UNDERLYING LTIP COMPENSA-
BONUS TION (2) AWARDS OPTIONS/ PAYOUTS TION (2)
NAME AND SALARY (1) (3) (4) SARS (5) (6) (7)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
------------------------------- ----- -------- ------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
J. W. Stewart . . . . . . . . . 1997 568,340 778,960 0 39,480
President and Chief 1996 504,168 708,750 42,787 0
Executive Officer 1995 400,008 560,000 165,865 1,803,511
Michael McShane . . . . . . . . 1997 255,838 273,004 0 15,225
Vice President -- Finance 1996 231,674 246,750 14,364 0
and Chief Financial Officer 1995 213,338 229,000 61,749 986,070
Kenneth A. Williams . . . . . . 1997 210,000 159,750 0 12,801
Vice President -- North 1996 191,834 146,250 9,932 0
American Operations 1995 174,670 50,000 42,239 606,489
Thomas H. Koops . . . . . . . . 1997 204,840 140,405 0 13,992
Vice President -- 1996 186,334 127,575 9,627 0
Technology and Logistics 1995 171,504 152,850 41,934 589,466
Margaret B. Shannon . . . . . . 1997 202,174 138,380 0 13,049
Vice President -- General 1996 185,270 126,900 9,576 0
Counsel 1995 169,668 151,950 40,962 547,786
</TABLE>
_____________________________________________
(1) Includes bonuses earned in the reported fiscal year and paid in the
following fiscal year.
(2) In accordance with SEC regulations, information for prior years is not
required to be disclosed in this column.
(3) Perquisites and other personal benefits paid or distributed during 1997 to
the persons listed in the compensation table above did not exceed, with
respect to any individual, the lesser of $50,000 or 10 percent of such
individual's total salary and bonus.
(4) See table entitled "Long-Term Incentive Plans -- Awards in Last Fiscal
Year" for information regarding performance units granted for fiscal
years 1996 and 1997.
(5) Includes options earned in the reported fiscal year and granted subsequent
to the end of the fiscal year.
(6) Reflects payments with respect to performance awards granted under the 1990
Stock Incentive Plan. Also includes cash awards to offset the federal
income tax payable by the recipients of such payments with respect to
performance awards.
(7) The amount shown in this column is the annual Company contribution to the
Company's 401 (k) defined contribution plan on behalf of each executive
officer.
-21-
<PAGE> 23
<TABLE>
<CAPTION>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
----------------------------------------------------------------------------------- ------------------------
(a) (b) (c) (d) (e) (f) (g)
% OF TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS
UNDERLYING GRANTED TO EXERCISE
OPTIONS/ EMPLOYEES OR BASE
SARS IN FISCAL PRICE EXPIRATION
NAME GRANTED (#) (1) YEAR ($/Sh)1. DATE 5%($) 10%($)
---- ---------------- ---- ------------ ----------- ----------- ------------
<S> <C>
J.W. Stewart . . . . . . 12/11/07
12/11/07
Michael McShane . . . . . 12/11/07
12/11/07
Kenneth A. Williams . . . 12/11/07
12/11/07
Thomas H. Koops . . . . . 12/11/07
12/11/07
Margaret B. Shannon . . . 12/11/07
12/11/07
</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) Includes options granted on December 11, 1997. Such options will
become exercisable __________________ _________________.
(3) Includes special options granted on December 11, 1997. Such options
will become exercisable __________________________________________________
__________.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END(#) AT FY-END($)
SHARE ------------------------------------------------------------------
ACQUIRED VALUE
NAME ON EXERCISE REALIZED ($) EXERCISABLE UNEXERCISABLE (1) EXERCISABLE UNEXERCISABLE(1)
---- --------------------------- ----------- ----------------- ------------ ---------------
<S> <C>
J.W. Stewart . . . . . . .
Michael McShane . . . . . .
Kenneth A. Williams . . . .
Thomas H. Koops . . . . . .
Margaret B. Shannon . . . .
</TABLE>
_______________
(1) Includes options earned in fiscal 1997 and granted on December 11, 1997.
-22-
<PAGE> 24
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
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>
J.W. Stewart . . . . . . . . . 3 Years
Michael McShane . . . . . . . . 3 Years
Kenneth A. Williams . . . . . . 3 Years
Thomas H. Koops . . . . . . . . 3 Years
Margaret B. Shannon . . . . . . 3 Years
</TABLE>
- ---------------
(1) Awards reflected in this table represent performance units awarded under
the Company's [1990 Stock Incentive Plan]. These awards were earned
during fiscal 1997 and granted on December 11, 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 entered into severance agreements with certain executive
officers, including each of the named executive officers shown in the Summary
Compensation Table, as well as with Matthew D. Fitzgerald, Taylor M. Whichard
III, 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 Company's assets. In the
event that any payments made in connection with a change
-23-
<PAGE> 25
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.
