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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999
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
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BJ SERVICES COMPANY
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 63-0084140
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5500 NORTHWEST CENTRAL DRIVE, HOUSTON, TEXAS 77092
(Address of principal executive offices) (Zip Code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 462-4239
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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COMMON STOCK $.10 PAR VALUE NEW YORK STOCK EXCHANGE
PREFERRED SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
WARRANTS TO PURCHASE COMMON STOCK NEW YORK STOCK EXCHANGE
7% SERIES B NOTES DUE 2006 NEW YORK STOCK EXCHANGE
</TABLE>
Securities Registered Pursuant to Section 12(g) of the Act: NONE
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 / /.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K /X/.
At December 3, 1999, the registrant had outstanding 75,820,745 shares of
Common Stock, $.10 par value per share. The aggregate market value of the Common
Stock on such date (based on the closing prices in the daily composite list for
transactions on the New York Stock Exchange) held by nonaffiliates of the
registrant was approximately $2,663,987,662.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held January 27, 2000 are incorporated by reference into
Part III.
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PART I
ITEM 1. BUSINESS
GENERAL
BJ Services Company (the "Company"), whose operations trace back to the
Byron Jackson Company (which was founded in 1872), was organized in 1990 under
the corporate laws of the state of Delaware. The Company is a leading provider
of pressure pumping and other oilfield services serving the petroleum industry
worldwide. The Company's pressure pumping services consist of cementing and
stimulation services used in the completion of new oil and natural gas wells and
in remedial work on existing wells, both onshore and offshore. Other oilfield
services include product and equipment sales for pressure pumping services,
tubular services provided to the oil and natural gas exploration and production
industry, commissioning and inspection services provided to refineries,
pipelines and offshore platforms and specialty chemical services.
In April 1995, the Company completed the acquisition of The Western Company
of North America ("Western" and the "Western Acquisition") for a total purchase
price of $511.4 million (including transaction costs of $7.2 million),
consisting of 12.0 million shares of Common Stock, cash of $247.9 million from
borrowings under the Company's then existing bank credit facility and Warrants
to purchase 4.8 million shares of Common Stock. The Western Acquisition has
provided the Company with a greater critical mass with which to compete in both
domestic and international markets and the realization of significant
consolidation benefits. The Western Acquisition increased the Company's then
existing total revenue base by approximately 75% and more than doubled the
Company's then existing domestic revenue base. In addition, in excess of $40
million in annual overhead and redundant operating costs were eliminated
annually by combining the two companies.
In June 1996, the Company completed the acquisition of Nowsco Well Service
Ltd. ("Nowsco" and the "Nowsco Acquisition") for a total purchase price of
$582.6 million (including transaction costs of $6.2 million). Nowsco's
operations were conducted primarily in Canada, the United States, Europe,
Southeast Asia and Argentina and included pressure pumping and commissioning and
inspection services businesses. The Nowsco Acquisition added approximately 40%
to the Company's then existing revenue base.
During the year ended September 30, 1999, the Company generated
approximately 83% of its revenue from pressure pumping services and 17% from
product and equipment sales and other oilfield services. Over the same period,
the Company generated approximately 43% of its revenue from U.S. operations and
57% from international operations.
PRESSURE PUMPING SERVICES
CEMENTING SERVICES
The Company's cementing services, which accounted for approximately 32% of
the Company's total revenue during 1999, consist of blending high-grade cement
and water with various solid and liquid additives to create a slurry that is
pumped into a well between the casing and the wellbore. The additives and the
properties of the slurry are designed to achieve the proper cement set up time,
compressive strength and fluid loss control, and vary depending upon the well
depth, downhole temperatures and pressures, and formation characteristics.
The Company provides regional laboratory testing services to evaluate slurry
properties, which vary with cement supplier and local water sources. Job design
recommendations are developed by the Company's field engineers to achieve
desired comprehensive strength and bonding characteristics.
There are a number of specific applications for cementing services used in
oilfield operations. The principal application is the cementing between the
casing pipe and the wellbore during the drilling and completion phase of a well
("primary cementing"). Primary cementing is performed to (i) isolate fluids
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behind the casing between productive formations and other formations that would
damage the productivity of hydrocarbon producing zones or damage the quality of
freshwater aquifers, (ii) seal the casing from corrosive formation fluids, and
(iii) provide structural support for the casing string. Cementing services are
also utilized when recompleting wells from one producing zone to another and
when plugging and abandoning wells.
STIMULATION SERVICES
The Company's stimulation services, which accounted for approximately 51% of
the Company's total revenue during 1999, consist of fracturing, acidizing, sand
control, nitrogen, coiled tubing and downhole tool services. These services are
designed to improve the flow of oil and natural gas from producing formations
and are summarized as follows:
FRACTURING. Fracturing services are performed to enhance the production of
oil and natural gas from formations having such permeability that the natural
flow is restricted. The fracturing process consists of pumping a fluid gel into
a cased well at sufficient pressure to "fracture" the formation. Sand, bauxite
or synthetic proppant which is suspended in the gel is pumped into the fracture
to prop it open. The size of a fracturing job is generally expressed in terms of
the pounds of proppant, which can exceed 200,000 lbs. The main pieces of
equipment used in the fracturing process are the blender, which blends the
proppant and chemicals into the fracturing fluid, the pumping unit, which is
capable of pumping significant volumes at high pressures, and a monitoring van
loaded with real time monitoring equipment and computers used to control the
fracturing process. The Company's fracturing pump units are capable of pumping
slurries at pressures of up to 14,000 pounds per square inch at rates of up to
four barrels per minute. In some cases, fracturing is performed by an acid
solution pumped under pressure without a proppant or with small amounts of
proppant.
An important element of fracturing services is the design of the fracturing
treatment, which includes determining the proper fracturing fluid, proppants and
injection program to maximize results. The Company's field engineering staff
provides technical evaluation and job design recommendations as an integral
element of its fracturing service for the customer. Technological developments
in the industry over the past several years have focused on proppant
concentration control (i.e., proppant density), liquid gel concentrate
capabilities, computer design and monitoring of jobs and cleanup properties for
fracturing fluids. The Company also introduced equipment to respond to these
technological advances. During 1991, the Company introduced a patented,
borate-based fracturing fluid, Spectra Frac G-Registered Trademark-. During
1993, the Company introduced two complementary fracturing fluids, Medallion Frac
and Spartan Frac. These fracturing fluids are now used in most of the Company's
fracturing treatments. During 1994, the Company commercialized a proprietary
enzyme treatment used in conjunction with the three fracturing fluids. These
"enzyme breakers" can significantly enhance the production of oil and natural
gas in a wide range of wells. In 1998, the Company introduced a low polymer
fracturing fluid (Vistar-TM-) designed to provide greater fracture length with
minimal polymer residue. Vistar-TM- was commercialized in 1999. The Company, in
1999, developed and began field testing a product (FlexSand-TM-) designed to
address the long-standing industry problem of proppant flowback and proppant
fatigue after a fracturing treatment. FlexSand-TM-, a deformable particle
designed to improve the structural properties of the proppant, results in more
proppant being retained in the treated formation.
ACIDIZING. Acidizing services are performed to enhance the flow rate of oil
and natural gas from wells with reduced flow caused by formation damage due to
drilling or completion fluids, or the buildup over time of various materials
that block the formation. Acidizing entails pumping large volumes of specially
formulated acids into reservoirs to dissolve barriers and enlarge crevices in
the formation, thereby eliminating obstacles to the flow of oil and natural gas.
The Company maintains a fleet of mobile acid transport and pumping units to
provide acidizing services for the onshore market, and maintains acid storage
and pumping equipment on most of its offshore stimulation vessels.
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SAND CONTROL. Sand control services involve the pumping of gravel to fill
the cavity created around the wellbore during drilling. The gravel provides a
filter for the exclusion of formation sand from the producing pathway. Oil and
natural gas are then free to move through the gravel into the wellbore to be
produced. These services are utilized primarily in unconsolidated reservoirs and
are primarily provided in the Gulf of Mexico, the North Sea, Venezuela, Trinidad
and Indonesia.
NITROGEN. There are a number of uses for nitrogen, an inert gas, in
pressure pumping operations. Used alone, it is effective in displacing fluids in
various oilfield applications, including underbalanced drilling. However,
nitrogen services are used principally in applications which support the
Company's coiled tubing and fracturing services.
COILED TUBING. Coiled tubing services involve the injection of coiled
tubing into wells to perform various applications and functions for use
principally in well-servicing operations. The application of coiled tubing to
drilling operations has increased in recent years due to improvements in coiled
tubing technology. Coiled tubing is a flexible steel pipe with a diameter of
less than five inches manufactured in continuous lengths of thousands of feet
and wound or coiled along a large reel on a truck or skid-mounted unit. Due to
the small diameter of coiled tubing, it can be inserted through existing
production tubing and used to perform workovers without using a larger, more
costly workover rig. The other principal advantages of employing coiled tubing
in a workover include (i) not having to "shut-in" the well during such
operations, thereby allowing production to continue and reducing the risk of
formation damage to the well, (ii) the ability to reel continuous coiled tubing
in and out of a well significantly faster than conventional pipe, which must be
jointed and unjointed, (iii) the ability to direct fluids into a wellbore with
more precision, allowing for localized stimulation treatments and providing a
source of energy to power a downhole motor or manipulate downhole tools and (iv)
enhanced access to remote or offshore fields due to the smaller size and
mobility of a coiled tubing unit. Recent technological improvements to coiled
tubing have increased its dependability and durability, expanding coiled
tubing's potential uses and markets.
DOWNHOLE TOOLS. The Company provides downhole tools and technical personnel
for gravel pack and frac pack completions, reservoir flow testing, well
stimulation and well servicing applications, operating from key service bases on
the U.S. Gulf Coast. The Company's downhole tool capabilities fall into two
categories--completion tools and service tools. Completion tools, which are used
after a well is drilled to bring the well into production, generally are sold
and remain in the well. Service tools, which are used to perform a wide range of
downhole operations to maintain or improve a well, generally are rented by
customers from nearby tool inventories of the Company. While marketed
separately, downhole tool sales and services are provided primarily during the
course of providing other pressure pumping services.
The Company participates in the offshore stimulation market through the use
of skid-mounted pumping units and through operation of several stimula-tion
vessels including one in the North Sea, four in the Gulf of Mexico and five in
South America.
The Company believes that as production continues to decline in key
producing fields of the U.S. and certain international regions, the demand for
fracturing and other stimulation services is likely to increase. The Company has
been increasing its pressure pumping capabilities in certain international
markets over the past several years.
OTHER SERVICES
The Company's other services, including product and equipment sales for
cementing and stimulation services, as well as the following services, accounted
for approximately 17% of the Company's total revenue in 1999. Such products and
equipment sales to customers are generally made in areas where pressure pumping
services are primarily provided by local service companies, such as Russia and
China. Other than in its specialty chemical business, the Company generally does
not sell proprietary products to other companies involved in well servicing.
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TUBULAR SERVICES. Tubular services principally consist of installing (or
"running") casing and production tubing into a wellbore. Casing is run to
protect the structural integrity of the wellbore and to seal various zones in
the well. These services are primarily provided during the drilling and
completion phases of a well. Production tubing is run inside the casing. Oil and
natural gas are produced through the tubing. The Company expects that workover
activity and the demand for tubular services in the North Sea should increase
during at least the next several years as operators there attempt to mitigate
the decline in production from the North Sea's mature fields. These services are
provided during the completion and workover phases.
PROCESS AND PIPELINE SERVICES. Process and pipeline services involve the
inspection and testing of the integrity of pipe connections in offshore drilling
and production platforms, onshore and offshore pipelines and industrial plants,
and are provided during the commissioning, decommissioning, installation or
construction stages of these infrastructures, as well as during routine
maintenance checks. Historically, hydrocarbon storage and production facilities
have been tested for leaks using either water under pressure or a "live" system
whereby oil, gas or water was introduced at operating pressure. At remote
locations such as offshore facilities, the volume of fresh water required to
test the facility made its use impractical and the use of flammable or toxic
fluids created a risk of explosion or other health hazards. Commission leak
testing, or CLT, uses a nitrogen and helium gas mixture in conjunction with
certain specialized equipment to detect very small leaks in joints, instruments
and valves that form the components of such facilities. Although the process is
safer and more practical than traditional leak detection methods, it may in some
instances be more expensive. Accordingly its use is restricted to those
instances where environmental and safety concerns are particularly acute.
Pipeline testing and commissioning services include filling, pressure
testing, de-watering, purging and vacuum drying of pipelines. Other pipeline
services include grouting and insulating of pipeline bundles. Recent technical
innovations include the development of pipeline gels, both hydrocarbon and
aqueous, for pipeline cleaning and transport as well as plugs used for isolation
purposes. The Company has also developed high friction pig trains and freezing
techniques for the isolation of sections of pipelines.
In conducting its pipeline inspection business, the Company uses
"intelligent pigs." Intelligent pigs are pipeline monitoring vehicles which,
together with interpretational software, offer to pipeline operators,
constructors and regulators measurement of pipeline geometry, determination of
pipeline location and orientation and examination of the pipeline's internal
condition. In addition, the customer can develop a structural analysis using the
measured pipeline geometry information. The operator's planning is improved
through the utilization of the data to determine the pipeline's status, estimate
current and future reliability and provide recommendations on remedial or
maintenance requirements which consider the severity of the problem identified.
Analysis work using intelligent pigs can be routinely performed with maintenance
monitoring programs implemented as a method for increasing safety for people,
property and the environment.
SPECIALTY CHEMICAL SERVICES. Specialty chemical services are provided to
customers in the upstream and downstream oil and natural gas businesses through
the Company's Unichem division. These services involve the design of treatments
and the sale of products to reduce the negative effects of corrosion, scale,
paraffin, bacteria, and other contaminants in the production and processing of
oil and natural gas. Unichem's products are used by customers engaged in crude
oil production, natural gas processing, raw and finished oil and natural gas
product transportation, refining, fuel additizing and petrochemical
manufacturing. Unichem's services address two principal priorities of such
customers: (1) the protection of the customer's capital investment in metal
goods, such as downhole casing and tubing, pipelines and process vessels, and
(2) the treatment of fluids to allow the fluid to meet the specifications of the
particular operation, such as production transferred to a pipeline, water
discharged overboard from a platform, or fuel sold at a marketing terminal.
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OPERATIONS
Pressure pumping services are provided to both land-based and offshore
customers on a 24-hour, on-call basis, through regional and district facilities
in over 100 locations worldwide, utilizing complex, truck-or skid-mounted
equipment designed and constructed for the particular pressure pumping service
furnished. After such equipment is moved to a well location, it is configured
with appropriate connections to perform the specific services required. The
mobility of this equipment permits the Company to provide pressure pumping
services to changing geographic areas. Management believes that the Company's
pressure pumping equipment is adequate to service both current and projected
levels of market activity in the near term.
The Company maintains a fleet of mobile cement pumping equipment for onshore
operations. Offshore operations are performed with skid-mounted cement pumping
units primarily using the Company's patented Recirculating Averaging Mixer
("RAM"). Most cementing units are equipped with computerized systems which allow
for real-time monitoring and control of the cementing processes.
Principal materials utilized in the pressure pumping business include
cement, fracturing proppants, acid and bulk chemical additives. Generally, these
items are available from several suppliers, and the Company utilizes more than
one supplier for each item. The Company also produces certain of its specialized
pressure pumping products through company-owned blending facilities in Germany,
Singapore and Canada. Sufficient material inventories are maintained to allow
the Company to provide on-call services to its customers to whom the materials
are resold in the course of providing pressure pumping services. Repair parts
and maintenance items for pressure pumping equipment are carried in inventory to
ensure continued operations without significant downtime caused by parts
shortages. The Company has experienced only intermittent tightness in supply or
extended lead times in obtaining necessary supplies of these materials or
replacing equipment parts and does not anticipate any chronic shortage of any of
these items in the foreseeable future.
The Company believes that coiled tubing and other materials utilized in
performing coiled tubing services are and will continue to be widely available
from a number of manufacturers. Although there are only three principal
manufacturers of the reels around which the coiled tubing is wrapped, the
Company is not aware of any difficulty in obtaining coiled tubing reels in the
past, and the Company anticipates no such difficulty in the future.
ENGINEERING AND SUPPORT SERVICES
The Company maintains two primary research and development centers--one in
Tomball, Texas (near Houston) and the other in Calgary, Alberta. The Company's
research and development organization is divided into five distinct
areas--Petroleum Engineering, Software Applications, Instrumentation
Engineering, Mechanical Engineering and Coiled Tubing Engineering.
PETROLEUM ENGINEERING. The Petroleum Engineering laboratory specializes in
designing fluids with enhanced performance characteristics in the fracturing,
acidizing and cementing operations (i.e., "frac fluids" and "cement slurries").
As fluids must perform under a wide range of downhole pressures, temperatures
and other conditions, this design process is a critical element in developing
products to meet customer needs.
SOFTWARE APPLICATIONS. The Company's Software Applications group develops
and supports a wide range of proprietary software utilized in the monitoring of
both cement and stimulation job parameters. This software, combined with the
Company's internally developed monitoring hardware, allows for real-time job
control as well as post-job analysis.
INSTRUMENTATION ENGINEERING. The pumping services industry utilizes an
array of monitoring and control instrumentation as an integral element of
providing cementing and stimulation services. The
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Company's monitoring and control instrumentation, developed by its
Instrumentation Engineering group, complements its products and equipment and
provides customers with desired real-time monitoring of critical applications.
MECHANICAL ENGINEERING. Though similarities exist between the major
competitors in the general design of their pumping equipment, the actual
engine/transmission configurations as well as the mixing and blending systems
differ significantly. Additionally, different approaches to the integrated
control systems result in equipment designs which are usually distinct in
performance characteristics for each competitor. The Company's Mechanical
Engineering group is responsible for the design and manufacturing of virtually
all of the Company's primary pumping and blending equipment. However, some
primary pumping equipment and certain peripheral support equipment which is
generic to the industry is purchased externally. The Company's Mechanical
Engineering group provides new product design as well as support to the
rebuilding and field maintenance functions.
COILED TUBING ENGINEERING. The Coiled Tubing Engineering group is located
in Calgary, Alberta. This group provides most of the support and research and
development activities for the Company's coiled tubing services. Development
work for drilling applications (DUCT-TM-) involves using coiled tubing
directional drilling technology for completions and directional underbalanced
drilling. The Company is also actively involved in the ongoing development of
downhole tools that may be run on coiled tubing, including rotary jetting
equipment and through-tubing inflatable packer systems. The Company's SandVac
system is a licensed jet pump system used with concentric coiled tubing to clean
unwanted sand from horizontal wells. The tool and coiled tubing configuration
allow sand to be drawn into the system and brought to surface through a cleaning
process analogous to a vacuum.
MANUFACTURING
In addition to the engineering facility, the Company's research and
technology center near Houston also houses its main equipment and
instrumen-tation manufacturing facility. This operation currently occupies
approximately 105,000 square feet and includes complete fabrication, engine and
transmission rebuilding, pump manufacturing and assembly capabilities. The
Company is near completion of an expansion of these facilities by an additional
240,000 square feet to provide additional laboratories, warehousing, training,
manufacturing and engineering facilities and to consolidate certain logistical
operations. The Company also has smaller manufacturing capabilities in selected
international locations. The Company employs outside vendors for manufacturing
of its coiled tubing units and certain fabrication work, but is not dependent on
any one source.
COMPETITION
PRESSURE PUMPING SERVICES. There are two primary companies with which the
Company competes in pressure pumping services, Halliburton Energy Services, a
division of Halliburton Company, and Dowell, a division of Schlumberger Ltd.
These companies have operations in most areas of the U.S. in which the Company
participates and in most international regions. It is estimated that, exclusive
of "captive" service companies, these two competitors, along with the Company,
provide over 90% of pressure pumping services to the industry. Several smaller
companies compete with the Company in certain areas of the U.S. and in certain
international locations. The principal methods of competition which apply to the
Company's business are its prices, service record and reputation in the
industry. While Halliburton Energy Services and Dowell are larger in terms of
overall pressure pumping revenues, the Company has a number one or a number two
share position in several markets throughout the world.
OTHER SERVICES. The Company believes that it is one of the largest
suppliers of tubular services in the U.K. North Sea and has expanded such
services into other international markets in the past several years. The largest
provider of tubular services is Weatherford International, Inc. In the U.K.,
tubular services are typically provided under long-term contracts which limit
the opportunities to compete for business until
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the end of the contract term. In continental Europe, shorter-term contracts are
typically available for bid by the provider of tubular services. The Company
believes it is the largest provider of commissioning and leak detection services
and one of the largest providers of pipeline inspection services. In specialty
chemical services, there are several competitors significantly larger than the
Company's Unichem division.
MARKETS AND CUSTOMERS
Demand for the Company's services and products depends primarily upon the
number of oil and natural gas wells being drilled, the depth and drilling
conditions of such wells, the number of well completions and the level of
workover activity worldwide.
The Company's principal customers consist of major and independent oil and
natural gas producing companies. During 1999, the Company provided oilfield
services to several thousand customers, none of which accounted for more than 5%
of consolidated revenues. While the loss of certain of the Company's largest
customers could have a material adverse effect on Company revenues and operating
results in the near term, management believes the Company would be able to
obtain other customers for its services in the event of a loss of any of its
largest customers.
UNITED STATES. The United States represents the largest single oilfield
services market in the world. The Company provides its pressure pumping services
to its U.S. customers through a network of over 50 locations throughout the
U.S., a majority of which offer both cementing and stimulation services. Demand
for the Company's pressure pumping services in the U.S. is primarily driven by
oil and natural gas drilling activity, which tends to be extremely volatile
depending on the current and anticipated prices of oil and natural gas. Due to
aging oilfields and lower-cost sources of oil internationally, drilling activity
in the U.S. has declined more than 75% from its peak in 1981. Record low
drilling activity levels were experienced in 1986 and 1992 and again in 1999.
Excess capacity among pumping service companies has generally resulted in the
inability to generate adequate returns on new capital investments. To improve
returns in this environment, management believes it is important to operate with
a greater "critical mass" in the key U.S. markets. This conclusion led to the
decision to consolidate the Company's operations with those acquired from
Western, which had a larger presence in the U.S., and from Nowsco. While U.S.
drilling activity temporarily rebounded during 1997 and the beginning of 1998,
it subsequently retracted due to weak oil prices. Although drilling activity had
begun to recover somewhat toward the end of the fiscal year, the U.S. average
fiscal 1999 active rig count represented the lowest in history and was down 34%
from the average level of both fiscal 1997 and 1998.
INTERNATIONAL. The Company operates in over 40 countries in the major
international oil and natural gas producing areas of Latin America, Europe,
Africa, Southeast Asia, Canada and the Middle East. The Company generally
provides services to its international customers through wholly-owned foreign
subsidiaries. Additionally, the Company holds certain controlling and minority
interests in these joint venture companies, through which it conducts a portion
of its international operations. With the acquisition of Fracmaster Ltd., the
Company's Canadian operations now represent its largest international operation
with over 10% of consolidated revenue.
Other than Canada, the international market is somewhat less volatile than
the U.S. market. Due to the significant investment and complexity in
international projects, management believes drilling decisions relating to such
projects tend to be evaluated and monitored with a longer-term perspective with
regard to oil and natural gas pricing. Additionally, the international market is
dominated by major oil companies and national oil companies which tend to have
different objectives and more operating stability than the typical independent
producer in the U.S. International activities have been increasingly important
to the Company's results of operations since 1992, when the Company implemented
a strategy to expand its international presence.
The Company now operates in most of the major oil and natural gas producing
regions of the world. International operations are subject to special risks that
can materially affect the sales and profits of the
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Company, including currency exchange rate fluctuations, the impact of inflation,
governmental expropriation, exchange controls, political instability and other
risks. With the exception of Canada, however, the majority of the Company's
services are billed in U.S. dollars.
EMPLOYEES
At September 30, 1999, the Company had a total of 7,610 employees.
Approximately 60% of the Company's employees were employed outside the United
States.
GOVERNMENTAL AND ENVIRONMENTAL REGULATION
The Company's business is affected both directly and indirectly by
governmental regulations relating to the oil and natural gas industry in
general, as well as environmental and safety regulations which have specific
application to the Company's business.
The Company, through the routine course of providing its services, handles
and stores bulk quantities of hazardous materials. In addition, leak detection
services involve the inspection and testing of facilities for leaks of hazardous
or volatile substances. If leaks or spills of hazardous materials handled,
transported or stored by the Company occur, the Company may be responsible under
applicable environmental laws for costs of remediating damage to the surface,
sub-surface or aquifers incurred in connection with such occurrence.
Accordingly, the Company has implemented and continues to implement various
procedures for the handling and disposal of hazardous materials. Such procedures
are designed to minimize the occurrence of spills or leaks of these materials.
The Company has implemented and continues to implement various procedures to
further assure its compliance with environmental regulations. Such procedures
generally pertain to the operation of underground storage tanks, disposal of
empty chemical drums, improvement to acid and wastewater handling facilities and
cleaning of certain areas at the Company's facilities. The estimated future cost
for such procedures is $6.3 million which will be incurred over a period of
several years, and for which the Company has provided appropriate reserves. In
addition, the Company maintains insurance for certain environmental liabilities
which the Company believes is reasonable based on its knowledge of the industry.
The Comprehensive Environmental Response, Compensation and Liability Act,
also known as "Superfund," imposes liability without regard to fault or the
legality of the original conduct, on certain classes of persons that contributed
to the release of a "hazardous substance" into the environment. Certain disposal
facilities used by the Company or its predecessors have been investigated under
state and federal Superfund statutes, and the Company is currently named as a
potentially responsible party for cleanup at five such sites. Although the
Company's level of involvement varies at each site, in general, the Company is
one of numerous parties named and will be obligated to pay an allocated share of
the cleanup costs. While it is not feasible to predict the outcome of these
matters with certainty, management is of the opinion that their ultimate
resolution should not have a material effect on the Company's operations or
financial position.
RESEARCH AND DEVELOPMENT; PATENTS
Research and development activities for pressure pumping services are
directed primarily toward improvement of existing products and services and the
design of new products and processes to meet specific customer needs. The
Company currently holds numerous patents relating to products and equipment used
in its pumping services business. While such patents, in the aggregate, are
important to maintaining the Company's competitive position, no single patent is
considered to be of a critical or essential nature.
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To remain competitive, the Company devotes significant resources to
developing technological improvements to its pumping services products. Many of
these improvements have centered on improving products in fracturing systems
and, more recently, in deepwater cementing applications.
In 1991, the Company introduced a borate-based fracturing fluid, Spectra
Frac G-Registered Trademark-, which is being widely used in the U.S. stimulation
market and the North Sea. In 1993, this product was complemented with two
additional fracturing fluids, Spartan Frac and Medallion Frac, which have
expanded the Company's services line offering to cover a broader range of
economic and downhole design variables. During 1994, the Company commercialized
a proprietary enzyme process used in conjunction with the three fracturing
fluids. These "enzyme breakers" significantly enhance the production of oil and
natural gas in a wide range of wells. During 1998, the Company introduced a low
polymer fracturing fluid (Vistar-TM-) designed to provide greater fracture
length with minimal polymer residue. This product has been successfully utilized
in a wide variety of applications since 1998. At the same time, the Company is
currently field testing a new type of deformable particle (FlexSand-TM-)
designed to prevent proppant flowback and extend the life of the fracturing
treatment.
To address the trend towards more deepwater completions, the Company has
developed DeepSet, a cementing system designed to handle low sea floor
temperatures, and new automated foam cementing equipment designed to address
shallow water flows typically found in deepwater environments.
The testing and development of new products is an integral part of the
Company's pipeline inspection and coiled tubing businesses. Developments also
include a MFL corrosion inspection tool; Rotojet-TM-, a tool for use in wellbore
scale removal; SandVac, a licensed jet pump system used to clean unwanted sand
from horizontal wells, and various downhole tools and other technologies used in
directional drilling applications using coiled tubing. Additionally, the Company
operates under various license arrangements, generally ranging from 10 to 20
years in duration, relating to certain products or techniques. None of these
license arrangements is material.
The Company intends to continue to devote significant resources to its
research and development efforts. For information regarding the amounts of
research and development expenses for each of the three fiscal years ended
September 30, 1999, see Note 12 of the Notes to Consolidated Financial
Statements.
RISK FACTORS
This document contains "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995. The forward-looking statements
discuss the Company's prospects, expected revenues, expenses and profits,
strategies for its operations, Year 2000 readiness and other subjects. All of
these areas are subject to risks and uncertainties. The forward-looking
statements are based on assumptions which may not prove to be accurate. Actual
results could differ significantly from the results expected, as a result of the
risk factors discussed below.
The Company's operations are subject to hazards present in the oil and
natural gas industry, such as fire, explosion, blowouts and oil spills. These
incidents as well as accidents or problems in normal operations can cause
personal injury or death and damage to property or the environment. The
customer's operations can also be interrupted. From time to time, customers seek
to recover from the Company for damage to their equipment or property that
occurred while the Company was performing work. In the pressure pumping
business, these include customer claims for loss of oil and natural gas
production and damage to underground reservoir formations. In the specialty
chemical business, some products are sold for use in refineries. In the process
and pipeline business, work is done on petrochemical plants as well as
pipelines. Damage to the customer's property could be extensive if a major
problem occurred.
The Company has insurance coverage that it believes is customary in the
industry against these hazards. However, such insurance has large deductibles
and certain exclusions. The Company's insurance
10
<PAGE>
premiums can be increased or decreased based on the claims made by the Company
under its insurance policies. The insurance does not cover damages from breach
of contract by the Company or based on alleged fraud or deceptive trade
practices. Whenever possible, the Company obtains agreements from customers that
limit the Company's liability. Insurance and customer agreements do not provide
complete protection against the losses and risks described above.
The Company's international operations are subject to special risks that can
significantly affect the Company's sales and profits. These risks include
changes in currency exchange rates, the impact of inflation, governmental
expropriation of assets, exchange controls, political instability and other
risks.
Other risk factors that could cause actual results to be different from
those expected include: lower prices and decreased drilling for oil and natural
gas; higher prices for products used by the Company in its operations; lower
spending by customers in the oil and natural gas industry; changes in
environmental laws; and computer software and hardware used by government
entities, service providers, vendors, customers and the Company that are
impacted by Year 2000 date references. Most of these risks are beyond the
control of the Company.
EXECUTIVE OFFICERS OF THE REGISTRANT
The current executive officers of the Company and their positions and ages
are as follows:
<TABLE>
<CAPTION>
OFFICE
NAME AGE POSITION WITH THE COMPANY HELD SINCE
- ---- -------- --------------------------------------------------- ----------
<S> <C> <C> <C>
J. W. Stewart............ 55 Chairman of the Board, President and Chief
Executive Officer 1990
Michael McShane.......... 45 Senior Vice President--Finance and Chief Financial
Officer 1998
David Dunlap............. 38 Vice President and President--International
Division 1995
Matthew D. Fitzgerald.... 42 Vice President and Controller 1998
Thomas H. Koops.......... 53 Vice President--Technology and Logistics 1992
Margaret B. Shannon...... 50 Vice President--General Counsel 1994
T. M. Whichard........... 41 Vice President and Treasurer 1998
Kenneth A. Williams...... 49 Vice President and President--U.S. Division 1991
Stephen A. Wright........ 52 Director of Human Resources 1987
</TABLE>
Mr. Stewart joined Hughes Tool Company in 1969 as Project Engineer. He
served as Vice President--Legal and Secretary of Hughes Tool Company and as Vice
President--Operations for a predecessor of the Company prior to being named
President of the Company in 1986. In 1990, he was also named Chairman and Chief
Executive Officer of the Company.
Mr. McShane joined the Company from Reed Tool Company in 1987 as Vice
President--Finance and was named Senior Vice President--Finance in 1998. At Reed
Tool Company he held various financial management positions including Corporate
Controller and Regional Controller of Far East Operations.
Mr. Dunlap joined the Company in 1984 as a District Engineer and was named
Vice President--International Operations in December 1995. He has previously
served as Vice President--Sales for the Coastal Division of North America and
U.S. Sales and Marketing Manager.
Mr. Fitzgerald joined the Company as Controller in 1989 from Baker Hughes
Incorporated and was named Vice President in 1998. Prior thereto, he was a
Senior Manager with the certified public accounting firm of Ernst & Whinney.
Mr. Koops joined the Company as Manager--Products and Technical Services in
1976, prior to being named Vice President--Manufacturing and Logistics of the
Company in 1988 and to his current position in 1992.
11
<PAGE>
Ms. Shannon joined the Company in 1994 as Vice President--General Counsel
from the law firm of Andrews & Kurth L.L.P. where she had been a partner since
1984.
Mr. Whichard joined the Company as Tax and Treasury Manager in 1989 from
Weatherford International and was named Treasurer in 1992 and Vice President in
1998. Prior to being named Treasurer in 1992, he served in various positions
including Tax Director and Assistant Treasurer.
Mr. Williams joined the Company in 1973 and has since held various positions
in the U.S. operations. Prior to being named Vice President--North American
Operations in 1991, he served as Region Manager--Western U.S. and Canada.
Mr. Wright joined the Company as Manager of Compensation and Benefits in
1985 from Global Marine Inc., an offshore drilling company, and assumed his
current position with the Company in 1987.
ITEM 2. PROPERTIES
The Company's properties consist primarily of pressure pumping and blending
units and related support equipment such as bulk storage and transport units.
Although a portion of the Company's U.S. pressure pumping and blending fleet is
being utilized through a servicing agreement with an outside party, the majority
of its worldwide fleet is owned and unencumbered. The Company's tractor fleet,
most of which in the U.S. is leased, is used to transport the pumping and
blending units. The Company's domestic light duty truck fleet is also leased,
whereas a majority of vehicles used in its international operations are owned by
the Company.
The Company both owns and leases regional and district facilities from which
pressure pumping services and other oilfield services are provided to land-based
and offshore customers. The Company's principal executive offices in Houston,
Texas are leased. The technology and research centers located near Houston,
Texas and Calgary, Alberta are owned by the Company, as are blending facilities
located in Germany, Singapore and Canada. The Company operates several
stimulation vessels, including one in the North Sea and five in South America
which are owned, and four in the Gulf of Mexico on which the hulls are leased.
The Company believes that its facilities are adequate for its current
operations. For additional information with respect to the Company's lease
commitments, see Note 11 of the Notes to Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
The Company, through performance of its service operations, is sometimes
named as a defendant in litigation, usually relating to claims for bodily
injuries or property damage (including claims for well or reservoir damage). The
Company maintains insurance coverage against such claims to the extent deemed
prudent by management. The Company believes that there are no existing claims
that are likely to have a materially adverse effect on the Company for which it
has not already provided.
As a result of the Western Acquisition and the Nowsco Acquisition, the
Company assumed responsibility for certain claims and proceedings made against
Western and Nowsco in connection with their businesses. Some, but not all, of
such claims and proceedings will continue to be covered under insurance policies
of the Company's predecessors that were in place at the time of the
acquisitions. Although the outcome of the claims and proceedings against the
Company (including Western and Nowsco) cannot be predicted with certainty,
management believes that there are no existing claims or proceedings that are
likely to have a materially adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted for stockholders' vote during the fourth quarter
of the fiscal year ended September 30, 1999.
12
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock of the Company began trading on The New York Stock Exchange
in July 1990 under the symbol "BJS". Warrants to purchase common stock
("Warrants") were issued in April 1995 and trade under the symbol "BJSW". At
December 3, 1999 there were approximately 1,968 holders of record of the
Company's Common Stock and 1,165 holders of record of the Warrants. The Warrants
expire on April 13, 2000.
The following table sets forth for the periods indicated the high and low
sales prices per share for the Company's Common Stock and Warrants reported on
the NYSE composite tape.
<TABLE>
<CAPTION>
COMMON STOCK WARRANT PRICE
PRICE RANGE RANGE
------------------- -------------------
HIGH LOW HIGH LOW
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Fiscal 1998
1st Quarter....................................... $45.38 $31.88 $64.50 $38.00
2nd Quarter....................................... 43.81 26.94 56.50 28.75
3rd Quarter....................................... 39.81 24.75 51.88 24.63
4th Quarter....................................... 30.19 11.88 33.38 5.50
Fiscal 1999
1st Quarter....................................... 22.19 13.25 18.13 6.88
2nd Quarter....................................... 24.13 13.50 20.75 7.00
3rd Quarter....................................... 31.75 19.75 35.00 13.50
4th Quarter....................................... 39.00 26.81 49.06 25.88
Fiscal 2000
1st Quarter (through December 3, 1999)............ 41.50 27.56 53.38 26.50
</TABLE>
Since its initial public offering in 1990, BJ Services has not paid any cash
dividends to its stockholders. The Company expects that, for the foreseeable
future, any earnings will be retained for the development of the Company's
business or used for the share repurchase program discussed below and,
accordingly, no cash dividends are expected to be declared on the Common Stock.
At September 30, 1999, there were 76,382,162 shares of Common Stock issued and
71,177,549 shares outstanding. On December 11, 1997, the Company's Board of
Directors approved a 2 for 1 stock split, which was distributed on February 20,
1998 in the form of a stock dividend, to holders of record as of January 30,
1998. On December 19, 1997, the Company's Board of Directors authorized a stock
repurchase program of up to $150 million (subsequently increased to $300 million
in May 1998). Repurchases are made at the discretion of the Company's management
and the program will remain in effect until terminated by the Company's Board of
Directors. During fiscal 1998, the Company purchased 5,996,400 shares at a cost
of $196.6 million. No shares were repurchased during 1999. In October 1999, the
Company reissued 4,027,972 shares of treasury stock through a private placement
with certain financial institutions. The proceeds from the private placement of
$144.0 million were used to pay down outstanding debt. The Company also entered
into privately negotiated option agreements pursuant to which it currently
intends to repurchase an equivalent number of shares in April 2000 for a total
of $149.0 million.
The Company's Bank Credit Facility prohibits any dividend payments when the
Company's debt to capitalization ratio exceeds 35% immediately prior to and
after giving effect to the declaration of any dividend, except that the Company
may declare and make dividend payments solely in its capital stock. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Capital Resources and Liquidity" and Note 6 of the Notes to
Consolidated Financial Statements.
13
<PAGE>
The Company has a Stockholder Rights Plan (the "Rights Plan") designed to
deter coercive takeover tactics and to prevent an acquirer from gaining control
of the Company without offering a fair price to all of the Company's
stockholders. Under this plan, each outstanding share of the Company's Common
Stock includes one preferred share purchase right ("Right") which becomes
exercisable under certain circumstances, including when beneficial ownership of
the Company's Common Stock by any person, or group, equals or exceeds 15% of the
Company's outstanding Common Stock. Each Right entitles the registered holder to
purchase from the Company one one-hundredth of a share of Series A Junior
Participating Preferred Stock at a price of $150, subject to adjustment under
certain circumstances. Upon the occurrence of certain events specified in the
Rights Plan, each holder of a Right (other than an Acquiring Person) will have
the right, upon exercise of such Right, to receive that number of shares of
common stock of the Company (or the surviving corporation) that, at the time of
such transaction, would have a market price of two times the purchase price of
the Right. No shares of Series A Junior Participating Preferred Stock have been
issued by the Company. The Rights were proportionately adjusted as of the stock
split record date to reflect the effect of the stock split.
14
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain selected historical financial data of
the Company. The selected operating and financial position data as of and for
each of the five years in the period ended September 30, 1999 have been derived
from the audited consolidated financial statements of the Company, some of which
appear elsewhere in this Annual Report. This information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and Notes
thereto which are included elsewhere herein.
