<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ___ to ___.
COMMISSION FILE NUMBER 1-10570
BJ SERVICES COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 63-0084140
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5500 NORTHWEST CENTRAL DRIVE, HOUSTON, TEXAS 77092
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 462-4239
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
There were 38,334,265 shares of the registrant's common stock, $.10 par value,
outstanding as of May 13, 1997.
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<PAGE> 2
BJ SERVICES COMPANY
INDEX
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statement of Operations (Unaudited) - Three
and six months ended March 31, 1997 and 1996 3
Consolidated Condensed Statement of Financial Position -
March 31, 1997 (Unaudited) and September 30, 1996 4
Consolidated Condensed Statement of Cash Flows (Unaudited) -
Six months ended March 31, 1997 and 1996 5
Notes to Unaudited Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 18
PART II - OTHER INFORMATION 23
</TABLE>
2
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BJ SERVICES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue $ 343,698 $ 200,794 $ 684,078 $ 407,295
Operating expenses:
Cost of sales and services 273,651 167,163 544,451 334,249
Research and engineering 6,080 3,858 11,992 7,602
Marketing 12,230 9,600 23,801 17,883
General and administrative 12,548 8,233 24,673 16,722
Goodwill amortization 3,601 1,329 7,385 2,671
--------- --------- --------- ---------
Total operating expenses 308,110 190,183 612,302 379,127
--------- --------- --------- ---------
Operating income 35,588 10,611 71,776 28,168
Interest expense (7,978) (5,557) (16,298) (11,095)
Interest income 262 247 303 326
Other income - net 769 739 852 1,339
--------- --------- --------- ---------
Income before income taxes 28,641 6,040 56,633 18,738
Income taxes 8,444 1,617 16,462 5,170
--------- --------- --------- ---------
Net income $ 20,197 $ 4,423 $ 40,171 $ 13,568
========= ========= ========= =========
Net income per share:
Primary $ .50 $ .15 $ .99 $ .48
Fully diluted $ .49 $ .15 $ .98 $ .46
Average shares outstanding:
Primary 40,797 28,664 40,716 28,560
Fully diluted 40,969 29,281 40,916 29,241
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
3
<PAGE> 4
BJ SERVICES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1997 1996
---------- ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,284 $ 2,897
Receivables - net 287,573 271,583
Inventories:
Finished goods 64,166 59,926
Work in process 5,435 9,479
Raw materials 18,942 17,696
---------- ----------
Total inventories 88,543 87,101
Deferred income taxes 13,087 19,349
Other current assets 20,964 37,217
---------- ----------
Total current assets 413,451 418,147
Property - net 569,931 558,156
Deferred income taxes 173,070 132,666
Goodwill - net 539,866 567,260
Other assets 17,116 32,931
---------- ----------
$1,713,434 $1,709,160
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 134,549 $ 141,966
Short-term borrowings and current
portion of long-term debt 80,684 34,358
Accrued employee compensation and benefits 33,918 32,227
Income and other taxes 14,493 13,698
Accrued insurance 13,571 13,282
Other accrued liabilities 53,467 56,494
---------- ----------
Total current liabilities 330,682 292,025
Long-term debt 447,066 523,004
Deferred income taxes 12,574 11,740
Accrued post retirement benefits and other 34,261 40,688
Stockholders' equity 888,851 841,703
---------- ----------
$1,713,434 $1,709,160
========== ==========
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
4
<PAGE> 5
BJ SERVICES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 40,171 $ 13,568
Adjustments to reconcile net income to cash
provided by operating activities:
Amortization of unearned compensation 750 546
Depreciation and amortization 45,608 29,305
Deferred income taxes 11,884 593
Changes in:
Receivables (14,029) 3,141
Inventories 1,898 (2,111)
Accounts payable (9,730) 1,139
Other current assets and liabilities (274) (17,889)
Other - net (30,688) (9,710)
---------- ----------
Net cash provided by operating activities 45,590 18,582
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (32,241) (21,795)
Proceeds from disposal of assets 25,224 735
Acquisition of business, net of cash acquired (13,464) (3,700)
---------- ----------
Net cash used for investing activities (20,481) (24,760)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings - net 3,421
Reduction of borrowings - net (29,612)
Proceeds from issuance of stock 4,890 4,006
---------- ----------
Net cash provided by (used for) financing activities (24,722) 7,427
Increase in cash and cash equivalents 387 1,249
Cash and cash equivalents at beginning of period 2,897 1,842
---------- ----------
Cash and cash equivalents at end of period $ 3,284 $ 3,091
========== ==========
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
5
<PAGE> 6
BJ SERVICES COMPANY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1 GENERAL
In the opinion of management, the unaudited consolidated condensed financial
statements for BJ Services Company (the "Company") include all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation of the financial position as of March 31, 1997, the results of
operations for each of the three-month and six-month periods ended March 31,
1997 and 1996 and cash flows for each of the six-month periods ended March 31,
1997 and 1996. The consolidated condensed statement of financial position at
September 30, 1996 is derived from the September 30, 1996 audited consolidated
financial statements. Although management believes the disclosures in these
financial statements are adequate to make the information presented not
misleading, certain information and footnote disclosures normally included in
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The results of
operations and the cash flows for the six-month period ended March 31, 1997 are
not necessarily indicative of the results to be expected for the full year.
Certain amounts for fiscal 1996 have been reclassified in the accompanying
consolidated condensed financial statements to conform to the current year
presentation.
NOTE 2 EARNINGS PER SHARE
Primary earnings per share are based on the weighted average number of shares
outstanding during each period and the assumed exercise of dilutive stock
options and warrants less the number of treasury shares assumed to be purchased
from the proceeds using the average market price of the Company's common stock
for each of the periods presented.
Fully diluted earnings per share are based on the weighted average number of
shares outstanding during each period and the assumed exercise of dilutive
stock options and warrants less the number of treasury shares assumed to be
purchased from the proceeds using the closing market price of the Company's
common stock for each of the periods presented if greater than the average
market price during the period.
6
<PAGE> 7
The following table presents information necessary to calculate earnings per
share for the periods presented:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income $ 20,197 $ 4,423 $ 40,171 $ 13,568
========= ========= ========= =========
Average primary common and common
equivalent shares outstanding:
Common stock 38,313 28,095 38,260 28,055
Common stock equivalents from assumed
exercise of stock options 833 569 828 505
Common stock equivalents from assumed
exercise of warrants 1,651 1,628
--------- --------- --------- ---------
40,797 28,664 40,716 28,560
========= ========= ========= =========
Primary earnings per share $ .50 $ .15 $ .99 $ .48
========= ========= ========= =========
Average fully diluted common and common
equivalent shares outstanding:
Common stock 38,313 28,095 38,260 28,055
Common stock equivalents from
assumed exercise of stock options 866 685 866 685
Common stock equivalents from
assumed exercise of warrants 1,790 501 1,790 501
--------- --------- --------- ---------
40,969 29,281 40,916 29,241
========= ========= ========= =========
Fully diluted earnings per share $ .49 $ .15 $ .98 $ .46
========= ========= ========= =========
</TABLE>
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS 128") "Earnings Per Share." SFAS
128 establishes standards for computing and presenting earnings per share
("EPS") and applies to entities with publicly held common stock or potential
common stock. This statement simplifies the standards for computing EPS
previously found in Accounting Principles Board Opinion No. 15, "Earnings Per
Share," and makes them comparable to international EPS standards. The statement
replaces the presentation of Primary EPS and requires presentation of Basic EPS.
Basic EPS excludes dilution and is computed by dividing income available to
common shareholders by the weighted-average number of common shares outstanding
for the period. This statement is effective for financial statements issued for
periods ending after December 15, 1997, including interim periods; earlier
application is not permitted. Proforma basic EPS for the three months ended
March 31, 1997 and 1996 is $ .53 and $ .16, respectively. Proforma basic EPS for
the six months ended March 31, 1997 and 1996 is $1.05 and $ .48, respectively.
7
<PAGE> 8
NOTE 3 ACQUISITION OF BUSINESS
Effective December 1, 1996, the Company acquired the remaining 51% ownership of
its previously unconsolidated joint venture in Argentina, for total
consideration of $13.5 million which was funded through borrowings under
existing credit facilities. This acquisition was accounted for as a purchase
and, accordingly, the acquired assets and liabilities have been recorded at
their estimated fair values at the date of acquisition. The consolidated
statement of operations includes operating results of the subsidiary acquired
since the date of acquisition. This acquisition is not material to the
Company's financial statements and therefore proforma information is not
presented.
NOTE 4 SUPPLEMENTAL GUARANTOR INFORMATION
In August 1996, the Company exchanged unsecured 7% Series B Notes due 2006 (the
"7% Series B Notes") for its then outstanding unsecured 7% Series A Notes due
2006. Three of the Company's wholly owned subsidiaries, BJ Services Company,
U.S.A., BJ Service International, Inc. and BJ Services Company Middle East
(collectively, the "Guarantor Subsidiaries"), are guarantors of the 7% Series B
Notes. Each of the Guarantor Subsidiaries has fully and unconditionally
guaranteed, on a joint and several basis, the Company's obligation to pay
principal and interest with respect to the 7% Series B Notes.