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.
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 21, 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> 26
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 255,000,000 shares of capital stock,
consisting of 5,000,000 shares of preferred stock, par value $1.00 per share
(the "Preferred Stock"), and 250,000,000 shares of common stock, par value
$0.10 per share (the "Common Stock").
The designations, powers, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions of the Preferred Stock shall be established by resolution of the
Board of Directors pursuant to Section 151 of the General Corporation Law of
the State of Delaware."
-25-
<PAGE> 27
DRAFT OF 12/1/97
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
<PAGE> 28
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 "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
-2-
<PAGE> 29
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
(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.
-3-
<PAGE> 30
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
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director subsequent to such date whose election, or nomination for election by
the Company's stockholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either (1) an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Act), or an
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board or (2) a plan or agreement to replace a majority of
the members of the Board then comprising the Incumbent Board.
ARTICLE II
NONQUALIFIED STOCK OPTIONS
1. Eligible 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
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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
gross negligence or willful misconduct in performance of the
duties of Employee's employment or (C) Employee's final
conviction of a felony or of a misdemeanor involving moral
turpitude] (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 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
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(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 X, 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
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such option is granted, it shall be exercisable only by the Employee
Optionee. Any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of, or to subject to execution, attachment or
similar process, any nonqualified option granted under Article II, or
any right thereunder, contrary to the provisions hereof, shall be void
and ineffective, shall give no right to the purported transferee and
shall, at the sole discretion of the Committee, result in forfeiture
of the option with respect to the shares involved in such attempt.
(e) Adjustment of Shares. In the event that at any time
after the effective date of the Plan the outstanding shares of Common
Stock are changed into or exchanged for, a different number or kind of
shares or other securities of the Company by reason of merger,
consolidation, recapitalization, reclassification, stock split, stock
dividend, combination of shares or the like, the Committee shall make
an appropriate and equitable adjustment in the number and kind of
shares as to which all outstanding nonqualified options granted under
Article II, or portions thereof then unexercised, shall be
exercisable, and with any necessary corresponding adjustment in
exercise price per share, to the end that after such event the shares
subject to Article II of the Plan and each Employee Optionee's
proportionate interest shall be maintained as before the occurrence of
such event. Any such adjustment made by the Committee shall be final
and binding upon all Employee Optionees, the Company, and all other
interested persons.
(f) Listing and Registration of Shares. Each
nonqualified option granted under Article II shall be subject to the
requirement that if at any time the Committee determines, in its
discretion, that the listing, registration, or qualification of the
shares subject to such option under any securities exchange or under
any state or federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition
of, or in connection with, the issue or purchase of shares thereunder,
such option may not be exercised 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.
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<PAGE> 35
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 in or order or to otherwise defer the
"spread" on exercise of such option.
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
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<PAGE> 36
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
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<PAGE> 37
(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
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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
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
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<PAGE> 39
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 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
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<PAGE> 40
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
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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).
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 Cause [of (A)
fraud, theft or embezzlement committed against the Company or
a Subsidiary, affiliated entity or customer of the Company,
(B) Non-Employee Director's gross negligence or willful
misconduct in performance of his duties as Non-Employee
Director or (C) Non-Employee Director's final conviction of a
felony or of a misdemeanor involving moral turpitude] (other
than disability or in accordance with the provisions of the
Company's Bylaws regarding automatic termination of directors'
terms of office); or
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(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)(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 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
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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 X, no option granted under Article IV shall be transferable
otherwise than by will or by the laws of descent and distribution and,
during the lifetime of the Non-Employee Director to whom any such
option is granted, it shall be exercisable only by such Non-Employee
Director. Any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of, or to subject to execution, attachment or
similar process, any option granted under Article IV, or any right
thereunder, contrary to the provisions hereof, shall be void and
ineffective and shall give no right to the purported transferee.
(e) Adjustment of Shares. In the event that at any time
after the effective date of the Plan the outstanding shares of Common
Stock are changed into or 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
shares to the end that after such event the shares subject to Article
II of the Plan and each Non-Employee Director's proportionate interest
shall be maintained as before the occurrence of such event. Any
adjustment provided for in the preceding provisions of this Paragraph
5(e) shall be subject to any required stockholder action.