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------
1999(1) 1998 1997 1996(1) 1995(1)
---------- ---------- ---------- ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenue........................... $1,131,334 $1,527,468 $1,466,573 $ 965,261 $633,660
Operating expenses, excluding
unusual charges and goodwill
amortization.................... 1,092,879 1,289,295 1,269,731 875,022 592,905
Goodwill amortization............. 13,525 13,824 14,435 7,910 3,266
Unusual charges(2)................ 39,695 26,586 7,425 17,200
Operating income (loss)........... (14,765) 197,763 182,407 74,904 20,289
Interest expense.................. (31,365) (25,685) (30,715) (26,948) (15,164)
Other income (expense)--net....... 613 (772) 1,727 3,321 2,763
Income tax expense (benefit)...... (15,221) 54,654 46,462 12,105 (1,102)
Net income (loss)................. (29,688) 117,400 107,906 40,486 9,889
Earnings (loss) per share:
Basic........................... (.42) 1.58 1.40 .66 .23
Diluted......................... (.42) 1.44 1.31 .65 .23
Depreciation and amortization..... 99,800 91,497 90,376 66,050 42,064
Capital expenditures(3)........... 110,566 167,961 102,198 54,158 30,966
FINANCIAL POSITION DATA (AT END OF PERIOD):
Property--net..................... $ 659,717 $ 602,028 $ 540,356 $ 558,156 $416,810
Total assets...................... 1,824,764 1,743,701 1,726,768 1,709,160 989,683
Long-term debt, excluding current
maturities...................... 422,764 241,869 298,634 523,004 259,566
Stockholders' equity.............. 877,089 900,064 960,227 841,703 466,795
</TABLE>
- ------------------------
(1) Includes the effect of the acquisitions of Fracmaster in 1999, Nowsco in
1996 and Western in 1995, all of which were accounted for as purchases in
accordance with generally accepted accounting principles. For further
details of the Fracmaster acquisition, see Note 3 of the Notes to
Consolidated Financial Statements.
(2) Unusual charges represent nonrecurring costs associated with the downturn in
oilfield drilling activity in 1999 and 1998 and the acquisitions of Nowsco
in 1996 and Western in 1995. For further details of the 1999 and 1998
unusual charges, see Note 4 of the Notes to Consolidated Financial
Statements.
(3) Excluding acquisitions of businesses.
15
<PAGE>
ITEM 7. 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
natural 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 situation often leads to volatility in the Company's
revenues and profitability, especially in the United States and Canada, where
the Company historically has generated in excess of 50% of its revenues. This
volatility has been particularly evident during the last year when, as a result
of low oil prices (falling below $11 per barrel), the industry experienced the
lowest worldwide oilfield drilling activity levels in recorded history. However,
a recent recovery in oil prices to above $20 per barrel has led to a recovery in
North American drilling activity during the last half of 1999.
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, 1992 and
again in early 1999. The U.S. drilling activity temporarily rebounded during
1997 (exceeding 1,000 active rigs for the first time since 1991); however, it
subsequently retracted due to weak oil prices. Although drilling activity had
begun to recover somewhat toward the end of the fiscal year, the U.S. average
fiscal 1999 active rig count represented the lowest in history and was down 34%
from the average level of both fiscal 1997 and 1998. Most of the decline
occurred in the number of rigs drilling for oil, which was down 62% over the
two-year period.
Drilling activity outside North America has historically been less volatile
than domestic drilling activity. Due to low oil prices during most of the year,
international drilling activity also reached record low levels during 1999 as
each of the Company's international regions experienced double digit activity
declines. While Canadian drilling activity began to recover during the latter
part of the fiscal year, activity in most of the other international regions is
not expected to recover until at least the middle of fiscal 2000.
ACQUISITION
On June 28, 1999, the Company completed the acquisition of selected assets
and subsidiaries of Fracmaster Ltd. ("Fracmaster"), an oilfield services company
based in Calgary, Alberta with operations in Canada, the United States, Russia
and China. The acquisition was completed for a total purchase price of
$78.4 million. Fracmaster generated worldwide revenue of $209.1 million during
its most recent fiscal year ended December 31, 1998. In the near-term, the
acquisition of Fracmaster is expected to primarily impact the Company's
operations in Canada.
16
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth selected key operating statistics reflecting
industry rig count and the Company's financial results:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Rig Count:(1)
U.S.................................................. 601 906 906
International........................................ 828 1,109 1,147
Revenue per rig (in thousands)......................... $791.7 $758.0 $714.4
Revenue per employee (in thousands).................... $152.0 $173.0 $185.8
Percentage of gross profit to revenue(2)............... 14.2% 24.5% 21.8%
Percentage of research and engineering expense to
revenue.............................................. 2.1% 2.0% 1.7%
Percentage of marketing expense to revenue............. 4.6% 3.6% 3.5%
Percentage of general and administrative expense to
revenue.............................................. 4.2% 3.3% 3.1%
</TABLE>
- ------------------------
(1) Industry estimate of drilling activity as measured by average active rigs.
(2) Gross profit represents revenue less cost of sales and services.
REVENUE: After six consecutive years of revenue growth, the Company's 1999
revenue declined for the first time since 1992. Overall, 1999 revenues declined
by 26% compared to 1998, with each of the Company's service lines--pressure
pumping, process and pipeline services, tubular services and specialty
chemicals--experiencing revenue decreases. The largest revenue declines occurred
in the Company's U.S. and Canadian pressure pumping operations. Revenues
increased by 4% during 1998, with each of the Company's major service lines
increasing during the year despite the 2% decline in worldwide drilling
activity. The Company's revenues reached their lowest level for fiscal 1999
during the third quarter and rebounded during the fourth quarter with a 24%
sequential increase. Management expects the Company to show year-over-year
revenue increases beginning in the first quarter of fiscal 2000.
U.S./MEXICO PRESSURE PUMPING REVENUE
The Company's U.S./Mexico pressure pumping revenues declined by 38% in 1999
after increasing by 1% in 1998. The 1999 revenue decline was the result of lower
activity and pricing caused by the record low drilling levels. The fiscal 1999
average active rig count, down 34% from the previous year, was the lowest in
recorded history. Workover activity was also weak, down 32% during the year.
Excluding Mexico, each of the Company's U.S. regions experienced revenue
declines, with the oil producing regions of Texas and Oklahoma being the most
severely impacted. Pricing declined by approximately 16% in 1999 compared to the
previous year. Revenue in the Company's Mexico operations increased as a result
of a new contract and the expansion of operations in Northeast Mexico.
The 1998 revenue increase was due to approximately 8-10% better pricing,
which was partially offset by a slight decline in market share. U.S. activity
was flat during the year. Fiscal 1998 also showed a continuation of the shift
away from oilfield drilling and more toward drilling for natural gas.
INTERNATIONAL PRESSURE PUMPING REVENUE
International revenues decreased by 17% in 1999 compared to 1998, after
increasing by 5% the previous year. With the exception of its Russia operations,
each of the Company's international regions experienced revenue declines during
1999, with its Canadian and Latin American operations showing the largest
declines. The revenue declines were a result of lower drilling activity and
lower pricing in each of these regions. Subsequent to the 1999 spring breakup
period (April through June), however, Canadian
17
<PAGE>
activity has increased substantially. Management expects Canadian drilling
activity to continue to be strong during the winter drilling season and increase
at least 20-30% during 2000. Excluding its Canadian operations, management does
not expect to experience a recovery in its international operations until at
least the second half of fiscal 2000.
With the exception of its Canadian operations, each of the Company's
international pressure pumping regions generated revenue increases during 1998.
The largest increases occurred in the Far East and Middle East regions due to
growth in stimulation and coiled tubing services and expansions into Saudi
Arabia and Bangladesh. Partially offsetting these increases were revenue
declines in Canada and Venezuela due to lower oil drilling activity and a $15.0
million decline in international equipment sales.
OTHER REVENUE
Revenue for each of the Company's other service lines, which consist of
specialty chemicals, tubular services and process and pipeline services, in
total was down 8% in 1999 after increasing in the previous two years. The
drilling activity declines were mostly offset by expansions into new markets and
these service lines' greater concentration of revenues from nondrilling oilfield
activities, which are not as greatly impacted by the decline in the active rig
count.
OPERATING INCOME (LOSS): The Company incurred an operating loss in 1999
after improved operating income during both 1998 and 1997. The 1999 operating
loss was primarily a result of the Company recording a pretax unusual charge of
$39.7 million ($.36 per diluted share after-tax), comprised of $12.8 million of
severance costs, $23.1 million of asset writedowns and $3.8 million of other
costs associated with the downturn in the oilfield services industry. In
addition, the operating loss includes $16.7 million recorded in the third fiscal
quarter for costs resulting from the acquisition of Fracmaster, and additional
severance costs and asset writedowns primarily associated with the Company's
international operations, all of which have been included in cost of sales.
Excluding these items, the operating income decline was primarily a result of
the decline in North and Latin American drilling and workover activity, and
lower pricing, all of which were discussed in the Revenue section above. In
response to the downturn in activity, the Company consolidated its worldwide
pressure pumping operations, resulting in over 2,000 personnel reductions and
the closure of several operating locations. Additionally, idle equipment has
been moved from U.S. operating locations to a central location. A portion of
this equipment will be sold or salvaged for spare parts. The remainder will be
redistributed to other operating locations as the need arises.
In addition to the 1999 writedown, the Company also recorded a $26.6 million
($.22 per diluted share after-tax) unusual charge in 1998 to reflect employee
severance, asset writedowns and other costs associated with the downturn in the
industry which began during the later part of 1998.
Research and engineering, marketing and general and administrative expenses
in total decreased by $13.8 million in 1999 due to the implementation of three
phases of cost reduction programs beginning in July 1998. The increase in other
operating expenses in 1998 was reflective of increased support costs from the
higher activity levels at the beginning of the fiscal year, as well as increased
spending on coiled tubing and downhole tool research, international commissions
and information systems. No further reductions in operating expenses are
expected to be realized in the near-term as the cost reduction programs have
been substantially implemented. The Company is in the process of hiring
additional equipment operators and other field personnel to address the current
increase in drilling activity occurring in North America.
OTHER: Interest expense increased by $5.7 million in 1999 due primarily to
additional borrowings to finance the Company's stock repurchase program
implemented in December 1997. The Company has repurchased the equivalent of 6.0
million shares totaling $196.6 million under this program. Interest expense
decreased by $5.0 million in 1998 due to strong operating cash flows during the
year (see Capital Resources and Liquidity) and from the effects of an equipment
financing transaction which occurred near the end of fiscal 1997. Interest
expense is expected to decline in 2000 from the reduction of debt resulting from
$144.0 million received from the private placement of common stock in October
1999. This stock was
18
<PAGE>
issued under a financing arrangement structured around the expected exercise of
the Company's outstanding warrants in April 2000 (see also Capital Resources and
Liquidity).
INCOME TAXES: The Company's effective tax rate has remained below the U.S.
statutory rate during each of the past three years primarily as a result of
profitability in international jurisdictions where the statutory tax rate is
below the U.S. rate, the availability of certain nonrecurring tax benefits and
the availability of tax benefits from the Company's reorganization pursuant to
its initial public offering in 1990. The effective tax rate increased to 34% in
1999 from 32% and 30% in 1998 and 1997, respectively, as the majority of the
operating losses occurred in the U.S.
CAPITAL RESOURCES AND LIQUIDITY
Net cash provided from operating activities decreased to $64.4 million in
1999 primarily as a result of the lower profitability. In addition, the tax
benefit from U.S. operating losses is noncash due to its cumulative net
operating loss position. This was partially offset by the additional liquidation
of working capital balances from the reduction in activity. The increase in cash
provided from operating activities in 1998 was the result of higher
profitability, the majority of the 1998 unusual charge being noncash and the
liquidation of working capital balances (primarily receivables) from the
slowdown in business during the last half of the year.
Net cash used for investing activities in 1999 was $176.7 million, an
increase of $15.7 million compared to 1998. The increase is due to the
acquisition of Fracmaster in June 1999 for net cash consideration of
$73.4 million. Excluding this acquisition, investing activities declined by
$57.8 million, primarily due to a curtailment of capital spending caused by the
depressed business environment. The 1999 capital spending related primarily to
upgrades to the Company's U.S. fracturing fleet, which was already in process
before the beginning of the fiscal year, and expansion of the Tomball
Manufacturing and Research and Development facility. The 1998 capital spending
related primarily to additional fracturing and coiled tubing capacity for the
Company's international growth initiatives, upgrades to the Company's U.S.
pumping fleet and upgrades to the Company's information systems. The 1997
property additions include two additional pumping service vessels (both
operating in Latin America), expansion of cementing and stimulation capacity in
the Gulf of Mexico and Latin America, and upgrades to the Company's information
systems. Net cash used for 1997 investing activities was offset by a transaction
involving the transfer of certain pumping service equipment assets. Subsequent
to the transfer of equipment, the Company received $100.0 million, which was
used to repay outstanding bank debt. As a result of the reduced debt, the
Company realized a reduction in annual interest expense of approximately
$6 million. The equipment is being used to provide services to the Company for
its customers for which the Company is paying a service fee for a period of at
least eight, but not more than fourteen, years. The transaction generated a
deferred gain for book purposes of approximately $38 million, which is being
amortized over a twelve-year period. The taxable gain of $91.0 million was
completely offset with net operating loss carryforwards that are available to
the Company as a result of the Western acquisition in 1995. Net cash used for
1997 investing activities was also impacted by the receipt of $20.3 million from
the sale of an idle stimulation vessel (the Renaissance), and the acquisitions
of Top Tool Company, Inc. and the remaining 51% ownership of the Company's
previously unconsolidated joint venture in Argentina.
Projected capital expenditures for fiscal 2000 (currently expected to be
approximately $75 million) are expected to decline from 1999 to more of a
maintenance level. The actual amount of 2000 capital expenditures will be
primarily dependent on maintenance capital levels and 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.
Cash flows provided by financing activities in 1999 were $114.6 million
compared to a usage of cash for financing activities in 1998 of $125.6 million.
The 1999 proceeds from borrowings were used to fund the
19
<PAGE>
Fracmaster acquisition and the Company's capital spending program. In 1998, the
Company used $196.6 million to purchase its common stock under a stock
repurchase program approved by the Company's Board of Directors in
December 1997. Due to reduced profitability and the resulting reduction in cash
flows from operating activities, the Company did not repurchase any of its
common stock during 1999. Subsequent to the fiscal year end (in October 1999),
the Company received $144.0 million through the private placement of 4,027,972
shares of common stock with certain financial institutions. The proceeds from
the private placement have been used to pay down outstanding debt. The Company
has also entered into privately negotiated option agreements pursuant to which
it currently intends to repurchase an equivalent number of shares in April 2000
for a total of $149.0 million. The Company expects to utilize proceeds of
approximately $144 million from the exercise of outstanding warrants, or, if the
warrants are not exercised, borrowing under new and existing credit facilities
to fund the repurchase. These outstanding warrants expire in April 2000 at an
exercise price of $15 per share.
Management strives to maintain low cash balances while utilizing available
credit facilities to meet the Company's capital needs. Any excess cash generated
has historically been used to pay down outstanding borrowings or fund the
Company's stock repurchase program. The Company has a committed, unsecured bank
credit facility (the "Bank Credit Facility") which consists of a six-year term
loan of approximately $121.1 million (currently drawn partially in Canadian
dollars under a provision which is renewable annually at the option of the
banks), which is repayable in 22 quarterly installments that began in March
1997, and a five year U.S. $225.0 million revolving facility available through
June 2001. At September 30, 1999, borrowings outstanding under the Bank Credit
Facility totaled $341.1 million, consisting of $121.1 million under the term
loan and $220.0 million of borrowings under the revolver. Principal reductions
of term loans under the Bank Credit Facility are due in aggregate annual
installments of $44.1 million, $44.1 million and $32.9 million in the years
ending September 30, 2000, 2001 and 2002, respectively.
In addition to the committed facility, the Company had $202.0 million in
various unsecured, discretionary lines of credit at September 30, 1999, which
expire at various dates in 2000. 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 September 30, 1999, there was
$106.0 million in outstanding borrowings under these lines of credit.
The Company has issued and outstanding $125.0 million of unsecured 7% Notes
due 2006. The net proceeds from the issuance of the 7% notes ($123.3 million) in
August 1996 were used by the Company to repay indebtedness outstanding under the
term loan portion of the Company's then existing bank credit facility.
The Company's interest-bearing debt increased to 39.5% of its total
capitalization at September 30, 1999, compared to 34.1% at September 30, 1998,
due to borrowings to fund the Fracmaster acquisition and the Company's capital
spending. The Bank Credit Facility includes various customary covenants and
other provisions including the maintenance of certain profitability and solvency
ratios and restrictions on dividend payments under certain circumstances, none
of which materially restrict the Company's activities. Management believes that
the Bank Credit Facility, combined with other discretionary credit facilities
and cash flows from operations, provides the Company with sufficient capital
resources and liquidity to manage its routine operations, meet debt service
obligations and fund projected capital expenditures. If the discretionary lines
of credit are not renewed, or if borrowings under these lines of credit
otherwise become unavailable, the Company expects to refinance this debt by
arranging additional committed bank facilities or through other long-term
borrowings alternatives.
YEAR 2000 COMPLIANCE
Historically, many computer programs have been written using two digits
rather than four to define the applicable year. This programming practice could
result in certain computerized applications failing to
20
<PAGE>
properly recognize a year that begins with "20" instead of "19." This, in turn,
could result in major system failures or miscalculations, and is generally
referred to as the "Year 2000 issue."
In July 1997, the Company established a formal program to assess the global
impact of Year 2000 issues. The Company's own internal systems are the primary
area of focus under this program. Such systems include, but are not limited to,
data processing and financial reporting software applications, computerized job
monitoring hardware and software used at the wellsite and in the Company's labs,
embedded control systems and telecommunications and other support equipment. In
addition, the program addresses the Company's reliance on third party suppliers
to determine the extent to which the Company is vulnerable to those third
parties' failure to remediate their own Year 2000 issues. The Company's Year
2000 program is comprised of four primary phases: (i) inventory of all existing
equipment and systems; (ii) assessment of equipment and systems to identify
those which are not Year 2000 ready and to prioritize critical systems and
equipment; (iii) remediation or replacement of non-Year 2000 ready equipment and
systems; (iv) testing and certification of Year 2000 readiness. The Company
completed the worldwide inventory of its systems and equipment in September
1997. The Company has substantially completed the remediation or replacement of
noncompliant systems and equipment that are critical to its operations. The
remainder of calendar 1999 will be focused on the testing and certification of
new and modified programs. Certain non-critical systems may not be addressed
until after January 2000; however, the Company believes such systems will not
disrupt the Company's operations in a material way.
The Company has contacted all of its critical external suppliers of goods
and services to assess their compliance efforts and the Company's exposure in
the event of a failure of third party compliance efforts. The Company has
received a favorable response from a majority of these critical suppliers. For
situations where the remaining suppliers are not compliant or do not respond,
the Company is in the process of developing contingency plans, including
utilizing alternative suppliers.
The comprehensive plan designed to achieve an uninterrupted transition into
calendar year 2000 cost the Company approximately $2.3 million, of which $2.2
million has been incurred as of September 30, 1999. In addition, the program has
resulted in the acceleration of approximately $1.4 million in hardware and
software expenditures to replace non-compliant systems. The cost of the project
and the dates on which the Company believes it will complete the Year 2000
modifications are based on management's best estimates.
On June 28, 1999, the Company acquired certain assets of Fracmaster Ltd. The
hardware and software which are being retained have been thoroughly inventoried
and an assessment of all Year 2000 related issues has been completed.
Remediation and testing activities are in progress. Prior to December 31, 1999,
the Company will either upgrade, replace or remove from service all Fracmaster
assets with any Year 2000 related risks.
Failure to completely remedy Year 2000 issues, including those critical
internal systems, infrastructure and third party suppliers mentioned above,
could result in business disruption that could materially affect the Company's
operations. In an effort to minimize business interruptions, the Company is in
the process of developing contingency plans in the event that circumstances
prevent the Company or any of its third party suppliers from meeting any portion
of their Year 2000 program schedules. These contingency plans are expected to be
completed and in place by the end of December 1999.
FORWARD LOOKING STATEMENTS
This document contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 and Section 21E of the
Securities Exchange Act of 1934 concerning, among other things, the Company's
prospects, expected revenues, expenses and profits, developments and business
strategies for its operations and Year 2000 readiness, all of which are subject
to certain risks, uncertainties and assumptions. These forward-looking
statements are identified by their use of terms and
21
<PAGE>
phrases such as "expect," "estimate," "project," "believe," and similar terms
and phrases. These statements are based on certain assumptions and analyses made
by the Company in light of its experience and its perception of historical
trends, current conditions, expected future developments and other factors it
believes are appropriate under the circumstances. Such statements are subject to
general economic and business conditions, conditions in the oil and natural gas
industry, the business opportunities that may be presented to and pursued by the
Company, changes in law or regulations and other factors, many of which are
beyond the control of the Company. 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>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The table below provides information about the Company's market sensitive
financial instruments and constitutes a "forward-looking statement." The
Company's major market risk exposure is changing interest rates, primarily in
the United States and Canada. The Company's policy is to manage interest rates
through use of a combination of fixed and floating rate debt. A portion of the
Company's borrowings are denominated in foreign currencies which exposes the
Company to market risk associated with exchange rate movements. When necessary,
the Company enters into forward foreign exchange contracts to hedge the impact
of foreign currency fluctuations. There were no material foreign exchange
contracts outstanding at September 30, 1999. All items described are non-trading
and are stated in U.S. dollars.
<TABLE>
<CAPTION>
EXPECTED MATURITY DATES FAIR VALUE
------------------------------------------------------ SEPTEMBER 30,
2000 2001 2002 2003 THEREAFTER TOTAL 1999
(IN THOUSANDS) -------- -------- -------- -------- ---------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
SHORT TERM BORROWINGS
Bank borrowings; US $ denominated $43,763 $ 43,763 $ 43,763
Average variable interest rate--6.17% at
September 30, 1999
Bankers' acceptance notes; Canadian $ $61,111 $ 61,111 $ 61,111
denominated
Average variable interest rate--5.24% at
September 30, 1999
Bank borrowings; Deutsche mark $ 1,091 $ 1,091 $ 1,091
denominated
Average variable interest rate--2.95% at
September 30, 1999
LONG TERM BORROWINGS
Current-term loan; US $ denominated $13,011 $ 13,011 $ 13,011
Variable interest rate--5.84% at
September 30, 1999
Current-term loan; Canadian $ $31,084 $ 31,084 $ 31,084
denominated
Variable interest rate--5.15% at
September 30, 1999
Current Leases; US $ denominated $ 392 $ 392 $ 392
Variable interest rate--5.06% at
September 30, 1999
Non-current bank borrowings; US $ $220,000 $220,000 $220,000
denominated
Variable interest rate--5.84% at
September 30, 1999
Non-current-term loan; US $ denominated $ 13,011 9,902 $ 22,913 $ 22,913
Variable interest rate--5.84% at
September 30, 1999
Non-current-term loan; Canadian $ $ 31,084 22,972 $ 54,056 $ 54,056
denominated
Variable interest rate--5.15% at
September 30, 1999
Non-current leases; US $ denominated $ 767 383 128 $ 1,278 $ 1,278
Variable interest rate--5.06% at
September 30, 1999
7% Series B Notes--US $ denominated $124,517 $124,517 $121,936
Fixed interest rate--7%
</TABLE>
23
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
Stockholders of BJ Services Company:
We have audited the accompanying consolidated statements of financial
position of BJ Services Company and subsidiaries as of September 30, 1999 and
1998, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended
September 30, 1999. Our audits also included the financial statement schedule
listed at Item 14. These financial statements and the financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and the financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of BJ Services Company and
subsidiaries at September 30, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended September
30, 1999 in conformity with generally accepted accounting principles. Also, in
our opinion, such financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Houston, Texas
November 23, 1999
24
<PAGE>
BJ SERVICES COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------
1999 1998 1997
------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenue.................................................. $1,131,334 $1,527,468 $1,466,573
Operating Expenses:
Cost of sales and services............................. 970,280 1,152,910 1,147,170
Research and engineering............................... 23,269 30,308 24,820
Marketing.............................................. 51,883 55,333 51,555
General and administrative............................. 47,447 50,744 46,186
Goodwill amortization.................................. 13,525 13,824 14,435
Unusual charges........................................ 39,695 26,586
---------- ---------- ----------
Total operating expenses............................. 1,146,099 1,329,705 1,284,166
---------- ---------- ----------
Operating income (loss).................................. (14,765) 197,763 182,407
Interest expense......................................... (31,365) (25,685) (30,715)
Interest income.......................................... 608 748 949
Other income (expense)--net.............................. 613 (772) 1,727
---------- ---------- ----------
Income (loss) before income taxes........................ (44,909) 172,054 154,368
Income tax expense (benefit)............................. (15,221) 54,654 46,462
---------- ---------- ----------
Net income (loss)........................................ $ (29,688) $ 117,400 $ 107,906
========== ========== ==========
Earnings (Loss) Per Share:
Basic.................................................. $ (.42) $ 1.58 $ 1.40
Diluted................................................ $ (.42) $ 1.44 $ 1.31
Weighted-Average Shares Outstanding:
Basic.................................................. 70,789 74,482 76,868
Diluted................................................ 70,789 81,263 82,496
</TABLE>
See Notes to Consolidated Financial Statements
25
<PAGE>
BJ SERVICES COMPANY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------
1999 1998
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Current Assets:
Cash and cash equivalents................................. $ 3,924 $ 1,625
Receivables, less allowance for doubtful accounts: 1999,
$20,572,000; 1998, $9,090,000........................... 297,975 300,140
Inventories:
Products................................................ 64,995 78,459
Work in process......................................... 2,116 2,574
Parts................................................... 30,176 30,153
---------- ----------
Total inventories..................................... 97,287 111,186
Deferred income taxes................................... 15,668 12,767
Other current assets.................................... 24,109 26,078
---------- ----------
Total current assets.................................. 438,963 451,796
Property:
Land...................................................... 12,410 12,086
Buildings and other....................................... 170,111 153,519
Machinery and equipment................................... 957,314 883,600
---------- ----------
Total property........................................ 1,139,835 1,049,205
Less accumulated depreciation............................. 480,118 447,177
---------- ----------
Property--net......................................... 659,717 602,028
Goodwill, net of amortization............................... 489,736 503,259
Deferred income taxes....................................... 201,774 171,164
Investments and other assets................................ 34,574 15,454
---------- ----------
$1,824,764 $1,743,701
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
26
<PAGE>
BJ SERVICES COMPANY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------
1999 1998
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Current Liabilities:
Accounts payable--trade................................... $ 128,422 $ 140,726
Short-term borrowings..................................... 105,965 184,874
Current portion of long-term debt......................... 44,487 39,932
Accrued employee compensation and benefits................ 37,749 41,686
Income taxes.............................................. 15,641 17,777
Taxes other than income................................... 9,798 8,336
Accrued insurance......................................... 12,041 12,303
Other accrued liabilities................................. 91,043 67,491
---------- ----------
Total current liabilities............................... 445,146 513,125
Long-term debt.............................................. 422,764 241,869
Deferred income taxes....................................... 6,578 9,021
Accrued postretirement benefits............................. 29,932 28,353
Minority interest and other long-term liabilities........... 43,255 51,269
Commitments and contingencies
Stockholders' Equity:
Preferred stock (authorized 5,000,000 shares)
Common stock, $.10 par value (authorized 160,000,000
shares; 76,382,162 shares issued and 71,177,549 shares
outstanding in 1999; 76,375,440 shares issued and
70,434,295 shares outstanding in 1998;.................. 7,638 7,638
Capital in excess of par.................................. 765,866 765,547
Retained earnings......................................... 269,797 313,629
Accumulated other comprehensive income.................... 4,924 7,419
Unearned compensation..................................... (614) (365)
Treasury stock at cost (1999--5,204,613 shares;
1998--5,941,145 shares)................................. (170,522) (193,804)
---------- ----------
Total stockholders' equity.............................. 877,089 900,064
---------- ----------
$1,824,764 $1,743,701
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
27
<PAGE>
BJ SERVICES COMPANY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
CAPITAL OTHER
COMMON IN EXCESS TREASURY UNEARNED RETAINED COMPREHENSIVE
STOCK OF PAR STOCK COMPENSATION EARNINGS INCOME TOTAL
-------- --------- --------- ------------ -------- ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1996............. $3,809 $748,712 $(3,186) $ 93,991 $(1,623) $841,703
Comprehensive income:
Net income............................ 107,906
Other comprehensive income, net of
tax.................................
Cumulative translation
adjustments....................... 2,163
Minimum pension liability
adjustment........................ (2,051)
Comprehensive income.................... 108,018
Issuance of stock for:
Stock options......................... 36 7,270 7,306
Stock purchase plan................... 8 1,676 1,684
Warrants surrendered.................. 16 16
Stock performance awards.............. 964 (964)
Recognition of unearned compensation.... 1,500 1,500
Revaluation of stock performance........ 4,425 (4,425)
------ -------- --------- ------- -------- ------- --------
BALANCE, SEPTEMBER 30, 1997............. 3,853 763,063 (7,075) 201,897 (1,511) 960,227
Comprehensive income:
Net income............................ 117,400
Other comprehensive income, net of
tax.................................
Cumulative translation
adjustments....................... 12,855
Minimum pension liability
adjustment........................ (3,925)
Comprehensive income.................... 126,330
Issuance of stock for:
Stock options......................... 7 1,873 1,880
Stock purchase plan................... 9 2,861 2,870
Warrants surrendered.................. 39 39
Stock performance awards.............. 1,068 (1,068)
Stock split........................... 3,769 (3,769)
Treasury stock purchased................ $(196,608) (196,608)
Treasury stock reissued................. 2,804 (1,899) 905
Recognition of unearned compensation.... 1,850 1,850
Revaluation of stock performance........ (7,790) 5,928 (1,862)
Tax benefit from exercise of options.... 4,433 4,433
------ -------- --------- ------- -------- ------- --------
BALANCE, SEPTEMBER 30, 1998............. 7,638 765,547 (193,804) (365) 313,629 7,419 900,064
Comprehensive income:
Net loss.............................. (29,688)
Other comprehensive income, net of
tax.................................
Cumulative translation
adjustments....................... (5,585)
Minimum pension liability
adjustment........................ 3,090
Comprehensive loss...................... (32,183)
Issuance of stock for:
Warrants surrendered.................. 70 70
Reissuance of treasury stock for:
Stock options......................... 14,796 (9,750) 5,046
Stock purchase plan................... 4,144 (2,172) 1,972
Stock performance awards.............. (2,235) 4,342 115 (2,222)
Recognition of unearned compensation.... 1,140 1,140
Revaluation of stock performance
awards................................ 1,504 (1,504)
Tax benefit from exercise of options.... 980 980
------ -------- --------- ------- -------- ------- --------
BALANCE, SEPTEMBER 30, 1999............. $7,638 $765,866 $(170,522) $ (614) $269,797 $ 4,924 $877,089
====== ======== ========= ======= ======== ======= ========
</TABLE>
See Notes to Consolidated Financial Statements
28
<PAGE>
BJ SERVICES COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------
1999 1998 1997
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................... $ (29,688) $ 117,400 $ 107,906
Adjustments to reconcile net income to cash provided from
operating activities:
Depreciation and amortization............................. 99,800 91,497 90,376
Net (gain) loss on disposal of assets..................... 147 89 (169)
Recognition of unearned compensation...................... 1,140 1,850 1,500
Deferred income tax expense (benefit)..................... (32,866) 31,426 28,764
Unusual charge (noncash).................................. 23,051 15,278
Minority interest......................................... 2,585 3,206 805
Changes in:
Receivables............................................... 19,191 28,689 (59,307)
Accounts payable--trade................................... (22,444) (22,248) 18,188
Inventories............................................... 19,921 (5,750) (13,355)
Other current assets and liabilities...................... (5,837) 13,580 (6,638)
Other, net................................................ (10,571) 9,325 (24,525)
--------- --------- ---------
Net cash flows provided from operating activities........... 64,429 284,342 143,545
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions.......................................... (110,566) (167,961) (102,198)
Proceeds from disposal of assets............................ 7,270 9,372 127,490
Acquisitions of businesses, net of cash acquired............ (73,442) (2,459) (20,810)
--------- --------- ---------
Net cash provided from (used for) investing activities...... (176,738) (161,048) 4,482
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options and stock purchase
grants.................................................... 8,067 5,696 9,006
Purchase of treasury stock.................................. (196,608)
Proceeds from (repayment of) bank borrowings--net........... 106,541 71,343 (150,030)
Principal payment on other long-term notes.................. (6,000) (6,000)
--------- --------- ---------
Net cash flows provided from (used for) financing
activities................................................ 114,608 (125,569) (147,024)
Increase (decrease) in cash and cash equivalents............ 2,299 (2,275) 1,003
Cash and cash equivalents at beginning of year.............. 1,625 3,900 2,897
--------- --------- ---------
Cash and cash equivalents at end of year.................... $ 3,924 $ 1,625 $ 3,900
========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements
29
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
BJ Services Company is a leading provider of pressure pumping and other
oilfield services to the petroleum industry. The consolidated financial
statements include the accounts of BJ Services Company and its majority-owned
subsidiaries (the "Company"). All significant intercompany balances and
transactions have been eliminated in consolidation.
Certain amounts for 1998 and 1997 have been reclassified in the accompanying
consolidated financial statements to conform to the current year presentation.
Fiscal 1997 number of shares and price per share amounts have been restated to
reflect the 2 for 1 stock split in fiscal year 1998. See Notes 13 and 14.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting periods. Actual results could differ from these estimates.
CASH AND CASH EQUIVALENTS: The Company considers all highly liquid debt
instruments purchased with original maturities of three months or less to be
cash equivalents.
INVENTORIES: Inventories, which consist principally of (i) products which
are consumed in the Company's services provided to customers, (ii) spare parts
for equipment used in providing these services and (iii) manufactured components
and attachments for equipment used in providing services, are stated primarily
at the lower of weighted-average cost or market.
PROPERTY: Property is stated at cost less amounts provided for permanent
impairments and includes capitalized interest of $2,317,000, $1,665,000 and
$684,000 for the years ended September 30, 1999, 1998 and 1997, respectively, on
funds borrowed to finance the construction of capital additions. Depreciation is
generally provided using the straight-line method over the estimated useful
lives of individual items. Leasehold improvements are amortized on a
straight-line basis over the shorter of the estimated useful life or the lease
term.
INTANGIBLE ASSETS: Goodwill represents the excess of cost over the fair
value of the net assets of companies acquired in purchase transactions. Goodwill
is being amortized on a straight-line method over periods ranging from 5 to 40
years. Patents are being amortized on a straight line basis over their estimated
useful lives, not to exceed 17 years. Accumulated amortization on intangible
assets at September 30, 1999 and 1998 was $51,934,000 and $43,525,000
respectively. The Company utilizes undiscounted estimated cash flows to evaluate
any possible impairment of intangible assets. If such cash flows exceed the net
carrying value of the intangible assets, the Company records an impairment
charge equal to the difference in discounted estimated cash flows and the net
carrying value. The discount rate utilized is based on market factors at the
time the charge is determined.
INVESTMENTS: Investments in companies in which the Company's ownership
interest ranges from 20 to 50 percent and the Company exercises significant
influence over operating and financial policies are accounted for using the
equity method. Other investments are accounted for using the cost method.
REVENUE RECOGNITION: The Company recognizes revenue as services are
rendered or products are delivered. Certain revenues from the Company's process
and pipeline services are reported on the
30
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
percentage of completion method of accounting using measurements of progress
towards completion appropriate for the work performed.
FOREIGN CURRENCY TRANSLATION: Gains and losses resulting from financial
statement translation of foreign operations where the U.S. dollar is the
functional currency are included in the consolidated statement of operations as
cost of sales. Gains and losses resulting from financial statement translation
of foreign operations where a foreign currency is the functional currency are
included as a separate component of stockholders' equity. Except in Canada, the
Company's foreign operations use the U.S. dollar as the functional currency.
FOREIGN EXCHANGE CONTRACTS: From time to time, the Company enters into
forward foreign exchange contracts to hedge the impact of foreign currency
fluctuations on certain assets and liabilities denominated in foreign
currencies. Changes in market value are offset against foreign exchange gains or
losses on the related assets or liabilities and are included in cost of sales
and services. There were no material foreign exchange contracts outstanding at
September 30, 1999 and 1998.
ENVIRONMENTAL REMEDIATION AND COMPLIANCE: Environmental remediation and
compliance costs are accrued based on estimates of known environmental
exposures. Liabilities are recorded when environmental assessments and/or
remedial efforts are probable, and the cost can be reasonably estimated.
IMPAIRMENT OF LONG-LIVED ASSETS: In accordance with Financial Accounting
Standards Board Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"), the Company
recognizes impairment losses for long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. In
the years ended September 30, 1999 and 1998, the Company recorded an impairment
of $23.1 million and $12.3 million, respectively, against certain long-lived
assets based on a decrease in the undiscounted cash flows expected to be
generated by these assets as a result of the downturn in oilfield drilling
activity. See Note 4.
EMPLOYEE STOCK-BASED COMPENSATION: In fiscal 1997, the Company adopted
Financial Accounting Standards Board Statement No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"). Under SFAS 123, the Company is permitted
to either record expenses for stock options and other stock-based employee
compensation plans based on their fair value at the date of grant or to continue
to apply Accounting Principles Board Opinion No. 25 ("APB 25") and recognize
compensation expense, if any, based on the intrinsic value of the equity
instrument at the measurement date. The Company elected to continue following
APB 25; therefore, no compensation expense has been recognized because the
exercise price of employee stock options equals the market price of the
underlying stock on the date of grant.
NEW ACCOUNTING PRONOUNCEMENTS: Effective October 1, 1998, the Company
adopted Financial Accounting Standards Board Statement No. 130, "Reporting
Comprehensive Income" ("SFAS 130"), Statement No. 131, "Disclosures About
Segments of an Enterprise and Related Information" ("SFAS 131") and Statement
No. 132, "Employer's Disclosures about Pensions and Other Postretirement
Benefits" ("SFAS 132"). SFAS 130 establishes standards for the reporting and
displaying of comprehensive income and its components. SFAS 131 establishes
standards for the way that public business enterprises report information about
operating segments in interim and annual financial statements. SFAS 132
standardizes employers' disclosures for pensions and other postretirement
benefit plans to the extent
31
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
possible, and it requires additional information about changes in the benefit
obligations and the fair value of plan assets.
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities. This statement requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. This statement
is effective for all fiscal quarters of fiscal years beginning after June 15,
2000 and therefore was not used in preparing the Company's 1999 financial
statements. Management is currently evaluating what, if any, additional
adjustment or disclosure may be required when these statements are adopted in
fiscal 2001.
3. ACQUISITIONS OF BUSINESSES
Effective June 28, 1999, the Company acquired selected assets and
subsidiaries of Fracmaster Ltd. for total consideration of $78.4 million.
This acquisition was accounted for using the purchase method of accounting.
Accordingly, the results of Fracmaster Ltd.'s operations were included in the
Company's statement of operations beginning July 1, 1999. The assets and
liabilities of Fracmaster Ltd. have been recorded in the Company's statement of
financial position at estimated fair market value of $78.4 million at September
30, 1999. The allocation of the purchase price may be summarized as follows (in
millions):
<TABLE>
<S> <C>
Fair value of assets acquired(1)............................ $129.6
Debt assumed................................................ (1.7)
Liabilities assumed......................................... (37.1)
Excess of fair value over cost.............................. (12.4)
------
$ 78.4
======
</TABLE>
- ------------------------
(1) Includes cash acquired of $4.9 million.
Pro forma financial information is not presented as this acquisition is not
material to the Company's consolidated financial statements.
OTHER: Effective September 30, 1998, the Company acquired the remaining 51%
ownership of its previously unconsolidated joint venture in Bolivia for total
consideration of $2.6 million in cash.
Effective July 1, 1997, the Company acquired Top Tool Company, Inc. for a
total cash outlay of $7.3 million, including transaction costs. Top Tool
provides oilfield servicing tools to customers operating along the Louisiana
Gulf Coast. The acquisition provides added capacity and tool expertise to the
Company's downhole tool operations. The consolidated statement of operations
includes operating results of the subsidiary acquired since the date of
acquisition.
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
32
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITIONS OF BUSINESSES (CONTINUED)
through borrowings under existing credit facilities. The consolidated statement
of operations includes operating results of the subsidiary acquired since the
date of acquisition.
Each of these "other" acquisitions have been accounted for using the
purchase method of accounting and, accordingly, any excess of the total
consideration over the estimated fair value of the net assets acquired has been
recorded as goodwill and is being amortized over 40 years. These acquisitions
are not material to the Company's financial statements and therefore pro forma
information is not presented.