Substantially all of the Company's operating income and cash flow is generated
by its subsidiaries. As a result, funds necessary to meet the Company's debt
service obligations are provided in part by distributions or advances from its
subsidiaries. Under certain circumstances, contractual and legal restrictions,
as well as the financial condition and operating requirements of the Company's
subsidiaries, could limit the Company's ability to obtain cash from its
subsidiaries for the purpose of meeting its debt service obligations, including
the payment of principal and interest on the 7% Series B Notes. Although
holders of the 7% Series B Notes are direct creditors of the Company's
principal direct subsidiaries by virtue of the guarantees, the Company has
subsidiaries ("Non-Guarantor Subsidiaries") that are not included among the
Guarantor Subsidiaries, and such subsidiaries are not obligated with respect to
the 7% Series B Notes. As a result, the claims of creditors of the
Non-Guarantor Subsidiaries will effectively have priority with respect to the
assets and earnings of such companies over the claims of creditors of the
Company, including the holders of the 7% Series B Notes.
The following supplemental consolidating condensed financial statements
present:
1. Consolidating condensed statements of financial position as of
March 31, 1997 and September 30, 1996, consolidating condensed statements of
operations for each of the three-month and six-month periods ended March 31,
1997 and 1996 and consolidating condensed statements of cash flows for each of
the six-month periods ended March 31, 1997 and 1996.
8
<PAGE> 9
2. BJ Services Company (the "Parent"), combined Guarantor Subsidiaries
and combined Non-Guarantor Subsidiaries with their investments in subsidiaries
accounted for using the equity method.
3. Elimination entries necessary to consolidate the Parent and all of
its subsidiaries.
The Company has not presented separate financial statements and other
disclosures concerning the Guarantor Subsidiaries because management does not
believe that such information is material to investors in the 7% Series B
Notes.
9
<PAGE> 10
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT
OF OPERATIONS
(IN THOUSANDS)
THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Revenue $ $ 185,425 $ 164,121 $ (5,848) $ 343,698
Operating expenses:
Cost of sales and services 151,342 128,157 (5,848) 273,651
Research and engineering 2,000 4,080 6,080
Marketing 9,160 3,070 12,230
General and administrative 6,344 6,204 12,548
Goodwill amortization 1,259 2,342 3,601
-------------- ------------- ------------- -------------- -------------
Total operating expenses 170,105 143,853 (5,848) 308,110
-------------- ------------- ------------- -------------- -------------
Operating income 15,320 20,268 35,588
Interest income 1,280 132 (1,150) 262
Interest expense (5,588) (3,540) 1,150 (7,978)
Income from equity investees 20,197 8,401 0 (28,598)
Other income - net 575 194 769
-------------- ------------- ------------- -------------- -------------
Income before income taxes 20,197 19,988 17,054 (28,598) 28,641
Income tax expense (benefit) (209) 8,653 8,444
-------------- ------------- ------------- -------------- -------------
Net income $ 20,197 $ 20,197 $ 8,401 $ (28,598) $ 20,197
============== ============= ============= ============== =============
</TABLE>
10
<PAGE> 11
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT
OF OPERATIONS
(IN THOUSANDS)
THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Revenue $ $ 133,095 $ 77,141 $ (9,442) $ 200,794
Operating expenses:
Cost of sales and services 118,344 58,261 (9,442) 167,163
Research and engineering 3,638 220 3,858
Marketing 7,105 2,495 9,600
General and administrative 4,921 3,312 8,233
Goodwill amortization 1,167 162 1,329
-------------- ------------- ------------- -------------- -------------
Total operating expenses 135,175 64,450 (9,442) 190,183
-------------- ------------- ------------- --------------- -------------
Operating income (loss) (2,080) 12,691 10,611
Interest income 366 242 (361) 247
Interest expense (4,801) (1,117) 361 (5,557)
Income from equity investees 4,423 8,816 (13,239)
Other income (expense) - net 997 (258) 739
-------------- ------------- ------------- -------------- -------------
Income before income taxes 4,423 3,298 11,558 (13,239) 6,040
Income tax expense (benefit) (1,125) 2,742 1,617
-------------- ------------- ------------- -------------- -------------
Net income $ 4,423 $ 4,423 $ 8,816 $ (13,239) $ 4,423
============== ============= ============= ============== =============
</TABLE>
11
<PAGE> 12
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT
OF OPERATIONS
(IN THOUSANDS)
SIX MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Revenue $ $ 378,073 $ 320,208 $ (14,203) $ 684,078
Operating expenses:
Cost of sales and services 306,068 252,586 (14,203) 544,451
Research and engineering 3,848 8,144 11,992
Marketing 17,312 6,489 23,801
General and administrative 12,629 12,044 24,673
Goodwill amortization 2,381 5,004 7,385
-------------- ------------- ------------- -------------- -------------
Total operating expenses 342,238 284,267 (14,203) 612,302
-------------- ------------- ------------- -------------- -------------
Operating income 35,835 35,941 71,776
Interest income 2,232 483 (2,412) 303
Interest expense (11,335) (7,375) 2,412 (16,298)
Income from equity investees 40,171 16,367 (56,538)
Other income - net 848 4 852
-------------- ------------- ------------- -------------- -------------
Income before income taxes 40,171 43,947 29,053 (56,538) 56,633
Income tax expense 3,776 12,686 16,462
-------------- ------------- ------------- -------------- -------------
Net income $ 40,171 $ 40,171 $ 16,367 $ (56,538) $ 40,171
============== ============= ============= ============== =============
</TABLE>
12
<PAGE> 13
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT
OF OPERATIONS
(IN THOUSANDS)
SIX MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Revenue $ $ 273,122 $ 152,226 $ (18,053) $ 407,295
Operating expenses:
Cost of sales and services 236,640 115,662 (18,053) 334,249
Research and engineering 7,196 406 7,602
Marketing 13,647 4,236 17,883
General and administrative 10,098 6,624 16,722
Goodwill amortization 2,334 337 2,671
-------------- ------------- ------------- -------------- -------------
Total operating expenses 269,915 127,265 (18,053) 379,127
-------------- ------------- ------------- -------------- -------------
Operating income 3,207 24,961 28,168
Interest income 729 320 (723) 326
Interest expense (9,609) (2,209) 723 (11,095)
Income from equity investees 13,568 16,585 (30,153)
Other income (expense) - net 1,620 (281) 1,339
-------------- ------------- ------------- -------------- -------------
Income before income taxes 13,568 12,532 22,791 (30,153) 18,738
Income tax expense (benefit) (1,036) 6,206 5,170
-------------- ------------- ------------- -------------- -------------
Net income $ 13,568 $ 13,568 $ 16,585 $ (30,153) $ 13,568
============== ============= ============= ============== =============
</TABLE>
13
<PAGE> 14
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT
OF FINANCIAL POSITION
(IN THOUSANDS)
MARCH 31, 1997
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------- ------------- ---------------- --------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ $ 3,284 $ $ $ 3,284
Receivables - net 116,180 171,393 287,573
Inventories - net 40,903 47,640 88,543
Deferred income taxes 13,087 13,087
Other current assets 7,755 13,209 20,964
-------------- ------------- ------------- ---------------- --------------
Total current assets 181,209 232,242 413,451
Investment in subsidiaries 254,315 168,113 (422,428)
Intercompany advances 635,124 (635,124)
Property - net 304,424 265,507 569,931
Deferred income taxes 140,158 32,912 173,070
Goodwill - net 128,604 411,262 539,866
Other assets 11,004 6,112 17,116
-------------- ------------- ------------- ---------------- --------------
$ 889,439 $ 933,512 $ 948,035 $ (1,057,552) $ 1,713,434
============== ============= ============= ================ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ $ 76,458 $ 58,091 $ $ 134,549
Short-term borrowings and
current portion of long-term debt 14,810 65,874 80,684
Accrued employee
compensation and benefits 19,315 14,603 33,918
Income and other taxes 1,467 13,026 14,493
Other accrued liabilities 588 30,091 36,066 293 67,038
-------------- ------------- ------------- ---------------- --------------
Total current liabilities 588 142,141 187,660 293 330,682
Long-term debt 257,502 189,564 447,066
Deferred income taxes 12,574 12,574
Accrued post retirement benefits
and other long-term liabilities 34,375 (114) 34,261
Intercompany advances-net 245,179 390,238 (635,417)
Stockholders' equity 888,851 254,315 168,113 (422,428) 888,851
-------------- ------------- ------------- ---------------- --------------
$ 889,439 $ 933,512 $ 948,035 $ (1,057,552) $ 1,713,434
============== ============= ============= ================ ==============
</TABLE>
14
<PAGE> 15
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT
OF FINANCIAL POSITION
(IN THOUSANDS)
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ---------------- ------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ $ 2,897 $ $ $ 2,897
Receivables - net 109,110 162,473 271,583
Inventories - net 39,222 47,879 87,101
Deferred income taxes 19,349 19,349
Other current assets 5,379 31,838 37,217
------------- ---------------- ------------- ---------------- --------------
Total current assets 175,957 242,190 418,147
Investment in subsidiaries 213,404 150,339 (363,743)
Intercompany advances - net 628,979 (628,979)