(f) Listing and Registration of Shares. Each option
granted under Article IV shall be subject to the requirement that if
at any time the Committee determines, in its discretion, that the
listing, registration, or qualification of the shares subject to such
option under any securities exchange or under any state or federal
law, or the consent or approval of any governmental regulatory body,
is necessary or desirable as a condition of, or in connection with,
the issue or purchase of shares thereunder, such option may not be
exercised in whole or in part unless such 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.
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(b) No option granted under Article IV shall be construed
as limiting any right which either the stockholders of the Company or
the Board may have to remove at any time, with or without Cause, any
person to whom such option has been granted from the Board.
(c) Notwithstanding any provision of the Plan or the
terms of any option granted under Article IV, the Company shall not be
required to issue any shares hereunder if such issuance would, in the
judgment of the Committee, constitute a violation of any state or
federal law or of the rule or regulations of any governmental
regulatory body.
(d) If, as of any date that the Plan is in effect, there
are not sufficient shares of Common Stock available under the Plan to
allow for the grant to each Non-Employee Director of an option for the
number of shares provided for in Article IV, each Non-Employee
Director shall receive an option for his pro-rata share of the total
number of shares of Common Stock then available under the Plan.
ARTICLE V
PERFORMANCE STOCK AND PERFORMANCE UNITS
1. Eligible 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
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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
(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
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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 that does not qualify as performance based compensation
under Section 162(m) of the Code, the Committee may, at any time or times,
amend the performance objectives and/or the Performance Period for earning such
Award. However, with respect to any Performance Stock or Performance Unit
Award that is intended on its date of grant to qualify as performance based
compensation under Section 162(m) of the Code, the Committee, in its sole
discretion and without the consent of the Employee-Grantee, may amend the Award
to reflect a change in corporate capitalization, such as a stock split or
dividend, or a corporate transactions such as a corporate merger, a corporate
consolidation, any corporate separation (including a spinoff or other
distribution of stock or property by a corporation), any corporate
reorganization (whether or not such reorganization comes within the definition
of such term in section 368), or any partial or complete corporate liquidation
or for any other reason permitted by the regulations promulgated under Section
162(m) of the Code without disqualifying such Award as "performance based"
compensation for said section.
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
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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
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
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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 designates 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 ("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.
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(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.
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4. Amendment. With respect to any outstanding Performance Cash
Awards that does not qualify as performance based compensation under Section
162(m) of the Code, the Committee may, at any time or times, amend the
performance objectives and/or the Performance Period for earning such Award.
However, with respect to any Performance Cash Award that is intended on its
date of grant to qualify as Performance based compensation under Section 162(m)
of the Code, the Committee, in its sole discretion and without the consent of
the Employee-Grantee, may amend the Award to reflect a change in corporate
capitalization, such as a stock split or dividend, or a corporate transaction,
such as a corporate merger, a corporate consolidation, any corporate separation
(including a spinoff or other distribution of stock or property by a
corporation), any corporate reorganization (whether or not such reorganization
comes within the definition of such term in section 368), or any partial or
complete corporate liquidation or for any other reason permitted by the
regulations promulgated under Section 162(m) of the Code without disqualifying
such Award as "performance based" compensation for said section.
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.
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.
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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 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
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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.
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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 NO. 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 listed below to vote for all nominees
three-year term. listed 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
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<TABLE>
<S> <C>
2. To approve an amendment to the Company's 3. To approve the adoption of
certificate of incorporation, as amended the BJ Services Company 1997
(the "Charter"), to increase the total Incentive Plan (the "1997
number of shares of common stock, par Incentive Plan").
value $.10 per share (the "Common Stock")
that the Company has the authority to FOR [ ] AGAINST [ ] ABSTAIN [ ]
issue from 80,000,000 shares to 250,000,000
shares.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Change of Address and
or Comments Mark Here [ ]
4. To transact such other business as may
properly come before the meeting and any
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:___________________, 1997
_______________________________
Signature(s)
_______________________________
Signature(s)
</TABLE>
(PLEASE SIGN, DATE AND RETURN THIS PROXY VOTES MUST BE INDICATED
IN THE ENCLOSED POSTAGE PREPAID ENVELOPE.) (X) IN BLACK OR BLUE INK. [ ]
<PAGE> 54
BJ SERVICES COMPANY
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: the election of directors,
the approval of an amendment to the Company's certificate of incorporation and
the adoption of the Company's 1997 Incentive Plan.
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-