4. UNUSUAL CHARGES
During the first two quarters of fiscal 1999, the Company recorded pretax
unusual charges totaling $39.7 million ($26.0 million after tax, or $.36 per
diluted share) to reflect changes in its operations as a result of the downturn
in oilfield drilling activity. The components of the unusual charge are as
follows (in thousands):
<TABLE>
<CAPTION>
BALANCE AT
1999 INCURRED SEPTEMBER 30,
PROVISION TO DATE 1999
--------- -------- --------------
<S> <C> <C> <C>
Asset impairments (noncash).................. $23,051 $(23,051)
Severance and related benefits............... 12,798 (12,792) $ 6
Facility closures and other.................. 3,846 (3,317) 529
------- -------- ----
$39,695 $(39,160) $535
======= ======== ====
</TABLE>
The asset impairment of $23.1 million primarily relates to certain equipment
previously utilized in the Company's U.S. operations which will be sold or
decommissioned and salvaged for spare parts. The severance and related benefits
relate to the cost of the involuntary termination of approximately 1,100
employees worldwide. The Company had paid out substantially all severance
benefits by the end of fiscal 1999. The facility closures and other costs
primarily represent remaining lease obligations related to the closure of
several locations in the oil producing regions of the U.S. and also one location
in Latin America, and costs incurred during the first six months of fiscal 1999
for the relocation of equipment and personnel resulting from the closing of
these facilities.
During the fourth quarter of fiscal 1998, the Company recorded a pretax
unusual charge of $26.6 million ($17.6 million after tax, or $.22 per diluted
share) to reflect changes in its operations as a result of
33
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. UNUSUAL CHARGES (CONTINUED)
the downturn in oilfield drilling activity. The components of the unusual charge
are as follows (in thousands):
<TABLE>
<CAPTION>
1998 PROVISION
--------------
<S> <C>
Asset impairments (noncash)................................. $12,218
Severance and related benefits.............................. 7,830
Bad debt expense (noncash).................................. 3,005
Facility closure(1)......................................... 2,455
Other....................................................... 1,078
-------
$26,586
=======
</TABLE>
- ------------------------
(1) Includes $55 noncash impairment of facilities.
The asset impairment losses of $12.2 million consist principally of the
write-down of certain non-productive facilities and equipment in the U.S., and
result from the evaluation of the Company's ability to recover asset costs given
the downturn in oilfield drilling activity. The severance and related benefits
costs relate to the involuntary termination of approximately 850 permanent and
contracted personnel worldwide, substantially all of which had been notified as
of September 30, 1998. The bad debt expense relates to the write-off of
uncollectible receivables resulting from certain customers' inability to pay
their obligations due to reduced production revenue as a result of the lower
prices for oil and natural gas. The facility closure costs relate to the closing
of certain marginal operating locations which were most impacted by the drilling
downturn and also cancellation costs related to a proposed new office building.
The other costs relate primarily to legal expenses resulting from the employee
terminations and cancellation costs related to certain proposed equipment
purchases. All expenditures for the 1998 provision were made as of
September 30, 1999.
5. EARNINGS PER SHARE
In October 1997, the Company adopted Statement of Financial Accounting
Standards No. 128 "Earnings Per Share ("EPS")." In accordance with this standard
the Company has replaced the presentation of primary EPS and fully diluted EPS
with the presentation of basic EPS and diluted EPS for all periods presented.
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS is 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.
At the annual meeting of stockholders on January 22, 1998, the Company's
stockholders approved an amendment to the Company's charter increasing the
number of authorized shares of common stock from 80 million to 160 million
shares. A 2 for 1 stock split approved by the Board of Directors on December 11,
1997 (effected in the form of a stock dividend) was distributed on February 20,
1998 to stockholders of record as of January 30, 1998. Accordingly, all
references in the financial statements to number of shares outstanding and
earnings per share amounts have been retroactively restated for all periods
presented to reflect the increased number of common shares outstanding resulting
from the stock split.
34
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. EARNINGS PER SHARE (CONTINUED)
The following table presents information necessary to calculate earnings per
share for the three years ended September 30, 1999 (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net income (loss)............................. $(29,688) $117,400 $107,906
Average common shares outstanding............. 70,789 74,482 76,868
-------- -------- --------
Basic earnings (loss) per share............... $ (.42) $ 1.58 $ 1.40
======== ======== ========
Average common and dilutive potential common
shares outstanding:
Average common shares outstanding........... 70,789 74,482 76,868
Assumed exercise of stock options........... 1,777 1,780 1,568
Assumed exercise of warrants................ 3,353 5,001 4,060
-------- -------- --------
75,919(1) 81,263 82,496
-------- -------- --------
Diluted earnings (loss) per share............. $ (.42) $ 1.44 $ 1.31
======== ======== ========
</TABLE>
- ------------------------
(1) Antidilutive because the Company incurred a net loss in this period.
6. LONG-TERM DEBT AND BANK CREDIT FACILITIES
Long-term debt at September 30, 1999 and 1998 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Notes payable, banks.................................... $341,064 $157,135
7% Series B Notes due 2006, net of discount............. 124,517 124,441
Other................................................... 1,670 225
-------- --------
467,251 281,801
Less current maturities of long-term debt............... 44,487 39,932
-------- --------
Long-term debt.......................................... $422,764 $241,869
======== ========
</TABLE>
The Company has a committed, unsecured bank credit facility (the "Bank
Credit Facility") consisting of a six-year term loan of approximately $121.1
million (currently drawn partially in Canadian dollars under a provision which
is renewable annually at the option of the banks), which is repayable in 22
quarterly installments that began in March 1997, and a five year U.S. $225.0
million revolving facility available through June 2001. Interest on outstanding
borrowings is charged based on prevailing market rates. The Company is charged
various fees in connection with the Bank Credit Facility, including a commitment
fee based on the average daily unused portion of the commitment. Commitment fees
under the Company's credit facilities were $155,000, $355,000, and $414,000 for
1999, 1998 and 1997, respectively. At September 30, 1999, borrowings outstanding
under the Bank Credit Facility totaled $341.1 million, consisting of $121.1
million under the term loan and $220.0 million under the revolving loan.
Principal reductions of term loans under the Bank Credit Facility are due in
aggregate annual installments
35
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT AND BANK CREDIT FACILITIES (CONTINUED)
of $44.1 million, $44.1 million, and $32.9 million in the years ending
September 30, 2000, 2001 and 2002, respectively.
In addition to the committed facility, the Company had $202.0 million in
various unsecured, discretionary lines of credit at September 30, 1999, which
expire at various dates in 2000. 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 September 30, 1999, there
were $106.0 million in outstanding borrowings under these lines of credit,
consisting of $61.1 million in Canadian borrowings, $43.8 million in U.S.
borrowings and $1.1 million in other currencies. At September 30, 1998, there
were $184.9 million in outstanding borrowings under these lines of credit. The
weighted average interest rates on short-term borrowings outstanding as of
September 30, 1999 and 1998 were 5.6% and 6.1%, respectively.
The Company has issued and outstanding $125.0 million of unsecured 7% Notes
due 2006. The net proceeds from the issuance of the 7% Notes ($123.3 million) in
August 1996 were used by the Company to repay indebtedness outstanding under the
term loan portion of the Company's then existing bank credit facility.
At September 30, 1999, the Company had outstanding letters of credit and
performance related bonds totaling $18.6 million and $33.3 million,
respectively. The letters of credit are issued to guarantee various trade
activities.
The Company's debt agreements contain various customary covenants including
maintenance of certain profitability and solvency ratios and restrictions on
dividend payments, as defined in the Bank Credit Facility, none of which
materially restrict the Company's activities.
7. FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.
CASH AND CASH EQUIVALENTS, TRADE RECEIVABLES, TRADE PAYABLES AND SHORT-TERM
BORROWINGS: The carrying amount approximates fair value because of the short
maturity of those instruments.
LONG-TERM DEBT: Fair value is based on the rates currently available to the
Company for debt with similar terms and average maturities. Other long-term debt
consists of borrowings under the Company's Bank Credit Facility. The carrying
amount of such borrowings approximates fair value as the individual borrowings
bear interest at current market rates.
The fair value of financial instruments which differed from their carrying
value at September 30, 1999 and 1998 was as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
--------------------- ---------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
7.0% Series B Notes................. $124,517 $121,936 $124,441 $128,439
</TABLE>
36
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES
The geographical sources of income (loss) before income taxes for the three
years ended September 30, 1999 were as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
United States................................. $(67,887) $ 72,120 $ 70,638
Foreign....................................... 22,978 99,934 83,730
-------- -------- --------
Income (loss) before income taxes............. $(44,909) $172,054 $154,368
======== ======== ========
</TABLE>
The provision (benefit) for income taxes for the three years ended September
30, 1999 is summarized below (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Current:
United States................................. $ 379
Foreign....................................... $ 17,645 22,849 $17,698
-------- ------- -------
Total current............................... 17,645 23,228 17,698
Deferred:
United States................................. (26,501) 28,353 18,312
Foreign....................................... (6,365) 3,073 10,452
-------- ------- -------
Total deferred.............................. (32,866) 31,426 28,764
-------- ------- -------
Income tax (benefit) expense.................... $(15,221) $54,654 $46,462
======== ======= =======
</TABLE>
The consolidated effective income tax rates (as a percent of income before
income taxes) for the three years ended September 30, 1999 varied from the
United States statutory income tax rate for the reasons set forth below:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Statutory rate..................................... (35.0)% 35.0% 35.0%
Foreign earnings at varying rates.................. (10.4) (7.2) (3.1)
Amortization of excess tax basis over book
resulting from separation from former parent..... (6.6)
Changes in tax laws and tax rates.................. .3
Foreign income recognized domestically............. (4.8) .6 .9
Goodwill amortization.............................. 10.5 2.8 3.4
Nondeductible expenses............................. 5.6 .8 .7
Other--net......................................... .2 (.2) (.5)
----- ----- -----
(33.9)% 31.8% 30.1%
===== ===== =====
</TABLE>
Deferred tax assets and liabilities are recognized for the estimated future
tax effects of temporary differences between the tax basis of an asset or
liability and its reported amount in the financial statements. The measurement
of deferred tax assets and liabilities is based on enacted tax laws and rates
currently in effect in each of the jurisdictions in which the Company has
operations. Generally, deferred tax assets and
37
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES (CONTINUED)
liabilities are classified as current or noncurrent according to the
classification of the related asset or liability for financial reporting. The
estimated deferred tax effect of temporary differences and carryforwards as of
September 30, 1999 and 1998 were as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Assets:
Expenses accrued for financial reporting purposes, not
yet deducted for tax................................ $ 50,590 $ 48,226
Net operating loss carryforwards...................... 233,314 202,627
Valuation allowance................................... (34,920) (25,300)
-------- --------
Total deferred tax asset............................ 248,984 225,553
Liabilities:
Differences in depreciable basis of property.......... (33,723) (47,564)
Income accrued for financial reporting purposes, not
yet reported for tax................................ (4,397) (3,079)
-------- --------
Total deferred tax liability........................ (38,120) (50,643)
-------- --------
Net deferred tax asset.................................. $210,864 $174,910
======== ========
</TABLE>
At September 30, 1999, the Company had approximately $537 million of U.S.
tax net operating loss carryforwards expiring in varying amounts between 2000
and 2011. The Company also had approximately $79 million of foreign tax net
operating loss carryforwards and approximately $10 million of foreign investment
tax credit carryforwards as of September 30, 1999. Of the foreign tax net
operating loss carryforwards, approximately $40 million is not subject to an
annual limitation and will carryforward indefinitely. The foreign investment tax
credit carryforward and the remaining loss carryforward, if not used, will
expire in varying amounts beginning in 2000. The potential impact of the
expiration of net operating loss and investment tax credit carryforwards has
been reflected in the deferred tax asset valuation allowance balance as of
September 30, 1999 and 1998. The increase in the deferred tax valuation
allowance from 1998 to 1999 reflects the calculable portion of the gross tax
asset recorded with respect to the Fracmaster acquisition that the Company
believes may not be realized. Any subsequent decrease in the deferred tax
valuation allowance will be recorded as a reduction to goodwill.
The Company does not provide federal income taxes on the undistributed
earnings of its foreign subsidiaries that the Company considers to be
permanently reinvested in foreign operations. The cumulative amount of such
undistributed earnings was approximately $395 million at September 30, 1999.
9. SEGMENT INFORMATION
The Company has three business segments: U.S./Mexico Pressure Pumping,
International Pressure Pumping and Other Oilfield Services. The U.S./Mexico
Pressure Pumping Services segment includes cementing services and stimulation
services (consisting of fracturing, acidizing, sand control, nitrogen, coiled
tubing and downhole tools services) which are provided throughout the United
States and Mexico. The International Pressure Pumping Services segment also
includes cementing and stimulation services which are provided to over 40
countries in the major international oil and natural gas producing areas of
Latin America, Europe, Africa, Southeast Asia, Canada and the Middle East. The
Other Oilfield Services
38
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. SEGMENT INFORMATION (CONTINUED)
segment consists of specialty chemicals, tubular services and process and
pipeline services, both throughout the U.S. and internationally.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates the
performance of its operating segments based on operating income excluding
goodwill amortization and unusual charges. Intersegment sales and transfers are
not significant.
Summarized financial information concerning the Company's segments is shown
in the following table. The "Corporate" column includes corporate general and
administrative expenses, goodwill amortization, unusual charges, interest
expense and other income and expense items not allocated to reportable segments.
BUSINESS SEGMENTS
<TABLE>
<CAPTION>
U.S./MEXICO INTERNATIONAL OTHER
PRESSURE PRESSURE OILFIELD
PUMPING PUMPING SERVICES CORPORATE TOTAL
----------- ------------- -------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1999
Revenues.............................. $453,912 $505,613 $171,184 $ 625 $1,131,334
Operating income (loss)............... (3,889) 39,791 18,973 (69,640) (14,765)
Identifiable assets................... 394,824 584,936 122,121 722,883 1,824,764
Capital expenditures.................. 42,460 36,515 12,607 18,984 110,566
Depreciation and amortization......... 36,532 44,951 10,677 7,640 99,800
1998
Revenues.............................. $726,729 $612,672 $185,329 $ 2,738 $1,527,468
Operating income...................... 117,604 97,494 27,611 (44,946) 197,763
Identifiable assets................... 407,761 530,848 123,613 681,479 1,743,701
Capital expenditures.................. 58,070 89,924 14,853 5,114 167,961
Depreciation and amortization......... 34,280 40,822 10,145 6,250 91,497
1997
Revenues.............................. $719,028 $585,334 $161,536 $ 675 $1,466,573
Operating income...................... 107,539 77,242 23,248 (25,622) 182,407
Identifiable assets................... 425,901 494,468 108,500 697,899 1,726,768
Capital expenditures.................. 38,341 52,292 10,127 1,438 102,198
Depreciation and amortization......... 32,815 34,795 8,856 13,910 90,376
</TABLE>
39
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. SEGMENT INFORMATION (CONTINUED)
GEOGRAPHIC INFORMATION
<TABLE>
<CAPTION>
LONG-LIVED
REVENUES ASSETS
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
1999
United States........................................ $ 488,566 $ 769,492
Canada............................................... 118,996 114,159
Other foreign countries.............................. 523,772 300,376
---------- ----------
Consolidated total................................. $1,131,334 $1,184,027
========== ==========
1998
United States........................................ $ 779,715 $ 780,029
Canada............................................... 153,611 68,582
Other foreign countries.............................. 594,142 272,130
---------- ----------
Consolidated total................................. $1,527,468 $1,120,741
========== ==========
1997
United States........................................ $ 770,075 $ 769,448
Canada............................................... 179,869 68,663
Other foreign countries.............................. 516,629 230,837
---------- ----------
Consolidated total................................. $1,466,573 $1,068,948
========== ==========
</TABLE>
REVENUES BY PRODUCT LINE
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cementing................................ $ 356,762 $ 499,789 $ 484,375
Stimulation.............................. 577,077 797,578 757,642
Other.................................... 197,495 230,101 224,556
---------- ---------- ----------
Total revenue.......................... $1,131,334 $1,527,468 $1,466,573
========== ========== ==========
</TABLE>
10. EMPLOYEE BENEFIT PLANS
The Company administers a thrift plan whereby eligible employees elect to
contribute from 2% to 12% of their base salaries to an employee benefit trust.
Employee contributions are matched by the Company at the rate of $.50 per $1.00
up to 6% of the employee's base salary. In addition, the Company contributes
between 2% and 5% of each employee's base salary depending on their age as of
January 1 each year as a base contribution. Company matching contributions vest
immediately while base contributions become fully vested after five years of
employment. The Company's contributions to these thrift plans amounted to
$7,365,000, $7,916,000 and $6,887,000 in 1999, 1998 and 1997, respectively.
40
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. EMPLOYEE BENEFIT PLANS (CONTINUED)
The Company's Canadian employees formerly employed by Fracmaster Ltd. (See
Note 3) are currently covered under a registered retirement savings plan whereby
eligible employees elect to contribute from 1% to 5% of their salary based on
years of service. In addition, the Company also contributes from 4% to 6% of the
employee's base salary based on years of service beginning after the first year,
for those employees participating in the plan. The Company contributions vest
immediately. During the fiscal year ended September 30, 1999, the Company
contributed approximately $227,000 to the plan. Management is in the process of
developing a unified plan for all Canadian employees.
The Company's U.S. employees formerly employed by The Western Company of
North America ("Western") with at least one year of service are covered under a
defined benefit pension plan as a carryover from the Western acquisition.
Pension benefits are based on years of service and average compensation for each
employee's five consecutive highest paid years during the last ten years worked.
Benefits under the Western plan were frozen effective December 31, 1995, at
which time all earned benefits were vested. Management has not yet made a
decision on whether to terminate the plan and therefore will fund the amounts
necessary to meet minimum funding requirements under the Employees' Retirement
Income Security Act, as amended. The funded status of this plan at September 30,
1999 and 1998 was as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Vested benefit obligation................................. $53,383 $56,577
======= =======
Accumulated benefit obligation............................ $53,383 $56,577
Plan assets at fair value................................. 48,970 47,377
------- -------
Benefit obligation in excess of plan assets............... 4,413 9,200
Unrecognized loss......................................... (4,440) (9,194)
Adjustment required to recognize minimum liability........ 4,440 9,194
------- -------
Net pension liability..................................... $ 4,413 $ 9,200
======= =======
</TABLE>
The following provides a reconciliation of the benefit obligation and plan
assets:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Defined benefit plan obligation, beginning of year........ $56,577 $50,847
Interest cost............................................. 3,589 3,571
Actuarial (gain)/loss..................................... (3,617) 4,866
Benefits paid from plan assets............................ (3,166) (2,707)
------- -------
Defined benefit plan obligation, end of year.............. $53,383 $56,577
======= =======
</TABLE>
41
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. EMPLOYEE BENEFIT PLANS (CONTINUED)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
CHANGE IN PLAN ASSETS
Fair value of plan assets, beginning of year.............. $47,377 $46,285
Company contributions..................................... 927
Actual return on plan assets.............................. 4,759 2,872
Benefits paid from plan assets............................ (3,166) (2,707)
------- -------
Fair value of plan assets, end of year.................... $48,970 $47,377
======= =======
</TABLE>
Pursuant to the provisions of Statement of Financial Accounting Standards
No. 87, "Employers' Accounting for Pensions," the Company recorded in other
noncurrent liabilities a minimum pension liability adjustment of $4.4 million
and $9.2 million as of September 30, 1999 and 1998, respectively, representing
the amount by which the accumulated benefit obligation exceeded the fair value
of plan assets. As there were no previously unrecognized prior service costs at
September 30, 1999 and 1998, the full amount of the adjustments, net of related
deferred tax benefit, were recorded as a reduction of stockholders' equity. See
Note 12 for disclosure of the amounts included in other comprehensive income.
Assumptions used in accounting for the Company's U.S. defined benefit plan
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Weighted-average discount rate....................... 7.25% 6.50% 7.25%
Weighted-average expected long-term rate of return on
assets............................................. 9.00% 9.00% 9.00%
</TABLE>
Costs for each of the three years ended September 30, 1999 for the Company's
U.S. defined benefit plan were as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Interest cost on projected benefit obligation..... $ 3,589 $ 3,571 $ 3,537
Expected return on plan assets.................... (4,759) (2,872) (7,779)
Net amortization and deferral..................... 1,137 (1,172) 4,452
------- ------- -------
Net pension cost (benefit)........................ $ (33) $ (473) $ 210
======= ======= =======
</TABLE>
In addition, the Company sponsors defined benefit plans for foreign
operations which cover substantially all employees in Canada and the United
Kingdom. The Company also sponsored a defined benefit plan in Venezuela. During
fiscal year 1998, a new labor law was enacted in Venezuela which resulted in
termination of the plan. The new labor law in essence prospectively requires
employers to fund stipulated amounts based on employees' salaries into a trust
fund. After making the contribution, the Company has no further obligation.
Therefore, no obligation is included for Venezuela as of September 30, 1999 and
42
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. EMPLOYEE BENEFIT PLANS (CONTINUED)
1998. The funded status of the Company's international plans at September 30,
1999 and 1998 was as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation............................... $53,998 $50,451
======= =======
Accumulated benefit obligation.......................... $55,327 $51,922
======= =======
Projected benefit obligation.............................. $61,519 $58,667
Plan assets at fair value................................. 65,311 52,668
------- -------
Plan assets in (excess of) less than projected benefit
obligation.............................................. (3,792) 5,999
Unrecognized gain (loss).................................. 5,344 (6,002)
Unrecognized transition asset, net of amortization........ 26 29
Unrecognized prior service cost........................... (170) (200)
------- -------
Net pension (asset) liability............................. $ 1,408 $ (174)
======= =======
</TABLE>
The following provides a reconciliation of the benefit obligation and plan
assets of the Company's international defined benefit plans (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Defined benefit obligation, beginning of year............. $58,667 $57,903
Service cost.............................................. 5,478 5,492
Interest cost............................................. 3,860 4,112
Actuarial (gain)/loss..................................... (3,894) 1,156
Benefits paid from plan assets............................ (3,658) (2,429)
Contributions by plan participants........................ 1,045 973
Settlement................................................ (1,816)
Curtailment of plan....................................... (5,696)
Foreign currency exchange rate change..................... 21 (1,028)
------- -------
Defined benefit obligation, end of year................... $61,519 $58,667
======= =======
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
CHANGE IN PLAN ASSETS
Fair value of plan assets, beginning of year.............. $52,668 $54,599
Actual return on plan assets.............................. 11,286 (3,357)
Company contributions..................................... 2,783 3,224
Contributions by plan participants........................ 1,981 1,775
Benefits paid from plan assets............................ (3,658) (2,429)
Foreign currency exchange rate change..................... 251 (1,144)
------- -------
Fair value of plan assets, end of year.................... $65,311 $52,668
======= =======
</TABLE>
43
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. EMPLOYEE BENEFIT PLANS (CONTINUED)
Assumptions used in accounting for the Company's international defined
benefit pension plans were as follows:
<TABLE>
<S> <C>
Weighted-average discount rate.............................. 6-7%
Weighted-average rate of increase in future compensation.... 2-5%
Weighted-average expected long-term rate of return on
assets.................................................... 2-9%
</TABLE>
Combined costs for the Company's international defined benefit plans for the
three years ended September 30, 1999 were as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net periodic foreign pension cost:
Service cost for benefits earned.............. $ 5,478 $ 5,492 $ 4,687
Interest cost on projected benefit
obligation.................................. 3,860 4,112 4,238
Expected return on plan assets................ (11,387) 3,335 (12,846)
Net amortization and deferral................. 7,309 (7,615) 9,005
-------- ------- --------
Net pension cost................................ $ 5,260 $ 5,324 $ 5,084
======== ======= ========
</TABLE>
In addition, the Company expensed $780,000 and $910,000 during 1999 and
1998, respectively, relating to the settlement of the pension liability
resulting from the enactment of the new labor law in Venezuela.
The Company also sponsors a plan whereby certain health care and life
insurance benefits are provided for retired employees (primarily U.S.) and their
eligible dependents if the employee meets specified age and service
requirements. These plans are unfunded and the Company retains the right,
subject to existing agreements, to modify or eliminate these plans.
The Company's postretirement medical benefit plan provides credits based on
years of service which can be used to purchase coverage under the active
employee plans. This plan effectively caps the Company's health care inflation
rate at a 4% increase per year. The reduction of approximately $5.7 million in
the accumulated postretirement benefit obligation due to this amendment is being
amortized over the average period of future service to the date of full
eligibility for such postretirement benefits of the active employees.
44
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. EMPLOYEE BENEFIT PLANS (CONTINUED)
Net periodic postretirement benefit costs for the three years ended
September 30, 1999 included the following components (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Service cost for benefits attributed to service
during the period................................. $1,786 $1,563 $1,388
Interest cost on accumulated postretirement benefit
obligation........................................ 1,532 1,513 1,532
Amortization of prior service costs................. (894) (894) (894)
Amortization of cumulative unrecognized net gain.... (65)
------ ------ ------
Net periodic postretirement benefit cost............ $2,424 $2,117 $2,026
====== ====== ======
</TABLE>
The actuarial and recorded liabilities for these postretirement benefits
were as follows at September 30, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................................ $ 7,683 $ 6,650
Fully eligible active plan participants................. 2,155 2,494
Other active plan participants.......................... 13,864 15,873
------- -------
23,702 25,017
Unrecognized cumulative net gain.......................... 5,631 1,842
Unrecognized prior service cost........................... 599 1,494
------- -------
Accrued postretirement benefit liability.................. $29,932 $28,353
======= =======
</TABLE>
The following provides a reconciliation of the benefit obligation and plan
assets (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Postretirement benefit obligation, beginning of year...... $25,017 $22,137
Service cost.............................................. 1,786 1,563
Interest cost............................................. 1,532 1,513
Actuarial (gain)/loss..................................... (3,787) 797
Benefits paid............................................. (846) (993)
------- -------
Postretirement benefit obligation, end of year............ $23,702 $25,017
======= =======
</TABLE>
The accumulated postretirement benefit obligation at September 30, 1999 and
1998 was determined using a discount rate of 7.25% and 6.25%, respectively, and
a health care cost trend rate of 4%, reflecting the cap discussed above.
Increasing the assumed health care cost trend rates by one percentage point
would not have a material impact on the accumulated postretirement benefit
obligation or the net periodic postretirement benefit cost because these
benefits are effectively capped by the Company.
45
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. COMMITMENTS AND CONTINGENCIES
The Company, through performance of its service operations, is sometimes
named as a defendant in litigation, usually relating to claims for bodily
injuries or property damage (including claims for well or reservoir damage). The
Company maintains insurance coverage against such claims to the extent deemed
prudent by management. The Company believes that there are no existing claims of
a potentially material adverse nature for which it has not already provided
appropriate accruals.
Federal, state and local laws and regulations govern the Company's operation
of underground fuel storage tanks. Rather than incur additional costs to restore
and upgrade tanks as required by regulations, management has opted to remove the
existing tanks. The Company has completed the removal of these tanks and has
remedial cleanups in progress related to the tank removals. In addition, the
Company is conducting a number of environmental investigations and remedial
actions at current and former company locations and, along with other companies,
has been named a potentially responsible party at five waste disposal sites. The
Company has established an accrual of approximately $6 million for such
environmental matters which management believes to be its best estimate of the
Company's portion of future costs to be incurred. The Company also maintains
insurance for environmental liabilities which the Company believes is reasonable
based on its knowledge of its industry.
In 1997, the Company completed a transaction involving the transfer of
certain pumping service equipment assets. The Company received $100.0 million
which was used to pay outstanding bank debt. The equipment will be used to
provide services to the Company's customers for which the Company will pay a
service fee over a period of at least eight, but not more than fourteen years.
The transaction generated a deferred gain for book purposes of approximately $38
million which will be amortized over twelve years. The balance of the deferred
gain was $28.3 million and $33.4 million as of September 30, 1999 and 1998,
respectively.
LEASE AND OTHER LONG-TERM COMMITMENTS: At September 30, 1999, the Company
had long-term operating leases and service fee commitments covering certain
facilities and equipment, as well as other long-term commitments, with varying
expiration dates. Minimum annual commitments for the years ended September 30,
2000, 2001, 2002, 2003 and 2004 are $36,162,000, $32,968,000, $27,152,000,
$20,930,000 and $19,927,000 respectively, and $71,100,000 in the aggregate
thereafter.
46
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. SUPPLEMENTAL FINANCIAL INFORMATION
Supplemental financial information for the three years ended September 30,
1999 is as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Consolidated Statement of Operations:
Research and development expense............... $10,573 $11,908 $ 9,904
Rent expense................................... 46,871 46,153 26,576
Net foreign exchange gain (loss)............... (103) (214) 148
Consolidated Statement of Cash Flows:
Income taxes paid.............................. $15,571 $23,953 $20,387
Interest paid.................................. 31,835 25,595 30,407
Details of acquisitions:
Fair value of assets acquired................ 112,276 3,855 5,366
Liabilities assumed.......................... 38,834 2,949 9,600
Goodwill..................................... 1,553 25,044
Cash paid for acquisitions, net of cash
acquired................................... 73,442 2,459 20,810
</TABLE>
Other income (expense)--net for the three years ended September 30, 1999 is
summarized as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Rental income..................................... $ 114 $ 384 $ 349
Gain on Argentine bonds........................... 276
Income from equity method investments............. 145 234 246
Royalty income.................................... 157 495 213
Gain (loss) on sales of assets--net............... (147) (89) 169
Minority interest................................. (2,585) (3,206) (805)
Non-operating net foreign exchange gain........... 35 1,110
Dividend income................................... 2,197 20
Other--net........................................ 697 300 1,259
------- ------- ------
Other income (expense)--net....................... $ 613 $ (772) $1,727
======= ======= ======
</TABLE>
47
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. SUPPLEMENTAL FINANCIAL INFORMATION (CONTINUED)
Accumulated other comprehensive income consists of the following (in
thousands):
<TABLE>
<CAPTION>
MINIMUM PENSION CUMULATIVE
LIABILITY TRANSLATION
ADJUSTMENT ADJUSTMENT TOTAL
--------------- ----------- --------
<S> <C> <C> <C>
Balance, September 30, 1996.............. $(1,623) $(1,623)
Changes.................................. $(2,051) 2,163 112
------- ------- -------
Balance, September 30, 1997.............. (2,051) 540 (1,511)
Changes.................................. (3,925) 12,855 8,930
------- ------- -------
Balance, September 30, 1998.............. (5,976) 13,395 7,419
Changes.................................. 3,090 (5,585) (2,495)
------- ------- -------
Balance, September 30, 1999.............. $(2,886) $ 7,810 $ 4,924
======= ======= =======
</TABLE>
The tax effects allocated to each component of other comprehensive income
may be summarized as follows (in thousands):
<TABLE>
<CAPTION>
BEFORE-TAX TAX (EXPENSE) NET-OF-TAX
AMOUNT BENEFIT AMOUNT
---------- ------------- ----------
<S> <C> <C> <C>
Year Ended September 30, 1997:
Foreign currency translation adjustment... $ 2,163 $ 2,163
Minimum pension liability adjustment...... (3,156) $ 1,105 (2,051)
------- ------- -------
Other comprehensive income................ $ (993) $ 1,105 $ 112
======= ======= =======
Year Ended September 30, 1998:
Foreign currency translation adjustment... $12,855 $12,855
Minimum pension liability adjustment...... (6,038) $ 2,113 (3,925)
------- ------- -------
Other comprehensive income................ $ 6,817 $ 2,113 $ 8,930
======= ======= =======
Year Ended September 30, 1999:
Foreign currency translation adjustment... $(5,585) $(5,585)
Minimum pension liability adjustment...... 4,754 $(1,664) 3,090
------- ------- -------
Other comprehensive income................ $ (831) $(1,664) $(2,495)
======= ======= =======
</TABLE>
13. EMPLOYEE STOCK PLANS
STOCK OPTION PLANS: The Company's 1990 Stock Incentive Plan, 1995 Incentive
Plan and 1997 Incentive Plan (the "Plans") provide for the granting of options
for the purchase of the Company's common stock ("Common Stock") and other
performance based awards to officers, key employees and nonemployee directors of
the Company. Such options vest over a three or four-year period and are
exercisable for periods ranging from one to ten years. The options granted in
December 1996 also had an acceleration clause which provided that such options
would vest immediately if the closing price of the Common Stock reached $37.50.
On October 1, 1997, the Company's Common Stock closed at $37.53 and all options
granted on December 12, 1996 became vested in full. An aggregate of 9,000,000
shares of
48
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. EMPLOYEE STOCK PLANS (CONTINUED)
Common Stock have been reserved for grants, of which 1,858,717 were available
for future grants at September 30, 1999.
A summary of the status of the Company's stock option activity, and related
information for the years ended September 30, 1999, 1998 and 1997 is presented
below (in thousands, except per share prices):
<TABLE>
<CAPTION>
1999 1998 1997
------------------------ ------------------------ ------------------------
WEIGHTED-AVG. WEIGHTED-AVG. WEIGHTED-AVG.
EXERCISE EXERCISE EXERCISE-
SHARES PRICE SHARES PRICE SHARES PRICE
-------- ------------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year............................ 2,888 $16.64 2,582 $13.14 2,772 $10.37
Granted........................... 2,023 14.73 503 35.22 558 23.14
Exercised......................... (468) 10.78 (164) 16.92 (718) 10.04
Forfeited......................... (55) 18.01 (33) 30.31 (30) 17.22
----- ----- -----
Outstanding at end of year........ 4,388 16.36 2,888 16.64 2,582 13.14
===== ===== =====
Options exercisable at year-end... 2,143 $15.41 2,260 $12.94 1,968 $12.93
Weighted-average fair value of
options granted during the
year............................ $11.16 $26.30 $12.28
</TABLE>
The following table summarizes information about stock options outstanding
as of September 30, 1999 (in thousands, except per share prices):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------- ------------------------
WEIGHTED-AVG. WEIGHTED-AVG. WEIGHTED-AVG.
REMAINING EXERCISE EXERCISE
RANGE OF EXERCISE PRICE SHARES CONTRACTUAL LIFE PRICE SHARES PRICE
- ----------------------- -------- ---------------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C>
$6.00 to 10.78......................... 969 4.8 $8.95 969 $ 8.95
10.79 to 21.56......................... 2,479 8.4 14.12 583 13.95
21.57 to 35.93......................... 940 7.2 29.88 591 27.44
----- -----
4,388 7.4 16.36 2,143 15.41
===== =====
</TABLE>
SFAS 123 encourages, but does not require, companies to record compensation
cost for employee stock-based compensation plans at fair value as determined by
generally recognized option pricing models such as the Black-Scholes model or
the binomial model. Because of the inexact and subjective nature of deriving
stock option values using these methods, the Company has adopted the
disclosure-only provisions of SFAS 123 and continues to account for stock-based
compensation as it has in the past using the intrinsic value method prescribed
in APB 25. Accordingly, no compensation expense has been recognized for the
Company's employee stock option plans. Had compensation cost for the Company's
employee stock option plans been determined based on the fair value at the grant
date for awards issued in 1999, 1998 and 1997 consistent with the provisions of
SFAS 123, the Company's net earnings and diluted earnings per share would have
been reduced by $6.0 million or $.08 per share, $4.4 million or $.05 per share
and $5.1 million or $.07 per share in 1999, 1998 and 1997, respectively. As this
calculation does not consider the effect of awards issued prior to 1996, it may
not be representative of the effects on pro forma net income in future
49
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. EMPLOYEE STOCK PLANS (CONTINUED)
years. The pro forma fair value of options at the date of grant was estimated
using the Black-Scholes model and the following assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Expected life (years).......................... 7.9 7.7 7.6
Interest rate.................................. 6.2% 4.9% 5.8%
Volatility..................................... 65.4% 66.2% 37.4%
Dividend yield................................. 0 0 0
Weighted-average fair value per share at grant
date......................................... $11.16 $26.30 $12.28
</TABLE>
STOCK PURCHASE PLAN: The Company's 1990 Employee Stock Purchase Plan and
the Company's 1999 Employee Stock Purchase Plan (together, the "Purchase Plan")
are plans under which all employees may purchase shares of the Common Stock at
85% of market value on the first or last business day of the twelve-month plan
period beginning each October, whichever is lower. Such purchases are limited to
10% of the employee's regular pay. A maximum aggregate of 4,500,000 shares has
been reserved under the Purchase Plan, 3,567,636 of which were available for
future purchase at September 30, 1999. In October 1999, 347,316 shares were
purchased at $13.81 per share and in October 1998, 131,435 shares were purchased
at $15.04 per share. Had compensation cost for the Company's stock purchase plan
been determined consistent with the provisions of SFAS 123, the Company's net
earnings and diluted earnings per share would have been reduced by $1.4 million
or $.02 per share, $.6 million or $.01 per share and $.6 million or $.01 per
share in 1999, 1998 and 1997, respectively. The pro forma value of the
employees' purchase rights was estimated using the Black-Scholes model with the
following assumptions; no dividend yield; an expected life of 1 year; expected
volatility of 65.4% in 1999, 66.2% in 1998 and 37.4% in 1997; and a risk free
interest rate of 4.99% in 1999, 4.68% in 1998 and 5.8% in 1997. The
weighted-average fair value per share of these purchase rights granted in 1999,
1998 and 1997 was $6.23, $6.81 and $10.79, respectively.
STOCK INCENTIVE PLAN: Pursuant to the terms of the 1990 Stock Incentive
Plan, during 1993 through 1997 the Company also issued a total of 632,932
Performance Units ("Units") to officers of the Company. Each Unit represents the
right to receive from the Company at the end of a stipulated period one
unrestricted share of Common Stock, contingent upon achievement of certain
financial performance goals over the stipulated period. Should the Company fail
to achieve the specific financial goals as set by the Executive Compensation
Committee of the Board of Directors, the Units are canceled and the related
shares revert to the Company for reissuance under the plan. The aggregate fair
market value of the underlying shares granted under this plan is considered
unearned compensation at the time of grant and is adjusted annually based on the
current market price for the Common Stock. Compensation expense is determined
based on management's current estimate of the likelihood of meeting the specific
financial goals and charged ratably over the stipulated period. On October 12,
1998, the Executive Compensation Committee of the Board of Directors reviewed
the Company's performance for the three-year period ending September 30, 1998
for purposes of determining the performance criteria achievement level for the
Unit awards made in November 1995. Based on various performance factors
including comparison of the Company's stock price to the peer group established
at the time of grant (which has changed significantly due to mergers and
acquisitions in the oilfield sector), earnings growth, return on equity growth
and return on assets growth, the Compensation Committee decided that the 1995
Units should vest at the level of 66% of the maximum level. Therefore, a total
of 137,353 Units were converted into Common Stock and issued to officers, 11,287
Units were deferred for later issuance and 76,572 Units were cancelled. As of
50
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. EMPLOYEE STOCK PLANS (CONTINUED)
September 30, 1999 there were 81,913 Units outstanding. On November 23, 1999,
the Executive Compensation Committee of the Board of Directors reviewed the
Company's performance for the three-year period ending September 30, 1999 and
determined that the highest level of performance criteria was achieved for the
Unit awards made in December 1996. Therefore, a total of 40,924 Units were
converted into Common Stock and issued to officers.
14. STOCKHOLDERS' EQUITY
STOCKHOLDER RIGHTS PLAN: The Company has a Stockholder Rights Plan (the
"Rights Plan") designed to deter coercive takeover tactics and to prevent an
acquirer from gaining control of the Company without offering a fair price to
all of the Company's stockholders. Under this plan, each outstanding share of
the Common Stock includes one preferred share purchase right ("Right") which
becomes exercisable under certain circumstances, including when beneficial
ownership of the Common Stock by any person, or group, equals or exceeds 15% of
the Company's outstanding Common Stock. Each Right entitles the registered
holder to purchase from the Company one one-hundredth of a share of Series A
Junior Participating Preferred Stock at a price of $150, subject to adjustment
under certain circumstances. Upon the occurrence of certain events specified in
the Rights Plan, each holder of a Right (other than an Acquiring Person) will
have the right, upon exercise of such Right, to receive that number of shares of
common stock of the Company (or the surviving corporation) that, at the time of
such transaction, would have a market price of two times the purchase price of
the Right. No shares of Series A Junior Participating Preferred Stock have been
issued by the Company at September 30, 1999. The Rights were proportionately
adjusted as of the stock split record date to reflect the effect of the February
1998 stock split.