Property - net 292,075 266,081 558,156
Deferred income taxes 112,574 20,092 132,666
Goodwill - net 171,551 395,709 567,260
Other assets 13,467 19,464 32,931
------------- ---------------- ------------- ---------------- --------------
$ 842,383 $ 915,963 $ 943,536 $ (992,722) $ 1,709,160
============= ================ ============= ================ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ $ 78,740 $ 63,226 $ $ 141,966
Short-term borrowings and
current portion of long-term debt 6,015 28,343 34,358
Accrued employee
compensation and benefits 20,548 11,679 32,227
Income and other taxes 2,635 11,063 13,698
Other accrued liabilities 680 35,428 33,668 69,776
------------- ---------------- ------------- ---------------- --------------
Total current liabilities 680 143,366 147,979 292,025
Long-term debt 276,461 246,543 523,004
Deferred income taxes 11,740 11,740
Accrued post retirement
benefits and other 39,343 1,345 40,688
Intercompany advances - net 243,389 385,590 (628,979)
Stockholders' equity 841,703 213,404 150,339 (363,743) 841,703
------------- ---------------- ------------- ---------------- --------------
$ 842,383 $ 915,963 $ 943,536 $ (992,722) $ 1,709,160
============= ================ ============= ================ ==============
</TABLE>
15
<PAGE> 16
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT
OF CASH FLOWS
(IN THOUSANDS)
SIX MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 40,171 $ 40,171 $ 16,367 $ (56,538) $ 40,171
Adjustments to reconcile net income to
cash provided by (used for) operating
activities:
Depreciation and amortization 20,267 25,341 45,608
Recognition of unearned compensation 750 750
Deferred income taxes 3,434 8,450 11,884
Income of equity investees (40,171) (16,367) 56,538
Changes in:
Receivables (7,070) (6,959) (14,029)
Accounts payable (2,282) (7,448) (9,730)
Inventories (1,681) 3,579 1,898
Other current assets and liabilities (92) (3,852) 3,377 293 (274)
Advances, net (4,798) (49,559) 54,650 (293)
Other, net 22,138 (52,826) (30,688)
-------------- ------------- ------------- -------------- -------------
Net cash provided by (used for)
operating activities (4,890) 5,949 44,531 45,590
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (17,784) (14,457) (32,241)
Proceeds from disposal of assets 22,386 2,838 25,224
Acquisition of business,
net of cash acquired (13,464) (13,464)
-------------- ------------- ------------- -------------- -------------
Net cash used for
investing activities 4,602 (25,083) (20,481)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock 4,890 4,890
Proceeds from borrowings-net (10,164) (19,448) (29,612)
-------------- ------------- ------------- -------------- -------------
Net cash provided by (used for)
financing activities 4,890 (10,164) (19,448) (24,722)
Increase in cash and cash equivalents 387 387
Cash and cash equivalents
at beginning of period 2,897 2,897
-------------- ------------- ------------- -------------- -------------
Cash and cash equivalents
at end of period $ $ 3,284 $ $ $ 3,284
============== ============= ============= ============== =============
</TABLE>
16
<PAGE> 17
SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT
OF CASH FLOWS
(IN THOUSANDS)
SIX MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,568 $ 13,568 $ 16,585 $ (30,153) $ 13,568
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 18,066 11,239 29,305
Recognition of unearned compensation 546 546
Deferred income taxes 593 593
Income of equity investees (13,568) (16,585) 30,153
Changes in:
Receivables 6,340 (3,199) 3,141
Accounts payable 20,174 (19,035) 1,139
Inventories 107 (2,218) (2,111)
Other current assets and liabilities (205) (17,701) (2,820) 2,837 (17,889)
Advances, net (3,801) (13,522) 20,160 (2,837)
Other, net (3,415) (6,295) (9,710)
-------------- ------------- ------------- -------------- -------------
Net cash provided by (used for)
operating activities (4,006) 8,171 14,417 18,582
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (11,081) (10,714) (21,795)
Proceeds from disposal of assets 479 256 735
Acquisition on business, net of
cash acquired (3,700) (3,700)
-------------- ------------- ------------- -------------- -------------
Net cash used for
investing activities (10,602) (14,158) (24,760)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock 4,006 4,006
Proceeds from (reduction of)
borrowings-net 3,680 (259) 3,421
-------------- ------------- ------------- -------------- -------------
Net cash provided by (used for)
financing activities 4,006 3,680 (259) 7,427
Increase in cash and cash equivalents 1,249 1,249
Cash and cash equivalents
at beginning of period 1,842 1,842
-------------- ------------- ------------- -------------- -------------
Cash and cash equivalents
at end of period $ $ 3,091 $ $ $ 3,091
============== ============= ============= ============== =============
</TABLE>
17
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's operations are primarily driven by the number of oil and gas
wells being drilled, the depth and drilling conditions of such wells, the
number of well completions and the level of workover activity worldwide.
Drilling activity, in turn, is largely dependent on the price of oil and
natural gas. This is especially true in the United States, where the Company is
expected to generate approximately one-half of its revenues during fiscal 1997.
Due to "aging" oilfields and lower-cost sources of oil internationally,
drilling activity in the United States has declined more than 75% from its peak
in 1981. Record low drilling activity levels were experienced in 1986 and 1992.
As a result, pumping service companies have been unable to recapitalize their
aging United States fleets due to the inability, under current market
conditions, to generate adequate returns on new capital investments. The
Company believes it is important to operate with a greater "critical mass" in
the key U.S. markets to improve returns in this environment. This conclusion
led to the decision in April 1995 to consolidate its U.S. operations with those
of The Western Company of North America ("Western"), which had a larger
presence in the United States. The Company's U.S. critical mass was further
increased through the acquisition of Nowsco Well Service Ltd. ("Nowsco") in
June 1996 which added operations in the mid-continental and northeastern U.S.,
the latter being an area in which the Company did not have an existing
presence.
Relatively stronger oil and gas prices have recently caused U.S. exploration
and development companies to be more optimistic about the industry. As a
result, the normal seasonal drilling decline did not occur during the March
1997 quarter and drilling activity reached 900 rigs for the first time since
1993. U.S. exploration and production spending is forecast to increase 8-10% in
1997 from 1996. The rig count in the United States averaged 856 and 851 active
drilling rigs during the respective three and six -month periods ended March
31, 1997. Such activity represents a 21% and 16% increase over the same three
and six-month periods of the prior fiscal year, respectively. The activity
increase during the quarter was due to an increase in both oil and natural gas
drilling.
With the exception of Canada, international drilling activity has historically
been less volatile than domestic drilling activity. International drilling
activity increased by 8% compared with the prior year's three and six-month
periods primarily on the strength of development work in Canada and exploration
programs in the Middle East.
In both the U.S. and internationally, there has been a continuing trend by oil
and gas companies toward alliances with service companies. These alliances take
various forms including packaged or integrated services, single source
suppliers and turnkey agreements. More than 20% of the Company's revenues are
generated under such alliances.
18
<PAGE> 19
EXPANSIONS AND ACQUISITIONS
The Company's expansion and acquisition efforts over the past several years
have been focused on adding critical mass to its U.S. operations and
international geographic expansions of its existing product lines. The
acquisition of Nowsco in June 1996 (the "Nowsco Acquisition") contributed
towards both these efforts by giving the Company the number one pumping
services market position in Canada, where the Company had not operated since
1992, and adding to the Company's existing market positions in several key U.S.
and international markets. The Nowsco Acquisition added approximately 40% to
the Company's existing revenue base. The Company strengthened its market
position in Argentina in December 1996 by acquiring the remaining 51% interest
in its Argentine joint venture, NASA. The Company's original 49% share was
acquired through the Nowsco Acquisition.
RESULTS OF OPERATIONS
Revenue: Revenue increased by 71% and 68% over the same three and six-month
periods of the previous fiscal year, primarily as a result of the Nowsco
Acquisition and a strong recovery in the U.S. oil and gas markets.
The Company's U.S. pressure pumping operations continued its strong year over
year improvement with a 48% revenue increase over the prior year's second
quarter. Taking into account the prior year's Nowsco revenues, these operations
showed a pro forma revenue increase of 22%, benefiting from a 21% increase in
the active rig count. For the six-month period ended March 31, 1997, U.S.
revenues increased 47% over the same period of the prior year. Revenues in most
of the central U.S. regions were up sharply, most significantly South Texas,
East Texas and the Permian Basin regions. Management expects U.S. drilling
activity to remain strong during the remainder of fiscal 1997 in relation to
the prior year.