STOCK PURCHASE WARRANTS: In connection with the acquisition of Western in
1995, the Company issued 4,800,037 stock purchase warrants ("Warrants"). The
Warrants were issued on April 14, 1995 at an initial value of $5.00 per Warrant.
Subsequent to the February 1998 stock split, each Warrant represents the right
to purchase two shares of the Common Stock at an exercise price of $15 per
share, until the expiration date of April 13, 2000. As of September 30, 1999,
4,923 Warrants had been exercised.
STOCK SPLIT: At the annual meeting of stockholders on January 22, 1998, the
Company's stockholders approved an amendment to the Company's charter increasing
the number of authorized shares of common stock from 80 million to 160 million
shares. This allowed the Company to effect a 2 for 1 stock split (in the form of
a dividend) previously authorized by the Board of Directors on December 11,
1997. The distribution on February 20, 1998 increased the number of shares
outstanding from 37,694,427 to 75,388,854 (net of treasury shares of 986,000,
which did not split). All share and per share data, including stock option and
stock purchase plan information have been restated to reflect the stock split.
TREASURY STOCK: In December 1997, the Board of Directors approved a share
repurchase program authorizing purchases up to $150 million of Common Stock at
the discretion of the Company's management. In May 1998, the Board approved an
increase in the authorized amount up to $300 million. Under this program, the
Company repurchased 5,996,400 shares at a cost of $196.6 million during fiscal
1998 and no shares during fiscal 1999. In October 1999, the Company reissued
4,027,972 shares of treasury stock through a private placement with certain
financial institutions. The proceeds from the private placement of $144.0
million were used to pay down outstanding debt. The Company has also entered
into privately negotiated option agreements pursuant to which it currently
intends to repurchase an equivalent number of shares in April 2000 for a total
of $149.0 million.
51
<PAGE>
BJ SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH FISCAL YEAR
QUARTER QUARTER QUARTER QUARTER TOTAL
-------- -------- -------- -------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Fiscal Year 1999:
Revenue.............................. $294,435 $269,601 $253,093 $314,205 $1,131,334
Gross profit(1)...................... 44,632 37,239 11,524 44,390 137,785
Net income (loss).................... (7,026)(2) (11,387)(3) (16,095) 4,820 (29,688)
Earnings (loss) per share:
Basic.............................. (.10) (.16) (.23) .07 (.42)
Diluted............................ (.10) (.16) (.23) .06 (.42)
Fiscal Year 1998:
Revenue.............................. $415,360 $395,602 $365,343 $351,163 $1,527,468
Gross profit(1)...................... 102,937 95,575 81,815 63,923 344,250
Net income........................... 44,077 38,606 32,871 1,846(4) 117,400
Earnings per share:
Basic.............................. .57 .51 .44 .03 1.58
Diluted............................ .52 .47 .41 .02 1.44
</TABLE>
- ------------------------
(1) Represents revenue less cost of sales and services and research and
engineering expenses.
(2) Includes $21.6 million ($14.0 million after tax, or $.19 per diluted share)
unusual charge resulting from the restructuring of worldwide operations due
to the downturn in oilfield drilling activity. See Note 4.
(3) Includes $18.1 million ($12.1 million after tax, or $.17 per diluted share)
unusual charge resulting from the restructuring of worldwide operations due
to the downturn in oilfield drilling activity. See Note 4.
(4) Includes $26.6 million ($17.6 million after tax, $.22 per diluted share)
unusual charge resulting from the restructuring of worldwide operations due
to the downturn in oilfield drilling activity. See Note 4.
52
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
53
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the directors of the Company is set forth in the
section entitled "Election of Directors" in the Proxy Statement of the Company
for the Annual Meeting of Stockholders to be held January 28, 1999 which section
is incorporated herein by reference. For information regarding executive
officers of the Company, see page 11 hereof. Information concerning compliance
with Section 16(a) of the Exchange Act is set forth in the section entitled
"Compliance with Section 16(a) of the Exchange Act" in the Proxy Statement of
the Company for the Annual Meeting of Stockholders to be held January 27, 2000,
which section is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information for this item is set forth in the sections entitled "Executive
Compensation" and "Severance Agreements" in the Proxy Statement of the Company
for the Annual Meeting of Stockholders to be held January 27, 2000, which
sections are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information for this item is set forth in the sections entitled "Voting
Securities" and "Election of Directors" in the Proxy Statement of the Company
for the Annual Meeting of Stockholders to be held January 27, 2000, which
sections are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
54
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this report or incorporated herein by
reference:
(1) Financial Statements:
The following financial statements of the Registrant as set forth under
Part II, Item 8 of this report on Form 10-K on the pages indicated.
<TABLE>
<CAPTION>
PAGE IN THIS
FORM 10-K
-------------
<S> <C>
Report of Independent Auditors.............................. 24
Consolidated Statement of Operations for the years ended
September 30, 1997, 1998 and 1999......................... 25
Consolidated Statement of Financial Position as of
September 30, 1998 and 1999............................... 26
Consolidated Statement of Stockholders' Equity for the years
ended September 30, 1997, 1998 and 1999................... 28
Consolidated Statement of Cash Flows for the years ended
September 30, 1997, 1998 and 1999......................... 29
Notes to Consolidated Financial Statements.................. 30
</TABLE>
(2) Financial Statement Schedules:
<TABLE>
<CAPTION>
SCHEDULE PAGE
NUMBER DESCRIPTION OF SCHEDULE NUMBER
- -------- ----------------------- ---------
<C> <S> <C>
II Valuation and Qualifying Accounts....................... 60
</TABLE>
All other financial statement schedules are omitted because of the
absence of conditions under which they are required or because all
material information required to be reported is included in the
consolidated financial statements and notes thereto.
(b) A report on Form 8-K was filed on October 29,1999, reporting other events
under Item 5 regarding a private financing arrangement structured around the
expected exercise of the Company's outstanding warrants in April 2000, and
attaching as an exhibit under Item 7 the related press release.
(3) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
--------------------- ----------------------
<C> <S>
2.1 Agreement and Plan of Merger dated as of November 17, 1994
(Merger Agreement), among BJ Services Company, WCNA
Acquisition Corp. and The Western Company of North America
(filed as Exhibit 2.1 to the Company's Annual Report on Form
10-K for the year ended September 30, 1995, and incorporated
herein by reference).
2.2 First Amendment to Agreement and Plan of Merger dated
March 7, 1995, among BJ Services Company, WCNA Acquisition
Corp. and The Western Company of North America (filed as
Exhibit 2.2 to the Company's Annual Report on Form 10-K for
the year ended September 30, 1995, and incorporated herein
by reference).
*3.1 Certificate of Incorporation, as amended as of April 13,
1995.
*3.2 Certificate of Amendment to Certificate of Incorporation,
dated January 22, 1998.
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
--------------------- ----------------------
<C> <S>
3.3 Certificate of Designation of Series A Junior Participating
Preferred Stock, as amended (filed as Exhibit 3.2 to the
Company's Annual Report on Form 10-K for the year ended
September 30, 1996, and incorporated herein by reference).
*3.4 Bylaws of the Company, as amended as of December 9, 1999.
4.1 Specimen form of certificate for the Common Stock (filed as
Exhibit 4.1 to the Company's Registration Statement on Form
S-1 (Reg. No. 33-35187) and incorporated herein by
reference).
4.2 Amended and Restated Rights Agreement dated September 26,
1996, between the Company and First Chicago Trust Company of
New York, as Rights Agent (filed as Exhibit 4.1 to the
Company's Form 8-K dated October 21, 1996 and incorporated
herein by reference).
4.3 First Amendment to Amended and Restated Rights Agreement and
Appointment of Rights Agent, dated March 31, 1997, among the
Company, First Chicago Trust Company of New York and The
Bank of New York.
4.4 Warrant Agreement with respect to the Company's warrants to
purchase common stock (filed as Exhibit 4.6 to the Company's
Annual Report on Form 10-K for the year ended September 30,
1995, and incorporated herein by reference).
4.5 First Amendment to Warrant Agreement and Appointment of
Warrant Agent, dated as of March 31, 1997, among the
Company, First Chicago Trust Company of New York, and The
Bank of New York.
4.6 Indenture among BJ Services Company, BJ Services Company,
U.S.A., BJ Services Company Middle East, BJ Service
International, Inc. and Bank of Montreal Trust Company,
Trustee, dated as of February 1, 1996, which includes the
form of 7% Notes due 2006 and Exhibits thereto (filed as
Exhibit 4.1 to the Company's Registration Statement on Form
S-4 (Reg. No. 333-02287) and incorporated herein by
reference).
10.1 Relationship Agreement dated as of July 20, 1990, between
the Company and Baker Hughes Incorporated (filed as Exhibit
10.1 to the Company's Registration Statement on Form S-1
(Reg. No. 33-35187) and incorporated herein by reference).
10.2 Tax Allocation Agreement dated as of July 20, 1990, between
the Company and Baker Hughes Incorporated (included as
Exhibit A to Exhibit 10.1) (filed as Exhibit 10.2 to the
Company's Registration Statement on Form S-1 (Reg. No.
33-35187) and incorporated herein by reference).
10.3 1990 Stock Incentive Plan, as amended and restated (filed as
Exhibit 10.1 to the Company's Registration Statement on Form
S-8 (Reg. No. 33-62098) and incorporated herein by
reference.
10.4 Amendment effective December 12, 1996, to 1990 Stock
Incentive Plan, as amended and restated (filed as Exhibit
10.4 to the Company's Annual Report on Form 10-K for the
year ended September 30, 1996, and incorporated herein by
reference).
10.5 1990 Employee Stock Purchase Plan (filed as Exhibit 10.4 to
the Company's Registration Statement on Form S-1 (Reg. No.
33-35187) and incorporated herein by reference).
10.6 Amendment effective December 12, 1996, to 1990 Employee
Stock Purchase Plan (filed as Exhibit 10.6 to the Company's
Annual Report on form 10-K for the year ended September 30,
1996, and incorporated herein by reference).
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
--------------------- ----------------------
<C> <S>
10.7 BJ Services Company 1995 Incentive Plan (filed as Exhibit
4.5 to the Company's Registration Statement on Form S-8
(Reg. No. 33-58637) and incorporated herein by reference).
10.8 Amendments effective January 25, 1996, and December 12,
1996, to BJ Services Company 1995 Incentive Plan (filed as
Exhibit 10.9 to the Company's Annual Report on form 10-K for
the year ended September 30, 1996, and incorporated herein
by reference).
10.9 Form of Severance Agreement between BJ Services Company and
certain executive officers (filed as Exhibit 10.6 to the
Company's Annual Report on Form 10-K for the year ended
September 30, 1993 and incorporated herein by reference).
10.10 Credit Agreement dated as of August 7, 1996, among the
Company, BJ Services Company U.S.A., BJ Service
International, Inc., and BJ Services Company Middle East,
Nowsco Well Service, Ltd., and Bank of America National
Trust and Savings Association and Bank of America Canada, as
agents, and the other financial institutions parties thereto
(the "Credit Agreement") (filed as Exhibit 10.1 to the
Company's Form 10-Q for the quarter ended June 30, 1996, and
incorporated herein by reference).
10.11 Form of Revolving Note, U.S. Term Note, Prime Rate Note and
Swing Loan Note pursuant to the Credit Agreement (filed as
Exhibit 10.15 to the Company's Annual Report on Form 10-K
for the year ended September 30, 1996 and incorporated
herein by reference).
10.12 Parent Guaranty Agreement dated as of August 7, 1996, by the
Company under the Credit Agreement (filed as Exhibit 10.16
to the Company's Annual Report on Form 10-K for the year
ended September 30, 1996 and incorporated herein by
reference).
10.13 Form of Amendment to Executive Severance Agreement between
BJ Services Company and certain executive officers (filed as
Exhibit 10.18 to the Company's Annual Report on Form 10-K
for the year ended September 30, 1995 and incorporated
herein by reference).
10.14 Key Employee Security Option Plan (filed as Exhibit 10.14 to
the Company's Annual Report on Form 10-K for the year ended
September 30, 1997 and incorporated herein by reference).
10.15 Trust Indenture and Security Agreement dated as of
August 7, 1997 among First Security Bank, National
Association, BJ Services Equipment, L.P. and State Street
Bank and Trust Company, as Indenture Trustee (filed as
Exhibit 10.15 to the Company's Annual Report on Form 10-K
for the year ended September 30, 1997 and incorporated
herein by reference).
10.16 Amended and Restated Agreement of Limited Partnership dated
as of August 7, 1997 of BJ Services Equipment, L.P (filed as
Exhibit 10.16 to the Company's Annual Report on Form 10-K
for the year ended September 30, 1997 and incorporated
herein by reference).
10.17 Indenture Supplement No. 1 dated as of August 8, 1997
between First Security Bank, as Nonaffiliated Partner
Trustee, and BJ Services Equipment, L.P., and State Street
Bank and Trust Company, as Indenture Trustee (filed as
Exhibit 10.17 to the Company's Annual Report on Form 10-K
for the year ended September 30, 1997 and incorporated
herein by reference).
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
--------------------- ----------------------
<C> <S>
10.18 First Amendment to Amended and Restated Credit Agreement
dated as of November 14, 1997 among the Company, BJ Services
Company, U.S.A., BJ Service International, Inc., BJ Services
Company Middle East, Nowsco Well Service Ltd., Bank of
America National Trust and Savings Association, Bank of
America Canada, The Chase Manhattan Bank, Bank of Montreal,
Royal Bank of Canada, Toronto Dominion (Texas), Inc., Credit
Lyonnais New York Branch, and Wells Fargo Bank (Texas),
National Association (filed as Exhibit 10.18 to the
Company's Annual Report on Form 10-K for the year ended
September 30, 1997 and incorporated herein by reference).
10.19 Second Amendment to Amended and Restated Credit Agreement
dated as of October 30, 1998 among the Company, BJ Services
Company, U.S.A., BJ Service International, Inc., BJ Services
Company Middle East, Nowsco Well Service Ltd., Bank of
America National Trust and Savings Association, Bank of
America Canada, The Chase Manhattan Bank, Bank of Montreal,
Royal Bank of Canada, Toronto Dominion (Texas), Inc. and
Wells Fargo Bank (Texas), National Association (filed as
Exhibit 10.19 to the Company's Annual Report on Form 10-K
for the year ended September 30, 1998 and incorporated
herein by reference).
10.20 1997 Incentive Plan (filed as Appendix B to the Company's
Proxy Statement dated December 22, 1997 and incorporated
herein by reference).
10.21 1999 Employee Stock Purchase Plan (filed as Appendix A to
the Company's Proxy Statement dated December 21, 1998 and
incorporated herein by reference).
*10.22 Form of Amended and Restated Executive Severance Agreement
between BJ Services Company and certain executive officers.
*10.23 Purchase Agreement dated October 25, 1999 between the
Company and Bank of America, N.A. and related agreements.
*10.24 Amendment effective July 22, 1999 to 1990 Stock Incentive
plan.
*10.25 Amendment effective July 22, 1999 to BJ Services Company
1995 Incentive Plan.
*10.26 Amendment effective July 22, 1999 to 1997 Incentive Plan.
*10.27 Amendment effective September 23, 1999 to 1990 Employee
Stock Purchase Plan.
*21.1 Subsidiaries of the Company.
*23.1 Consent of Deloitte & Touche LLP.
*27.1 Financial data schedule.
</TABLE>
- ------------------------
*Filed herewith.
58
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
<TABLE>
<S> <C> <C>
BJ SERVICES COMPANY
By /s/ J.W. STEWART
-----------------------------------------
J. W. Stewart
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
Date: December 20, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J.W. STEWART Chairman of the Board, President,
--------------------------------- and Chief Executive Officer December 20, 1999
J.W. Stewart (Principal Executive Officer)
Senior Vice President--Finance,
/s/ MICHAEL MCSHANE Chief Financial Officer and
--------------------------------- Director (Principal Financial December 20, 1999
Michael McShane Officer)
/s/ MATTHEW D. FITZGERALD
--------------------------------- Vice President and Controller December 20, 1999
Matthew D. Fitzgerald (Principal Accounting Officer)
/s/ L. WILLIAM HEILIGBRODT
--------------------------------- Director December 20, 1999
L. William Heiligbrodt
--------------------------------- Director
John R. Huff
/s/ DON D. JORDAN
--------------------------------- Director December 20, 1999
Don D. Jordan
/s/ R. A. LEBLANC
--------------------------------- Director December 20, 1999
R. A. LeBlanc
/s/ JAMES E. MCCORMICK
--------------------------------- Director December 20, 1999
James E. McCormick
/s/ MICHAEL E. PATRICK
--------------------------------- Director December 20, 1999
Michael E. Patrick
/s/ JAMES L. PAYNE
--------------------------------- Director December 20, 1999
James L. Payne
</TABLE>
59
<PAGE>
BJ SERVICES COMPANY
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1998 AND 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT ---------------------------
BEGINNING CHARGED CHARGED TO BALANCE AT
OF PERIOD TO EXPENSE OTHER ACCOUNTS DEDUCTIONS END OF PERIOD
---------- ---------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1997
Allowance for doubtful accounts
receivable........................ $ 6,223 $2,098 $ 337(4) $ 2,464(1) $ 6,194
Reserve for inventory obsolescence
and adjustment.................... 11,010 1,056 521(3) 3,050(2) 9,537
YEAR ENDED SEPTEMBER 30, 1998
Allowance for doubtful accounts
receivable........................ $ 6,194 $4,140 $ 1,244(1) $ 9,090
Reserve for inventory obsolescence
and adjustment.................... 9,537 893 $ 479(3) 2,458(2) 8,451
YEAR ENDED SEPTEMBER 30, 1999
Allowance for doubtful accounts
receivable........................ $ 9,090 $3,301 $10,344(3) $ 2,163(1) $20,572
Reserve for inventory obsolescence
and adjustment.................... 8,451 1,749 1,831(3) 2,356(2) 9,675
</TABLE>
- ------------------------
(1) Deductions in the allowance for doubtful accounts principally reflect the
write-off of previously reserved accounts.
(2) Deductions in the reserve for inventory obsolescence and adjustment
principally reflect the sale or disposal of related inventory.
(3) Additions to the reserve resulting from acquisitions of businesses.
(4) Additions to the reserve resulting from recoveries of accounts previously
written-off.
60
<PAGE>
EX-3.1
2
CERTIFICATE OF INCORPORATION, AS AMENDED
1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
KNAK CO.
FIRST: The name of the Corporation is:
KNAK CO.
SECOND: The address of its registered office in the State of
Delaware is the Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation
shall have the authority to issue is 45,000,000 shares of capital stock
consisting of 5,000,000 shares of preferred stock, par value $1.00 per share
(the "Preferred Stock"), and 40,000,000 shares of common stock, par value $.10
per share (the "Common Stock").
The designations, powers, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions of the Preferred Stock shall be established by resolution of the
Board of Directors pursuant to Section 151 of the General Corporation Law of
the State of Delaware.
FIFTH: The name and mailing address of the incorporator is:
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
Karen M. Nakfoor Fulbright & Jaworski
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
</TABLE>
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to make, alter or
repeal the bylaws of the Corporation.
EIGHTH: Election of directors need not be by written ballot unless
the bylaws of the Corporation shall so provide.
-1-
<PAGE>
2
NINTH: The bylaws of the Corporation shall not be made, repealed,
altered, amended or rescinded 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 purposes of this Article NINTH as one class.
TENTH: No action shall be taken by the stockholders except at an
annual or special meeting of stockholders and stockholders may not act by
written consent.
ELEVENTH: Special meetings of the stockholders of the Corporation
for any purpose or purposes may be called at any time by the Board of
Directors, or by a committee of the Board of Directors which has been duly
designated by the Board of Directors and whose powers and authority, as
provided in a resolution of the Board of Directors or in the bylaws of the
Corporation, include the power to call such meetings. Special meetings of
stockholders of the Corporation may not be called by any other person or
persons.
TWELFTH: No director of this Corporation shall be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of the law, (iii) under Section 174 of the General
Corporation Law of the State of Delaware, or (iv) for any transaction from
which the director derived an improper personal benefit.
If the General Corporation Law of the State of Delaware is hereafter
amended to authorize corporate action further limiting or eliminating the
personal liability of directors, then the liability of the director to the
Corporation shall be limited or eliminated to the full extent permitted by the
General Corporation Law of the State of Delaware, as so amended from time to
time. Any repeal or modification of this Article shall be prospective only,
and shall not adversely affect any limitation on the personal liability of a
director of the Corporation existing at the time of such repeal or
modification.
THIRTEENTH: The names and mailing addresses of the persons who are to
serve as the directors of the Corporation until the first annual meeting of the
stockholders or until their respective successors are elected and qualified
are:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
J. W. Stewart 5500 N.W. Central Drive
Houston, Texas 77210-4442
Michael McShane 5500 N.W. Central Drive
Houston, Texas 77210-4442
-2-
<PAGE>
3
James D. Woods 3900 Essex Lane
Houston, Texas 77026
Thomas W. Cason 3900 Essex Lane
Houston, Texas 77026
</TABLE>
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 shall be a member of
Class II. After division of the Board of Directors into classes, 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 initial directors appointed to Class I shall serve for a term ending on the
date of the first annual meeting next following September 30, 1990, the initial
directors 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 initial
directors appointed to Class III shall serve for a term ending on the date of
the third annual meeting next following September 30, 1990.
The number of directors shall be fixed from time to time by the
bylaws of the Corporation or an amendment thereof duly adopted by the Board
of Directors or by the stockholders acting in accordance with Article NINTH
herein. In the event of any increase or 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
his current term, or his prior death, retirement, resignation or removal, and
(b) the newly created or eliminated directorships resulting from such
increase or 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 this Article,
as applied to the new authorized number of directors.
Notwithstanding any of the foregoing provisions of this Article,
each director shall serve until his successor is elected and qualified or
until his death, retirement, resignation or removal. No director may be
removed during his term except for cause.
FOURTEENTH: The affirmative vote of the holders of not less than 75%
of the outstanding shares of "Voting Stock" (as hereinafter defined) of the
Corporation, including the affirmative vote of the holders of not less than
66 2/3% of the outstanding shares of Voting Stock not owned, directly or
indirectly, by any "Related Person" (as hereinafter defined), shall be
required for the approval or authorization of any "Business Combination" (as
hereinafter defined) of the Corporation with any Related Person; provided,
however, that the 66 2/3% voting requirement referred to above shall not be
applicable if the Business Combination is approved by the affirmative vote of
the holders of not less than 90% of the outstanding shares of Voting Stock;
and further provided that the 75% voting requirement shall not be applicable
if:
-3-
<PAGE>
4
(1) The Board of Directors of the Corporation by a vote of not
less than 75% of the directors then holding office (a) have expressly
approved in advance the acquisition of outstanding shares of Voting Stock of
the Corporation that caused the Related Person to become a Related Person or
(b) have approved the Business Combination prior to the Related Person
involved in the Business Combination having become a Related Person;
(2) The Business Combination is solely between the Corporation
and another corporation, 100% of the Voting Stock of which is owned directly
or indirectly by the Corporation; or
(3) All of the following conditions have been met: (a) the
Business Combination is a merger or consolidation, the consummation of which
is proposed to take place within one year of the date of the transaction
pursuant to which such person became a Related Person and the cash or fair
market value of the property, securities or other consideration to be
received per share by holders of Common Stock of the Corporation in the
Business Combination is not less than the highest per share price (with
appropriate adjustments for recapitalizations and for stock splits, reverse
stock splits and stock dividends) paid by the Related Person in acquiring any
of its holdings of the Corporation's Common Stock; (b) the consideration to
be received by such holders is either cash or, if the Related Person shall
have acquired the majority of its holdings of the Corporation's Common Stock
for a form of consideration other than cash, in the same form of
consideration as the Related Person acquired such majority; (c) after such
Related Person has become a Related Person and prior to the consummation of
such Business Combination: (i) except as approved by a majority of the
"Continuing Directors" (as hereinafter defined), there shall have been no
failure to declare and pay at the regular date therefor any full quarterly
dividends (whether or not cumulative) on any outstanding Shares of Preferred
Stock of the Corporation, (ii) there shall have been no reduction in the
annual rate of dividends paid per share on the Corporation's Common Stock
(adjusted as appropriate for recapitalizations and for stock splits, reverse
stock splits and stock dividends) except as approved by a majority of the
Continuing Directors, (iii) such Related Person shall not have become the
"Beneficial Owner" (as hereinafter defined) of any additional shares of
Voting Stock of the Corporation except as part of the transaction which
resulted in such Related Person becoming a Related Person, and (iv) such
Related Person shall not have received the benefit, directly or indirectly
(except proportionately as a stockholder), of any loans, advances,
guarantees, pledges or other financial assistance or any tax credits or other
tax advantages provided by the Corporation, whether in anticipation of or in
connection with such Business Combination or otherwise; and (d) a proxy
statement, responsive to the requirements of the Securities Exchange Act of
1q934, as amended ("Exchange Act") and the rules and regulations thereunder
(or any subsequent provisions replacing the Exchange Act, rules or
regulations), shall be mailed to all stockholders of record at least 30 days
prior to the consummation of the Business Combination for the purpose of
soliciting stockholder approval of the Business Combination and shall contain
at the front thereof, in a prominent place, any recommendations as to the
advisability (or inadvisability) of the Business Combination which the
Continuing Directors, or any of them, may choose to state and, if deemed
advisable by a majority of the Continuing Directors, an opinion of a
reputable investment banking firm as to the fairness (or unfairness) of the
terms of such Business Combination from the point of view of the remaining
stockholders of the Corporation
-4-
<PAGE>
5
(such investment banking firm to be selected by a majority of the Continuing
Directors and to be paid a reasonable fee for its services by the Corporation
upon receipt of such opinion).
For the purposes of this Article:
(i) The term "Business Combination" shall mean (a) any merger or
consolidation of the Corporation or a subsidiary with or into a Related
Person, (b) any sale, lease, exchange, transfer or other disposition,
including without limitation a mortgage or any other security device, of all
or any "Substantial Part" (as hereinafter defined) of the assets either of
the Corporation (including, without limitation, any voting securities of a
subsidiary) or of a subsidiary to a Related Person (other than a distribution
by the Corporation or a subsidiary to the Related Person of assets in
connection with a pro rata distribution by the Corporation to all
stockholders), (c) any merger or consolidation of a Related Person with or
into the Corporation or a subsidiary of the Corporation, (d) any sale, lease,
exchange, transfer or other disposition of all or any Substantial Part of the
assets of a Related Person to the Corporation or a subsidiary of the
Corporation, (e) the issuance of any securities (other than by way of pro
rata distribution to all stockholders) of the Corporation or a subsidiary of
the Corporation to a Related Person, (f) the acquisition by the Corporation
or a subsidiary of the Corporation of any securities of a Related Person, (g)
any recapitalization that would have the effect of increasing the voting
power of a Related Person, (h) any series or combination of transactions
having the same effect, directly or indirectly, as any of the foregoing and
(i) any agreement, contract or arrangement providing for any of the
transactions described in this definition of Business Combination.
(ii) The term "Continuing Director" shall mean any member of the
Board of Directors of the Corporation who is not affiliated with a Related
Person and who was a member of the Board of Directors immediately prior to
the time that the Related Person became a Related Person, and any successor
to a Continuing Director who is not affiliated with the Related Person and is
recommended to succeed a Continuing Director by a majority of Continuing
Directors then serving as members of the Board of Directors of the
Corporation.
(iii) The term "Related Person" shall mean and include any
individual, corporation, partnership or other person or entity which,
together with its "Affiliates" and "Associates" (as defined on July 1, 1990
in Rule 12b-2 under the Exchange Act), is the "Beneficial Owner" (as defined
on July 1, 1990 in Rule 13d-3 under the Exchange Act) in the aggregate of 10%
or more of the outstanding Voting Stock of the Corporation, and any Affiliate
or Associate of any such individual, corporation, partnership or other person
or entity.
(iv) The term "Substantial Part" shall mean more than 10% of the
book value of the total assets of the Corporation in question as of the end
of its most recent fiscal year ending prior to the time the determination is
being made.
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<PAGE>
6
(v) Without limitation, any shares of Common Stock of the
Corporation that any person has the right to acquire pursuant to any agreement,
or upon exercise of conversion rights, warrants or options, or otherwise, shall
be deemed beneficially owned by such person.
(vi) For the purposes of subparagraph (3) of this Article, the term
"other consideration to be received" shall include, without limitation, Common
Stock of the Corporation retained by its existing public stockholders in the
event of a Business Combination in which the Corporation is the surviving
corporation.
(vii) The term "Voting Stock" shall mean all outstanding shares of
capital stock of the Corporation or another corporation entitled to vote
generally in the election of directors and each reference to a proportion of
shares of Voting Stock shall refer to such proportion of the votes entitled to
be cast by such shares.
FIFTEENTH: The provisions set forth in this Article FIFTEENTH and
in Articles NINTH (dealing with the alteration of Bylaws by stockholders),
TENTH (dealing with the prohibition against stockholder action without
meetings), TWELFTH (dealing with liability of directors), THIRTEENTH (dealing
with the classification and number of directors) and FOURTEENTH (dealing with
the 75% vote of stockholders required for certain Business Combinations)
herein may not be repealed or amended in any respect, and no Article imposing
cumulative voting in the election of directors may be added, unless such
action is approved by the affirmative vote 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 purposes of this Article FIFTEENTH
as one class. Amendment to the provisions set forth in this Article
FIFTEENTH and in Article FOURTEENTH shall also require the affirmative vote
of 66 2/3% of such total voting power excluding the vote of shares owned by a
"Related Person" (as defined in Article FOURTEENTH). The voting requirements
contained in Article NINTH, Article FOURTEENTH and this Article FIFTEENTH
herein shall be in addition to the voting requirements imposed by law, other
provisions of this Certificate of Incorporation or any Certificate of
Designation of Preferences in favor of certain classes or series of classes
of shares of the Corporation.
SIXTEENTH: The Corporation reserves the right to amend, alter,
change or repeal any provisions contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation. Notwithstanding the foregoing, the provisions set forth in
Articles NINTH, TENTH, TWELFTH, THIRTEENTH, FOURTEENTH and FIFTEENTH may not
be repealed or amended in any respect unless such repeal or amendment is
approved as specified in Article FIFTEENTH herein.
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<PAGE>
7
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, does make this Certificate, hereby declaring and
certifying that this is my act and deed and the facts herein stated are true,
and accordingly have hereunto set my hand this 12th day of July, 1990.
/s/ Karen M. Nakfoor
--------------------
Karen M. Nakfoor
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<PAGE>
8
CERTIFICATE OF MERGER
Pursuant to the provisions of Section 251 of the General Corporation
Law of the State of Delaware, the undersigned certifies as follows:
1. The names and states of incorporation of each of the constituent
corporations are as follows:
<TABLE>
<CAPTION>
Name of Corporation State of Incorporation
------------------- ----------------------
<S> <C>
KNAK CO. Delaware
BJ Services Company Delaware
</TABLE>
2. A Plan and Agreement of Merger dated July 13, 1990, between KNAK
CO. and BJ Services Company (the "Plan and Agreement of Merger"), has been
approved, adopted, certified, executed and acknowledged by each of the
constituent corporations, in accordance with Section 251 of the General
Corporation Law of the State of Delaware.
3. The name of the surviving corporation is KNAK CO.
4. At the effective time of the merger, Article FIRST of the
Certificate of Incorporation of KNAK CO. shall be amended to read in its
entirety as follows:
"The name of the Corporation is:
BJ SERVICES COMPANY."
5. The executed Plan and Agreement of Merger is on file at the
principal place of business of the surviving corporation at the following
address: 5500 N.W. Central Drive, Houston, Texas 77210-4442.
6. A copy of the Plan and Agreement of Merger will be furnished
by the surviving corporation, on request and without cost, to any stockholder
of KNAK CO. or BJ Services Company.
Dated as of July 13, 1990.
KNAK CO.
By: /s/ George E. Cash
------------------------------
George E. Cash, Vice President
ATTEST:
/s/ Matthew D. Fitzgerald
- ---------------------------------
Matthew D. Fitzgerald,
Secretary
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<PAGE>
9
BJ SERVICES COMPANY
CERTIFICATE OF DESIGNATION OF
SERIES ONE JUNIOR PARTICIPATING PREFERRED STOCK
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
BJ SERVICES COMPANY, a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter, the
"Corporation"), DOES HEREBY CERTIFY that, by the unanimous written consent of
the Board of Directors of the Corporation dated July 13, 1990, the following
resolution was adopted pursuant to Section 151 of the General Corporation Law
of the State of Delaware:
WHEREAS, Article FOURTH of the Certificate of Incorporation of this
Corporation authorizes 45,000,000 shares of capital stock, consisting of
5,000,000 shares of preferred stock, with par value of $1.00 per share (the
"Preferred Stock"), issuable from time to time in one or more series and
40,000,000 shares of common stock, with par value of $.10 per share (the
"Common Stock"), issuable from time to time; and
WHEREAS, pursuant to Article FOURTH of the Certificate of
Incorporation of this Corporation, the Board of Directors of this Corporation
is authorized to fix the designations, powers, preferences and relative,
participating, optional or other special rights, if any, and qualifications,
limitations or restrictions thereof, of any wholly unissued series of
Preferred Stock, and to fix the number of shares constituting such series,
and to increase or decrease the number of shares of any such series (but not
below the number of shares thereof then outstanding); and
WHEREAS, it is the desire of the Board of Directors of this
Corporation, pursuant to its authority as aforesaid, to issue a series of
Preferred Stock and to fix the rights, preferences, restrictions and other
matters relating thereto;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does
hereby establish a series of Preferred Stock of this Corporation and does
hereby fix and determine the rights, preferences, restrictions and other
matters relating to said series of Preferred Stock, as follows:
Section 1. Title of Series and Ranking. The shares of such series
shall be designated as "Series One Junior Participating Preferred Stock." The
Series One Junior Participating Preferred Stock shall rank junior to all other
series of the Corporation's Preferred Stock as to the payment of dividends and
the distribution of assets, unless the terms of any such series shall provide
otherwise.
Section 2. Number of Shares in Series. The number of shares which
shall constitute such Series shall be 400,000.
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<PAGE>
10
Section 3. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the
shares of Series One Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Series One Junior Participating Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the thirtieth day of March, June, September and December, or
such earlier date within each such calendar quarter determined from time to
time by the Board of Directors (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series One Junior Participating Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $.25 or (b) subject
to the provision for adjustment hereinafter set forth, 100 times the aggregate
per share amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions other
than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock since the immediately preceding Quarterly Dividend Payment
Date, or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series One Junior
Participating Preferred Stock. In the event the Corporation shall at any time
after July 16, 1990 (the "Rights Declaration Date") (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount to which holders of shares
of Series One Junior Participating Preferred Stock were entitled immediately
prior to such event under clause (a) and clause (b) of the preceding sentence
shall be adjusted by multiplying each such amount by a fraction the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series One Junior Participating Preferred Stock as provided in paragraph (A)
above immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided that,
in the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the
next subsequent Quarterly Dividend Payment Date, a dividend of $.25 per share
as such amount may be adjusted pursuant to the last sentence of the preceding
paragraph on the Series One Junior Participating Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series One Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such shares
of Series One Junior Participating Preferred Stock, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue from
the date of issue of such shares, or
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<PAGE>
11
unless the date of issue is a Quarterly Dividend Payment Date or is a date
after the record date for the determination of holders of shares of Series One
Junior Participating Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series One Junior Participating Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix
a record date for the determination of holders of shares of Series One Junior
Participating Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than 30 days
prior to the date fixed for the payment thereof.
Section 4. Liquidation, Dissolution or Winding Up.
(A) Upon any voluntary liquidation, dissolution or winding up of
the Corporation, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series One Junior Participating Preferred Stock unless
prior thereto, the holders of shares of Series One Junior Participating
Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereof, whether or not
declared, to the date of such payment (the "Series One Liquidation
Preference"). Following the payment of the full amount of the Series One
Liquidation Preference, no additional distribution shall be made to the holders
of shares of Series One Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Common Stock shall have received an amount
per share (the "Common Adjustment") equal to the quotient obtained by dividing
(i) the Series One Liquidation Preference by (ii) 100 appropriately adjusted as
set forth in subparagraph C below to reflect such events as stock splits, stock
dividends and recapitalizations with respect to the Common Stock) (such number
in clause (ii), the "Adjustment Number"). Following the payment of the full
amount of the Series One Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of Series One Junior Participating Preferred
Stock and Common Stock, respectively, holders of Series One Junior
Participating Preferred Stock and holders of shares of Common Stock shall
receive their ratable and proportionate share of the remaining assets to be
distributed in the ratio of the Adjustment Number to 1 with respect to such
Preferred Stock and Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series One Liquidation Preference
and the liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series One Junior Participating Preferred
Stock, then such remaining assets shall be distributed ratably to the holders
of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
-3-
<PAGE>
12
(C) In the event the corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
Section 5. No Redemption. The shares of Series One Junior
Participating Preferred Stock shall not be redeemable.
Section 6. Voting Rights. The holders of shares of Series One Junior
Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth
and subject to the provisions in paragraph C below, each share of Series One
Junior Participating Preferred Stock shall entitle the holder thereof to 100
votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the number of votes per share to which holders of shares of Series One
Junior Participating Preferred Stock were entitled immediately prior to such
event shall be adjusted by multiplying such number by a fraction the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series One Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation.
(C) If, on the date used to determine stockholders of record for
any meeting of stockholders of the Corporation for the election of directors,
the equivalent of six full quarterly dividends payable on the Series One Junior
Participating Preferred Stock shall be accrued and unpaid, the holders of the
Series One Junior Participating Preferred Stock voting as a class together with
all other holders of Preferred Stock, the terms of which expressly provide
similar voting rights, will, to the exclusion of the holders of Common Stock
and such other series of Preferred Stock not given a class voting right with
the Series One Junior Participating Preferred Stock with respect thereto, be
entitled to elect, at such meeting and subsequent meetings of stockholders held
for the purpose of electing directors, a total of two directors, to be
distributed among the several classes of directors as nearly equally as
possible. Upon election, such directors shall become additional directors of
the Corporation and the authorized number of directors of the Corporation shall
thereupon be automatically increased by such number of directors. Such right
to elect directors shall continue until
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<PAGE>
13
all accrued dividends on all such shares of Series One Junior Participating
Preferred Stock shall have been paid for all past dividend periods. When all
accrued dividends on Series One Junior Participating Preferred Stock have been
paid for all past dividend periods, the right of the holders of Series One
Junior Participating Preferred Stock to elect such number of directors shall
cease, the term of such directors shall thereupon terminate, and the authorized
number of directors of the Corporation shall thereupon return to the number of
authorized directors otherwise in effect, but subject always to the same
provisions for the vesting of such special voting rights in the case of any
such future dividend default or defaults. The fact that dividends have been
paid as required by the preceding sentence shall be evidenced by a certificate
executed by the President and the Chief Financial Officer of the Corporation
and delivered to the Board of Directors. The directors so elected by holders
of Series One Junior Participating Preferred Stock shall serve until the
certificate described in the preceding sentence shall have been delivered to
the Board of Directors or until their respective successors shall be elected or
appointed and qualify.
Except as otherwise provided by law, at all meetings of the holders of
Series One Junior Participating Preferred Stock to elect or remove directors
pursuant to the terms of this subparagraph (C) each share of Series One Junior
Participating Preferred Stock entitled to vote thereat shall be entitled to one
vote per share. Each director elected by the holders of the shares of Series
One Junior Participating Preferred Stock and by the holders of shares of
Preferred Stock the terms of which provide similar voting rights (herein called
a "Preferred Director") may be removed by, and shall not be removed except by,
the vote of the holders of record of the majority of the outstanding shares of
Series One Junior Participating Preferred Stock (and other Preferred Stock) who
are at the time of such vote entitled to vote for the election of Preferred
Directors pursuant to the terms of this subparagraph (C), voting together as a
single class without regard to series, at a meeting of the stockholders, or of
the holders of such shares of stock, called for that purpose. So long as a
default in any preferred dividends on Preferred Stock shall exist (i) any
vacancy in the office of a Preferred Director may be filled (except as provided
in the following clause (ii) by any instrument in writing signed by the
remaining Preferred Director and filed with the Corporation and (ii) in the
case of the removal of any Preferred Director, the vacancy may be filled by the
vote of the holders of the majority of the outstanding shares of Series One
Junior Participating Preferred Stock and other Preferred Stock who are at the
time of such vote entitled to vote for the election of Preferred Directors
pursuant to the terms of this subparagraph (C), voting together as a single
class without regard to series, at the same meeting at which such removal shall
be voted. Each director appointed as aforesaid by the remaining Preferred
Director shall be deemed, for all purposes hereof, to be a Preferred Director.
(D) Unless the vote or consent of the holders of a greater number
of shares shall be then required by law, so long as any shares of Series One
Junior Participating Preferred Stock are outstanding, the Corporation will not,
without the affirmative vote or consent of at least 2/3 of the outstanding
shares of Series One Junior Participating Preferred Stock, voting as a separate
class, amend any of the provisions of its Certificate of Incorporation
(including any Certificate of Designation relating to any series of Preferred
Stock) so as to affect adversely the powers, preferences or special rights of
the Convertible Preferred Stock.
-5-
<PAGE>
14
The increase of the authorized amount of the Preferred Stock or Common
Stock, or the creation, authorization or issuance of any stock which ranks
junior to or on a parity with the Series One Junior Participating Preferred
Stock, or the reclassification of any authorized or outstanding stock of the
Corporation (other than the Series One Junior Participating Preferred Stock)
into any such junior or parity stock, or the creation, authorization or
issuance of any obligation or security convertible into or evidencing the right
to purchase any such junior Stock or parity Stock or the limitation or
qualification of the Corporation's right to redeem or repurchase shares of
Series One Junior Participating Preferred Stock or to take any other actions,
including without limitation, mergers, consolidations or the matters covered by
the preceding provisions of this paragraph, shall not be deemed, for purposes
of this subparagraph (D), to affect adversely the powers, preferences or
special rights of the Series One Junior Participating Preferred Stock
regardless of any financial or other effect on the Series One Junior
Participating Preferred Stock resulting therefrom.
(E) Unless the vote of the holders of a greater number of shares
shall then be required by law, so long as any shares of Series One Junior
Participating Preferred Stock are outstanding, the Corporation will not,
without the affirmative vote of the holders of at least a majority of all of
the outstanding shares of Series One Junior Participating Preferred Stock,
merge or consolidate with or into any other corporation if such merger or
consolidation would adversely affect the powers, preferences or rights of the
Series One Junior Participating Preferred Stock expressly set forth herein.
(F) Except as set forth herein, holders of Series One Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 7. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series One Junior Participating Preferred Stock as
provided in Section 3 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of
Series One Junior Participating Preferred Stock outstanding shall have been
paid in full, the Corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series One Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series One Junior Participating Preferred Stock, except dividends paid
ratably on the Series One Junior Participating Preferred Stock
-6-
<PAGE>
15
and all such parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series One Junior Participating Preferred Stock, provided that the
Corporation may at any time redeem, purchase or otherwise acquire
shares of any such parity stock in exchange for shares of any stock of
the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series One Junior
Participating Preferred Stock;
(iv) purchase or otherwise acquire for consideration any
shares of Series One Junior Participating Preferred Stock, or any
shares of stock ranking on a parity with the Series One Junior
Participating Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board
of Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 7, purchase or otherwise acquire such shares at such time and in
such manner.
Section 8. Consolidation, Mergers, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series One Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series One Junior Participating Preferred Stock
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
Section 9. Exclusion of Other Rights. Except as may otherwise be
required by law, the shares of Series One Junior Participating Preferred Stock
shall not have any preferences or relative,
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<PAGE>
16
participating, optional or other special rights other than those specifically
set forth in this resolution (as such resolution may be amended from time to
time) and in the Certificate of Incorporation of the Corporation.
Section 10. Heading of Subdivision. The headings of the various
subdivisions hereof are for convenience of reference only and shall not affect
the interpretation of any of the provisions hereof.
Section 11. Severability of Provisions. If any right, preference or
limitation of the Series One Junior Participating Preferred Stock set forth in
this resolution (as such resolutions may be amended from time to time) is
invalid, unlawful, or incapable of being enforced by reason of any rule of law
or public policy, all other rights, preferences and limitations set forth in
this resolution (as so amended) which can be given effect without the invalid,
unlawful or unenforceable right, preference or limitation shall, nevertheless,
remain in full force and effect, and no right, preference or limitation herein
set forth shall be deemed dependent upon any other such right, preference or
limitation unless so expressed herein.
Section 12. Status of Reacquired Shares. Shares of the Series One
Junior Participating Preferred Stock which have been issued and reacquired in
any manner shall (upon compliance with any applicable provisions of the laws of
the State of Delaware) have the status of authorized and unissued shares of the
class of Preferred Stock issuable in series, undesignated as to series, and may
be redesignated and reissued.
Section 13. Fractional Shares. Series One Junior Participating
Preferred Stock may be issued in fractions of a share which shall entitle the
holder, in proportion to such holder's fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have the benefit
of all other rights of holders of Series One Junior Participating Preferred
Stock.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to
be affixed and this certificate to be signed by George E. Cash, Vice President,
and attested to by Matthew D. Fitzgerald, its Secretary, this 17th day of
July, 1990.
/s/ George E. Cash
----------------------------------
George E. Cash
Vice President
[CORPORATE SEAL]
Attest:
/s/ Matthew D. Fitzgerald
- - - -----------------------------
Matthew D. Fitzgerald
Secretary
-8-
<PAGE>
17
ACKNOWLEDGMENT
BE IT DEEMED that on this 17th day of July, 1990, personally came
before me, the undersigned, a Notary Public duly authorized to take
acknowledgment of deeds by the laws of the place where the foregoing
certificate was executed, George E. Cash and Matthew D. Fitzgerald, Vice
President and Secretary, respectively, of BJ Services Company, a corporation of
the State of Delaware, the corporation described in the foregoing certificate,
known to me personally to be such, and they duly executed said certificate
before me and acknowledged the said certificate to be their act and deed and
made on behalf of said corporation, and that the facts stated therein are true;
and that the signatures of said George E. Cash, Vice President and of the said
Matthew D. Fitzgerald, Secretary, of the said corporation to said foregoing
certificate are in their handwriting.
GIVEN under my hand on July 17, 1990.
/s/ Pat Montgomery
--------------------------
Notary Public
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<PAGE>
18
CERTIFICATE OF DESIGNATION
OF
SERIES TWO JUNIOR PARTICIPATING PREFERRED STOCK
OF
BJ SERVICES COMPANY
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
BJ SERVICES COMPANY, a corporation organized and existing under the
laws of the State of Delaware (the "Company"), DOES HEREBY CERTIFY that, at a
meeting of the Company's Board of Directors duly called and held on January
5, 1994 at which a quorum was present and acting throughout, the following
resolutions were adopted pursuant to Section 151 of the Delaware General
Corporation Law (the "Delaware Act").
WHEREAS, Article FOURTH of the Company's Certificate of
Incorporation, as amended (the "Charter") authorizes 45,000,000 shares of
capital stock, consisting of 5,000,000 shares of preferred stock, par value
$1.00 per share (the "Preferred Stock"), issuable from time to time in one or
more series, and 40,000,000 shares of common stock, par value $0.10 per share
(the "Common Stock"), issuable from time to time; and
WHEREAS, in accordance with Section 151 of the Delaware Act and
pursuant to Article FOURTH of the Charter, the Company's Board of Directors
is authorized to fix the designations, powers, preferences and relative,
participating, optional or other special rights, if any, and qualifications,
limitations or restrictions thereof, of any wholly unissued series of
Preferred Stock, and to fix the number of shares constituting such series,
and to increase or decrease the number of shares of any such series (but not
below the number of shares thereof then outstanding); and
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19
WHEREAS, it is the desire of the Company's Board of Directors of this
Corporation, in accordance with the authority conferred upon it as described
above, to issue a series of Preferred Stock and to fix the rights, preferences,
restrictions and other matters relating thereto;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does
hereby establish a series of Preferred Stock of this Company and does hereby
fix and determine the rights, preferences, restrictions and other matters
relating to said series of Preferred Stock, as follows:
Section 1. Designation and Amount. The shares of such series shall
be designated as "Series Two Junior Participating Preferred Stock" ("Series
Two Preferred Stock") and the number of shares constituting such series shall
be 400,000. Such number of shares may be adjusted by appropriate action of
the Board of Directors.
Section 2. Dividends and Distribution.
(A) Subject to the provisions for adjustment hereinafter set
forth, the holders of shares of Series Two Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, (i) cash dividends in an amount per share
(rounded to the nearest cent) equal to 100 times the aggregate per share
amount of all cash dividends contemporaneously declared on the Company's
Common Stock, par value $0.10 per share ("Common Stock"), and (ii) a
preferential cash dividend ("Preferential Dividends"), if any, on the tenth
day of March, June, September and December of each year (each a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend Payment
Date after the first issuance of a share or fraction of a share of Series Two
Preferred Stock, in an amount equal to $1.00 per share of Series Two
Preferred Stock less the per share amount of all cash dividends declared on
the Series Two Preferred Stock pursuant to clause (i) of this sentence since
the immediately preceding Quarterly
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<PAGE>
20
Dividend Payment Date or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of Series
Two Preferred Stock. In the event the Company shall, at any time after the
issuance of any share or fraction of a share of Series Two Preferred Stock,
make any distribution on the shares of Common Stock of the Company, whether by
way of a dividend or a reclassification of stock, a recapitalization,
reorganization or partial liquidation of the Company or otherwise, which is
payable in cash or any debt security, debt instrument, real or personal
property or any other property (other than cash dividends subject to the
immediately preceding sentence and other than a distribution of shares of
Common Stock or other capital stock of the Company and other than a
distribution of rights or warrants to acquire any such share, including any
debt security convertible into or exchangeable for any such share, at a price
less than the Current Market Price of such share), then and in each such event
the Company shall simultaneously pay on each then outstanding share of Series
Two Preferred Stock of the Company a distribution, in like kind, of 100 times
(subject to the provisions for adjustment hereinafter set forth) such
distribution paid on a share of Common Stock. The dividends and distributions
on the Series Two Preferred Stock to which holders thereof are entitled
pursuant to clause (i) of the first sentence of this paragraph and pursuant to
the second sentence of this paragraph are hereinafter referred to as
"Participating Dividends" and the multiple of such cash and non-cash dividends
on the Common Stock applicable to the determination of the Participating
Dividends, which shall be 100 initially but shall be adjusted from time to time
as hereinafter provided, is hereinafter referred to as the "Dividend Multiple."
In the event the Company shall at any time after January 17, 1994 declare or
pay any dividend or make any distribution on Common Stock payable in shares of
Common Stock, or effect a subdivision or split or a combination, consolidation
or reverse split of the outstanding shares of Common Stock into a
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21
greater or lesser number of shares of Common Stock, then in each such case the
Dividend Multiple thereafter applicable to the determination of the amount of
Participating Dividends which holders of shares of Series Two Preferred Stock
shall be entitled to receive shall be the Dividend Multiple applicable
immediately prior to such event multiplied by a fraction, of which the
numerator is the number of shares of Common Stock outstanding immediately after
such event and of which the denominator is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(B) The Company shall declare each Participating Dividend at the
same time it declares any cash or non-cash dividend or distribution on the
Common Stock in respect of which a Participating Dividend is required to be
paid. No cash or non-cash dividend or distribution on the Common Stock in
respect of which a Participating Dividend is required to be paid shall be paid
or set aside for payment on the Common Stock unless a Participating Dividend in
respect of such dividend or distribution on the Common Stock shall be
simultaneously paid, or set aside for payment, on the Series Two Preferred
Stock.
(C) Preferential Dividends shall begin to accrue on outstanding
shares of Series Two Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issuance of any shares of Series Two Preferred
Stock. Accrued but unpaid Preferential Dividends shall cumulate but shall not
bear interest. Preferential Dividends paid on the shares of Series Two
Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.
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<PAGE>
22
Section 3. Voting Rights. The holders of shares of Series Two
Preferred Stock shall have the following voting rights:
(A) Subject to the provisions for adjustment hereinafter set forth,
each share of Series Two Preferred Stock shall entitle the holder thereof to
100 votes on all matters submitted to a vote of the stockholders of the
Company. The number of votes which a holder of Series Two Preferred Stock is
entitled to cast, as the same may be adjusted from time to time as hereinafter
provided, is hereinafter referred to as the "Vote Multiple." In the event the
Company shall at any time after January 17, 1994 declare or pay any dividend on
Common Stock payable in shares of Common Stock, or effect a subdivision or
split or a combination, consolidation or reverse split of the outstanding
shares of Common Stock into a greater or lesser number of shares of Common
Stock, then in each such case the Vote Multiple thereafter applicable to the
determination of the number of votes per share to which holders of shares of
Series Two Preferred Stock shall be entitled after such event shall be the Vote
Multiple immediately prior to such event multiplied by a fraction, of which the
numerator is the number of shares of Common Stock outstanding immediately after
such event and of which the denominator is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series Two Preferred Stock and the holders of shares of Common Stock
shall vote together as one class on all matters submitted to a vote of
stockholders of the Company.
(C) In the event that the Preferential Dividends accrued on the
Series Two Preferred Stock for six or more quarterly dividend periods, whether
consecutive or not, shall not have been declared and paid or set apart for
payment, the holders of record or preferred stock of the Company of all
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23
series (including the Series Two Preferred Stock), other than any series in
respect of which the right is expressly withheld by the Certificate of
Incorporation or the authorizing resolutions included in the Certificate of
Designation therefor, shall have the right, at the next meeting of stockholders
called for the election of directors, to elect two members to the Board of
Directors, which directors shall be in addition to the number required by the
Company's bylaws as in effect prior to such event, to serve until the next
annual meeting of the stockholders and until their successors are elected and
qualified or their earlier resignation, removal or incapacity or until such
earlier time as all accrued and unpaid Preferential Dividends upon the
outstanding shares of Series Two Preferred Stock shall have been paid (or set
aside for payment) in full. The holders of shares of Series Two Preferred
Stock shall continue to have the right to elect directors as provided by the
immediately preceding sentence until all accrued and unpaid Preferential
Dividends upon the outstanding shares of Series Two Preferred Stock shall have
been paid (or set aside for payment) in full. Such directors may be removed
and replaced by such stockholders, and vacancies in such directorships may be
filled only by such stockholders (or by the remaining director elected by such
stockholders, if there be one) in the manner permitted by law; provided,
however, that any such action by stockholders shall be taken at a meeting of
stockholders and shall not be taken by written consent thereof.
(D) Except as otherwise required by law or set forth herein,
holders of Series Two Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for the taking of any
corporate action.
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<PAGE>
24
Section 4. Certain Restrictions.
(A) Whenever Preferential Dividends or Participating Dividends are
in arrears or the Company shall be in default of payment thereof, thereafter
and until all accrued and unpaid Preferential Dividends and Participating
Dividends, whether or not declared, on shares of Series Two Preferred Stock
outstanding shall have been paid or set aside for payment in full, and in
addition to any and all other rights which any holder of shares of Series Two
Preferred Stock may have in such circumstances, the Company shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to, the
Series Two Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity as to
dividends with the Series Two Preferred Stock, unless dividends are
paid ratably on the Series Two Preferred Stock and all such parity
stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) except as permitted by sub-clause (iv) of this
Section 4(A), redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series Two Preferred Stock, provided that the Company may at any time
redeem, purchase or otherwise acquire shares of any such parity stock
in exchange for shares
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<PAGE>
25
of any stock of the Company ranking junior (both as to dividends and
upon liquidation, dissolution or winding up) to the Series Two
Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series Two Preferred Stock, or any shares of stock ranking
on a parity with the Series Two Preferred Stock (either as to
dividends or upon liquidation, dissolution or winding up), except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares
upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in
good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Company shall not permit any subsidiary of the Company to
purchase or otherwise acquire for consideration any shares of stock of the
Company unless the Company could, in accordance with Section 4(A), purchase or
otherwise acquire such shares at such time and in such manner.
(C) The Company shall not issue any shares of Series Two Preferred
Stock except upon exercise of rights issued pursuant to that certain Rights
Agreement dated as of January 17, 1994 between the Company and First Chicago
Trust Company of New York, a copy of which is on file with the Secretary of the
Company at its principal executive office and shall be made available to
stockholders of record without charge upon written request therefor addressed
to the Secretary. Notwithstanding the foregoing sentence, nothing contained in
the provisions hereof shall prohibit or
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<PAGE>
26
restrict the Company from issuing for any purpose any series of preferred stock
with rights and privileges similar to, different from, or greater than, those
of the Series Two Preferred Stock.
Section 5. Reacquired Shares. Any shares of Series Two Preferred
Stock purchased or otherwise acquired by the Company in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. The
Company shall cause all such shares upon their retirement and cancellation to
become authorized but unissued shares of preferred stock, without designation
as to series, and such shares may be reissued as part of a new series of
preferred stock to be created by resolution or resolutions of the Board of
Directors.
Section 6. Liquidation, Dissolution or Winding Up. Upon any voluntary
or involuntary liquidation, dissolution or winding up of the Company, no
distribution shall be made (i) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series Two Preferred Stock unless the holders of shares of Series Two Preferred
Stock shall have received, subject to adjustment as hereinafter provided, (A)
$1.00 per share plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment, or
(B) if greater than the amount specified in clause (i)(A) of this sentence, the
amount equal to 100 times the aggregate amount to be distributed per share to
holders of Common Stock, or (ii) to the holders of stock ranking on a parity
upon liquidation, dissolution or winding up with the Series Two Preferred
Stock, unless simultaneously therewith distributions are made ratable on the
Series Two Preferred Stock and all other shares of such parity stock in
proportion to the total amounts to which the holders of shares of Series Two
Preferred Stock are entitled under clause (i)(A) of this sentence and to which
the holders of such parity shares are entitled, in each case upon such
liquidation, dissolution or winding up. The amount to which holders of Series
Two Preferred Stock
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<PAGE>
27
may be entitled upon liquidation, dissolution or winding up of the Company
pursuant to clause (i)(B) of the immediately preceding sentence is hereinafter
referred to as the "Participating Liquidation Amount" and the multiple of the
amount to be distributed to holders of shares of Common Stock upon the
liquidation, dissolution or winding up of the Company applicable pursuant to
such clause to the determination of the Participating Liquidation Amount, as
such multiple may be adjusted from time to time as hereinafter provided, is
hereinafter referred to as the "Liquidation Multiple." In the event the
Company shall at any time after January 17, 1994 declare or pay any dividend on
Common Stock payable in shares of Common Stock, or effect a subdivision or
split or a combination, consolidation or reverse split of the outstanding
shares of Common Stock into a greater or lesser number of shares than of Common
Stock, then in each such case the Liquidation Multiple thereafter applicable to
the determination of the Participating Liquidation Amount to which holders of
Series Two Preferred Stock shall be entitled after such event shall be the
Liquidation Multiple applicable immediately prior to such event multiplied by a
fraction, of which the numerator is the number of shares of Common Stock
outstanding immediately after such event and of which the denominator is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
Section 7. Certain Reclassifications and Other Events.
(A) In the event that holders of shares of Common Stock of the
Company receive after January 17, 1994 in respect of their shares of Common
Stock any share of capital stock of the Company (other than any share of Common
Stock of the Company), whether by way of reclassification, recapitalization,
reorganization, dividend or other distribution or otherwise ("Transaction"),
then and in each such event the dividend rights, voting rights and rights upon
the liquidation, dissolution or winding up of the Company of the shares of
Series Two Preferred Stock
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28
shall be adjusted so that after such event the holders of Series Two Preferred
Stock shall be entitled, in respect of each share of Series Two Preferred Stock
held, in addition to such rights in respect thereof to which such holder was
entitled immediately prior to such adjustment, to (i) such additional dividends
as equal the Dividend Multiple in effect immediately prior to such Transaction
multiplied by the additional dividends which the holder of a share of Common
Stock shall be entitled to receive by virtue of the receipt in the transaction
of such capital stock, (ii) such additional voting rights as equal the Vote
Multiple in effect immediately prior to such Transaction multiplied by the
additional voting rights which the holder of a share of Common Stock shall be
entitled to receive by virtue of the receipt in the transaction of such capital
stock and (iii) such additional distributions upon liquidation, dissolution or
winding up of the Company as equal the Liquidation Multiple in effect
immediately prior to such transaction multiplied by the additional amount which
the holder of a share of Common Stock shall be entitled to receive upon
liquidation, dissolution or winding up of the Company by virtue of the receipt
in the Transaction of such capital stock, as the case may be, all as provided
by the terms of such capital stock.
(B) In the event that holders of shares of Common Stock of the
Company receive after January 17, 1994 in respect of their shares of Common
Stock any right or warrant to purchase Common Stock (including as such a right,
for all purposes of this paragraph, any security convertible into or
exchangeable for Common Stock) at a purchase price per share less than the
Current Market Price (as hereinafter defined) of a share of Common Stock on the
date of issuance of such right or warrant, then and in each such event the
dividend rights, voting rights and rights upon the liquidation, dissolution or
winding up of the Company of the shares of Series Two Preferred Stock shall
each be adjusted so that after such event the Dividend Multiple, the Vote
Multiple and the Liquidation
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<PAGE>
29
Multiple shall each be the product of the Dividend Multiple, the vote Multiple
and the Liquidation Multiple, as the case may be, in effect immediately prior
to such event multiplied by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding immediately before such issuance
of rights or warrants plus the maximum number of shares of Common Stock which
could be acquired upon exercise in full of all such rights or warrants and of
which the denominator shall be the number of shares of Common Stock outstanding
immediately before such issuance of rights or warrants plus the number of
shares of Common Stock which could be purchased, at the Current Market Price of
the Common Stock at the time of such issuance, by the maximum aggregate
consideration payable upon exercise in full of all such rights or warrants.
(C) In the event that holders of shares of Common Stock of the
Company receive after January 17, 1994 in respect of their shares of Common
Stock any right or warrant to purchase capital stock of the Company (other than
shares of common stock), including as such a right, for all purposes of this
paragraph, any security convertible into or exchangeable for capital stock of
the Company (other than Common Stock), at a purchase price per share less than
the Current Market Price of such shares of capital stock on the date of
issuance of such right or warrant, then and in each such event the dividend
rights, voting rights and rights upon liquidation, dissolution or winding up of
the Company of the shares of Series Two Preferred Stock shall each be adjusted
so that after such event each holder of a share of Series Two Preferred Stock
shall be entitled, in respect of each share of Series Two Preferred Stock held,
in addition to such rights in respect thereof to which such holder was entitled
immediately prior to such event, to receive (i) such additional dividends as
equal the Dividend Multiple in effect immediately prior to such event
multiplied, first, by the additional dividends to which the holder of a share
of Common Stock shall be entitled upon exercise of such
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<PAGE>
30
right or warrant by virtue of the capital stock which could be acquired upon
such exercise and multiplied again by the Discount Fraction (as hereinafter
defined) and (ii) such additional voting rights as equal the Vote Multiple in
effect immediately prior to such event multiplied, first, by the additional
voting rights to which the holder of a share of Common Stock shall be entitled
upon exercise of such right or warrant by virtue of the capital stock which
could be acquired upon such exercise and multiplied again by the Discount
Fraction and (iii) such additional distributions upon liquidation, dissolution
or winding up of the Company as equal the Liquidation Multiple in effect
immediately prior to such event multiplied, first, by the additional amount
which the holder of a share of Common Stock shall be entitled to receive upon
liquidation, dissolution or winding up of the Company upon exercise of such
right or warrant by virtue of the capital stock which could be acquired upon
such exercise and multiplied again by the Discount Fraction. For purposes of
this paragraph, the "Discount Fraction" shall be a fraction, of which the
numerator shall be the difference between the Current Market (as hereinafter
defined) of a share of the capital stock subject to a right or warrant
distributed to holders of shares of Common Stock of the Company as contemplated
by this paragraph immediately after the distribution thereof and the purchase
price per share for such share of capital stock pursuant to such right or
warrant and of which the denominator shall be the Current Market Price of a
share of such capital stock immediately after the distribution of such right or
warrant.
(D) For purposes of this Section 7, the "Current Market Price" of a
share of capital stock of the Company (including a share of Common Stock) on
any date shall be deemed to be the average of the daily closing prices per
share thereof over the 30 consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date; provided, however, that, in the event
that such Current Market Price of any such share of capital stock is determined
during a period which includes
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31
any date that is within 30 Trading Days after the ex-dividend date for (i) a
dividend or distribution on stock payable in shares of such stock or securities
convertible into shares of such stock, or (ii) any subdivision, split,
combination, consolidation, reverse stock split or reclassification of such
stock, then, and in each such case, the Current Market Price shall be
appropriately adjusted by the Board of Directors of the Company to reflect the
Current Market Price of such stock to take into account ex-dividend trading.
The closing price for any day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the shares are not
listed or admitted to trading on the New York Stock Exchange, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
shares are listed or admitted to trading or, if the shares are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then
in use, or if on any such date the shares are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the shares selected by the Board
of Directors of the Company. The term "Trading Day" shall mean a day on which
the principal national securities exchange on which the shares are listed or
admitted to trading is open for the transaction of business or, if the shares
are not listed or admitted to trading on any national securities exchange, on
which the New York Stock Exchange or such other national securities exchange as
may be selected by the Board of Directors of the Company
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32
is open. If the shares are not publicly held or not so listed or traded on any
day within the period of 30 Trading Days applicable to the determination of
current Market Price thereof as aforesaid, "Current Market Price" shall mean
the fair market value thereof per share as determined in good faith by the
Board of Directors of the Company. In either case referred to in the foregoing
sentence, the determination of Current Market Price shall be described in a
statement filed with the Secretary of the Company.
Section 8. Consolidation, Merger, Etc. In case the Company shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each
outstanding share of Series Two Preferred Stock shall at the same time be
similarly exchanged for or changed into the aggregate amount of stock,
securities, cash and/or other property (payable in like kind), as the case may
be, for which or into which each share of Common Stock is changed or exchanged
multiplied by the highest of the Vote Multiple, the Dividend Multiple or the
Liquidation Multiple in effect immediately prior to such event.
Section 9. Effective Time of Adjustments.
(A) Adjustments to the Series Two Preferred Stock required by the
provisions hereof shall be effective as of the time at which the event required
such adjustments occurs.
(B) The Company shall give prompt written notice to each holder of
a share of Series Two Preferred Stock of the effect of any adjustment to the
voting rights, dividend rights or rights upon liquidation, dissolution or
winding up of the Company of such shares required by the provisions hereof.
Notwithstanding the foregoing sentence, the failure of the Company to give such
notice shall not affect the validity of or the force or effect of or the
requirement for such adjustment.
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33
Section 10. No Redemption. The shares of Series Two Preferred Stock
shall not be redeemable at the option of the Company or any holder thereof.
Notwithstanding the foregoing sentence of this Section, the Company may acquire
shares of Series Two Preferred Stock in any other manner permitted by law, the
provisions hereof and the Company's Charter.
Section 11. Ranking. Unless otherwise provided in the Charter or a
Certificate of Designation relating to a subsequent series of preferred stock
of the Company, the Series Two Preferred Stock shall rank junior to all other
series of the Company's preferred stock as to the payment of dividends and the
distribution of assets on liquidation, dissolution or winding up and senior to
the Common Stock.
Section 12. Amendment. The provisions hereof and of the Charter shall
not be amended in any manner which would materially affect the rights,
privileges or powers of the Series Two Preferred Stock without, in addition to
any other vote of stockholders required by law, the affirmative vote of the
holders of two-thirds or more of the outstanding shares of Series Two Preferred
Stock, voting together as a single class.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
of Designation and do affirm the foregoing as true under the penalties of
perjury this 12th day of January, 1994.
/s/ J. W. Stewart
---------------------------------
J. W. Stewart
President and
Chief Executive Officer
/s/ Matthew D. Fitzgerald
---------------------------------
Matthew D. Fitzgerald
Assistant Secretary
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<PAGE>
34
BJ SERVICES COMPANY
CERTIFICATE OF ELIMINATION
OF
CERTIFICATE OF DESIGNATION OF SERIES ONE
JUNIOR PARTICIPATING PREFERRED STOCK
BJ Services Company, a corporation organized and existing under the
General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of BJ Services
Company, resolutions were duly adopted setting forth the proposed elimination
of the Series One Junior Participating Preferred Stock as set forth below:
RESOLVED FURTHER, that as none of the Series One Junior
Participating Preferred Stock authorized and designated pursuant to
that certain Certificate of Designation dated as of July 1990, and
attached as Exhibit A to the Current Rights Agreement, are currently
outstanding and, as the Current Rights are being redeemed, none of
such shares will be issued, the proper officers of the Company are
hereby authorized and directed, for and on behalf of the Company and
in its name, to file or cause to be filed in the State of Delaware
such certificate or certificates reflecting such fact and cancelling
such certificate of designation, and upon the filing of same the
400,000 shares so designated as Series One Junior Participating
Preferred Stock shall constitute authorized but unissued preferred
shares subject to issuance in accordance with the Company's
certificate of incorporation; and
SECOND: None of the authorized shares of the Series One Junior
Participating Preferred Stock are outstanding and none will be issued.
THIRD: In accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, the Certificate of
Incorporation of BJ Services Company is hereby amended to eliminate all
reference to the Series One Junior Participating Preferred Stock.
IN WITNESS WHEREOF, said BJ Services Company has caused this
certificate to be signed by Michael McShane, its Vice-President and attested
by Margaret B. Shannon, its Secretary, this 19th day of April, 1994.
BJ SERVICES COMPANY
By: /s/ Michael McShane
--------------------------
Vice-President
ATTEST:
By: /s/ Margaret B. Shannon
---------------------------
Secretary
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<PAGE>
35
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
------------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "BJ SERVICES COMPANY," FILED IN THIS OFFICE ON THE TWENTY-SECOND
DAY OF OCTOBER, A.D. 1996, AT 4 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
[GREAT SEAL OF THE STATE OF DELAWARE]
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
2235917 8100 AUTHENTICATION: 8157742
960307305 DATE: 10-23-96
<PAGE>
36
AMENDED
CERTIFICATE OF DESIGNATION
OF
SERIES TWO JUNIOR PARTICIPATING PREFERRED STOCK
OF
BJ SERVICES COMPANY
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
--------------------
BJ Services Company, a corporation organized and existing under
the General Corporation Law of the State of Delaware (hereinafter called the
"Company"), hereby certifies that the following resolution was duly adopted by
the Board of Directors of the Company as required by Section 151 of the General
Corporation Law of the State of Delaware at a meeting duly called and held on
September 26, 1996:
RESOLVED, that pursuant to the authority granted to and vested in
the Board of Directors of the Company (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Company's
Certificate of Incorporation, as amended to date (hereinafter called the
"Certificate of Incorporation"), the Board of Directors on January 5, 1994
adopted a resolution creating a series of shares of Preferred Stock, par value
$1.00 per share, designated as Series Two Junior Participating Preferred Stock
and filed such designation with the Secretary of State of Delaware on April 7,
1994, no shares of which have been issued as of September 26, 1996; and the
Board of Directors on September 26, 1996 adopted the following resolution to
amend and restate the terms of such Preferred Stock; and be it further
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of the Delaware
General Corporation Law and the Certificate of Incorporation, the Series Two
Junior Participating Preferred Stock of the Corporation heretofore created be,
and that the designation thereof and the powers, designations, preferences and
relative, participating, optional or other special rights of the shares of such
series, and the qualifications, limitations or restrictions thereof are hereby
amended and restated as follows:
Section 1. Designation and Amount. The shares of such series
shall be designated as "Series A Junior Participating Preferred Stock" (the
"Series A Preferred Stock") and the number of shares constituting the Series A
Preferred Stock shall be 200,000. Such number of shares may be increased or
decreased by
<PAGE>
37
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Company convertible
into Series A Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any
series of Preferred Stock of the Company (the "Preferred Stock") (or any
similar stock) ranking prior and superior to the Series A Preferred Stock with
respect to dividends, the holders of shares of Series A Preferred Stock, in
preference to the holders of Common Stock, par value $.10 per share, of the
Company (the "Common Stock") and of any other stock of the Company ranking
junior to the Series A Preferred Stock, shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the last day of January,
April, July, and October in each year (each such date being referred to herein
as a "Dividend Payment Date"), commencing on the first Dividend Payment Date
after the first issuance of a share or fraction of a share of Series A
Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $10 or (b) subject to the provision for adjustment
hereinafter set forth, 1000 times the aggregate per share amount of all cash
dividends, and 1000 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock, declared on the Common Stock since the immediately
preceding Dividend Payment Date or, with respect to the first Dividend Payment
Date, since the first issuance of any share or fraction of a share of Series A
Preferred Stock. In the event the Company shall at any time after September
26, 1996 declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior
to such event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Company shall declare a dividend or distribution on
the Series A Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a
<PAGE>
38
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during
the period between any Dividend Payment Date and the next subsequent Dividend
Payment Date, a dividend of $10 per share on the Series A Preferred Stock shall
nevertheless be payable, when, as and if declared, on such subsequent Dividend
Payment Date.
(C) Dividends shall begin to accrue and be cumulative, whether
or not earned or declared, on outstanding shares of Series A Preferred Stock
from the Dividend Payment Date next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to the record date for the
first Dividend Payment Date, in which case dividends on such shares shall begin
to accrue from the date of issue of such shares, or unless the date of issue is
a Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive a quarterly dividend and before such Dividend Payment Date, in either
of which events such dividends shall begin to accrue and be cumulative from
such Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix
a record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights;
(A) Subject to the provision for adjustment hereinafter set
forth and except as otherwise provided in the Certificate of
Incorporation or required by law, each share of Series A Preferred Stock
shall entitle the holder thereof to 1000 votes on all matters upon which
the holders of the Common Stock of the Company are entitled to vote. In
the event the Company shall at any time after September 26, 1996 declare
or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a greater
or lesser number of shares of Common Stock, then in each such case the
number of votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is
<PAGE>
39
the number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) Except as otherwise provided herein, in the Certificate of
Incorporation or in any other Certificate of Designations creating a
series of Preferred Stock or any similar stock, and except as otherwise
required by law, the holders of shares of Series A Preferred Stock and
the holders of shares of Common Stock and any other capital stock of the
Company having general voting rights shall vote together as one class on
all matters submitted to a vote of stockholders of the Company.
(C) Except as set forth herein, or as otherwise provided by
law, holders of Series A Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not earned or declared, on
shares of Series A Preferred Stock outstanding shall have been paid in
full, the Company shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (as to
dividends) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (as to
dividends) with the Series A Preferred Stock, except dividends
paid ratably on the Series A Preferred Stock and all such parity
stock on which dividends are payable or in arrears in proportion
to the total amounts to which the holders of all such shares are
then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock, provided that the Company may at any
time redeem, purchase or otherwise acquire shares of any such
junior stock in exchange for shares of any stock of the Company
ranking junior (as to dividends and upon dissolution, liquidation
or winding up) to the Series A Preferred Stock or rights,
warrants or options to acquire such junior stock;
<PAGE>
40
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock, or any
shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except in accordance with a purchase offer made
in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the
Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective
series or classes.
(B) The Company shall not permit any subsidiary of the Company
to purchase or otherwise acquire for consideration any shares of stock
of the Company unless the Company could, under paragraph (A) of this
Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred
Stock purchased or otherwise acquired by the Company in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All
such shares shall upon their retirement become authorized but unissued shares
of Preferred Stock and may be reissued as part of a new series of Preferred
Stock to be created by resolution or resolutions of the Board of Directors,
subject to any conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Company, no distribution shall be
made (A) to the holders of the Common Stock or of shares of any other stock of
the Company ranking junior, upon liquidation, dissolution or winding up, to the
Series A Preferred Stock unless, prior thereto, the holders of shares of Series
A Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not earned
or declared, to the date of such payment, provided that the holders of shares
of Series A Preferred Stock shall be entitled to receive an aggregate amount
per share, subject to the provision for adjustment hereinafter set forth, equal
to 1000 times the aggregate amount to be distributed per share to holders of
shares of Common Stock, or (B) to the holders of shares of stock ranking on a
parity upon liquidation, dissolution or winding up with the Series A Preferred
Stock, except distributions made ratably on the Series A Preferred Stock and
all such parity stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or winding
up. In the event, however, that there are not sufficient assets available to
permit payment in full of the Series A liquidation preference and the
liquidation preferences of all other classes
<PAGE>
41
and series of stock of the Company, if any, that rank on a parity with the
Series A Preferred Stock in respect thereof, then the assets available for such
distribution shall be distributed ratably to the holders of the Series A
Preferred Stock and the holders of such parity shares in the proportion to
their respective liquidation preferences. In the event the Company shall at
any time after September 26, 1996 declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under the proviso in clause (A) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Company
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are converted into, exchanged for or changed
into other stock or securities, cash and/or any other property, then in any
such case each share of Series A Preferred Stock shall at the same time be
similarly converted into, exchanged for or changed into an amount per share
(subject to the provision for adjustment hereinafter set forth) equal to 1000
times the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is converted, exchanged or converted. In the event the Company
shall at any time after September 26, 1996 declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
conversion, exchange or change of shares of Series A Preferred Stock shall be
adjusted by multiplying such amount by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred Stock
shall not be redeemable from any holder.
Section 9. Rank. The Series A Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets upon
liquidation, dissolution or winding
<PAGE>
42
up of the Company, junior to all other series of Preferred Stock and senior to
the Common Stock.
Section 10. Amendment. If any proposed amendment to the
Certificate of Incorporation (including this Certificate of Designations) would
alter, change or repeal any of the preferences, powers or special rights given
to the Series A Preferred Stock so as to affect the Series A Preferred Stock
adversely, then the holders of the Series A Preferred Stock shall be entitled
to vote separately as a class upon such amendment, and the affirmative vote of
two-thirds of the outstanding shares of the Series A Preferred Stock, voting
separately as a class, shall be necessary for the adoption thereof, in addition
to such other vote as may be required by the General Corporation Law of the
State of Delaware.
Section 11. Fractional Shares. Series A Preferred Stock may be
issued in fractions of a share that shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
<PAGE>
43
IN WITNESS WHEREOF, this Certificate of Designations is executed
on behalf of the Company by its President and attested by its Secretary this
26th day of September, 1996.
/s/ J. W. STEWART
-----------------------------------
J. W. STEWART
Attest:
/s/ MARGARET B. SHANNON
- - - ------------------------------
MARGARET B. SHANNON
EX-3.2
<PAGE>
3
AMEND. CERT. OF DESIGNATION OF SERIES TWO PREF. ST
1
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
BJ SERVICES COMPANY
BJ SERVICES COMPANY, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "DGCL"),
DOES HEREBY CERTIFY THAT:
FIRST: At a meeting of the Board of Directors of the corporation a
resolution was adopted proposing and declaring advisable the following amendment
to the Certificate of Incorporation of the corporation, as amended, and
directing that the amendment be considered at the next annual meeting of
stockholders of the corporation:
RESOLVED, that Article FOURTH of the Certificate of
Incorporation be amended to read as follows:
"FOURTH: The total number of shares of stock which
the Corporation shall have the authority to issue is
165,000,000 shares of capital stock, consisting of 5,000,000
shares of preferred stock, par value $1.00 per share (the
"Preferred Stock"), and 160,000,000 shares of common stock,
par value $0.10 per share (the "Common Stock").
The designations, powers and preferences and
relative, participating, optional or other special rights and
qualifications, limitations or restrictions of the Preferred
Stock shall be established by resolution of the Board of
Directors pursuant to Section 151 of the General Corporation
Law of the State of Delaware."
SECOND: Thereafter, the annual meeting of stockholders was duly called
and held upon notice in accordance with Section 222 of the DGCL, at which
meeting the necessary number of shares as required by statute were voted in
favor of the amendment.
THIRD: The amendment was duly adopted in accordance with the provisions
of Section 242 of the DGCL.
<PAGE>
IN WITNESS WHEREOF, BJ Services Company has caused this certificate to
be signed by its authorized officer this 22nd day of January, 1998.
BJ Services Company
By: /s/ Margaret B. Shannon
---------------------------------
Name: Margaret B. Shannon
Title: Vice President, General Counsel
and Secretary
<PAGE>
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
<PAGE>
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally noticed. If the
adjournment 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>
If any notice addressed to a stockholder at the address of such
stockholder appearing on the books of a Corporation is returned to the
Corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the stockholder
at such address, all further notices shall be deemed to have been duly given
without further mailing if the same shall be available to the stockholder upon
written demand of the stockholder at the principal executive office of the
Corporation for a period of one year from the date of the giving of such notice.