The Company's international pressure pumping operations continued their strong
growth with revenues increasing by over 100% (16% on a pro forma basis) from
the prior year's second quarter and first six-month period. This represents the
seventeenth consecutive quarter of international revenue improvement. The
Company's newly acquired Canadian operations achieved their highest ever
quarterly revenue level increasing 27% and 23% on a pro forma basis over the
prior year's three and six-month periods, respectively. Such activity increase
was primarily a result of a later than usual Spring breakup and particularly
strong fracturing and coiled tubing activity. Other international areas showing
significant revenue increases were UK (mainly coiled tubing), Indonesia and
Thailand. The Company's Middle East region also had another strong quarter
reflecting new contracts in India, Egypt and Saudi Arabia. The Company's
operations in Venezuela continued to benefit from increased coiled tubing
revenues resulting from the addition of one coiled tubing barge since the
previous year. Partially offsetting these gains were revenue declines in
Argentina, due to a slowdown in drilling activity by YPF. Management expects
the year over year international revenue increases to continue over the next
several quarters.
19
<PAGE> 20
The Company's other service lines, which include tubular services,
commissioning and pipeline inspection and production chemical businesses showed
an overall revenue increase of 87% and 84% for the three and six-month periods
ended March 31, 1997, respectively, over the same periods of the previous year
due mainly to the Nowsco Acquisition, as well as activity gains in each of
these service lines on a pro forma basis.
Operating Income: Operating income more than doubled for both the three and
six-month periods as a result of the revenue increase and higher operating
margins resulting from efficiencies derived from the combination of the
Company's and former Nowsco operations and the operating leverage realized from
the increase in U.S. business. The cost of sales and services as a percentage
of revenue during the three and six-month periods was 3.7% and 2.5% lower,
respectively, than in the same periods of the prior year primarily as a result
of cost reduction efforts implemented after the Nowsco Acquisition and the
economies of scale in having a larger U.S. operation. Other operating expenses,
excluding goodwill amortization, increased by 42% and 43% over the same three
and six-month periods of fiscal 1996 primarily as a result of additional
overhead from the former Nowsco operations. The increase in goodwill
amortization resulted from the Nowsco Acquisition, which was accounted for
under the purchase method of accounting.
Interest expense increased by $2.4 million and $5.2 million, respectively, over
the same three and six-month periods of the previous year due to increased
borrowings to fund the Nowsco Acquisition. See "Capital Resources and
Liquidity."
The year-to-date effective tax rate increased to 29% due to the higher U.S.
profitability which is taxed at a 35% statutory rate.
CAPITAL RESOURCES AND LIQUIDITY
Net cash provided from operating activities for the six months ended March 31,
1997 increased by $27.0 million from the prior year's figure. Higher
profitability, depreciation and amortization were partially offset by higher
receivable balances and the payment of merger related expenses previously
accrued. Net cash used for investing activities for the six-month period was
$20.5 million, a $4.3 million decrease from the first six months of the prior
year due to higher capital spending and the acquisition of the remaining 51%
ownership of the Company's previously unconsolidated joint venture in
Argentina, offset by the receipt of $20.3 million in cash on the sale of the
hull from the Renaissance, one of the Company's stimulation vessels. As a
result of cash received from the sale of the hull of the Renaissance and
because net cash flows from operating activities were sufficient to cover the
Company's capital requirements, the Company was able to reduce net borrowings
by $29.6 million during the current six-month period.
Management strives to maintain low cash balances while utilizing available
credit facilities to meet the Company's capital needs. Excess cash generated is
used to pay down outstanding borrowings. In June 1996, the Company replaced its
existing credit facility with a committed, unsecured bank credit facility (the
"New Bank Credit Facility") executed to accommodate the Nowsco Acquisition.
20
<PAGE> 21
The New Bank Credit Facility consists of a Canadian $320.0 million
(approximately U.S. $234 million) six-year term loan, which is repayable in 22
quarterly installments which began in March 1997, and a five-year U.S. $325.0
million revolving facility. At March 31, 1997, borrowings outstanding under the
New Bank Credit Facility amounted to $348.4 million consisting of $223.4
million under the term loan and $125.0 million borrowed under the revolver. At
March 31, 1997, principal reductions of term loans under the New Bank Credit
Facility are due in aggregate installments of $17,056,000; $34,113,000;
$43,616,000; $46,783,000; $46,783,000 and $35,062,000 in the years ending
September 30, 1997, 1998, 1999, 2000, 2001 and 2002, respectively.
The outstanding balance of the Company's 9.2% Notes, issued in 1991, was $12.0
million at March 31, 1997. Principal reductions of $6.0 million are required
annually each August until maturity on August 1, 1998.
In addition to the committed facility, the Company had $100.0 million in
various unsecured, discretionary lines of credit at March 31, 1997 which expire
at various dates in 1998. There are no requirements for commitment fees or
compensating balances in connection with these lines of credit. Interest on
borrowings is based on prevailing market rates. At March 31, 1997 and September
30, 1996, there were $40.4 million and $2.5 million, respectively, in
outstanding borrowings under these lines of credit.
The Company's interest-bearing debt represented 37.3% of its total
capitalization at March 31, 1997, a decrease from 39.8% at the previous fiscal
year-end. The Company's New Bank Credit Facility and 9.2% Notes contain various
customary covenants, including the maintenance of certain profitability and
solvency ratios and restrictions on dividend payments. Management believes that
the New Bank Credit Facility, combined with other discretionary credit
facilities and cash flow from operations, will provide the Company with
sufficient capital resources and liquidity to manage its routine operations and
fund projected capital expenditures.
At March 31, 1997, the Company had approximately $648 million of United States
tax net operating loss carryforwards expiring between 2000 and 2011. With the
Nowsco Acquisition, the Company acquired approximately $33 million of U.S. tax
net operating loss carryforwards, subject to certain limitations, expiring
between 2000 and 2011; approximately $115 million of non-U.S. tax net operating
loss carryforwards expiring in varying amounts beginning in 1997; and
approximately $7 million in non-U.S. tax credits which expire in varying
amounts between 1999 and 2009. Under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), the Company is
required to record a deferred tax asset for the future tax benefit of these tax
net operating loss carryforwards, as well as other items, if realization is
"more likely than not." The 1995 acquisition of The Western Company of North
America (the "Western Acquisition") provided the Company with a greater
critical mass with which to compete in the United States as it more than
doubled the Company's United States revenue base. In addition, with the
combination of Nowsco and Western, the Company has realized significant
consolidation benefits. Management estimates that in excess of $64 million of
overhead and redundant
21
<PAGE> 22
operating costs have been eliminated annually as a result of the combination of
the three companies. Management has concluded that the Company's future taxable
income will be sufficient over the remaining carryforward periods to realize the
tax benefits represented by approximately $510 million of U.S. tax net operating
loss carryforwards acquired with the acquisitions of Western and Nowsco and
generated by the Company's operations prior to such acquisitions. Net tax
benefits resulting from the acquisitions approximate $160 million and have been
included as a deferred tax asset recognized in the purchase price allocation.
Valuation allowances have been established for the benefits of the tax net
operating loss carryforwards that are estimated to expire prior to their
utilization. In March 1997, the Company increased its estimate of the amount of
pre-acquisition losses of Western and Nowsco for which it is more likely than
not that tax benefits will ultimately be realized. Accordingly, the Company has
recorded a $41.0 million increase in the deferred tax asset along with a
corresponding decrease in goodwill. Management estimates that the utilization of
net operating loss carryforwards will result in cash taxes equal to
approximately one-half of the book tax rate over the next several years.
Excluding acquisitions, capital expenditures during the first six months of the
fiscal year were $32.2 million, or $10.4 million higher than the spending in
the comparable period of the prior year. The current year's spending related
primarily to international expansion opportunities, primarily in Latin America,
and upgrades of the Company's information systems. Other investing activities
included the acquisition of the remaining 51% interest in the Company's joint
venture in Argentina for total consideration of $13.5 million.
Capital expenditures for fiscal 1997 are projected to be approximately $70-80
million, excluding acquisitions, and are expected to include spending for
continued geographic expansions of all service lines, construction of an
additional coiled tubing vessel, additional capacity in certain high margin
locations and normal levels of replacement capital. The actual amount of fiscal
1997 capital expenditures (excluding acquisitions) will be primarily dependent
upon the availability of expansion opportunities and are expected to be funded
by cash flows from operating activities and available credit facilities.
Management believes cash flows from operating activities and available lines of
credit, if necessary, will be sufficient to fund projected capital
expenditures.
This document contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 concerning, among other
things, the Company's prospects, developments and business strategies for its
operations, all of which are subject to certain risks, uncertainties and
assumptions. These forward-looking statements are identified by their use of
terms and phrases such as "expect," "estimate," "project," "believe," and
similar terms and phrases. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those expected, estimated or projected.
22
<PAGE> 23
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Stockholders on
January 23, 1997, in Houston, Texas. All nominated directors
were elected.
(i) Directors elected at the Annual Meeting:
<TABLE>
<CAPTION>
Votes in Votes Broker
Class I Directors Favor Withheld Non-Votes
- ----------------- --------- -------- ---------
<S> <C> <C> <C>
John R. Huff 34,994,047 390,927 0
R. A. LeBlanc 34,993,537 391,437 0
Michael E. Patrick 34,994,038 390,936 0
</TABLE>
Directors with terms of office continuing after the Annual
Meeting:
Class II Directors
------------------
Don D. Jordan
Michael McShane
Class III Directors
-------------------
L. William Heiligbrodt
James E. McCormick
J.W. Stewart
23
<PAGE> 24
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
3.1 Bylaws of the Company, as amended
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
None
24
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BJ Services Company
(Registrant)
Date: May 15, 1997 BY \s\ Margaret Barrett Shannon
-----------------------------------
Margaret Barrett Shannon
Vice President and General
Counsel
Date: May 15, 1997 BY \s\ Matthew D. Fitzgerald
-----------------------------------
Matthew D. Fitzgerald
Controller and Chief
Accounting Officer
25
<PAGE> 26
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.1 Bylaws of the Company, as amended
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
BYLAWS OF
BJ SERVICES COMPANY
AS OF DECEMBER 12, 1996
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
ARTICLE I - Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Registered Office . . . . . . . . . . . . . . . 1
Section 2. Other Offices . . . . . . . . . . . . . . . . . 1
ARTICLE II - Meetings of Stockholders . . . . . . . . . . . . . . . . . . 1
Section 1. Place of Meetings . . . . . . . . . . . . . . . 1
Section 2. Annual Meeting of Stockholders . . . . . . . . 1
Section 3. Quorum; Adjourned Meetings and Notice Thereof . 1
Section 4. Voting . . . . . . . . . . . . . . . . . . . . 2
Section 5. Proxies . . . . . . . . . . . . . . . . . . . . 2
Section 6. Special Meetings . . . . . . . . . . . . . . . 2
Section 7. Notice of Stockholders' Meetings . . . . . . . 2
Section 8. Waiver of Notice . . . . . . . . . . . . . . . 3
Section 9. Maintenance and Inspection of Stockholder List 3
Section 10. Stockholder Action by Written Consent Without .
a Meeting . . . . . . . . . . . . . . . . . . 3
Section 11. Inspectors of Election . . . . . . . . . . . . 3
Section 12. Procedure for Stockholders' Meetings . . . . . 4
Section 13. Order of Business . . . . . . . . . . . . . . . 4
Section 14. Procedures for Bringing Business before an. . .
Annual Meeting . . . . . . . . . . . . . . . . 4
Section 15. Procedures for Nominating Directors . . . . . . 5
ARTICLE III - Directors . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1. Number and Qualification of Directors . . . . . 6
Section 2. Election and Term of Office . . . . . . . . . . 6
Section 3. Resignation and Removal of Directors . . . . . 7
Section 4. Vacancies . . . . . . . . . . . . . . . . . . . 7
Section 5. Powers . . . . . . . . . . . . . . . . . . . . 8
Section 6. Place of Directors' Meetings . . . . . . . . . 8
Section 7. Regular Meetings . . . . . . . . . . . . . . . 8
Section 8. Special Meetings . . . . . . . . . . . . . . . 8
Section 9. Quorum . . . . . . . . . . . . . . . . . . . . 9
Section 10. Action Without Meeting . . . . . . . . . . . . 9
Section 11. Telephonic Meetings . . . . . . . . . . . . . . 9
Section 12. Meetings and Action of Committees . . . . . . . 9
Section 13. Special Meetings of Committees . . . . . . . . 10
Section 14. Minutes of Committee Meetings . . . . . . . . . 10
Section 15. Compensation of Directors . . . . . . . . . . . 10
Section 16. Indemnification . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV - Officers . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1. Officers . . . . . . . . . . . . . . . . . . . 12
Section 2. Election of Officers . . . . . . . . . . . . . 12
Section 3. Subordinate Officers . . . . . . . . . . . . . 12
Section 4. Removal and Resignation of Officers . . . . . . 12
Section 5. Vacancies in Offices . . . . . . . . . . . . . 12
Section 6. Chairman of the Board . . . . . . . . . . . . . 12
Section 7. Vice Chairman of the Board . . . . . . . . . . 12
Section 8. President . . . . . . . . . . . . . . . . . . . 13
Section 9. Vice Presidents . . . . . . . . . . . . . . . . 13
Section 10. Secretary . . . . . . . . . . . . . . . . . . . 13
Section 11. Chief Financial Officer . . . . . . . . . . . . 13
Section 12. Treasurer and Controller . . . . . . . . . . . 14
ARTICLE V - Certificates of Stock . . . . . . . . . . . . . . . . . . . . 14
Section 1. Certificates . . . . . . . . . . . . . . . . . 14
Section 2. Signature on Certificates . . . . . . . . . . . 14
Section 3. Statement of Stock Rights, Preferences,
Privileges. . . . . . . . . . . . . . . . . . . 14
Section 4. Lost Certificates . . . . . . . . . . . . . . . 15
Section 5. Transfers of Stock . . . . . . . . . . . . . . 15
Section 6. Fixing Record Date . . . . . . . . . . . . . . 15
Section 7. Registered Stockholders . . . . . . . . . . . . 15
ARTICLE VI - General Provisions - Dividends . . . . . . . . . . . . . . . 16
Section 1. Dividends . . . . . . . . . . . . . . . . . . . 16
Section 2. Payment of Dividends; Directors' Duties . . . . 16
Section 3. Checks . . . . . . . . . . . . . . . . . . . . 16
Section 4. Corporate Contracts and Instruments . . . . . . 16
Section 5. Fiscal Year . . . . . . . . . . . . . . . . . . 16
Section 6. Manner of Giving Notice . . . . . . . . . . . . 16
Section 7. Waiver of Notice . . . . . . . . . . . . . . . 17
Section 8. Annual Statement . . . . . . . . . . . . . . . 17
ARTICLE VII - Amendments . . . . . . . . . . . . . . . . . . . . . . . 17
Section 1. Amendment by Directors . . . . . . . . . . . 17
Section 2. Amendments by Stockholders . . . . . . . . . . 18
</TABLE>
<PAGE> 4
BYLAWS
OF
BJ SERVICES COMPANY
ARTICLE I
Offices
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The Corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may
from time to time determine or the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
Section 1. All meetings of the stockholders shall be held at such
place either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting.
Section 2. An annual meeting of stockholders shall be held on the
fourth Thursday in January in each year, if not a legal holiday, and if a legal
holiday, then on the next business day following, at 2:00 p.m. or at such other
date and time as may be determined from time to time by resolution adopted by
the Board of Directors, for the purpose of electing, subject to Article III,
Section 17 hereof, one class of the directors of the Corporation, and
transacting such other business as may properly be brought before the meeting.
Section 3. A majority of the stock issued and outstanding and
entitled to vote at any meeting of stockholders, the holders of which are
present in person or represented by proxy, without regard to class or series,
shall constitute a quorum for the transaction of business except as otherwise
provided by law, by the Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation"), or by these Bylaws. A quorum, once
established, shall not be broken by the withdrawal of enough votes to leave
less than a quorum and the votes present may continue to transact business
until adjournment provided that any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
If, however, such quorum shall not be present or represented at any meeting of
the stockholders, a majority of the voting stock represented in person or by
proxy may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented.
At such adjourned meeting at which a quorum shall be present or represented,
any business may be transacted which might have been transacted at the
<PAGE> 5
meeting as originally noticed. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder
of record entitled to vote thereat.
Section 4. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy and entitled to vote shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of the statutes or the Certificate of Incorporation or these Bylaws, a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 5. At each meeting of the stockholders, each stockholder
having the right to vote may vote in person or may authorize another person or
persons to act for him by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than three years
prior to said meeting, unless said instrument provides for a longer period.
All proxies must be filed with the Secretary of the Corporation at the
beginning of each meeting in order to be counted in any vote at the meeting. A
proxy shall be deemed signed if the stockholder's name is placed on the proxy
(whether by manual signature, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney in fact. Except as otherwise set
forth in the Certificate of Incorporation, each stockholder shall have one vote
for each share of stock having voting power, registered in his name on the
books of the Corporation on the record date set by the Board of Directors as
provided in Article V, Section 6 hereof.
Section 6. Special meetings of the stockholders, for any purpose, or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called at any time by the Board of Directors or by a
committee of the Board of Directors and whose powers and authority, as provided
in a resolution of the Board of Directors or in these Bylaws, include the power
to call meetings. Special meetings of stockholders of the corporation may not
be called by any other person or persons. Business transacted at any special
meeting of stockholders shall be limited to the purposes stated in the notice.