Section 8. Attendance of a person at a meeting shall constitute a waiver
of notice to such person of such meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened, or objects to the consideration of matters
not included in the notice of the meeting.
Section 9. The officer or agent who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where their
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept open at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present. The stock ledger of the Corporation shall be the only evidence
as to who are the stockholders entitled to examine such list or to vote at any
meetings of stockholders.
Section 10. No action shall be taken by stockholders except at an annual
or special meeting of stockholders, and stockholders may not act by written
consent.
Section 11. Before any meeting of stockholders, the Board of Directors
may appoint any persons other than nominees for office to act as inspectors of
election at the meeting or its adjournment. If no inspectors of election are so
appointed, the chairman of the meeting may, and on the request of any
stockholder or a stockholder's proxy shall, appoint inspectors of election at
the meeting. The number of inspectors shall be either one or three. If
inspectors are appointed at a meeting on the request of one or more stockholders
or proxies, the holders of a majority of shares or their proxies present at the
meeting shall determine whether one or three inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to act,
the chairman of the meeting may, and upon the request of any stockholder or a
stockholder's proxy shall, appoint a person to fill such vacancy.
3
<PAGE>
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 Secretary of
the Corporation. To be timely, a stockholder's notice
4
<PAGE>
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 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
5
<PAGE>
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 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 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
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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, or (ii) 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. The
requirements of clause (i) of the preceding sentence shall not apply to a
director who is 71 years old and serving on the Corporation's Board of Directors
as of December 10, 1998; such person shall be eligible to serve as a director
until the Annual Meeting of Stockholders that takes place in the year 2000. The
requirements of clause (i) of the second sentence of this section shall not
apply to a director who is 69 years old and serving on the Corporation's Board
of Directors as of December 9, 1999; such person shall be eligible to be
nominated for election to an additional three-year term at the Annual Meeting of
Stockholders to be held in 2000 and to serve until the end of the three-year
term for which he is elected. Any director may be removed for cause by the
holders of a majority of the shares of the Corporation entitled to vote in the
election of directors; stockholders may not remove any director without cause.
The Board of Directors may not remove any director for or without cause, and no
recommendation by the Board of Directors that a director be removed for cause
may be made to the stockholders except by the affirmative vote of not less than
75% of the members of the whole Board; provided that the Board may remove any
director who fails to resign as required by the provisions of these Bylaws.
Section 4. Except as otherwise provided by statute or the Certificate of
Incorporation, in the case of any increase in the number of directors, such
additional director or directors shall be proposed for election to terms of
office that will most nearly result in each Class of directors containing
one-third of the entire number of members of the whole Board, and, unless
such position is to be filled by a vote of the stockholders at an annual or
special meeting, shall be elected by a majority vote of the directors in such
Class or Classes, voting separately by Class. In the case of any vacancy in
the Board of Directors, however created, the vacancy or vacancies shall be
filled by 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 his 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
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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.
Section 9. At all meetings of the Board of Directors a majority of the
authorized number of directors shall be necessary and sufficient to constitute a
quorum for the transaction of business, and the vote of a majority of the
directors present at any meeting at which there is a quorum, shall be the act of
the Board of Directors, except as may be otherwise specifically provided by
statute, by the Certificate of Incorporation or by these Bylaws. If a quorum
shall not be present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present. If only one
director is authorized, such sole director shall constitute a quorum. A meeting
at which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, if any action is approved by at
least a majority of the required quorum for such meeting.
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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. Any such committee, to the extent provided in the resolution
of the Board of Directors, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation, but no such committee shall have the power or
authority to authorize an amendment to the Certificate of Incorporation, adopt
an agreement of merger or consolidation, recommend to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, recommend to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amend the Bylaws of the Corporation; and, unless
the resolution or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
Section 13. Special meetings of committees may be called by the Chairman
of such committee, the Chairman of the Board or the President, on at least 48
hours notice to each member and alternate member. Alternate members shall have
the right to attend all meetings of the committee. The Board of Directors may
adopt rules for the government of any committee not inconsistent with the
provisions of these Bylaws. If a committee is comprised of an odd number of
members, a quorum shall consist of a majority of that number. If the committee
is comprised of an even number of 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.
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Section 14. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when requested.
Compensation of Directors
Section 15. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving
the Corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
Indemnification
Section 16. (a) The Corporation shall indemnify every person who is or
was a party or is or was threatened to be made a party to any action, suit, or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he is or was a director, officer, employee or agent of the
Corporation or any of its direct or indirect wholly-owned subsidiaries or, while
a director, officer, employee or agent of the Corporation or any of its direct
or indirect wholly-owned subsidiaries, is or was serving at the request of the
Corporation or any of its direct or indirect wholly-owned subsidiaries, as a
director, officer, employee, agent or trustee of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including counsel fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, to the full extent permitted by applicable laws
provided that the Corporation shall not be obligated to indemnify any such
person against any such action, suit or proceeding which is brought by such
person against the Corporation or any of its direct or indirect wholly-owned
subsidiaries or the directors of the Corporation or any of its direct or
indirect wholly-owned subsidiaries, other than an action brought by such person
to enforce his rights to indemnification hereunder, unless a majority of the
Board of Directors of the Corporation shall have previously approved the
bringing of such action, suit or proceeding. The Corporation shall indemnify
every person who is or was a party or is or was threatened to be made a party to
any action, suit, or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was licensed to practice law
and an employee (including an employee who is or was an officer) of the
Corporation or any of its direct or indirect wholly-owned subsidiaries and,
while acting in the course of such employment 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
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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.
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.
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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 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
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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, 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 the 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
Certificates 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.
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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.
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
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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.
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
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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, 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.
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ARTICLE VII
Amendments
Section 1. Except any amendment to this Article VII and to Article II,
Section 6, Article II, Section 10, Article III, Section 1 (as it relates to
increases in the number of directors), Article III, Section 2, the last sentence
of Article III, Section 3 (as it relates to removal of directors), Article III,
Section 4, Article III, Section 16 and Article VI, Section 6 of these Bylaws, or
any of such provisions, which shall require approval by the affirmative vote of
directors representing at least 75% of the number of directors provided for in
accordance with Article III, Section 1, and except as otherwise expressly
provided in a bylaw adopted by the stockholders as hereinafter provided, the
directors, by the affirmative vote of a majority of the whole Board and without
the assent or vote of the stockholders, may at any meeting, make, repeal, alter,
amend or rescind any of these Bylaws, provided the substance of the proposed
amendment or other action shall have been stated in a notice of the meeting.
Section 2. These Bylaws may not be altered, amended or rescinded, and new
Bylaws may not be adopted, by the stockholders of the Corporation except by the
vote of the holders of not less than 75% of the total voting power of all shares
of stock of the Corporation entitled to vote in the election of directors,
considered for such purpose as one class.
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EXECUTIVE SEVERANCE AGREEMENT
THIS EXECUTIVE SEVERANCE AGREEMENT, made and entered into effective as of
________________, 1999 (the "Agreement"), is by and between BJ SERVICES COMPANY,
a Delaware corporation (the "Company"), and ___________________________ (the
"Employee").
WITNESSETH:
WHEREAS, Employee has rendered outstanding service to the Company and Employee's
experience and knowledge of the affairs of the Company, and Employee's
reputation and contacts are extremely valuable to the Company; and
WHEREAS, in recognition of Employee's service to the Company and as an
inducement to Employee to continue in the employ of the Company, the Company has
offered Employee, among other things, this Agreement, and Employee has accepted
the Company's offer;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, the Company and Employee hereby agree
as follows.
1. TERM. This Agreement shall commence on the date hereof and shall
continue until December 31, 1999; PROVIDED, HOWEVER, that commencing on
January 1, 2000 and on each January 1st thereafter, the term of this
Agreement shall automatically be extended for one additional year unless at
least one year prior to such January 1st date the Company shall have given
written notice to Employee that the term of this Agreement shall cease to be
so extended PROVIDED FURTHER that, , this Agreement shall automatically
terminate in all events upon the termination of the Employee's employment for
any reason prior to the commencement of the Protected Period, except as set
forth in Section 2. Notwithstanding anything in this Agreement to the
contrary however, this Agreement may not be terminated and shall remain in
full force and effect for at least two (2) years following a Change in
Control, and such additional time as may be necessary to give effect to its
terms.
2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL. Employee
shall be entitled to the benefits specified in Sections 3(iii) and 4 if (i) a
Change in Control occurs while Employee is employed by the Company, and this
Agreement is in effect, and (ii) during the Protected Period Employee's
employment is terminated without Cause by the Company, for Good Reason by
Employee, or by Employee without Good Reason with the consent of the
Company's Board of Directors ("Board"). If Employee's employment is
terminated due to Disability or death, or for Cause, then Employee shall not
be entitled to any benefits under this Agreement except as specified in
Sections 3(i) and 3(ii) . No benefits hereunder are payable prior to the date
on which a Change in Control occurs unless otherwise approved by the Board of
Directors of the Company. For purposes of this Agreement, the "Protected
Period" shall mean the period of time beginning with the Change in Control
and ending on the second anniversary of such Change in Control; PROVIDED,
HOWEVER, if Employee's employment with the Company
<PAGE>
terminates prior to, but within six months of, the date on which a Change in
Control occurs, and it is reasonably demonstrated by Employee that such
termination of employment was (i) by the Company in connection with or in
anticipation of the Change in Control or (ii) by Employee under circumstances
which would have constituted Good Reason if the circumstances arose on or after
the Change in Control, then for all purposes of this Agreement the Change in
Control shall be deemed to have occurred, and the Protected Period shall be
deemed to have commenced, on the date immediately prior to the date of such
termination of Employee's employment.
(i) DISABILITY. If, as a result of Employee's incapacity due to
physical or mental illness, Employee shall have been absent from Employee's
duties with the Company on a full-time basis for 180 consecutive calendar days,
and within 30 days after written Notice of Termination (as defined hereinafter)
Employee shall not have returned to the full-time performance of Employee's
duties, the Company may thereafter notify Employee of termination, which notice
shall, for purposes of this Agreement, constitute termination of Employee's
employment for "Disability"; PROVIDED, HOWEVER, a termination of Employee's
employment for Disability under this Agreement shall not by itself alter or
impair (A) Employee's rights as a "disabled employee" or otherwise under any of
the Company's employee benefit plans or (B) Employee's status as an "employee"
for any other purpose.
(ii) CAUSE. The Company may terminate Employee's employment for Cause.
For the purposes of this Agreement, the Company shall have "Cause" to terminate
Employee's employment hereunder only (A) upon the willful and continued failure
by Employee to perform substantially Employee's duties with the Company, other
than any such failure resulting from Employee's incapacity due to physical or
mental illness, which failure continues unabated after a demand for substantial
performance is delivered to Employee by the Board that specifically identified
the manner in which the Board believes that Employee has not substantially
performed Employee's duties, (B) if Employee willfully engages in gross
misconduct materially and demonstrably injurious to the Company or (C) upon
fraud, misappropriation or embezzlement related to the business of the Company
on the part of Employee. For purposes of this paragraph, an act or failure to
act on Employee's part shall be considered "willful" if done or omitted to be
done by Employee otherwise than in good faith and without reasonable belief that
Employee's action or omission was in the best interest of the Company.
Notwithstanding the foregoing, Employee shall not be deemed to have been
terminated by the Company for Cause unless and until the Company shall have
delivered to Employee a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters of the entire membership of the Board, at a
meeting of the Board called and held for the purpose (after reasonable notice to
Employee and an opportunity for Employee, together with Employee's counsel, to
be heard before the Board), finding that in the good-faith opinion of the Board
Employee was guilty of conduct constituting Cause hereunder and specifying the
particulars thereof in reasonable detail.
(iii) GOOD REASON. Employee may terminate Employee's employment for
Good Reason. For purposes of this Agreement "Good Reason" shall mean any of the
following:
(A) Employee is assigned any duties materially inconsistent
with Employee's positions, duties, responsibilities and status with the Company
immediately prior to a Change in Control, or Employee's reporting
responsibilities, titles or offices are materially changed in an
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adverse manner from those in effect immediately prior to such Change in Control.
(As an illustration, a change from an officer of a publicly traded company to an
officer of a subsidiary of another company would be considered a material change
in the Employee's reporting responsibility, title and office.) or Employee is
removed from or is not re-elected or appointed to any of such material
responsibilities, titles, offices or positions, except in each case in
connection with the termination of Employee's employment for Cause, or
Disability, or as a result of Employee's death, or by Employee for other than
Good Reason and excluding an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by Employee; provided, however, that if the Executive
Compensation Committee of the Board of Directors of the Company makes a
determination, prior to a Change in Control, that the Change in Control is a
"merger of equals" for the purposes of this section 2(iii)(A), and delivers
written notice to the Employee that the transaction has been designated a
"merger of equals" for purposes of this section 2(iii)(A), and that shorter time
periods may apply under this section, then the following additional provisions
shall apply: In the event that (x) Employee remains employed as an officer of a
publicly-traded company following the Change in Control but (y) an event or
events occur within the first six months of the Protected Period which
constitute Good Reason and Employee chooses to terminate his or her employment
for Good Reason, then employee must deliver his or her Notice of Termination (as
defined in paragraph (iv) below) on or before the date which is six months after
the event that constituted Good Reason, or else lose the right to terminate for
Good Reason based on such event or events and provided, further, that if, during
the final eighteen months of the Protected Period, additional events occur which
also constitute Good Reason, then Employee shall be entitled to terminate his or
her employment for Good Reason at any time pursuant to the terms of this
Agreement; or
(B) Employee's annual rate of base salary is reduced from that
in effect immediately prior to a Change in Control or as the same may be
increased from time to time thereafter (such annual rate of base salary, as so
increased (if applicable) but prior to such reduction, is referred to
hereinafter as the "Base Salary"); or
(C) the Company fails to continue the Company's annual cash
bonus plan for executives as the same may be modified from time to time, but
substantially in the form in effect prior to the date of the Change in Control
(the "Bonus Plan"), (unless the Bonus Plan is replaced within a reasonable time
with a substantively similar plan (the "Substitute Plan") or fails to continue
Employee as a participant in the Bonus Plan or the Substitute Plan, or reduces
Employee's "Entry Level," "Expected Value," or "Over-Achievement" guideline
percentages under the Bonus Plan or the Substitute Plan from that in effect
immediately prior to a Change in Control or as increased thereafter with respect
to Employee; or
(D) the Company fails to continue in effect any material
benefit or compensation plan, including, but not limited to, the Company's 1990
Stock Incentive Plan, 1995 Incentive Plan, 1997 Incentive Plan, qualified
retirement plan, executive life insurance plan, perquisite plan, and/or health
and accident plan, in which Employee is participating immediately prior to a
Change in Control, or plans providing Employee with substantially similar
benefits, or the Company takes any action that would materially adversely affect
Employee's participation in or
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<PAGE>
reduce Employee's benefits under any of such plans (excluding any such action by
the Company that is required by law); or
(E) the Employee is required to relocate to a location more
than 50 miles from where his office was located at the date of the Change in
Control (except for required travel on company business to an extent
substantially consistent with Employee's past business travel obligations to the
Company); or
(F) the Company fails to obtain the assumption of the
obligation to perform this Agreement by any successor as contemplated in Section
6 hereof; or
(G) any purported termination of Employee's employment by the
Company that is not effected pursuant to a Notice of Termination satisfying the
requirements of subparagraph (iv) below and, if applicable, the procedures
described in subparagraph (ii) above; and for purposes of this Agreement, no
such purported termination shall be effective; or
(H) the amendment, modification or repeal of any provision of
the Articles of Incorporation or Bylaws of the Company that was in effect
immediately prior to such Change in Control, if such amendment, modification or
repeal would materially adversely affect Employee's rights to indemnification by
the Company; or
(I) the Company shall violate or breach any obligation of the
Company in effect immediately prior to such Change in Control, regardless
whether such obligation be set forth in the Bylaws of the Company and/or in a
separate agreement entered into between the Company and Employee, to indemnify
Employee against any claim, loss, expense or liability sustained or incurred by
Employee by reason, in whole or in part, of the fact that Employee is or was an
officer or director of the Company.
(iv) NOTICE OF TERMINATION. Any termination by the Company pursuant to
subparagraphs (i) or (ii) above or by Employee pursuant to subparagraph (iii)
above shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice that shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Employee's employment under the
provision so indicated.
(v) DATE OF TERMINATION. "Date of Termination" shall mean (A) if
Employee is terminated for Disability, 30 days after Notice of Termination is
given, provided that Employee shall not have returned to the performance of
Employee's duties on a full-time basis during such 30-day period, (B) if
Employee's employment is terminated pursuant to subparagraph (iii) above, the
date specified in the Notice of Termination, (C) with respect to a termination
of employment prior to a Change in Control, the date of such termination, and
(D) if Employee's employment is terminated for any other reason on or after a
Change in Control, the date on which a Notice of Termination is given, PROVIDED,
HOWEVER, in the event of any dispute or controversy concerning Employee's
entitlement to payment under this Agreement, solely for purposes of Section
3(iii),
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<PAGE>
concerning the timing of the payment of amounts under this Agreement, the "Date
of Termination" shall mean the date of final resolution of such dispute or
controversy.
3. COMPENSATION DURING DISABILITY OR UPON TERMINATION.
(i) If during the Protected Period Employee fails to perform Employee's
normal duties as a result of incapacity due to physical or mental illness,
Employee shall continue during the period of disability to receive Employee's
full Base Salary at the rate then in effect and any awards, deferred and
non-deferred, payable during such period of disability under the Bonus Plan,
less any amounts paid to Employee during such period of disability pursuant to
the Company's sick-leave or disability program until Employee's employment is
terminated for Disability pursuant to Section 2(i) hereof. This Section 3(i)
shall not reduce or impair Employee's rights to terminate his employment for
Good Reason (to the extent such rights existed prior to such Disability) or with
the consent of the Board as otherwise provided herein.
(ii) If during the Protected Period Employee's employment shall be
terminated for Cause, the Company shall pay Employee's earned but unpaid Base
Salary through the Date of Termination at the rate in effect at the time of
Notice of Termination is given and the Company shall have no further obligations
to Employee under this Agreement, except those arising hereunder or under the
terms of any Company benefit plans, prior to the Date of Termination.
(iii) If during the Protected Period the Company shall terminate
Employee other than pursuant to Section 2(i) or 2(ii) hereof, or if during the
Protected Period Employee shall terminate Employee's employment either for Good
Reason or with the consent of the Board, then, subject to Section 4 and the
following provisions hereof, the Company shall pay to Employee, in a single lump
sum by certified or bank cashier's check within five days of such Date of
Termination, the sum of the amounts specified in subparagraphs (A) through (E)
below and also shall provide Employee the continued employee welfare benefits as
provided in subparagraph (F) below:
(A) an amount equal to three times the sum of (i) Employee's
Base Salary and (ii) the bonus that Employee would receive using the Expected
Value guideline percentage under the Bonus Plan (the "EV Bonus Amount");
(B) an amount equal to the product of (i) the higher of (a)
the EV Bonus Amount or (b) the bonus that the Employee would receive under the
Bonus Plan based on the performance of the Company for the then current fiscal
year, as of the date of the Change in Control and (ii) a fraction, the numerator
of which is the number of days in the current fiscal year under the Bonus Plan
that have elapsed on the Date of Termination and the denominator of which is
365;
(C) an amount equal to that portion of Employee's Base Salary
earned, but not paid, and vacation earned, but not taken, in each case, to the
Date of Termination, and all other amounts previously deferred by Employee or
earned but not paid as of such date under all Company incentive or deferred
compensation plans or programs;
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<PAGE>
(D) an amount, with respect to all outstanding unvested and
unexercisable awards that have been granted Employee after a Change in Control
under the Company's 1990 Stock Incentive Plan, 1995 Incentive Plan, and 1997
Incentive Plan or any successor or similar stock compensation plan, equal to the
sum of (i) the value of all such unvested (or unearned) shares of Performance
Stock and Performance Units (determined as if all restrictions had lapsed and
all performance goals had been achieved to the fullest extent) and (ii) the
excess of the exercise price of each such unexercisable option and appreciation
right over the closing price of the common shares of the Company stock on the
Date of Termination as reported on the national exchange on which the trading
volume for such stock is highest;
(E) an amount equal to three times the product of (A) the
highest number of options granted Employee in any grant in the last three years,
provided that if any such grant was intended to represent more than a single
year's grant, the number shall be adjusted to equate to an annualized amount for
purposes of this computation (it being understood that with respect to the stock
option grant made on October 12, 1998, one-half of such grant is considered to
be the annual grant for 1998 and one-half of such grant is considered to be the
annual grant for 1999) and (B) the value of such options as of the date they
were granted, using the Black-Scholes method of valuation (such value to be
determined by the Executive Compensation Committee of the Board of Directors of
the Company prior to the date of such Change in Control);
(F) the Company shall at all times during the three year
period following the Date of Termination (the "Continuation Period") maintain in
full force and effect for the continued benefit of Employee and Employee's
eligible dependents all life (including executive life), accidental death and
dismemberment, and medical and dental insurance benefits available to Employee
and Employee's eligible dependents by virtue of being an employee of the Company
immediately prior to such termination, PROVIDED that Employee's continued
participation is possible under the general terms and provisions of such plans
and programs (or any successor thereto); PROVIDED, HOWEVER, if Employee retires
on the Date of Termination or if Employee would have been eligible to retire
within five years of the Date of Termination, Employee's participation shall
continue in such group plans and programs to the extent such group plans and
programs provide benefits for retirees. In the event that participation by
Employee in any such plan or program after the Date of Termination is barred
pursuant to the terms thereof, the Company shall obtain at the Company's expense
and without any additional cost or liability to the Employee comparable coverage
under individual policies for Employee (and Employee's dependents). At the end
of the Continuation Period (except as provided below with respect to COBRA
benefits, if elected by Employee), the Company shall arrange to make available
to Employee and his eligible dependents comparable insurance coverage by
enabling Employee to convert Employee's coverage under the Company's group plans
or programs to an individual policy for the benefit of Employee and Employee's
eligible dependents, or to assume any individual policies obtained by the
Company for Employee's benefit, with Employee paying the full premiums after the
end of the Continuation Period. Nothing in this subparagraph (F) shall operate
to reduce, or be construed as reducing, Employee's (or a beneficiary's) group
health plan continuation rights under COBRA in any manner and upon the end of
the Continuation Period Employee (or Employee's beneficiary(ies)), if otherwise
eligible, will be entitled to elect COBRA continuation coverage for the full
period applicable as if that were Employee's termination date. In the event
Employee becomes covered by another employer's group plan or
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<PAGE>
programs as a result of Employee's employment during the Continuation Period,
the Company's plans or programs shall be liable for benefits only to the extent
such benefits are not covered by the subsequent employer's plans or programs;
and
(G) the Company shall, at its sole expense as incurred,
provide the Employee with outplacement services the scope and provider of which
shall be selected by the Employee in his or her sole discretion.
As a condition to the receipt of any benefit under this Agreement,
Employee must first execute and deliver to the Company a release, substantially
in the form attached hereto as Attachment A, releasing the Company, its
officers, directors, employees and agents from any and all claims and from any
and all causes of action of any kind or character that Employee may have arising
out of Employee's employment with the Company or the termination of such
employment, but excluding (i) any claims and causes of action that Employee may
have arising under or based upon this Agreement, (ii) rights under stock-based
incentive plans arising in connection with a change in control, (iii) rights
under directors' and officers' indemnification insurance, and (iv) rights of
indemnity under articles of incorporation, bylaws, contracts, law, or otherwise,
(v) rights under Company-sponsored retirement plans, including, without
limitation "401(k)" plans and "Rabbi trusts", and (vi) rights under the
Company's "KEYSOP" (Key Executive Stock Option Plan) and arrangements for
deferred compensation.
4. GROSS-UP OF PARACHUTE PAYMENTS.
(i) To provide Employee with adequate protection in connection with his
ongoing employment with the Company, this Agreement provides Employee with
various benefits in the event of termination of Employee's employment with the
Company during the Protected Period. If Employee's employment is terminated
following a "change in control" of the Company, within the meaning of Section
28OG of the Internal Revenue Code of 1986, as amended (the "Code"), a portion of
those benefits could be characterized as "excess parachute payments" within the
meaning of Section 28OG of the Code. The parties hereto acknowledge that the
protections set forth in this Section 4 are important, and it is agreed that
Employee should not have to bear the burden of any excise tax that might be
levied under Section 4999 of the Code, in the event that a portion of the
benefits payable to Employee pursuant to this Agreement are treated as an excess
parachute payment. The parties, therefore, have agreed as set forth in this
Section 4.
(ii) Anything in this Agreement to the contrary notwithstanding, if it
shall be determined that any payment or distribution by the Company or any other
person to or for the benefit of Employee (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
4) (including, without limitation, any cost associated with any continued
welfare plan coverage, welfare benefits, or any reimbursements of any
arbitration or litigation costs and expenses under Section 15) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred by the Employee with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Company
shall pay, in accordance with Section 4(iii), an additional payment (a "Gross-Up
Payment") in an amount
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<PAGE>
such that after payment by Employee of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income or other taxes (and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up Payment, Employee retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(iii) Subject to the provisions of Section 4(iv), all determinations
required to be made under this Section 4, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by an
independent public accounting firm with a national reputation that is selected
by Employee (the "Accounting Firm") which shall provide detailed preliminary
calculations both to the Company and to Employee within 15 business days after
the receipt of notice from the Company that there has been a Payment, or such
earlier time as is requested by the Employee and shall provide the actual amount
of the Gross-Up Payment each year. In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group effecting
the change in control of the Company, Employee shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
(The Company shall indemnify and hold harmless Employee, on an after-tax basis,
for any Excise Tax or income or other tax (including interest and penalties with
respect thereto) imposed on Employee as a result of such payment of fees and
expenses.) Any Gross-Up Payment, as determined pursuant to this Section 4, shall
be paid by the Company on behalf of Employee to the applicable tax authorities
prior to the time any such payments are due to be paid to the Internal Revenue
Service. If the Accounting Firm determines that no Excise Tax is payable by
Employee, it shall furnish Employee with a written opinion that failure to
report the Excise Tax on Employee's applicable federal income tax return would
not result in the imposition of a negligence or similar penalty. Any
determination by the Accounting Firm shall be binding upon the Company and
Employee; provided, however, that such determination may be changed to reflect
the outcome of a dispute under Section 4(iv). As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. If the Company exhausts its remedies pursuant to Section 4(iv) and
Employee thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of Employee.
(iv) Employee shall notify the Company in writing of any claim
(including any threatened tax lien related to or based upon any such claim) by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall apprise the Company
of the nature of such claim and the date on which such claim is requested to be
paid. Employee shall not pay such claim prior to the expiration of the 30-day
period following the date on which Employee gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due or such tax lien would be imposed). If the Company notifies
Employee in writing prior to the
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<PAGE>
expiration of such period that it desires to contest such claim (or threatened
lien), Employee shall:
(A) give the Company any information reasonably requested by
the Company relating to such claim (or threatened lien);
(B) take such action in connection with contesting such claim
(or threatened lien) as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Company;
(C) cooperate with the Company in good faith in order
effectively to contest such claim (or threatened lien); and
(D) permit the Company to participate in any proceedings
relating to such claim (or threatened lien);
PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Employee harmless, on an
after-tax basis, for any Excise Tax or income or other tax (including interest
and penalties with respect thereto) imposed as a result of such representation
and payment of costs and expenses. Without limitation on the foregoing
provisions of this Section 4(iv), the Company shall control all proceedings
taken in connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at its sole option,
either direct Employee to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as Employee shall
determine (but in no event shall the Company permit or direct Employee to allow
a tax lien to be imposed on Employee's property); PROVIDED, FURTHER, that if the
Company directs Employee to pay such claim and sue for a refund, the Company
shall advance the amount of such payment to Employee, on an interest-free basis,
and shall indemnify and hold Employee harmless on an after-tax basis, from any
Excise Tax or income or other tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and FURTHER PROVIDED that any extension of
the statute of limitations relating to payment of taxes for the taxable year of
Employee with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. In addition, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and Employee shall be entitled to settle or contest,
as the case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(v) If, after the receipt by Employee of an amount advanced by the
Company pursuant to Section 4(iv), Employee becomes entitled to receive any
refund with respect to such claim, Employee shall (subject to the Company's
complying with the requirements of Section 4(iv)) promptly pay to the Company
the amount of such refund (together with any interest paid or
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credited thereon after taxes applicable thereto). If after the receipt by
Employee of an amount advanced by the Company pursuant to Section 4(iv), a
determination is made that Employee shall not be entitled to any refund with
respect to such claim and the Company does not notify Employee in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
5. NO MITIGATION OF DAMAGES AND EXPENSES.
(i) The provisions of this Agreement are not intended to, nor shall
they be construed to, require that Employee seek or accept other employment
following a termination of employment and, except to the extent provided in
Section 3(iii)(F) of this Agreement, amounts payable and welfare benefits
provided under this Agreement to Employee shall not be reduced by Employee's
acceptance of (or failure to seek or accept) employment with another person. The
Company's obligations to make the payments and provide the welfare benefits
required for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set off, counterclaim, recoupment,
defense or other claim, rights or action that the Company may have against the
Employee or others.
(ii) If any contest or dispute (including, without limitation, in
accordance with Section 15) shall arise under this Agreement involving
termination of Employee's employment with the Company or involving the validity
or enforceability of, or liability under, any provision of this Agreement, then
(regardless of the outcome thereof, unless it shall be determined by a court of
competent jurisdiction in a final, non-appealable decision or by an arbitrator
in an arbitration proceeding in a final, non-appealable decision that Employee's
employment was properly terminated for Cause within the meaning of and in
accordance with Section 2(ii) hereof), the Company shall reimburse Employee, on
a current basis, for all legal fees and expenses, if any, incurred by Employee
in connection with such contest or dispute, together with interest in an amount
equal to the three-month U. S. Treasury bill rate, from time to time in effect
but in no event higher than the maximum legal rate permissible under applicable
law, such interest to accrue from the date such payment(s) become due through
the date of payment thereof.
6. SUCCESSORS; BINDING AGREEMENT.
(i) The Company will require any successor, whether direct or indirect,
by purchase, merger, consolidation or otherwise, of all or substantially all of
the business and/or assets of the Company, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent as the Company
would have been required if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle Employee to
compensation from the Company in the same amount and on the same terms as
Employee would be entitled hereunder if Employee terminated Employee's
employment for Good Reason, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as
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aforesaid that executes and delivers the agreement provided for in this Section
6 or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.
(ii) This Agreement shall inure to the benefit of and be enforceable by
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Employee should die
while any amounts would still be payable or benefits provided to Employee
hereunder if Employee had continued to live, all such amounts and benefits,
unless otherwise provided herein, shall be paid and continue to be provided in
accordance with the terms of this Agreement to Employee's beneficiary.
7. NOTICE. For the purpose of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when delivered or five days after deposit in the United
States mail, registered and return receipt requested, postage prepaid, addressed
to the respective addresses set forth on the last page of this Agreement,
provided that all notices to the Company shall be directed to the office of
corporate secretary of the Company, with a copy to the Secretary of the Company,
or to such other address as either party shall have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
8. CHANGE IN CONTROL. For purposes of this Agreement, a Change in
Control shall be deemed to have occurred upon, and shall mean:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of
either (1) the then outstanding shares of Common Stock of the Company (the
"Outstanding Company Common Stock") or (2) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities"); PROVIDED,
HOWEVER, that the following acquisitions shall not constitute a Change of
Control: (v) any acquisition directly from the Company (excluding an acquisition
by virtue of the exercise of a conversion privilege, (w) any acquisition by the
Company, (x) any acquisition by any employee benefit plan(s) (or related
trust(s)) sponsored or maintained by the Company or any corporation controlled
by the Company or (y) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, immediately following such
reorganization, merger or consolidation, the conditions described in clauses
(1), (2) and (3) of subparagraph (iii) of this Section 8 are satisfied, or (z)
any such acquisition if the Board of Directors of the Company determines in good
faith that a Person which has acquired more than a 25% interest in the
Outstanding Company Common Stock or the Outstanding Company Voting Securities
has done so inadvertently (including, without limitation, because such person
was unaware that it beneficially owned a 25% interest) and without any intention
of changing or influencing control of the Company, and such Person, as promptly
as practicable (but no longer than ninety days) after being advised of such
determination divested or divests himself or itself of beneficial ownership of a
sufficient amount such that such Person no longer has beneficial ownership of
25% or more of either the Outstanding Company Common Stock or the Outstanding
Company Voting Securities, or
11
<PAGE>
(ii) Individuals who, as of the date hereof, constitute the Company's
Board of Directors (the "Incumbent Board"), cease for any reason to constitute
at least a majority of the Company's Board of Directors; PROVIDED, HOWEVER, that
any individual becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company's stockholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either (1) an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act), or an actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Company's Board
of Directors or (2) a plan or agreement to replace a majority of the members of
the Company's Board of Directors then comprising the Incumbent Board; or
(iii) Approval by the stockholders of the Company of a reorganization,
merger or consolidation, in each case unless, immediately following such
reorganization, merger or consolidation, (1) more than 60% of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation (including, without limitation, a
corporation which as a result of such transaction owns the Company through one
or more subsidiaries) and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or consolidation, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be, (2) no Person (excluding the Company, any employee benefit
plan(s) (or related trust(s)) of the Company and/or its subsidiaries or any
Person beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 25% or more of the Outstanding Company
Common Stock or Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly 25% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors and (3) at least a majority of the members of the
board of directors of the corporation resulting from such reorganization, merger
or consolidation were members of the Incumbent Board at the time of the
execution of the initial agreement providing for such reorganization, merger or
consolidation; or
(iv) Approval by the stockholders of the Company of (1) a complete
liquidation or dissolution of the Company or (2) the sale or other disposition
of all or substantially all of the assets of the Company, other than to a
corporation, with respect to which immediately following such sale or other
disposition, (A) more than 60% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to such
sale or other disposition, of the Outstanding Company Common Stock and
12
<PAGE>
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding the Company and any employee benefit plan (or related trust) of the
Company and/or its subsidiaries or such corporation and any Person beneficially
owning, immediately prior to such sale or other disposition, directly or
indirectly, 25% or more of the Outstanding Company Stock or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding shares of common
stock of such corporation or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the election
of directors and (C) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent Board at the time of
the execution of the initial agreement or action of the Company's Board of
Directors providing for such sale or other disposition of assets of the Company.
9. EMPLOYMENT WITH AFFILIATES. Employment with the Company for purposes
of this Agreement includes employment with any entity in which the Company
has a direct or indirect ownership interest of 50% or more of the total
combined voting power of all outstanding equity interests, and employment
with any entity which has a direct or indirect interest of 50% or more of the
total combined voting power of all outstanding equity interests of the
Company, it being understood that for purposes of Section 2(iii)(A) hereof,
"Good Reason" shall be construed to refer to the Employee's positions,
duties, responsibilities (reporting and other), status, title, and office in
the position or positions in which the Employee serves immediately before the
Change of Control, but shall not include titles or positions with
subsidiaries and affiliates of the Company that are held primarily for
administrative convenience.
10. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed
to in writing signed by Employee and by the President or other authorized
officer of the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provisions of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time.
11. VALIDITY. The interpretation, construction and performance of this
Agreement shall be governed by and construed and enforced in accordance with
the laws of the State of Texas without regard to the principle of conflicts
of laws. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, each of which shall remain in full force and
effect.
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
13. DESCRIPTIVE HEADINGS. Descriptive headings are for convenience only and
shall not control or affect the meaning or construction of any provision of this
Agreement.
13
<PAGE>
14. CORPORATE APPROVAL. This Agreement has been approved by the Board,
and has been duly executed and delivered by Employee and on behalf of the
Company by its duly authorized representative.
15. ARBITRATION.
(i) Except as otherwise provided in subparagraph (ii) below, any
dispute or controversy arising out of or in connection with this Agreement as to
the existence, construction, validity, interpretation or meaning, performance,
non-performance, enforcement, operation, breach, continuance or termination
thereof shall be submitted to arbitration pursuant to the following procedure:
(A) Either party may demand such arbitration in writing after
the controversy arises, which demand shall include the name of the arbitrator
appointed by the party demanding arbitration, together with a statement of the
matter in controversy.
(B) Within 15 days after such demand, the other party shall
name an arbitrator, or in default thereof, such arbitrator shall be named by the
Arbitration Committee of the American Arbitration Association, and the two
arbitrators so selected shall name a third arbitrator within 15 days or, in lieu
of such agreement on a third arbitrator by the two arbitrators so appointed, a
third arbitrator shall be appointed by the Arbitration Committee of the American
Arbitration Association.
(C) The Company shall bear all arbitration costs and expenses.
(D) The arbitration hearing shall be held at a site in
Houston, Texas, to be agreed to by a majority of the arbitrators on 10 business
days prior written notice to the parties.
(E) The arbitration hearing shall be concluded within 10 days
unless otherwise ordered by a majority of the arbitrators, and the award thereon
shall be made within 10 days after the close of the submission of evidence. An
award rendered by a majority of the arbitrators appointed pursuant to this
Agreement shall be final and binding on all parties to the proceeding during the
period of this Agreement, and judgment on such award may be entered by either
party in the highest court, state or federal, having jurisdiction
(ii) During the pendency of any dispute or controversy pursuant
to this Section 15, the Company will continue to pay Employee (or reinstate)
Employee's Base Salary as in effect preceding the date the Notice of Termination
giving rise to the dispute was given or, if Employee's employment was terminated
prior to a Change in Control, the date of such termination of employment
(whichever date is applicable being the "Dispute Date") and continue (or
reinstate) Employee as a participant in all compensation and employee benefit
plans in which Employee was participating preceding the Dispute Date, until
the dispute is finally resolved. Notwithstanding the foregoing, the Employee
shall be entitled to specific performance of Employee's right to be paid
during the pendency of any dispute or controversy arising under or in
connection with this Agreement and the Employee's right to receive legal fees
on a current basis as provided in Section 5(ii) of this
14
<PAGE>
Agreement, and Employee may commence a legal action to enforce such right. The
Company shall promptly (and in no event later than ten (10) business days after
demand) reimburse Employee for any expenses reasonably incurred for attorneys'
fees and disbursements in bringing such action).
Amounts paid under this Section 15 are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement.
(iii) Except as otherwise provided, the parties stipulate that
the provisions hereof shall be a complete defense to any suit, action or
proceeding instituted in any federal, state or local court or before any
administrative tribunal with respect to any controversy or dispute arising
during the period of this Agreement and which is arbitrable as herein set forth.
The arbitration provisions hereof shall, with respect to such controversy or
dispute, survive the termination of this Agreement.
16. WITHHOLDING. The Company may, to the extent required by law, withhold
applicable federal, state and local income and other taxes from any payments due
to the Employee hereunder.
17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes all other prior agreements concerning the effect of a
Change in Control on the relationship between the Company and Employee.
IN WITNESS WHEREOF, the Company and Employee have entered into
this Agreement as of the day and year first above written.
BJ SERVICES COMPANY
By:
---------------------------------------
J. W. Stewart
President, Chairman and
Chief Executive Officer
EMPLOYEE
-------------------------------------------
15
<PAGE>
Addresses:
If to the Company:
BJ Services Company
5500 Northwest Central Drive
Houston, Texas 77092
Attention: Secretary and General Counsel
If to the Employee:
-------------------------------------------
-------------------------------------------
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16
<PAGE>
Attachment A
WAIVER AND RELEASE AGREEMENT
By this Waiver and Release Agreement ("Release"), except as
provided below with respect to the Executive Severance Agreement, I,
__________________________, waive and release all rights, claims, charges,
demands and causes of action against BJ Services Company (the "Company"), its
subsidiaries and affiliates (collectively, the "Employer"), and their officers,
directors, employees and agents, of any kind or character, both past and
present, known or unknown, including those arising under any state or federal
statute, regulation or the common law (contract, tort or other), which relate to
my employment or termination of employment with the Employer, including any
alleged discriminatory employment practices, including age discrimination
claims, or which relate to any other matter whatsoever, except as set out below.