Section 7. Any notice requested to be given to stockholders by
statute, the Certificate of Incorporation or these Bylaws, including notice of
any meeting of stockholders, shall be given personally, by first-class mail or
by telegraphic communication, charges prepaid, addressed to the stockholder at
the address of such stockholder appearing on the books of the Corporation or
given by the stockholder to the Corporation for the purpose of notice. If no
such address appears on the Corporation's books or has been so given, notice
shall be deemed to have been given if sent by first-class mail or telegraphic
communication to the Corporation's principal executive office, or if published
at least once in a newspaper of general circulation in the county where such
principal executive office is located. Notice shall be deemed to have been
given at the time when delivered personally or deposited in the mail or sent by
telegram.
-2-
<PAGE> 6
If any notice addressed to a stockholder at the address of such
stockholder appearing on the books of a Corporation is returned to the
Corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the stockholder
at such address, all further notices shall be deemed to have been duly given
without further mailing if the same shall be available to the stockholder upon
written demand of the stockholder at the principal executive office of the
Corporation for a period of one year from the date of the giving of such
notice.
Section 8. Attendance of a person at a meeting shall constitute a
waiver of notice to such person of such meeting, except when the person objects
at the beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened, or objects to the consideration of
matters not included in the notice of the meeting.
Section 9. The officer or agent who has charge of the stock ledger of
the Corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where their meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept open at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine such list or
to vote at any meetings of stockholders.
Section 10. No action shall be taken by stockholders except at an
annual or special meeting of stockholders, and stockholders may not act by
written consent.
Section 11. Before any meeting of stockholders, the Board of
Directors may appoint any persons other than nominees for office to act as
inspectors of election at the meeting or its adjournment. If no inspectors of
election are so appointed, the chairman of the meeting may, and on the request
of any stockholder or a stockholder's proxy shall, appoint inspectors of
election at the meeting. The number of inspectors shall be either one or
three. If inspectors are appointed at a meeting on the request of one or more
stockholders or proxies, the holders of a majority of shares or their proxies
present at the meeting shall determine whether one or three inspectors are to
be appointed. If any person appointed as inspector fails to appear or fails or
refuses to act, the chairman of the meeting may, and upon the request of any
stockholder or a stockholder's proxy shall, appoint a person to fill such
vacancy.
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The duties of these inspectors shall be as follows:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity and effect of proxies;
(b) Receive votes or ballots;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes;
(e) Determine when the polls shall close;
(f) Determine the results; and
(g) Do any other acts that may be proper to conduct the election
or vote with fairness to all stockholders.
Section 12. Meetings of the stockholders shall be presided over by
the Chairman of the Board of Directors, or in his absence, by the Vice
Chairman, the President or by any Vice President, or, in the absence of any of
such officers, by a chairman to be chosen by a majority of the stockholders
entitled to vote at the meeting who are present in person or by proxy. The
Secretary, or, in his absence, any person appointed by the Chairman, shall act
as secretary of all meetings of the stockholders.
Section 13. The order of business at all meetings of stockholders
shall be as determined by the chairman of the meeting.
Section 14. Notwithstanding anything in these Bylaws to the contrary,
no business shall be conducted at an annual meeting of the stockholders except
in accordance with the procedures hereinafter set forth in this Section 14;
provided, however, that nothing in this Section 14 shall be deemed to preclude
discussion by any stockholder of any business properly brought before the
annual meeting in accordance with said procedures.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be (1) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board, (2) otherwise properly brought before the meeting by or at the
direction of the Board, or (3) otherwise properly brought before the meeting by
a stockholder. In addition to any other applicable requirements, for business
to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the
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Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 90 days prior to the date of the anniversary of the
annual meeting of the Corporation's stockholders held in the prior year. Any
adjournment(s) or postponement(s) of the original meeting whereby the meeting
will reconvene within 30 days from the original date shall be deemed for
purposes of notice to be a continuation of the original meeting and no business
may be brought before any such reconvened meeting unless timely notice of such
business was given to the Secretary of the Corporation for the meeting as
originally scheduled. A stockholder's notice to the Secretary shall set forth
as to each matter the stockholder proposes to bring before the annual meeting
(i) a brief description of the business desired to be brought before the annual
meeting and their reasons for conducting such business at the annual meeting,
(ii) the name and record address of the stockholder proposing such business,
(iii) the class and number of shares of the Corporation which are beneficially
owned by the stockholder, and (iv) any material interest of the stockholder in
such business.
The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 14, and if
he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
Section 15. Notwithstanding anything in these Bylaws to the contrary,
only persons who are nominated in accordance with the procedures hereinafter
set forth in this Section 15 shall be eligible for election as directors of the
Corporation.
Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of stockholders only (1) by or at the
direction of the Board of Directors or (2) by any stockholder of the
Corporation entitled to vote for the election of directors at the meeting who
complies with the notice of procedures set forth in this Section 15. Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered to
or mailed and received at the principal executive offices of the Corporation
not less than 90 days prior to the date of the anniversary of the annual
meeting of the Corporation's stockholders held in the prior year in the case of
an annual meeting or, in the case of a special meeting called by the Board of
Directors (or by a committee of the Board) for the purpose of electing
directors, not more than 10 days following the earlier of the date of notice of
such special meeting or the date on which a public announcement of such meeting
is made. Any adjournment(s) or postponement(s) of the original meeting whereby
the meeting will reconvene within 30 days from the original date shall be
deemed for purposes of notice to be a continuation of the original meeting and
no nominations by a shareholder of persons to be elected directors of the
Corporation may be made at any such reconvened meeting other than pursuant to a
notice that was timely for the meeting on the date originally scheduled. Such
stockholder's notice shall set forth: (i) as to each person
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whom the stockholder proposes to nominate for election or re-election as a
director, all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is
otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended, or any successor regulation
thereto (including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (ii) as to
the stockholder giving the notice (A) the name and address, as they appear on
the Corporation's books, of such stockholder, and (B) the class and number of
shares of the Corporation which are beneficially owned by such stockholder. At
the request of the Board of Directors, any person nominated by the Board of
Directors for election as a director shall furnish to the Secretary of the
Corporation that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by this Section 15, and if he should so determine, he
shall so declare to the meeting and the defective nomination shall be
disregarded.
ARTICLE III
Directors
Section 1. The Board of Directors shall consist of a minimum of four
(4) and a maximum of ten (10) directors. The number of directors shall be
fixed from time to time within the minimum and the maximum number established
by the then elected Board of Directors. The number of directors until changed
by the Board shall be seven (7). The maximum number of directors may not be
increased by the Board of Directors to exceed ten (10) without the affirmative
vote of 75% of the members of the entire Board. The directors need not be
stockholders. No officer of the Corporation may serve on a board of directors
of any company having a present or retired employee on the Corporation's Board
of Directors. No person may stand for election as a director if within the
previous one (1) year he has resigned from the Board as a result of the tenure
provisions of Article III, Section 3 hereof regarding service for more than 10,
11 or 12 consecutive years on the Board. No person associated with an
organization whose services are contracted by the Corporation shall serve on
the Corporation's Board of Directors, provided however that this prohibition
may be waived by a majority of the members of the whole Board if the Board in
its judgment determines that such waiver would be in the best interest of the
Corporation.
Section 2. The Board of Directors shall be divided into three
classes, Class I, Class II and Class III. The number of directors in each
class shall be the whole number contained in the quotient arrived at by
dividing the authorized number of directors by three, and if a fraction is also
contained in such quotient then if such fraction is one-third (1/3), the extra
director shall be a member of Class III, and if the fraction is two-thirds
(2/3), one of the extra directors shall be a member of Class III and the other
a member of
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Class II. Each director shall serve for a term ending on the date of the third
annual meeting following the annual meeting at which such director was elected;
provided, however, that the directors initially appointed to Class I shall
serve for a term ending on the date of the first annual meeting next following
September 30, 1990, the directors initially appointed to Class II shall serve
for a term ending on the date of the second annual meeting next following
September 30, 1990, and the directors initially appointed to Class III shall
serve for a term ending on the date of the third annual meeting next following
September 30, 1990. One class of the directors shall be elected at each annual
meeting of the stockholders. If any such annual meeting is not held or the
directors are not elected thereat, the directors may be elected at any special
meeting of stockholders held for that purpose. All directors shall hold office
until their respective successors are elected and qualified or until their
earlier death, resignation or removal.
Section 3. Directors who are employees of the Corporation must resign
from the Board of Directors at the time of any diminution in their duties or
responsibilities as an officer, at the time they leave the employ of the
Corporation for any reason or on their 70th birthday. A director's term of
office shall automatically terminate on the date of the annual meeting of
stockholders following: (i) his 70th birthday; (ii) the third anniversary of
his retirement from his principal occupation; (iii) unless he is an officer of
the Corporation, the date on which he has served on the Corporation's Board of
Directors for a consecutive period of (a) twelve (12) complete years or more
prior to the Corporation's 1991 annual meeting of stockholders, (b) eleven (11)
complete years or more prior to the Corporation's 1992 annual meeting of
stockholders, or (c) commencing with the 1993 annual meeting of stockholders, a
total of ten (10) complete years or more thereafter; (iv) any fiscal year in
which he has failed to attend at least 66% of the meetings of the Board of
Directors and any committees of the Board of Directors on which such director
serves; or (v) the first anniversary of any change in his employment (other
than a promotion or lateral movement within the same organization). The
requirements of sections 3(i) and 3(ii) of this Article III shall not apply to
a director who was 68 years old and serving on the Company's Board of Directors
on December 1, 1995. The requirements of section 3(ii) of this Article III
shall not apply to a director who retired in 1995 and was serving on the
Company's Board of Directors on December 1, 1996. The requirements of Section
3(v) of Article III may be waived by a majority of the members of the whole
Board (excluding the director whose resignation would otherwise be required) if
the Board in its judgment determines that such waiver would be in the best
interest of the Corporation. Any director may be removed for cause by the
holders of a majority of the shares of the Corporation entitled to vote in the
election of directors; stockholders may not remove any director without cause.
The Board of Directors may not remove any director for or without cause, and no
recommendation by the Board of Directors that a director be removed for cause
may be made to the stockholders except by the affirmative vote of not less than
75% of the members of the whole Board; provided that the Board may remove any
director who fails to resign as required by the provisions of these Bylaws.
Section 4. Except as otherwise provided by statute or the Certificate
of Incorporation, in the case of any increase in the number of directors, such
additional director or directors shall be proposed for election to terms of
office that will most nearly result in each Class of directors containing
one-third of the entire number of members of
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the whole Board, and, unless such position is to be filled by a vote of the
stockholders at an annual or special meeting, shall be elected by a majority
vote of the directors in such Class or Classes, voting separately by Class. In
the case of any vacancy in the Board of Directors, however created, the vacancy
or vacancies shall be filled by majority vote of the directors remaining in the
Class in which the vacancy occurs or, if only one such director remains, by
such director. In the event one or more directors shall resign, effective at a
future date, such vacancy or vacancies shall be filled as provided herein.
Directors so chosen or elected shall hold office for the remaining term of the
directorship to which appointed. Any director elected or chosen as provided
herein shall serve for the unexpired term of office or until his successor is
elected and qualified or until his earlier death, resignation or removal.
In the event of any decrease in the authorized number of directors,
(a) each director then serving as such shall nevertheless continue as a
director of the class of which he is a member until the expiration of this
current term, or his prior death, resignation or removal, and (b) the newly
eliminated directorships resulting from such decrease shall be apportioned by
the board of directors to such class or classes as shall, so far as possible,
bring the number of directors in the respective classes into conformity with
the formula in Section 2 hereof as applied to the new authorized number of
directors.
Section 5. The property and business of the Corporation shall be
managed by or under the direction of its Board of Directors. In addition to
the powers and authorities by these Bylaws expressly conferred upon them, the
Board may exercise all such powers of the corporation and do all such lawful
acts and things as are not by statute, by the Certificate of Incorporation or
by these Bylaws directed or required to be exercised or done by the
stockholders.
Meetings of the Board of Directors
Section 6. The directors may hold their meetings and have one or more
offices, and keep the books of the Corporation outside the state of Delaware.
Section 7. Regular meetings of the Board of Directors may be held
without notice at such time and place as shall from time to time be determined
by the Board. Except as otherwise provided by statute, any business may be
transacted at any regular meeting of the Board of Directors.
Section 8. Special meetings of the Board of Directors may be called
by the Chairman of the Board, the Vice Chairman or the President on at least
forty-eight hours' notice to each director. Special meetings shall be called
by the President or the Secretary in like manner and on like notice on the
written request of any two directors unless the Board consists of only one
director, in which case special meetings shall be called by the President or
Secretary in like manner and on like notice on the written request of the sole
director.
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Section 9. At all meetings of the Board of Directors a majority of
the authorized number of directors shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the vote of a majority
of the directors present at any meeting at which there is a quorum, shall be
the act of the Board of Directors, except as may be otherwise specifically
provided by statute, by the Certificate of Incorporation or by these Bylaws.
If a quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
If only one director is authorized, such sole director shall constitute a
quorum. A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action is
approved by at least a majority of the required quorum for such meeting.
Section 10. Unless otherwise restricted by statute, the Certificate
of Incorporation or these Bylaws, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting, if all members of the Board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board or committee.
Section 11. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such meeting.
Committees of Directors
Section 12. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each such
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. If no alternate members have been appointed, the committee
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any absent or disqualified member. The Board of Directors shall, by resolution
passed by a majority of the whole Board, designate one member of each committee
as chairman of such committee. Each such chairman shall hold such office for a
period not in excess of five years, and shall upon surrender of such
chairmanship resign from membership on such committee. Any such committee, to
the extent provided in the resolution of the Board of Directors, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, but no such
committee shall have the power or authority to authorize an amendment to the
Certificate of Incorporation, adopt an agreement of merger or
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consolidation, recommend to the stockholders the sale, lease or exchange of all
or substantially all of the Corporation's property and assets, recommend to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amend the Bylaws of the Corporation; and, unless the resolution or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock.
Section 13. Special meetings of committees may be called by the
Chairman of such committee, the Chairman of the Board or the President, on at
least 48 hours notice to each member and alternate member. Alternate members
shall have the right to attend all meetings of the committee. The Board of
Directors may adopt rules for the government of any committee not inconsistent
with the provisions of these Bylaws. If a committee is comprised of an odd
number of members, a quorum shall consist of a majority of that number. If the
committee is comprised of an even number of members, a quorum shall consist of
one-half of that number. If a committee is comprised of two members, a quorum
shall consist of both members.
Section 14. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when requested.
Compensation of Directors
Section 15. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be
allowed like compensation for attending committee meetings.
Indemnification
Section 16. (a) The Corporation shall indemnify every person who is
or was a party or is or was threatened to be made a party to any action, suit,
or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation or any of its direct or indirect wholly-owned subsidiaries or,
while a director, officer, employee or agent of the Corporation or any of its
direct or indirect wholly-owned subsidiaries, is or was serving at the request
of the Corporation or any of its direct or indirect wholly-owned subsidiaries,
as a director, officer, employee, agent or trustee of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including counsel fees), judgments, fines, and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, to the full extent permitted by applicable laws
provided that the Corporation shall not be obligated to
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indemnify any such person against any such action, suit or proceeding which is
brought by such person against the Corporation or any of its direct or indirect
wholly-owned subsidiaries or the directors of the Corporation or any of its
direct or indirect wholly-owned subsidiaries, other than an action brought by
such person to enforce his rights to indemnification hereunder, unless a
majority of the Board of Directors of the Corporation shall have previously
approved the bringing of such action, suit or proceeding. The Corporation
shall indemnify every person who is or was a party or is or was threatened to
be made a party to any action, suit, or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is or was
licensed to practice law and an employee (including an employee who is or was
an officer) of the Corporation or any of its direct or indirect wholly-owned
subsidiaries and, while acting in the course of such employment committed or is
alleged to have committed any negligent acts, errors or omissions in rendering
professional legal services at the request of the Corporation or pursuant to
his employment (including, without limitation, rendering written or oral legal
opinions to third parties) against expenses (including counsel fees),
judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding, to the full
extent permitted by applicable law; provided that the Corporation shall not be
obligated to indemnify any such person against any action, suit or proceeding
arising out of any adjudicated criminal, dishonest or fraudulent acts, errors
or omissions of such person or any adjudicated willful, intentional or
malicious acts, errors or omissions of such person.
(b) Expenses incurred by an officer or director of the Corporation
or any of its direct or indirect wholly-owned subsidiaries in defending a
civil or criminal action, suit or proceeding shall be paid by the Corporation
in advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such director or officer to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this Section 16. Such expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
(c) The indemnification and advancement of expenses provided by,
or granted pursuant to, this Section 16 shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any provision of law, the Corporation's Certificate of
Incorporation, the Certificate of Incorporation or bylaws or other governing
documents of any direct or indirect wholly-owned subsidiary of the Corporation,
or any agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding any of the positions or having any of the relationships referred
to in this Section 16.
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ARTICLE IV
Officers
Section 1. The officers of the Corporation shall be a Chairman of the
Board, a President, a Chief Financial Officer, a Vice President, a Secretary, a
Treasurer and a Controller. The Corporation may also have, at the discretion
of the Board of Directors, a Vice Chairman of the Board, one or more additional
Vice Presidents, and such other officers as may be appointed in accordance with
the provisions of Section 3 of this Article.
Section 2. The officers of the Corporation, except such officers as
may be appointed in accordance with the provisions of Section 3 or Section 5 of
this Article, shall be chosen by the Board of Directors, and each shall serve
at the pleasure of the Board, subject to the rights, if any, of any officer
under any contract of employment.