In exchange for this Release, I acknowledge the right to good and
sufficient consideration in the form of benefits under the Executive Severance
Agreement between the Company and myself, dated ______________, 1999, which
provides, inter alia, for a lump sum payment, the continuation of certain
welfare benefits and outplacement services. I understand that I am not entitled
to receive any benefits under the Executive Severance Agreement except in return
for this Release. However, this Release shall not serve to waive or release any
rights or claims that I may have under the Executive Severance Agreement or that
may arise after the date this Release is executed. In addition, this release
shall not serve to waive or release any rights or claims that I may have with
respect to (i) rights under stock-based incentive plans arising in connection
with a change in control, (ii) rights under directors' and officers'
indemnification insurance, (iii) rights of indemnity under articles of
incorporation, bylaws, contracts, law, or otherwise, (iv) rights under
Company-sponsored retirement plans, including, without limitation "401(k)" plans
and "Rabbi trusts", and (v) rights under the Company's "KEYSOP" (Key Executive
Stock Option Plan) and arrangements for deferred compensation.
I acknowledge that the Employer has advised me to consult with an
attorney prior to executing this Release. I understand that anyone who succeeds
to my rights and responsibilities, such as my heirs or the executor of my
estate, shall also be bound by the terms of this Release.
This Release shall be interpreted and construed in accordance with and
shall be governed by the laws of the State of Texas, except to the extent that
Federal law may apply.
I acknowledge that I have carefully read this Release, that I have had
the opportunity to review it with my attorney, that I fully understand the
provisions and their final and binding effect, that the only promises made to me
to sign this Release are those stated herein, that this
1
<PAGE>
Release is the only agreement of its kind arising out of my employment
relationship with the Employer and that I am signing this Release knowingly and
voluntarily.
After having the opportunity to consider this Release as stated
above, I hereby accept the terms and conditions stated in it.
SIGNED AND ACCEPTED this _________day of _____________, 19____.
-------------------------------------------
EMPLOYEE'S SIGNATURE
SIGNED AND ACCEPTED this _______ day of _______________, 19____.
-------------------------------------------
EMPLOYER
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
2
<PAGE>
EXECUTION VERSION
October 25, 1999
BJ Services Company
5500 Northwest Central Drive
Houston, Texas 77092
Attn: Vice President Treasurer
Re: PURCHASE AGREEMENT
Ladies and Gentlemen:
Section 1. DEFINITIONS.
As used in this Purchase Agreement, the following terms shall have the
following meanings:
"BOFA INDEMNIFIED PARTY" means each of the Purchaser, Banc of America
Securities LLC and any other wholly-owned subsidiary of the Purchaser designated
by the Purchaser to receive or sell shares of Common Stock delivered hereunder.
"BUSINESS DAY" means any day that is not a Saturday, a Sunday or a day on
which banking institutions or trust companies in The City of New York are
authorized or obligated by law or executive order to close.
"CALL OPTION" has the meaning specified in Section 5.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company.
"COMPANY" means BJ Services Company, a Delaware corporation.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
<PAGE>
"FIRST PURCHASE DATE" has the meaning specified in Section 2(b).
"FIRST TRANCHE SHARES" has the meaning specified in Section 2(b).
"MATERIAL ADVERSE CHANGE" means any material adverse change, or any
development that could reasonably be expected to result in a material adverse
change, in the condition, financial or otherwise, or in the earnings, business,
operations or prospects, whether or not arising from transactions in the
ordinary course of business, of the Company and its subsidiaries, considered as
one entity.
"PERSON" means an individual, corporation, limited liability company,
partnership, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"PURCHASE DATE" has the meaning specified in Section 2(b).
"PURCHASE PRICE" has the meaning specified in Section 2(a).
"PURCHASE SHARES" has the meaning specified in Section 2(a).
"PURCHASER" means Bank of America, N.A.
"PUT OPTION" has the meaning specified in Section 5.
"RELEVANT EXCHANGE" means the principal national securities exchange or
automated quotation system on which the Common Stock is listed or quoted.
"RULE 144" has the meaning set forth in Section 3(e)(i).
"SEC FILINGS" means each document of the Company referred to in Section
3(e)(v)(A) and (B).
"SECOND PURCHASE DATE" has the meaning specified in Section 2(b).
"SECOND TRANCHE SHARES" has the meaning specified in Section 2(b).
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"THIRD PARTY PURCHASER" has the meaning specified in Section 2(d)(iii).
"TRANSFER RESTRICTIONS" means the restrictions on transfer of the
Purchase Shares set forth in Section 5.
Section 2. PURCHASE OF PURCHASE SHARES.
<PAGE>
(a) PURCHASE AND SALE. The Company agrees to issue and sell to the
Purchaser 4,027,972 shares of Common Stock (the "PURCHASE SHARES") in two
tranches upon the terms herein set forth. On the basis of the
representations, warranties and agreements herein contained, and upon the
terms but subject to the conditions herein set forth, the Purchaser agrees to
purchase from the Company the Purchase Shares. The purchase price per
Purchase Share to be paid by the Purchaser to the Company shall be $35.75
(the "PURCHASE PRICE").
(b) CLOSINGS. Delivery of certificates for the first tranche of
Purchase Shares (which shall be 1,078,000 shares) (the "FIRST TRANCHE
SHARES") and payment for the First Tranche Shares shall be made at the
offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York
(or such other place as may be agreed to by the Company and the Purchaser) at
10:00 a.m., New York City time, on October 27, 1999, or such other time and
date as the parties may agree (the time and date of such closing are called
the "FIRST PURCHASE DATE"). Delivery of certificates for the second tranche
of Purchase Shares (which shall be 2,949,972 shares) (the "SECOND TRANCHE
SHARES") and payment for the Second Tranche Shares shall be made at 10:00
a.m., New York City time, on the Business Day following the First Purchase
Date or such other time and date as the parties may agree (the "SECOND
PURCHASE DATE" and, together with the First Purchase Date, the "PURCHASE
DATES") in the same manner and at the same location as on the First Purchase
Date.
(c) DELIVERY AND PAYMENT. Payment for the Purchase Shares shall be
made on the related Purchase Date by wire transfer of immediately available
funds to the order of the Company. The Company shall deliver, or cause to be
delivered, to the Purchaser certificates for the Purchase Shares being
purchased on such Purchase Date, against the irrevocable release of a wire
transfer of immediately available funds for the amount of the purchase price
therefor. The certificates for the Purchase Shares shall be in definitive
form and registered in such names and denominations as the Purchaser shall
have requested.
(d) CONDITIONS TO PURCHASE. The obligations of the Purchaser to
pay for the Purchase Shares as provided herein on the Purchase Dates shall be
subject to the prior execution and delivery by the parties of agreements with
respect to the Put Option and the Call Option, to the accuracy of the
representations and warranties on the part of the Company set forth in
Section 3 as of the date hereof, to the timely performance by the Company of
its covenants and other obligations hereunder, and to each of the following
additional conditions:
(i) the Company shall have caused to be delivered to the
Purchaser an opinion of counsel acceptable to the Purchaser, dated as of
the relevant Purchase Date, to the effect set forth in Exhibit A; and
(ii) the Company shall have caused to be delivered to the
Purchaser by the Treasurer of the Company, a certificate of such person
dated as of the relevant Purchase Date, to the effect that (A) the
representations and
<PAGE>
warranties of the Company set forth in this Purchase Agreement are true
and correct as of such Purchase Date and (B) the Company has complied
with all the agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to such Purchase Date.
In addition, the obligations of the Purchaser to pay for the Second
Tranche Shares as provided herein on the Second Purchase Date shall be
subject to the acquisition of all First Tranche Shares by a third party
designated by the Purchaser (the "THIRD PARTY PURCHASER").
SECTION 3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) BASIC REPRESENTATIONS. The Company represents and warrants to and
agrees with the Purchaser as follows:
(i) The Company is duly organized and existing and in good
standing under the laws of the jurisdiction of its incorporation.
(ii) The Company has all corporate power and authority to enter
into this Purchase Agreement and to consummate the transactions
contemplated hereby.
(iii) This Purchase Agreement has been duly authorized, executed
and delivered by, and is a valid and binding agreement of, the Company,
enforceable against the Company in accordance with its terms, except as
rights to indemnification and contribution hereunder may be limited by
applicable law and except as the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by
general equitable principles.
(iv) The execution and delivery by the Company of, and the
compliance by the Company with all of the provisions of, this Purchase
Agreement and the consummation of the transactions herein contemplated
are within the Company's corporate powers and will not result in a breach
of any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or any other material
agreement or instrument to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries is bound or
to which any of the material property or assets of the Company or any of
its subsidiaries is subject, nor will such action result in any violation
of the provisions of the Certificate of Incorporation or By-laws or other
constitutive documents of the Company or any material statute or any
order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries or any of
their respective properties.
(v) No consent, approval, authorization, order, registration,
qualification or filing of or with any court or governmental agency or
body having jurisdiction over the Company or any of its subsidiaries or
any of their respective properties is required for the execution and
delivery by the
<PAGE>
Company of, and the compliance by the Company with all the terms of,
this Purchase Agreement or the consummation by the Company of the
transactions contemplated hereby.
(b) EQUITY REPRESENTATIONS. The Company makes the representations and
warranties to the Purchaser set forth in Annex A hereto.
(c) REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE PURCHASER. The
Purchaser represents and warrants to, and agrees with, the Company as follows:
(i) The Purchaser is duly organized and existing and in good
standing under the laws of the jurisdiction of its incorporation.
(ii) The Purchaser has all corporate power and authority to enter
into this Purchase Agreement and to consummate the transactions
contemplated hereby.
(iii) This Purchase Agreement has been duly authorized, executed
and delivered by, and is a valid and binding agreement of, the Purchaser,
enforceable against the Purchaser in accordance with its terms, except
as rights to indemnification and contribution hereunder may be limited by
applicable law and except as the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by
general equitable principles.
(iv) The execution and delivery by the Purchaser of, and the
compliance by the Purchaser with all of the provisions of, this Purchase
Agreement and the consummation of the transactions herein contemplated
are within the Purchaser's corporate powers and will not result in a
breach of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or any
other material agreement or instrument to which the Purchaser or any of
its subsidiaries is a party or by which the Purchaser or any of its
subsidiaries is bound or to which any of the material property or assets
of the Purchaser or any of its subsidiaries is subject, nor will such
action result in any violation of the provisions of the Charter or
By-laws or other constitutive documents of the Purchaser or any material
statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Purchaser or any of its
subsidiaries or any of their respective properties.
(v) No consent, approval, authorization, order, registration,
qualification or filing of or with any court or governmental agency or
body having jurisdiction over the Purchaser or any of its subsidiaries or
any of their respective properties is required for the execution and
delivery by the Purchaser of, and the compliance by the Purchaser with
all the terms of, this Purchase Agreement or the consummation by the
Purchaser of the transactions contemplated hereby.
(vi) The Purchaser is knowledgeable, sophisticated and experienced in
making, and is qualified to make, decisions with respect to investments
in
<PAGE>
shares presenting an investment decision like that involved in the
purchase of the Purchase Shares, including investments in securities
issued by the Company, and has requested, received, reviewed and
considered all information it deems relevant in making an informed
decision to purchase the Purchase Shares.
(vii) The Purchaser is acquiring the Purchase Shares in the ordinary
course of its business and for its own account for investment (as defined
for the purposes of the Hart-Scott-Rodino Antitrust Improvements Act of
1976 and the regulations thereunder) only and with no present intention
of distributing any of such Purchase Shares, except pursuant to a
registration statement effective under, or an exemption from the
registration requirements of, the Securities Act.
(viii) The Purchaser will not, directly or indirectly, sell or
otherwise dispose of (or solicit any offers to purchase or otherwise
acquire) any of the Purchase Shares except in compliance with the
Securities Act and any applicable state securities or blue sky laws or
pursuant to an available exemption or exclusion therefrom.
(ix) The Purchaser is an "accredited investor" within the meaning of
Rule 501 of Regulation D promulgated under the Securities Act.
(x) The Purchaser understands that the First Tranche Shares
will contain a legend to the following effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THESE SHARES UNDER THE
SECURITIES ACT OF 1933 OR AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SAID ACT. NO TRANSFER OF THE
SHARES WILL BE MADE ON THE BOOKS OF THE COMPANY UNLESS
ACCOMPANIED BY EVIDENCE OF COMPLIANCE WITH THESE
RESTRICTIONS.
The Purchaser agrees that it will obtain a letter of
representations substantially in the form of Exhibit B from the Third Party
Purchaser prior to the issuance of the First Tranche Shares to the Third
Party Purchaser.
(xi) The Purchaser understands that the Second Tranche Shares
will contain a legend to the following effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND ARE SUBJECT
TO CERTAIN TRANSFER
<PAGE>
RESTRICTIONS CONTAINED IN THE PURCHASE
AGREEMENT DATED OCTOBER 25, 1999 (THE "TRANSFER
RESTRICTIONS"). THE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
SAID ACT AND COMPLIANCE WITH THE TRANSFER RESTRICTIONS. NO
TRANSFER OF THE SHARES WILL BE MADE ON THE BOOKS OF THE
COMPANY UNLESS THE COMPANY RECEIVES EVIDENCE OF COMPLIANCE
WITH THESE RESTRICTIONS.
(d) BRING-DOWN OF REPRESENTATIONS; REGISTRATION REPRESENTATIONS.
The Company shall make the representations and warranties set forth in
Sections 3(a) and 3(b) as of the date of this Purchase Agreement, as of each
Purchase Date and as of the date the Purchaser notifies the Company that the
Purchaser shall sell any of the Purchase Shares in accordance with the
Transfer Restrictions.
(e) RESALE AGREEMENTS. The Company covenants and agrees with the
Purchaser as follows:
(i) If, at any time following the date on which the Transfer
Restrictions shall have terminated and prior to the first date on which
the Purchaser may sell Purchase Shares in compliance with Rule 144 under
the Securities Act (together with any successor rule thereof, "RULE
144"), the Purchaser shall have notified the Company in writing of the
Purchaser's intention to transfer some or all of the Purchase Shares, the
Company shall, within five Business Days of receipt of such notice from
the Purchaser, promptly advise the Purchaser in writing of the occurrence
of any event or the existence of any condition as a result of which it is
necessary to amend or supplement the SEC Filings so that the SEC Filings
do not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(ii) If, at any time following the date on which the Transfer
Restrictions shall have terminated and prior to the first date on which
the Purchaser may sell Purchase Shares in compliance with Rule 144, in
the reasonable opinion of the Purchaser or counsel for the Purchaser it
is necessary to amend or supplement the SEC Filings to comply with law,
the Company agrees to promptly prepare, file with the Commission and
furnish at its own expense to the Purchaser, amendments or supplements to
the SEC Filings so that the SEC Filings as so amended or supplemented
will
<PAGE>
comply with law.
(iii) The Company shall continue to engage and maintain, at its
expense, a registrar and transfer agent for the Common Stock.
(iv) The Company shall file, on a timely basis, with the Commission
and the Relevant Exchange all reports and documents required to be
filed under the Exchange Act or the rules of the Relevant Exchange.
(v) Until such time as the Transfer Restrictions shall have
terminated and the Purchaser may sell Purchase Shares in compliance
with Rule 144, the Company shall furnish to the Purchaser (A) as soon
as practicable after the end of each fiscal year, copies of the Annual
Report of the Company containing the balance sheet of the Company as
of the close of such fiscal year and statements of income,
stockholders' equity and cash flows for the year then ended and the
opinion thereon of the Company's independent public or certified
public accountants; (B) as soon as practicable after the filing
thereof, copies of each proxy statement, Annual Report on Form 10-K,
Quarterly Report on Form 10-Q, Current Report on Form 8-K or other
report filed by the Company under the Exchange Act with the Commission
or any securities exchange or automated quotation system; and (C) as
soon as available, copies of any report or communication of the
Company mailed generally to holders of its capital stock. In
addition, until such time as the Transfer Restrictions shall have
terminated and the Purchaser may sell Purchase Shares in compliance
with Rule 144, the Company shall furnish to the Purchaser as soon as
practicable after the filing thereof, copies of each filing made with
the Commission pursuant to the Securities Act after the date hereof.
(vi) On the date of any resale of Purchase Shares by the Purchaser
or any of its affiliates following the date on which the Transfer
Restrictions shall have terminated and prior to the first date on
which the Purchaser may sell Purchase Shares in compliance with Rule
144, if requested by the Purchaser at least five Business Days prior
to such date (any such request to be made no more often than once
every 30 days), the Company shall cause to be delivered to the
Purchaser by Deloitte & Touche LLP, independent public or certified
public accountants for the Company, a letter dated such date and
addressed to such recipient, in form and substance satisfactory to the
Purchaser, containing statements and information of the type
ordinarily included in accountant's "comfort letters" to underwriters,
delivered according to Statement of Auditing Standards No. 72 (or any
successor bulletin), with respect to the audited and unaudited
financial statements and certain financial information contained in
any SEC Filings.
(vii) On the date of any resale of Purchase Shares by the Purchaser
or any of its affiliates following the date on which the Transfer
Restrictions shall have terminated and prior to the first date on
which the Purchaser may sell
<PAGE>
Purchase Shares in compliance with Rule 144, if requested by the
Purchaser at least five Business Days prior to such date (any such
request to be made no more often than once every 30 days), the Company
shall cause to be delivered to the Purchaser by counsel for the
Company as shall be designated by the Company and shall be reasonably
acceptable to the Purchaser, the favorable opinion of such counsel for
the Company, dated as of such date, the form of which is attached as
Exhibit A.
(viii) On the date of any resale of Purchase Shares by the Purchaser
or any of its affiliates following the date on which the Transfer
Restrictions shall have terminated and prior to the first date on
which the Purchaser may sell Purchase Shares in compliance with Rule
144, if requested by the Purchaser at least five Business Days prior
to such date (any such request to be made no more often than once
every 30 days), the Company shall cause to be delivered to the
Purchaser by the Chairman of the Board, Chief Executive Officer or
President of the Company and the Chief Financial Officer or Chief
Accounting Officer of the Company, a certificate of such person dated
as of such date, to the effect that:
(A) for the period from and after the date of the
last SEC Filing and prior to the proposed date of sale of the
Purchase Shares, there has not occurred any Material Adverse
Change;
(B) the representations and warranties of the Company
set forth in this Purchase Agreement are true and correct as
of such date; and
(C) the Company has complied with all the agreements
and satisfied all the conditions on its part to be performed
or satisfied at or prior to such date.
(ix) On the date of any resale of Purchase Shares by the Purchaser
or any of its affiliates following the date on which the Transfer
Restrictions shall have terminated and prior to the first date on
which the Purchaser may sell Purchase Shares in compliance with Rule
144, if requested by the Purchaser at least five Business Days prior
to such date (any such request to be made no more often than once
every 30 days), the Company shall cause to be delivered to the
Purchaser and counsel for the Purchaser such information, documents
and opinions as they may reasonably require for the purposes of
enabling them to pass upon the issuance and delivery of the Common
Stock as contemplated herein, or in order to evidence the accuracy of
any of the representations and warranties, or the satisfaction of any
of the conditions or agreements herein contained.
(x) In connection with any proposed resale of Purchase Shares by
the Purchaser or any of its affiliates following the date on which the
Transfer Restrictions shall have terminated and prior to the first
date on which the Purchaser may sell Purchase Shares in compliance
with Rule 144, the Company shall afford to the Purchaser a reasonable
opportunity to conduct a due diligence investigation with respect to
the Company customary in
<PAGE>
scope for unregistered offerings of equity securities.
(f) LIMITATION ON STOCK REPURCHASES. The Company shall not repurchase
any shares of Common Stock if, as a result of such purchase, the number of
Second Tranche Shares would be equal to or greater than 4.7% of the number of
outstanding shares of Common Stock.
(g) SOLVENCY. The Company is solvent and able to pay its debts as
they come due, with assets having a fair value greater than the amount of the
Company's liabilities and with capital sufficient to carry on the businesses in
which it engages.
(h) EXPENSES. The Company agrees to pay all costs, fees and expenses
incurred in connection with the performance of its obligations hereunder and in
connection with the transactions contemplated hereby, including without
limitation (i) all expenses incident to the issuance and delivery of Common
Stock (including all printing and engraving costs), (ii) all fees and expenses
of the registrar and transfer agent of the Common Stock, (iii) all necessary
issue, transfer and other stamp taxes in connection with the issuance and
delivery of the Purchase Shares to the Purchaser and (iv) all fees and expenses
of the Company's counsel, independent public or certified public accountants and
other advisors. The Purchaser shall pay the fees and expenses of counsel for
the Purchaser and its affiliates incurred in connection with the transactions
contemplated by this Purchase Agreement.
SECTION 4. INDEMNIFICATION AND CONTRIBUTION.
(a) INDEMNIFICATION. (i) The Company agrees to indemnify and hold
harmless each of the BofA Indemnified Parties, their respective officers and
employees, and each person, if any, who controls any BofA Indemnified Party
within the meaning of the Securities Act and the Exchange Act against any loss,
claim, damage, liability or expense, as incurred, to which such BofA Indemnified
Party or such controlling person may become subject, under the Securities Act,
the Exchange Act or other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Company), insofar as such
loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based (A) upon any untrue statement or
alleged untrue statement of a material fact contained in the SEC Filings, or the
omission or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; or (B) in whole or in part upon any inaccuracy in the
representations and warranties of the Company contained herein; or (C) in whole
or in part upon any failure of the Company to perform its obligations hereunder
or under law; or (D) upon any act or failure to act or any alleged act or
failure to act by any BofA Indemnified Person in connection with, or relating in
any manner to, the Common Stock or the transactions contemplated hereby
(including the resale of Purchaser Shares by the Purchaser or its affiliates in
compliance with the
<PAGE>
Transfer Restrictions and the Securities Act), to the extent that such loss,
claim, damage, liability or action arises out of or is based upon any matter
covered by clause (A) above; provided that the Company shall not be liable
under this clause (D) to the extent that a court of competent jurisdiction
shall have determined by a final judgment that such loss, claim, damage,
liability or action resulted directly from any such acts or failures to act
undertaken or omitted to be taken by such BofA Indemnified Party through its
gross negligence, bad faith or willful misconduct; and to reimburse each BofA
Indemnified Person and each such controlling person for any and all expenses
(including the reasonable fees and disbursements of one counsel chosen by the
Purchaser or such BofA Indemnified Person) as such expenses are reasonably
incurred by such BofA Indemnified Person or such controlling person in
connection with investigating, defending, settling, compromising or paying
any such loss, claim, damage, liability, expense or action. The indemnity
agreement set forth in this Section 4(a)(i) shall be in addition to any
liabilities that the Company may otherwise have.
(ii) Promptly after receipt by an indemnified party under this
Section 4(a) of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party under this Section 4(a), notify the
indemnifying party in writing of the commencement thereof, but the
omission so to notify the indemnifying party will not relieve it from
any liability that it may have to any indemnified party for
contribution or otherwise than under the indemnity agreement contained
in this Section 4(a) or to the extent it is not prejudiced as a
proximate result of such failure. In case any such action is brought
against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying
party will be entitled to participate in, and, to the extent that it
shall elect, jointly with all other indemnifying parties similarly
notified, by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified
party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party; provided that if the
defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall have reasonably
concluded that a conflict may arise between the positions of the
indemnifying party and the indemnified party in conducting the defense
of any such action or that there may be legal defenses available to it
that are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the
right to select separate counsel to assume such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval
by the
<PAGE>
indemnified party of counsel, the indemnifying party will not be
liable to such indemnified party under this Section 4(a) for any legal
or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof unless (A) the indemnified party
shall have employed separate counsel in accordance with the proviso to
the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than
one separate counsel (together with local counsel), approved by the
indemnifying party, representing the indemnified parties who are
parties to such action) or (B) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of
commencement of the action, in each of which cases the fees and
expenses of counsel shall be at the expense of the indemnifying party.
(iii) The indemnifying party under this Section 4(a) shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment
for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party against any loss, claim, damage, liability or expense
by reason of such settlement or judgment. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement, compromise or consent to the entry of judgment in any pending
or threatened action, suit or proceeding in respect of which any
indemnified party is or could have been a party and indemnity was or
could have been sought hereunder by such indemnified party, unless such
settlement, compromise or consent includes an unconditional release of
such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
(b) (i) If the indemnification provided for in Section 4(a) is for any
reason held to be unavailable to or otherwise insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount paid or payable by such indemnified party, as incurred, as
a result of any losses, claims, damages, liabilities or expenses referred to
therein (A) in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the BofA Indemnified
Parties, on the other hand, from the transactions contemplated by this Purchase
Agreement or (B) if the allocation provided by clause (A) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (A) above but also the relative fault of
the Company, on the one hand, and the BofA Indemnified Parties, on the other
hand, in connection with the statements or omissions or inaccuracies in the
representations and warranties herein that resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by
<PAGE>
the Company, on the one hand, and the BofA Indemnified Parties, on the other
hand, in connection with the transactions contemplated by this Purchase
Agreement shall be deemed to be the aggregate Purchase Price paid hereunder.
The relative fault of the Company, on the one hand, and the BofA Indemnified
Parties, on the other hand, shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact or any such
inaccurate or alleged inaccurate representation or warranty relates to
information supplied by the Company, on the one hand, or the Purchaser, on
the other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(ii) The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above
shall be deemed to include, subject to the limitations set forth in
Section 4(a)(ii), any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending
any action or claim. The provisions set forth in Section 4(a)(ii) with
respect to notice of commencement of any action shall apply if a claim
for contribution is to be made under this Section 4(b); provided that
no additional notice shall be required with respect to any action for
which notice has been given under Section 4(a)(ii) for purposes of
indemnification.
(iii) The Company and the Purchaser agree that it would not be just
and equitable if contribution pursuant to this Section 4(b) were
determined by PRO RATA allocation (even if the BofA Indemnified
Parties were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable
considerations referred to in this Section 4(b).
(iv) Notwithstanding the provisions of this Section 4(b), the
Purchaser shall not be required to contribute any amount in excess of
the amount (if any) by which (x) the amount by which the aggregate
nine-month forward price of the Purchase Shares exceeds the aggregate
Purchase Price, exceeds (y) the amount of any damages that the
Purchaser has otherwise been required to pay in connection herewith.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 4(b), each officer
and employee of a BofA Indemnified Person and each person, if any, who
controls a BofA Indemnified Person within the meaning of the
Securities Act and the Exchange Act shall have the same rights to
contribution as such BofA Indemnified Person, and each person, if any,
who controls the Company with the meaning of the Securities Act and
the Exchange Act shall have the same rights to contribution as the
Company.
<PAGE>
Section 5. TRANSFER RESTRICTIONS AND VOTING AGREEMENT.
Prior to the earlier of (i) the expiration or earlier termination of
the put options to be granted by the Company to the Purchaser pursuant to a
letter agreement to be dated on or about October 25, 1999 (the "PUT OPTION")
or the call options to be granted by the Purchaser to the Company pursuant to
a letter agreement to be dated on or around October 25, 1999 (the "CALL
OPTION") and (ii) any default by the Company under either the Put Option or
the Call Option, (x) the Purchaser shall not sell or transfer any of the
Second Tranche Shares to any party other than a wholly-owned subsidiary of
the Purchaser and (y) all Second Tranche Shares shall be voted by the holder
thereof on any matter submitted for a vote (or consent) of the Company's
stockholders in proportion to the votes cast by the holders of the Common
Stock other than the Purchaser and its affiliates.
Section 6. GOVERNING LAW.
THIS PURCHASE AGREEMENT SHALL BE GOVERNED BY THE LAW OF THE STATE OF
NEW YORK WITHOUT REFERENCE TO THE CHOICE OF LAW RULES THEREOF.
Section 7. ASSIGNMENT AND TRANSFER.
The rights and duties under this Purchase Agreement may not be
assigned or transferred by either party hereto without the prior written
consent of the other party hereto; provided that the Purchaser may assign any
of its rights or duties hereunder to any of its wholly-owned subsidiaries
without the prior written consent of the Company.
Section 8. NOTICES.
Unless otherwise specified, notices under this contract may be made by
telephone, to be confirmed in writing to the address below. Changes to the
information below must be made in writing.
(a) If to the Company:
BJ Services Company
5500 Northwest Central Drive
Houston, Texas 77092
Attn: Vice President Treasurer
Telephone: 713-895-5847
Facsimile: 713-895-3420
(b) If to the Purchaser:
<PAGE>
Bank of America, N.A.
c/o NationsBanc Montgomery Securities LLC
9 W. 57th Street
New York, NY 10019
Attn: Michael Elgarten
Telephone: (212) 583-8173
Facsimile: (212) 583-8457
Section 9. THIRD PARTY BENEFICIARIES. No provision of this Purchase
Agreement is intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
<PAGE>
Please confirm your agreement to the foregoing by signing and
returning to us the enclosed duplicate of this Purchase Agreement.
Very truly yours,
BANK OF AMERICA, N.A.
By: /S/ William Caccamise
---------------------------------
Name: William Caccamise
Title: Managing Director
Acknowledged and agreed to as of
the date first above written,
BJ SERVICES COMPANY
By: /s/ T. M. Whichard
- -----------------------------------
Name: T. M. Whichard
Title: Vice President and Treasurer
<PAGE>
ANNEX A
EQUITY REPRESENTATIONS
(a) The Purchase Shares have been duly authorized for issuance and
delivery pursuant to this Purchase Agreement and, when issued and delivered
by the Company pursuant to this Purchase Agreement, will be validly issued,
fully paid and nonassessable.
(b) Deloitte & Touche, who have expressed their opinion with
respect to the financial statements (which term as used in this Purchase
Agreement includes the related notes thereto) and supporting schedules, if
any, filed with the Commission as a part of the most recent applicable SEC
Filings are independent public or certified public accountants as required by
the Exchange Act.
(c) The financial statements filed with the Commission as a part of
the most recent applicable SEC Filings present fairly the consolidated
financial position of the Company and its subsidiaries as of and at the dates
indicated and the results of their operations and cash flows for the periods
specified. The supporting schedules, if any, included in the most recent
applicable SEC Filings present fairly the information required to be stated
therein. Such financial statements and supporting schedules, if any, have
been prepared in conformity with generally accepted accounting principles as
applied in the United States applied on a consistent basis throughout the
periods involved, except as may be expressly stated in the related notes
thereto. No other financial statements or supporting schedules are required
to be included in any SEC Filing made since October 1, 1998.
(d) Except as otherwise disclosed in the most recent applicable SEC
Filings and except for the transactions contemplated in connection with the
Purchase Agreement, since the date of the Company's most recent audited
financial statements included in the SEC Filings: (i) there has been no
Material Adverse Change; and (ii) the Company and its subsidiaries,
considered as one entity, have not incurred any material liability or
obligation, indirect, direct or contingent, not in the ordinary course of
business nor entered into any material transaction or agreement not in the
ordinary course of business.
(e) The Company and each of its material subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as currently conducted and, in the case of the Company, to enter
into and perform its obligations under this Purchase Agreement, except, in
the case of such subsidiaries, for such jurisdictions and with respect to
such properties and business, where the failure to be in good standing or
have such corporate powers and authority would not, individually or in the
aggregate, result in a Material Adverse Change. Each of the Company and each
of its subsidiaries is duly
<PAGE>
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except for such jurisdictions where the failure to so qualify or to
be in good standing would not, individually or in the aggregate, result in a
Material Adverse Change. Except as previously disclosed by the Company to
the Purchaser in writing, except for directors' qualifying shares, and except
as would not, individually or in the aggregate, result in a Material Adverse
Change, all of the issued and outstanding capital stock of each subsidiary
has been duly authorized and validly issued, is fully paid and nonassessable
and is owned by the Company, directly or through subsidiaries, free and clear
of any security interest, mortgage, pledge, lien, encumbrance or claim
(f) All of the issued and outstanding shares of Common Stock have
been duly authorized and validly issued, are fully paid and nonassessable and
have been issued in compliance with federal and state securities laws. The
Common Stock conforms in all material respects to the description thereof
contained in the most recent applicable SEC Filings. None of the outstanding
shares of Common Stock were issued in violation of any preemptive rights,
rights of first refusal or other similar rights to subscribe for or purchase
securities of the Company. There are no authorized options, warrants,
preemptive rights, rights of first refusal or other rights to purchase, or
equity or debt securities convertible into or exchangeable or exercisable
for, any capital stock of the Company or any of its subsidiaries other than
those accurately described in the most recent applicable SEC Filings. Except
as previously disclosed by the Company to the Purchaser in writing, the
description of the Company's stock option, stock bonus and other stock plans
or arrangements set forth in the most recent applicable SEC Filings
accurately and fairly presents the information required to be shown with
respect to such plans, arrangements, options and rights.
(g) The SEC Filings made since October 1, 1998, as of their
respective filing dates, did not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(h) Neither the Company nor any of its subsidiaries is in violation
of its charter or by-laws or is in default (or, with the giving of notice or
lapse of time, would be in default) ("DEFAULT") under any indenture,
mortgage, loan or credit agreement, note, contract, franchise, lease or other
instrument to which the Company or any of its subsidiaries is a party or by
which it or any of them may be bound, or to which any of the property or
assets of the Company or any of its subsidiaries is subject (each, an
"EXISTING INSTRUMENT"), except for such Defaults as would not, individually
or in the aggregate, result in a Material Adverse Change. The Company's
execution, delivery and performance of this Purchase Agreement and
consummation of the transactions contemplated hereby (i) have
<PAGE>
been duly authorized by all necessary corporate action and will not result in
any violation of the provisions of the charter or by-laws of the Company or
any subsidiary, (ii) will not conflict with or constitute a breach of, or a
Default or a Debt Repayment Triggering Event (as defined below) under, or
result in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any of its subsidiaries pursuant to,
or require the consent of any other party to, any Existing Instrument, except
for such conflicts, breaches, Defaults, liens, charges or encumbrances as
would not, individually or in the aggregate, result in a Material Adverse
Change and (iii) will not result in any violation of any material law,
administrative regulation or administrative or court decree applicable to the
Company or any subsidiary. No consent, approval, authorization or other
order of, or registration or filing with, any court or other governmental or
regulatory authority or agency, is required for the Company's execution,
delivery and performance of this Purchase Agreement and consummation of the
transactions contemplated hereby or thereby, except such as have been or will
be obtained or made by the Company and are in full force and effect under the
Securities Act, applicable state securities or blue sky laws and from the
National Association of Securities Dealers, Inc. As used herein, a "DEBT
REPAYMENT TRIGGERING EVENT" means any event or condition that gives, or with
the giving of notice or lapse of time would give, the holder of any note,
debenture or other evidence of indebtedness (or any person acting on such
holder's behalf) the right to require the repurchase, redemption or repayment
of all or a portion of such indebtedness by the Company or any of its
subsidiaries.
(i) Except as otherwise disclosed in the most recent applicable SEC
Filings, there are no legal or governmental actions, suits or proceedings
pending or, to the best of the Company's knowledge, threatened (i) against or
affecting the Company or any of its subsidiaries, (ii) that has as the
subject thereof any officer or director of, or property owned or leased by,
the Company or any of its subsidiaries or (iii) relating to environmental or
employment discrimination matters, where in any such case (A) there is a
reasonable possibility that such action, suit or proceeding will be
determined adversely to the Company or such subsidiary and (B) any such
action, suit or proceeding, if so determined adversely, would reasonably be
expected to result in a Material Adverse Change or adversely affect the
consummation of the transactions contemplated by this Purchase Agreement.
Except as otherwise disclosed in the most recent applicable SEC Filings, no
material labor dispute with the employees of the Company or any of its
subsidiaries exists or, to the best of the Company's knowledge, is threatened
or imminent.
(j) The Company has been advised of the rules and requirements
under the Investment Company Act of 1940, as amended (the "INVESTMENT COMPANY
ACT"). The Company is not, and after receipt of payment for the Purchase
Shares and the consummation of the transactions contemplated hereby will not
be, an "investment company" within the meaning of Investment Company Act and
will conduct its business in a manner so that it will not become subject to
the
<PAGE>
Investment Company Act.
(k) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might be reasonably expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of any shares of Common Stock
delivered hereunder.
(l) There are no business relationships or related-party
transactions involving the Company or any subsidiary or any other person
required to be described in the SEC Filings made since October 1, 1998 that
have not been described as required.
<PAGE>
EXHIBIT A
FORM OF OPINION OF COUNSEL
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware.
(ii) The Company has corporate power and authority to own, lease
and operate its properties and to conduct its business as currently
conducted and to enter into and perform its obligations under the
Purchase Agreement.
(iii) The authorized, issued and outstanding capital stock of the
Company conform to the descriptions thereof set forth in the most recent
applicable SEC Filings, except as set forth in Schedule I with respect to
exercises of options. The form of certificate used to evidence the
Common Stock is in due and proper form and complies with all applicable
requirements of the charter and by-laws of the Company and the General
Corporation Law of the State of Delaware.
(iv) No stockholder of the Company or any other person has any
preemptive right, right of first refusal or other right similar to a
preemptive right or a right of first refusal to subscribe for or purchase
securities of the Company arising (A) by operation of the charter or
by-laws of the Company or of the State of Delaware or (B) to the best
knowledge of such counsel, otherwise. (1)
(v) The Purchase Agreement has been duly authorized, executed
and delivered by, and is a valid and binding agreement of, the Company,
enforceable in accordance with its terms, except as rights to
indemnification and contribution thereunder may be limited by applicable
law and except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
or affecting creditors' rights generally or by general equitable
principles.
(vi) The Purchase Shares have been duly authorized for issuance
and delivery pursuant to the Purchase Agreement and, when issued and
delivered by the Company pursuant to the Purchase Agreement against
payment of the consideration set forth therein, will be validly issued,
fully paid and
- --------------------------------
(1) Note that the opinion will contain a reference to the
"poison pill" provisions contained in the Company's shareholder rights
agreement.
<PAGE>
nonassessable.(2)
(vii) To the best knowledge of such counsel, there are no
legal or governmental actions, suits or proceedings pending or
threatened that are required to be disclosed in any SEC Filing, other
than those disclosed therein.
(viii) No consent, approval, authorization or other order
of, or registration or filing with, any court or other governmental
authority or agency, is required for the Company's execution, delivery
and performance of the Purchase Agreement and consummation of the
transactions contemplated thereby.
(ix) The execution and delivery of the Purchase Agreement by
the Company and the performance by the Company of its obligations
thereunder (A) have been duly authorized by all necessary corporate
action on the part of the Company; (B) will not result in any
violation of the provisions of the charter or by-laws of the Company
or any subsidiary; (C) to the best knowledge of such counsel, will not
constitute a breach of, or Default or a Debt Repayment Triggering
Event under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or
any of its subsidiaries pursuant to, any material agreement for
borrowed money to which the Company or any of its subsidiaries is a
party or by which the Company's or any of its subsidiaries' assets are
bound; or (D) to the best knowledge of such counsel, will not result
in any violation of any law, administrative regulation or
administrative or court decree applicable to the Company or any
subsidiary (it being understood that such counsel shall express no
opinion with regard to the Commodity Exchange Act, since such counsel
is unfamiliar with the provisions of such Act).
(x) The Company is not, and after receipt of payment for the
Purchase Shares and the consummation of the transactions contemplated
by the Purchase Agreement will not be, an "investment company" within
the meaning of Investment Company Act.
(xi) To the best knowledge of such counsel, neither the
Company nor any subsidiary is in violation of its charter or by-laws
or any law, administrative regulation or administrative or court
decree applicable to the Company or any subsidiary or is in Default in
the performance or observance of any obligation, agreement, covenant
or condition contained in any material agreement for
- -----------------------------------
(2) Note that the opinion will contain a reference to the Put
Option and the Call Option.
<PAGE>
borrowed money to which the Company or any of its subsidiaries
is a party or by which the Company's or any of its subsidiaries'
assets are bound, except in each such case for such violations or
Defaults as would not, individually or in the aggregate, result in a
Material Adverse Change.
(xii) Each SEC Filing made since October 1, 1998, as of
its date (other than the financial statements and supporting schedules
included or incorporated by reference therein or in exhibits to or
excluded from such SEC Filing, as to which no opinion need be
rendered) complied as to form in all material respects with the
applicable requirements of the Exchange Act.