Section 3. The Board of Directors may appoint, and may empower the
President to appoint, such other officers as the business of the Corporation
may require, each of whom shall hold office for such period, have such
authority and perform such duties as are provided in the Bylaws or as the Board
of Directors may from time to time determine.
Section 4. Any officer may be removed, either with or without cause,
by the Board of Directors, at any regular or special meeting thereof, or except
in case of an officer chosen by the Board of Directors, by any officer upon
whom such power of removal may be conferred by the Board of Directors, provided
that such removal shall not prejudice the remedy of such officer for breach of
any contract of employment.
Any officer may resign at any time by giving written notice to the
Corporation. Any such resignation shall take effect on receipt of such notice
or at any later time specified therein. Unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
Any such resignation is without prejudice to the rights, if any, of the
Corporation under any contract to which the officer is a party.
Section 5. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled in the manner
prescribed in these Bylaws for regular appointments to such office.
Section 6. The Chairman of the Board shall, if present, preside at
all meetings of the Board of Directors and of the stockholders, and shall
exercise and perform such other powers and duties as may be from time to time
assigned to him by the Board of Directors or prescribed by the Bylaws.
Section 7. The Vice Chairman of the Board shall exercise and perform
such powers and duties as may be from time to time assigned to him by the Board
of Directors
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or prescribed in these Bylaws. In the absence of the Chairman of the Board,
the Vice Chairman of the Board shall preside at all meetings of the
stockholders and the Board of Directors.
Section 8. The President shall be the chief executive officer of the
Corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and the officers of
the Corporation. In the absence of the Chairman of the Board and the Vice
Chairman of the Board, the President shall preside at all meetings of the
stockholders and the Board of Directors. He shall have the general powers and
duties of management usually vested in the office of President of a
Corporation, and shall have such other powers and duties as may be prescribed
by the Board of Directors or the Bylaws.
Section 9. In the absence or disability of the President, the Vice
Presidents, if any, in order of their rank as fixed by the Board of Directors,
or if not ranked, the Vice President designated by the President, shall perform
all the duties of the President, and when so acting shall have all the powers
of, and be subject to all the restrictions upon, the President. The Vice
Presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the Board of Directors,
these Bylaws or the President.
Section 10. The Secretary shall keep or cause to be kept, at the
principal office or such other place as the Board of Directors may order, a
book of minutes of all meetings and actions of directors, committees of
directors and stockholders, with the time and place of holding, whether regular
or special, and, if special, how authorized, the notice thereof given, the
names of those present at directors' and committee meetings, the number of
shares present or represented at stockholders' meetings, and the proceedings
thereof.
The Secretary shall keep, or cause to be kept, at the principal office
or at the office of the Corporation's transfer agent or registrar, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required by these Bylaws or
by law to be given, and he shall keep the seal of the Corporation, if one be
adopted, in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or by the Bylaws.
Section 11. The Chief Financial Officer shall keep and maintain, or
cause to be kept and maintained, adequate and correct books and records of
accounts of the properties and business transactions of the Corporation,
including accounts of its assets, liabilities,
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receipts, disbursements, gains, losses, capital, retained earnings and shares.
The books of account shall be open at all times to inspection by any director.
The Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such
depositaries as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation as may be ordered by the Board of Directors, shall
render to the President and Directors, whenever they request it, an account of
all of his transactions as Chief Financial Officer and of the financial
condition of the Corporation, and shall have other powers and perform such
other duties as may be prescribed by these Board of Directors or these Bylaws.
Section 12. The Treasurer and the Controller shall each have such
powers and perform such duties as from time to time may be prescribed for him
by the Board of Directors, the President or these Bylaws.
ARTICLE V
Certificate of Stock
Section 1. Every holder of stock of the Corporation shall be entitled
to have a certificate signed by, or in the name of the Corporation by, the
Chairman or Vice Chairman of the Board of Directors, or the President or a Vice
President, and by the Secretary or an Assistant Secretary, if one be appointed,
or the Treasurer or an Assistant Treasurer, if one be appointed, of the
Corporation, certifying the number of shares represented by the certificate
owned by such stockholder in the Corporation.
Section 2. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
Section 3. If the Corporation shall be authorized to issue more than
one class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualification,
limitations or restrictions of such preferences and/or rights shall be set
forth in full or summarized on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided by statute, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock, a
statement that the Corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
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<PAGE> 18
Lost, Stolen or Destroyed Certificates
Section 4. The Board of Directors, the Secretary and the Treasurer
each may direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the owner of such certificate, or his legal representative. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to furnish the Corporation a bond in such form and
substance and with such surety as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the Certificate
alleged to have been lost, stolen or destroyed.
Transfers of Stock
Section 5. Upon surrender to the Corporation, or the transfer agent
of the Corporation, of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall
be the duty of the Corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon
its books.
Fixing Record Date
Section 6. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of the
stockholders, or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may fix a
record date which shall not be more than 60 nor less than 10 days before the
date of such meeting, nor more than 60 days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
Registered Stockholder
Section 7. The Corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equitable or other claim or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, save as expressly provided by the laws of
the State of Delaware.
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<PAGE> 19
ARTICLE VI
General Provisions
Dividends
Section 1. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property or in shares of the
Corporation's capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 2. Before declaration of any dividend, there may be set aside
out of any funds of the Corporation available for dividends such sum or sums as
the Board of Directors from time to time, in their absolute discretion, thinks
proper as a reserve fund to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for such other
purpose as the Board of Directors shall think conducive to the interests of the
Corporation, and the Board of Directors may thereafter abolish any such reserve
in its absolute discretion.
Checks
Section 3. All checks, drafts or other orders for payment of money,
notes or other evidences of indebtedness, issued in the name of or payable to
the Corporation shall be signed by such officer or officers as the Board of
Directors or the President or any Vice President, acting jointly, may from time
to time designate.
Section 4. The President, any Vice President, the Secretary or the
Treasurer may enter into contracts and execute instruments on behalf of the
Corporation. The Board of Directors, the President or any Vice President may
authorize any officer or officers, and any employee or employees or agent or
agents of the Corporation or any of its subsidiaries, to enter into any
contract or execute any instrument in the name of and on behalf of the
Corporation, and such authority may be general or confined to specific
instances.
Fiscal Year
Section 5. The fiscal year of the Corporation shall be October 1
through September 30, unless otherwise fixed by resolution of the Board of
Directors.
Notices
Section 6. Whenever, under the provisions of the statutes, the
Certificate of Incorporation or these Bylaws, notice is required to be given to
any director, it shall not be construed to require personal notice, but such
notice may be given in writing, by mail,
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<PAGE> 20
addressed to such director, at his address as it appears on the records of the
Corporation (unless prior to the mailing of such notice he shall have filed
with the Secretary a written request that notices intended for him be mailed to
some other address, in which case such notice shall be mailed to the address
designated in the request) with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the
United States mail; provided, however, that, in the case of notice of a special
meeting of the Board of Directors, if such meeting is to be held within seven
calendar days after the date of such notice, notice shall be deemed given as of
the date such notice shall be accepted for delivery by a courier service that
provides "opening of business next day" delivery, so long as at least one
attempt shall have been made, on or before the date such notice is accepted for
delivery by such courier service, to provide notice by telephone to each
director at his principal place of business and at his principal residence.
Notice to directors may also be given by telegram, by personal delivery or
telephone.
Section 7. Whenever any notice is required to be given under the
provisions of the statutes, the Certificate of Incorporation or these Bylaws, a
waiver thereof in writing, or by telegraph, cable or other written form of
recorded communication, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
Annual Statement
Section 8. The Board of Directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition
of the Corporation.
ARTICLE VII
Amendments
Section l. Except any amendment to this Article VII and to Article
II, Section 6, Article II, Section 10, Article III, Section 1 (as it relates to
increases in the number of directors), Article III, Section 2, the last
sentence of Article III, Section 3 (as it relates to removal of directors),
Article III, Section 4, Article III, Section 16 and Article VI, Section 6 of
these Bylaws, or any of such provisions, which shall require approval by the
affirmative vote of directors representing at least 75% of the number of
directors provided for in accordance with Article III, Section 1, and except as
otherwise expressly provided in a bylaw adopted by the stockholders as
hereinafter provided, the directors, by the affirmative vote of a majority of
the whole Board and without the assent or vote of the stockholders, may at any
meeting, make, repeal, alter, amend or rescind any of these Bylaws, provided
the substance of the proposed amendment or other action shall have been stated
in a notice of the meeting.
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<PAGE> 21
Section 2. These Bylaws may not be altered, amended or rescinded, and
new Bylaws may not be adopted, by the stockholders of the Corporation except by
the vote of the holders of not less than 75% of the total voting power of all
shares of stock of the Corporation entitled to vote in the election of
directors, considered for such purpose as one class.
-18-
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