(xiii) To the best knowledge of such counsel, there are no
agreements for borrowed money to which the Company or any of its
subsidiaries is a party or by which the Company's or any of its
subsidiaries' assets are bound required to be described or referred to
in any SEC Filing or to be filed as exhibits thereto other than those
described or referred to therein or filed or incorporated by reference
as exhibits thereto; and the descriptions thereof and references
thereto are correct in all material respects.
In addition, such counsel shall state that they have
participated in conferences with officers and other representatives of
the Company at which the contents of each SEC Filing and related
matters were discussed and, although such counsel is not passing upon
and does not assume any responsibility for the accuracy, completeness
or fairness of the statements contained in such SEC Filings, and any
supplements or amendments thereto, on the basis of the foregoing,
nothing has come to their attention that would lead them to believe
that such SEC Filing, as of its date or (taken as a whole together
with all other SEC Filings) as of the date of such opinion, contained
an untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading (it
being understood that such counsel need express no belief as to the
financial statements or schedules or other financial or statistical
data derived therefrom, included or incorporated by reference in any
SEC Filing).
<PAGE>
EXHIBIT B
[PURCHASER LETTERHEAD]
[DATE]
BANK OF AMERICA, N.A.
C/O NATIONSBANC MONTGOMERY SECURITIES LLC
9 W. 57TH STREET
NEW YORK, NY 10019
Ladies and Gentlemen:
In connection with the sale to, and the purchase by, [ ] (the
"Purchaser"), of [ ] shares (the "Shares") of common stock (the Common
Stock"), of BJ Services from Banc of America Securities LLC (the
"Seller"), we hereby represent and warrant to you as follows:
(i) The Shares are being acquired by the Purchaser for its own
account, not as a nominee or agent, for investment and not with a view
to resale or distribution within the meaning of the Securities Act of
1933, as amended (the "1933 Act"), and the rules and regulations
thereunder, and the Purchaser will not distribute the Shares in
violation or contravention of any applicable securities laws.
(ii) The Purchaser acknowledges that (a) the Shares are not
registered under the 1933 Act, (b) the Shares will not be transferable
unless so registered or unless an exemption from such registration is
applicable and (c) the certificates representing the Shares will bear a
legend substantially in the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES
UNDER THE SECURITIES ACT OF 1933 OR AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SAID ACT. NO TRANSFER OF THE SHARES WILL
BE MADE ON THE BOOKS OF THE COMPANY UNLESS ACCOMPANIED BY EVIDENCE OF
COMPLIANCE WITH THESE RESTRICTIONS."
<PAGE>
(iii) The Purchaser represents and warrants to the Seller, that
the Purchaser (i) is an "accredited investor" as such term is defined in
Regulation D under the 1933 Act and is financially able to purchase the
Shares, (ii) is fully capable of understanding the type of investment
being made by its purchase of the Shares pursuant to this Agreement and
the risks involved in connection therewith, (iii) believes that the
nature of the Shares is consistent with its overall investment programs
and financial position, (iv) recognizes that there are substantial risks
involved in its purchase of the Shares, (v) is capable of bearing the
economic risk of its investment for an indefinite period of time and can
afford a complete loss of its investment, (vi) has adequate means of
providing for its current liquidity needs, (vii) has no need for
liquidity of its investment, (viii) is not expecting any short term
income from its investment and (ix) has no reason to anticipate any
change in its circumstances, financial or otherwise, that may cause or
require any sale of the Shares.
(iv) The Purchaser acknowledges that it has had the opportunity to
ask questions of and receive answers from officers and directors of the
Seller concerning the business, financial condition and prospects of the
Issuer; and the Purchaser has received to its satisfaction, such
additional information about the business, financial condition and
prospects of the issuer, as it has requested. At no time was the
Purchaser presented with or solicited by or through any public
advertising or general solicitation.
(v) The Purchaser has received no representations or warranties
from the Seller or its officers, directors, employees, or agents, or any
other person and, in making the proposed investment decision, the
Purchaser is relying solely on its own investigations.
Yours truly,
[PURCHASER]
By: ____________________________
Name:
Title:
<PAGE>
October 27, 1999
To: BJ Services Company
5500 Northwest Central Drive
Houston, TX 77092
Attn. Vice President - Treasury
Telephone: 713-895-5847
Facsimile: 713-895-3420
From: Bank of America, N.A.
c/o Banc of America Securities LLC
9 West 57th Street, 40th floor
New York, NY 10019
Telephone: 212-583-8373
Facsimile: 212-847-5124
Re: Share Option Transaction
Reference: NY-2966C
The purpose of this letter agreement is to confirm the terms and
conditions of the Transaction entered into between BANK OF AMERICA, N.A.,
("BofA") and BJ SERVICES COMPANY ("Counterparty") on the Trade Date specified
below (the "Transaction"). This letter agreement constitutes a
"Confirmation" as referred to in the ISDA Master Agreement specified below.
The definitions and provisions contained in the 1996 ISDA Equity
Derivatives Definitions (the "Equity Definitions"), as published by the
International Swaps and Derivatives Association, Inc., are incorporated into
this Confirmation. In the event of any inconsistency between the Equity
Definitions and this Confirmation, this Confirmation shall govern. This
Confirmation evidences a complete binding agreement between the Counterparty
and BofA as to the terms of the Transaction to which this Confirmation
relates.
Each party is hereby advised, and each such party acknowledges, that
the other party has engaged in, or refrained from engaging in, substantial
financial transactions and has taken other material actions in reliance upon
the parties' entry into the Transaction to which this Confirmation relates on
the terms and conditions set forth below.
1. If the Counterparty and BofA have entered into an ISDA Master
Agreement (the "Agreement"), then this Confirmation supplements, forms a part
of, and is subject to, that Agreement, as amended and supplemented from time
to time. All provisions contained in the Agreement govern this Confirmation
except as expressly modified below. If the Counterparty and BofA have not
entered into an ISDA Master Agreement, then they agree to use all reasonable
efforts to promptly negotiate, execute and deliver an agreement in the form
of the ISDA Master Agreement (Multicurrency-Cross Border) (the "ISDA Form"),
with such modifications as the Counterparty and BofA will in good faith
agree. Upon the execution of such an agreement, this Confirmation will
supplement, form a part of, and be subject to, that agreement. All
provisions contained or incorporated by reference in that agreement upon its
execution will govern this Confirmation except as expressly modified below.
Until the parties execute and deliver that agreement, this Confirmation,
together with all other documents relating to the ISDA Form (each a
"Confirmation") confirming transactions (each a "Transaction") entered into
between us (notwithstanding anything to the contrary in a Confirmation),
shall supplement, form a part of, and be subject to an agreement in the form
of the ISDA Form as if we had executed an agreement in such form (but without
any Schedule) on the Trade Date of the first such Transaction between us
(such agreement, or the ISDA Form, hereinafter the "Agreement"). In the
event of any inconsistency between the provisions of the agreement and this
Confirmation, this Confirmation will prevail for the purpose of this
Transaction.
1
<PAGE>
2. The terms of the particular Transaction to which this Confirmation
relates are as follows:
General Terms
Trade Date: October 25, 1999
Option Style: European
Option Type: Call
Seller: BofA
Buyer: Counterparty
Shares: The common stock of BJ Services
Company (the "Issuer") (Exchange
symbol "BJS")
Number of Options: 1,078,000
Option Entitlement: One Share per Option
Strike Price: U.S. $37.0091
Premium: U.S. $1,156,155.00
Premium Payment Date: October 27, 1999
Exchange(s): New York Stock Exchange
Related Exchange(s): The principal exchange(s) for options
contracts or futures contracts, if
any, with respect to the Shares
Procedure for Exercise:
Expiration Time: At the close of trading on the
Exchange
Expiration Date: April 19, 2000
In-the-Money: That the Reference price is greater
than the Strike Price
Automatic Exercise: Applicable
Valuation Date: The Expiration Date
For the avoidance of doubt, the first two lines of Section 4.3(a) of the
Equity Definitions are amended to read: 'Section 4.3 Market Disruption
Event. (a) "Market Disruption Event" in relation to a Physically-settled
Option Transaction" means:'
Reference Price: The closing price per Share on the
Exchange at the Valuation Time on the
Valuation Date
Seller's Telephone
2
<PAGE>
Number and Facsimile Number
and Contact Details for Purpose Telephone No.: 212-583-8373
of Giving Notice: Telecopy No.: 212-583-8573
Settlement Terms:
Physical Settlement: Applicable
Failure to Deliver: Applicable
Adjustments:
Method of Adjustment: Calculation Agent Adjustment
Extraordinary Events:
Consequences of Merger Events
(a) Share-for-Share: Alternative Obligation
(b) Share-for-Other: Cancellation and Payment
(c) Share-for-Combined: Cancellation and Payment
Nationalization or Insolvency: Negotiated Close-out
3. Calculation Agent: BofA
4. Accounts Details:
Payments to BofA:
Pay to: Bank of America, N.A.
F/A/O: Equity Derivatives - Bank
Account No. : 0659795652
Routing No. : 053000196
Payments to Counterparty:
Please provide to expedite payment.
5. Offices:
(a) The Office of BofA for the Transaction is: Charlotte
Address and phone numbers for Notices:
c/o Banc of America Securities LLC
9 West 57th Street, 40th floor
New York, NY 10019
Telephone: 212-583-8373
Facsimile: 212-583-8573
(b) The Office of the Counterparty for the Transaction is:
Inapplicable. Counterparty is not a Multibranch Party.
3
<PAGE>
Address and phone numbers for Notices:
5500 Northwest Central Drive
Houston, TX 77092
Attn. Vice President - Treasury
Telephone: 713-895-5847
Facsimile: 713-895-3420
6. Other Provisions
(a) NON-RELIANCE. It is acting for its own account, and it has made
its own independent decision to enter into this Transaction and as
to whether this Transaction is appropriate or proper for it based
upon its own judgement and upon advice from such advisors as it
has deemed necessary. It is not relying on any communication
(written or oral) of the other party as investment advice or as a
recommendation to enter into this Transaction; it being understood
that information and explanations related to the terms and
conditions of this Transaction shall not be considered investment
advice or a recommendation to enter into this Transaction. It has
not received from the other party any assurance or guarantee as to
the expected results of this Transaction.
(b) DESIGNATION BY BOFA. Notwithstanding any other provision in this
Confirmation to the contrary requiring or allowing BofA to
purchase, sell, receive or deliver any shares or other securities
to or from the Counterparty, BofA may designate any of its
affiliates to purchase, sell, receive or deliver such shares or
other securities and otherwise to perform BofA obligations in
respect of this Transaction and any such designee may assume such
obligations. BofA shall be discharged of its obligations to the
Counterparty to the extent of any such performance.
(c) RISK MANAGEMENT. It has entered into this Transaction for the
purpose of managing its borrowings or investments, hedging its
underlying assets or liabilities or in connection with its line of
business.
(d) EVALUATION AND UNDERSTANDING. It is capable of evaluating and
understanding (on its own behalf or through independent
professional advice), and understands and accepts, the terms,
conditions and risks of this Transaction. It is also capable of
assuming, and assumes, the financial and other risks of this
Transaction.
(e) STATUS OF PARTIES. The other party is not acting as a fiduciary or
an advisor for it in respect of this Transaction.
(f) NO INFORMATION. The Counterparty represents and warrants that it
and its affiliates are not entering into the Transaction on the
basis of any material non-public information with respect to the
Shares.
(g) PRIVATE PLACEMENT. Each of Counterparty and BofA represents that
it (A) is an "accredited investor" within the meaning of Rule
501(a) under the Securities Act of 1933 (the "Securities Act"),
(B) is acquiring the instruments described in the Transaction for
its own account, and not with a view to distribution and (C)
understands and acknowledges that the Transaction has not and will
not be registered under the Securities Act.
(h) PAYMENTS UPON CERTAIN EXTRAORDINARY EVENTS. Section 9.7(b)(i) of
the Equity Definitions is amended by deleting the words "two-year"
in the second line and replacing them with the words "180 calendar
day".
(i) CONDITIONS OF EFFECTIVENESS. If the purchase of the First Tranche
Shares (as defined in the Purchase Agreement dated October 25,
1999 between BofA and the Counterparty) is not successfully
closed, then this Transaction shall be of no effect and no
financial compensation shall be due either party.
4
<PAGE>
Please confirm your acceptance and agreement with the foregoing by
immediately executing the copy of this Confirmation enclosed for that purpose
and returning it to Bank of America, N.A. by facsimile at 212-847-5124.
Very truly yours,
BANK OF AMERICA, N.A.
By: /s/ William Caccamise
-------------------------
Authorized Signatory
Name: William Caccamise
Confirmed
as of the date first above written:
BJ SERVICES COMPANY
By: /s/ T. M. Whichard
--------------------
Authorized Signatory
Name: T. M. Whichard
5
<PAGE>
October 27, 1999
To: BJ Services Company
5500 Northwest Central Drive
Houston, TX 77092
Attn. Vice President - Treasury
Telephone: 713-895-5847
Facsimile: 713-895-3420
From: Bank of America, N.A.
c/o Banc of America Securities LLC
9 West 57th Street, 40th floor
New York, NY 10019
Telephone 212-583-8373
Facsimile: 212-847-5124
Re: Share Option Transaction
Reference: NY-2966P
The purpose of this letter agreement is to confirm the terms and
conditions of the Transaction entered into between BANK OF AMERICA, N.A.,
("BofA") and BJ SERVICES COMPANY ("Counterparty") on the Trade Date specified
below (the "Transaction"). This letter agreement constitutes a
"Confirmation" as referred to in the ISDA Master Agreement specified below.
The definitions and provisions contained in the 1996 ISDA Equity
Derivatives Definitions (the "Equity Definitions"), as published by the
International Swaps and Derivatives Association, Inc., are incorporated into
this Confirmation. In the event of any inconsistency between the Equity
Definitions and this Confirmation, this Confirmation shall govern. This
Confirmation evidences a complete binding agreement between the Counterparty
and BofA as to the terms of the Transaction to which this Confirmation
relates.
Each party is hereby advised, and each such party acknowledges, that
the other party has engaged in, or refrained from engaging in, substantial
financial transactions and has taken other material actions in reliance upon
the parties' entry into the Transaction to which this Confirmation relates on
the terms and conditions set forth below.
1. If the Counterparty and BofA have entered into an ISDA Master
Agreement (the "Agreement"), then this Confirmation supplements, forms a part
of, and is subject to, that Agreement, as amended and supplemented from time
to time. All provisions contained in the Agreement govern this Confirmation
except as expressly modified below. If the Counterparty and BofA have not
entered into an ISDA Master Agreement, then they agree to use all reasonable
efforts to promptly negotiate, execute and deliver an agreement in the form
of the ISDA Master Agreement (Multicurrency-Cross Border) (the "ISDA Form"),
with such modifications as the Counterparty and BofA will in good faith
agree. Upon the execution of such an agreement, this Confirmation will
supplement, form a part of, and be subject to, that agreement. All
provisions contained or incorporated by reference in that agreement upon its
execution will govern this Confirmation except as expressly modified below.
Until the parties execute and deliver that agreement, this Confirmation,
together with all other documents relating to the ISDA Form (each a
"Confirmation") confirming transactions (each a "Transaction") entered into
between us (notwithstanding anything to the contrary in a Confirmation),
shall supplement, form a part of, and be subject to an agreement in the form
of the ISDA Form as if we had executed an agreement in such form (but without
any Schedule) on the Trade Date of the first such Transaction between us
(such agreement, or the ISDA Form, hereinafter the "Agreement"). In the
event of any inconsistency between the provisions of the agreement and this
Confirmation, this Confirmation will prevail for the purpose of this
Transaction.
1
<PAGE>
2. The terms of the particular Transaction to which this Confirmation
relates are as follows:
General Terms
Trade Date: October 25, 1999
Option Style: European
Option Type: Put
Seller: Counterparty
Buyer: BofA
Shares: The common stock of BJ Services
Company (the "Issuer") (Exchange
symbol "BJS")
Number of Options: 1,078,000
Option Entitlement: One Share per Option
Strike Price: U.S. $37.0091
Premium: U.S. $2,312,310.00
Premium Payment Date: October 27, 1999
Exchange(s): New York Stock Exchange
Related Exchange(s): The principal exchange(s) for options
contracts or futures contracts, if
any, with respect to the Shares
Procedure for Exercise:
Expiration Time: At the close of trading on the
Exchange
Expiration Date: April 19, 2000
In-the-Money: That the Reference Price is less than
the Strike Price
Automatic Exercise: Applicable
Valuation Date: The Expiration Date
Valuation Time The Expiration Time
For the avoidance of doubt, the first two lines of Section 4.3(a) of the
Equity Definitions are amended to read: 'Section 4.3 Market Disruption
Event. (a) "Market Disruption Event" in relation to a Physically-
settled Option Transaction" means:'
Reference Price: The closing price per Share on the
Exchange at the Valuation Time on the
Valuation Date
2
<PAGE>
Seller's Telephone
Number and Facsimile Number Vice President - Treasury
and Contact Details for Purpose Telephone. 713-895-5847
of Giving Notice: Facsimile: 713-895-3420
Settlement Terms:
Physical Settlement: Applicable
Failure to Deliver: Applicable
Adjustments:
Method of Adjustment: Calculation Agent Adjustment
Extraordinary Events:
Consequences of Merger Events
(a) Share-for-Share: Alternative Obligation
(b) Share-for-Other: Cancellation and Payment
(c) Share-for-Combined: Cancellation and Payment
Nationalization or Insolvency: Negotiated Close-out
3. Calculation Agent: BofA
4. Accounts Details:
Payments to BofA:
Pay to: Bank of America, N.A.
F/A/O: Equity Derivatives - Bank
Account No. : 0659795652
Routing No. : 053000196
Payments to Counterparty:
Please provide to expedite payment.
5. Offices:
(a) The Office of BofA for the Transaction is: Charlotte
Address and phone numbers for Notices:
c/o Banc of America Securities LLC
9 West 57th Street, 40th floor
New York, NY 10019
Telephone: 212-583-8373
Facsimile: 212-583-8573
(b) The Office of the Counterparty for the Transaction is: Inapplicable.
Counterparty is not a Multibranch Party.
3
<PAGE>
Address and phone numbers for Notices:
5500 Northwest Central Drive
Houston, TX 77092
Attn. Vice President - Treasury
Telephone: 713-895-5847
Facsimile: 713-895-3420
6. Other Provisions
(a) NON-RELIANCE. It is acting for its own account, and it has made
its own independent decision to enter into this Transaction and as
to whether this Transaction is appropriate or proper for it based
upon its own judgement and upon advice from such advisors as it
has deemed necessary. It is not relying on any communication
(written or oral) of the other party as investment advice or as a
recommendation to enter into this Transaction; it being understood
that information and explanations related to the terms and
conditions of this Transaction shall not be considered investment
advice or a recommendation to enter into this Transaction. It has
not received from the other party any assurance or guarantee as to
the expected results of this Transaction.
(b) DESIGNATION BY BOFA. Notwithstanding any other provision in this
Confirmation to the contrary requiring or allowing BofA to
purchase, sell, receive or deliver any shares or other securities
to or from the Counterparty, BofA may designate any of its
affiliates to purchase, sell, receive or deliver such shares or
other securities and otherwise to perform BofA obligations in
respect of this Transaction and any such designee may assume such
obligations. BofA shall be discharged of its obligations to the
Counterparty to the extent of any such performance.
(c) RISK MANAGEMENT. It has entered into this Transaction for the
purpose of managing its borrowings or investments, hedging its
underlying assets or liabilities or in connection with its line of
business.
(d) EVALUATION AND UNDERSTANDING. It is capable of evaluating and
understanding (on its own behalf or through independent
professional advice), and understands and accepts, the terms,
conditions and risks of this Transaction. It is also capable of
assuming, and assumes, the financial and other risks of this
Transaction.
(e) STATUS OF PARTIES. The other party is not acting as a fiduciary or
an advisor for it in respect of this Transaction.
(f) NO INFORMATION. The Counterparty represents and warrants that it
and its affiliates are not entering into the Transaction on the
basis of any material non-public information with respect to the
Shares.
(g) PRIVATE PLACEMENT. Each of Counterparty and BofA represents that
it (A) is an "accredited investor" within the meaning of Rule
501(a) under the Securities Act of 1933 (the "Securities Act"),
(B) is acquiring the instruments described in the Transaction for
its own account, and not with a view to distribution and (C)
understands and acknowledges that the Transaction has not and will
not be registered under the Securities Act.
(h) PAYMENTS UPON CERTAIN EXTRAORDINARY EVENTS. Section 9.7(b)(i) of
the Equity Definitions is amended by deleting the words "two-year"
in the second line and replacing them with the words "180 calendar
day".
(i) CONDITIONS OF EFFECTIVENESS. If the purchase of the First Tranche
Shares (as defined in the Purchase Agreement dated October 25,
1999 between BofA and the Counterparty) is not successfully
closed, then this Transaction shall be of no effect and no
financial compensation shall be due either party.
4
<PAGE>
Please confirm your acceptance and agreement with the foregoing by
immediately executing the copy of this Confirmation enclosed for that purpose
and returning it to Bank of America, N.A. by facsimile at 212-847-5124.
Very truly yours,
BANK OF AMERICA, N.A.
By: /s/ William Caccamise
----------------------------
Authorized Signatory
Name: William Caccamise
Confirmed
as of the date first above written:
BJ SERVICES COMPANY
By: /s/ T. M. Whichard
------------------------
Authorized Signatory
Name: T. M. Whichard
5
<PAGE>
October 27, 1999
To: BJ Services Company
5500 Northwest Central Drive
Houston, TX 77092
Attn. Vice President - Treasury
Telephone: 713-895-5847
Facsimile: 713-895-3420
From: Bank of America, N.A.
Equity Financial Products
c/o Banc of America Securities LLC
9 West 57th Street, 40th floor
New York, NY 10019
Telephone: 212-583-8373
Facsimile: 212-847-5124
Re: Issuer Share Option Transaction
Reference: NY-2968
The purpose of this letter agreement is to confirm the terms and
conditions of the Transaction entered into between BANK OF AMERICA, N.A.,
("BofA") and BJ SERVICES COMPANY ("Counterparty") on the Trade Date specified
below (the "Transaction"). This letter agreement constitutes a
"Confirmation" as referred to in the ISDA Master Agreement specified below.
The definitions and provisions contained in the 1996 ISDA Equity
Derivatives Definitions (the "Equity Definitions"), as published by the
International Swaps and Derivatives Association, Inc., are incorporated into
this Confirmation. In the event of any inconsistency between the Equity
Definitions and this Confirmation, this Confirmation shall govern. This
Confirmation evidences a complete binding agreement between the Counterparty
and BofA as to the terms of the Transaction to which this Confirmation
relates.
Each party is hereby advised, and each such party acknowledges, that
the other party has engaged in, or refrained from engaging in, substantial
financial transactions and has taken other material actions in reliance upon
the parties' entry into the Transaction to which this Confirmation relates on
the terms and conditions set forth below.
1. If the Counterparty and BofA have entered into an ISDA Master
Agreement (the "Agreement"), then this Confirmation supplements, forms a part
of, and is subject to, that Agreement, as amended and supplemented from time
to time. All provisions contained in the Agreement govern this Confirmation
except as expressly modified below. If the Counterparty and BofA have not
entered into an ISDA Master Agreement, then they agree to use all reasonable
efforts to promptly negotiate, execute and deliver an agreement in the form
of the ISDA Master Agreement (Multicurrency-Cross Border) (the "ISDA Form"),
with such modifications as the Counterparty and BofA will in good faith
agree. Upon the execution of such an agreement, this Confirmation will
supplement, form a part of, and be subject to, that agreement. All
provisions contained or incorporated by reference in that agreement upon its
execution will govern this Confirmation except as expressly modified below.
Until the parties execute and deliver that agreement, this Confirmation,
together with all other documents relating to the ISDA Form (each a
"Confirmation") confirming transactions (each a "Transaction") entered into
between us (notwithstanding anything to the contrary in a Confirmation),
shall supplement, form a part of, and be subject to an agreement in the form
of the ISDA Form as if we had executed an agreement in such form (but without
any Schedule) on the Trade Date of the first such Transaction between us
(such agreement, or the ISDA Form, hereinafter the "Agreement"). In the
event of any inconsistency between the provisions of the agreement and this
Confirmation, this Confirmation will prevail for the purpose of this
Transaction.
2. The terms of the particular Transactions to which this
Confirmation relates are as follows:
General Terms:
1
<PAGE>
Trade Date: October 25, 1999
Option Style: European
Option Type: Put
Seller: Counterparty
Buyer: BofA
Shares: The common stock of BJ Services Company (the
"Issuer") (Exchange symbol "BJS")
Number of Options: 425,000
Option Entitlement: One Share per Option
Multiple Exercise: Inapplicable
Strike Price: U.S. $28.5132 per Share
Premium: For valuable consideration in connection with
the Options Transactions and the Purchase
Agreement entered into on October 25, 1999
Premium Payment Date: Not Applicable
Exchange: The New York Stock Exchange
Related Exchange(s): Any exchange on which options contracts or
futures contracts, if any, relating to the
Shares are traded.
Procedure for Exercise:
Exercise Date: The Expiration Date, if on such date an Option
is or is deemed to be exercised, unless there
is a Market Disruption Event on that Date. If
there is a Market Disruption Event on that
day, then the Exercise Date shall be the first
succeeding Exchange Business Day on which
there is no Market Disruption Event, unless
there is a Market Disruption Event on each of
the five Exchange Business Days immediately
following the original date that, but for the
Market Disruption Event, would have been the
Exercise Date. In that case, (a) that fifth
Exchange Business Day shall be deemed to be
the Exercise Date, notwithstanding the Market
Disruption Event, and (b) the Calculation
Agent shall determine the Reference Price on
the basis of its good faith estimate of the
trading value for the relevant Shares.
Expiration Time: The Valuation Time
Expiration Date: April 25, 2000
Automatic Exercise: Applicable; provided, however, that if Cash
Settlement or Net Share Settlement is
applicable, each Option not previously
exercised will be deemed automatically
exercised at the Expiration Time on the
Exercise Date, unless BofA notifies
Counterparty (by phone or in
2
<PAGE>
writing) prior to the Expiration Time on the
Expiration Date that it does not wish Automatic
Exercise to occur, and if Physical Settlement
is applicable, "In-the-Money" shall mean that
the Strike Price exceeds the Reference Price.
Reference Price: The closing price per Share on the Exchange
at the Valuation Time on the Valuation Date
Valuation Time: The close of trading on the Exchange
Valuation Date: The Exercise Date
For the avoidance of doubt, the first two lines of Section 4.3(a) of the
Equity Definitions are amended to read: 'Section 4.3 Market Disruption Event.
(a) "Market Disruption Event" in relation to a Cash-settled Option
Transaction or Physically-settled Option Transaction" means:'
Settlement Terms:
Settlement: Physical Settlement; provided, however, that
the Counterparty may elect the method of
settlement to be Cash Settlement, subject to
the Additional Terms set forth in Section 3(a)
herein, or Net Share Settlement, subject to
the Additional Terms set forth in Section 3(b)
herein; and provided further, that in the
event that the Counterparty is prohibited on
the Exercise Date from purchasing Shares
pursuant to applicable law, then Cash
Settlement shall be deemed applicable and
Counterparty agrees to notify BofA in writing
of such prohibition (which notice shall be
irrevocable) not later than 12:00 p.m. (New
York time) on the Exercise Date.
PHYSICAL SETTLEMENT Applicable, subject to Additional Terms set
TERMS: forth in Section 3(b) herein.
Failure to Deliver: Applicable
3. Additional Terms:
(a) Option to Cash Counterparty shall have the right, but not the
Settle: obligation, to cash settle the Transaction.
If Counterparty elects such right,
Counterparty will execute and deliver written
notice specifying that Cash Settlement applies
to the Transaction on any Currency Business
Day that is at least three Currency Business
Days prior to the Expiration Date. Once Cash
Settlement is elected with respect to a
Transaction, such election shall be
irrevocable.
CASH SETTLEMENT TERMS:
Cash Settlement: If Cash Settlement is applicable, Seller shall
pay to Buyer the Cash Settlement Amount, if
any, on the Cash Settlement Payment Date for
all Options exercised or deemed exercised.
Cash Settlement Amount: An amount, as calculated by the Calculation
Agent, equal to the number of Options
exercised on the Exercise Date multiplied by
the Option Entitlement multiplied by the
Strike Price Differential.
3
<PAGE>
Cash Settlement Three Currency Business Days after the
Payment Date: Valuation Date.
Strike Price An amount equal to the greater of the (i)
Differential: excess of the Strike Price over the Reference
Price and (ii) zero
(b) Option to Net Counterparty shall have the right, but not the
Share Settle: obligation, to net share settle the
Transaction. If Counterparty elects such
right, Counterparty will execute and deliver
written notice specifying that Net Share
Settlement applies to the Transaction on any
Currency Business Day that is at least fifteen
(15) Currency Business Days prior to the
Expiration Date. Once Net Share Settlement is
elected with respect to a Transaction, such
election shall be irrevocable
MANDATORY PHYSICAL If the Options are exercised and if the
SETTLEMENT Counterparty shall have elected Cash
Settlement or Net Share Settlement in
accordance with the terms hereof, and any of
the conditions of the Registration Rights
Agreement and Shelf Registration provision
hereof regarding registration have not been
met on or prior to the dates specified herein,
Counterparty shall have the obligation to
settle the Transaction by Physical Settlement.
Registration Rights If this Transaction is settled in accordance
Agreement and Shelf with Section 3(b) hereof, the following
Registration: conditions must be met:
(1) Counterparty will enter into a
Registration Rights Agreement with BofA
in form and acceptance satisfactory to
BofA not later than the third Exchange
Business Day after such election, which
agreement will contain among other
things, customary representations and
warranties and indemnification and other
rights relating to the registration of
the Shares to be delivered pursuant to
Net Share Settlement;
(ii) Counterparty shall have made available to
BofA for inspection all financial and
other records, pertinent corporate
documents, or other information
reasonably requested by BofA in
connection with such Registration
Statement and BofA shall be satisfied
in all material respects with the results
of such due diligence investigation of
Counterparty;
(iii) The Shelf Registration (as hereinafter
defined) shall have been declared
effective by the Securities Exchange
Commission not less than three (3)
Exchange Business Days prior to the
Expiration Date; and
(iv) Counterparty shall maintain the
effectiveness of the Shelf Registration
until all Shares delivered pursuant to
Net Share Settlement have been sold by
BofA.
If any of the foregoing conditions regarding
registration have not been met on or prior to
the dates specified above, Physical Settlement
shall apply for this Transaction. In
addition, if the Shelf Registration has been
declared effective, but it does not remain
effective until all shares delivered pursuant
to Net Share Settlement have been sold by BofA,
BofA shall have the right to require that
Counterparty repurchase any unsold Shares at a
price per share equal to the Reference Price.
"Shelf Registration" means a registration
statement in form and substance reasonably
satisfactory to BofA for an offering to be
made on a continuous basis pursuant to Rule
415 under the Securities Act of 1933, as
amended, registering BofA's resale of not
less than all the Shares delivered pursuant to
Net Share
4
<PAGE>
Settlement, in the manner or manners designated
by BofA.
Make-whole Amount: If this Transaction is settled in accordance
with Section 3(b) hereof, the following shall
apply:
(i) If within ten (10) Exchange Business Days
after the Settlement Date, BofA resells
all or any portion of the Shares
delivered to BofA in payment pursuant to
Net Share Settlement and the net proceeds
received by BofA upon resale of such
Shares exceed the Net Share Settlement
Amount (or if less than all of the Shares
are resold, the applicable pro rata
portion of the Net Share Settlement
Amount), BofA shall promptly refund in
cash such difference to the Counterparty.
(ii) In the event that such net proceeds
received by BofA are less than the Net
Share Settlement Amount (or if less than
all of the Shares are resold, the
applicable pro rata portion of the Net
Settlement Amount), Counterparty shall
pay in cash such difference (the "Make-
whole Amount") to BofA promptly after
receipt of notice thereof.
NET SHARE SETTLEMENT
TERMS:
Net Share Settlement: If Net Share Settlement is applicable,
Counterparty shall deliver to BofA the Share
Delivery Quantity on the Settlement Date (as
such term is defined in Section 6.2 in the
Equity Definitions) at the account specified
hereto free of payment through the Clearance
System.
Share Delivery A number of Shares, as calculated by the
Quantity: Calculation Agent, equal to the Net Share
Settlement Amount divided by the Reference
Price, plus cash in lieu of any fractional
shares, provided that if the Reference Price
is greater than or equal to the Strike Price,
no Shares shall be so deliverable.
Net Share Settlement The product of (i) the Number of Options
Amount: multiplied by (ii) the Option Entitlement
multiplied by (iii) the Strike Price
Differential.
Failure to Deliver: Applicable
Adjustments:
Method of Adjustment: Calculation Agent Adjustment
Extraordinary Events:
Consequences of Merger
Events:
(a) Share-for-Share: Alternative Obligation
(b) Share-for-Other: Cancellation and Payment
(c) Share-for- Cancellation and Payment
Combined:
Nationalization or Insolvency: Cancellation and Payment
5
<PAGE>
4. Calculation Agent: BofA
5. Account Details:
(a) Account for Pay to :
payments to FBA:
Counterparty: Further A/C #:
Account for delivery of Please Advise
Shares to Counterparty:
(b) Account for FedWire to:
payments to BofA: Bank of America, N.A. - Charlotte, NC
Account #: 0659795652
ABA #: 053-000-196
For account of Equity Derivatives - Bank
7. Offices:
The Office of Counterparty for the Transaction is: Inapplicable,
Counterparty is not a Multibranch Party.
The Office of BofA for the Transaction is: Charlotte.
8. Other Provisions:
(a) NON-RELIANCE. It is acting for its own account, and it has made
its own independent decision to enter into this Transaction and
as to whether this Transaction is appropriate or proper for it
based upon its own judgement and upon advice from such advisors
as it has deemed necessary. It is not relying on any
communication (written or oral) of the other party as investment
advice or as a recommendation to enter into this Transaction; it
being understood that information and explanations related to
the terms and conditions of this Transaction shall not be
considered investment advice or a recommendation to enter into
this Transaction. It has not received from the other party any
assurance or guarantee as to the expected results of this
Transaction.
(b) DESIGNATION BY BOFA. Notwithstanding any other provision in this
Confirmation to the contrary requiring or allowing BofA to
purchase, sell, receive or deliver any shares or other
securities to or from the Counterparty, BofA may designate any
of its affiliates to purchase, sell, receive or deliver such
shares or other securities and otherwise to perform BofA
obligations in respect of this Transaction and any such designee
may assume such obligations. BofA shall be discharged of its
obligations to the Counterparty to the extent of any such
performance.
(c) RISK MANAGEMENT. It has entered into this Transaction for the
purpose of managing its borrowings or investments, hedging its
underlying assets or liabilities or in connection with its line
of business.
(d) EVALUATION AND UNDERSTANDING. It is capable of evaluating and
understanding (on its own behalf or through independent
professional advice), and understands and accepts, the terms,
conditions and risks of this Transaction. It is also capable of
assuming, and assumes, the financial and other risks of this
Transaction.
(e) STATUS OF PARTIES. The other party is not acting as a fiduciary
or an advisor for it in respect of this Transaction.
(f) NO INFORMATION. The Counterparty represents and warrants that
it and its affiliates are not entering into the Transaction on
the basis of any material non-public information with respect to
the Shares.
(g) NO PROHIBITION. The Counterparty represents that it could have
purchased Shares, in an amount equal to the product of 45% of
the Number of Options and the Option Entitlement, on the
Exchange or
6
<PAGE>
otherwise, in compliance with applicable law and any contractual
agreements binding upon Counterparty, on the Trade Date.
(h) PRIVATE PLACEMENT. Each of Counterparty and BofA represents that
it (A) is an accredited investor within the meaning of Rule
501(a) under the Securities Act of 1933 (the Securities Act ),
(B) is acquiring the instruments described in the Transaction
for its own account, and not with a view to distribution and (C)
understands and acknowledges that the Transaction has not and
will not be registered under the Securities Act.
(i) CONSISTENT WITH PUBLIC DISCLOSURES. The Counterparty represents
that any Shares acquired pursuant to the Transaction will be
made in connection with the Counterparty s Share repurchase
program, which was approved by its board of directors and
publicly announced, solely for the purposes stated in such board
resolution and public disclosure.
9. Notices: For purposes of this Confirmation::
(a) Address for notices or communications to Counterparty:
5500 Northwest Central Drive
Houston, TX 77092
Attn. Vice President - Treasury
Telephone: 713-895-5847
Facsimile: 713-895-3420
(b) Address for notices or communications to BofA :
Bank of America, N.A.
Equity Financial Products
c/o Banc of America Securities LLC
9 West 57th Street, 40th Floor
New York, NY 10019
Telephone No.: 212-583-8373
Facsimile No.: 212-847-5124
7
<PAGE>
Please confirm your agreement to be bound by the terms stated herein by
executing the copy of this Confirmation enclosed for that purpose and
returning it to us by mail or facsimile transmission to the address for
Notices indicated above.
Yours sincerely,
BANK OF AMERICA, N.A.
By: /s/ William Caccamise
------------------------
Name: William Caccamise
Title: Managing Director
Confirmed as of the date first above written:
BJ SERVICES COMPANY
By: /s/ T. M. Whichard
------------------------------
Name: T. M. Whichard
Title: Vice President and Treasurer
8
<PAGE>
October 27, 1999
To: BJ Services Company
5500 Northwest Central Drive
Houston, TX 77092
Attn. Vice President - Treasury
Telephone: 713-895-5847
Facsimile: 713-895-3420
From: Bank of America, N.A.
c/o Banc of America Securities LLC
9 West 57th Street, 40th floor
New York, NY 10019
Telephone: 212-583-8373
Facsimile: 212-847-5124
Re: Share Option Transaction
Reference: NY-2967C
The purpose of this letter agreement is to confirm the terms and
conditions of the Transaction entered into between BANK OF AMERICA, N.A.,
("BofA") and BJ SERVICES COMPANY ("Counterparty") on the Trade Date specified
below (the "Transaction"). This letter agreement constitutes a
"Confirmation" as referred to in the ISDA Master Agreement specified below.
The definitions and provisions contained in the 1996 ISDA Equity
Derivatives Definitions (the "Equity Definitions"), as published by the
International Swaps and Derivatives Association, Inc., are incorporated into
this Confirmation. In the event of any inconsistency between the Equity
Definitions and this Confirmation, this Confirmation shall govern. This
Confirmation evidences a complete binding agreement between the Counterparty
and BofA as to the terms of the Transaction to which this Confirmation
relates.
Each party is hereby advised, and each such party acknowledges, that
the other party has engaged in, or refrained from engaging in, substantial
financial transactions and has taken other material actions in reliance upon
the parties' entry into the Transaction to which this Confirmation relates on
the terms and conditions set forth below.
1. If the Counterparty and BofA have entered into an ISDA Master
Agreement (the "Agreement"), then this Confirmation supplements, forms a part
of, and is subject to, that Agreement, as amended and supplemented from time
to time. All provisions contained in the Agreement govern this Confirmation
except as expressly modified below. If the Counterparty and BofA have not
entered into an ISDA Master Agreement, then they agree to use all reasonable
efforts to promptly negotiate, execute and deliver an agreement in the form
of the ISDA Master Agreement (Multicurrency-Cross Border) (the "ISDA Form"),
with such modifications as the Counterparty and BofA will in good faith
agree. Upon the execution of such an agreement, this Confirmation will
supplement, form a part of, and be subject to, that agreement. All
provisions contained or incorporated by reference in that agreement upon its
execution will govern this Confirmation except as expressly modified below.
Until the parties execute and deliver that agreement, this Confirmation,
together with all other documents relating to the ISDA Form (each a
"Confirmation") confirming transactions (each a "Transaction") entered into
between us (notwithstanding anything to the contrary in a Confirmation),
shall supplement, form a part of, and be subject to an agreement in the form
of the ISDA Form as if we had executed an agreement in such form (but without
any Schedule) on the Trade Date of the first such Transaction between us
(such agreement, or the ISDA Form, hereinafter the "Agreement"). In the
event of any inconsistency between the provisions of the agreement and this
Confirmation, this Confirmation will prevail for the purpose of this
Transaction.
1
<PAGE>
2. The terms of the particular Transaction to which this Confirmation
relates are as follows:
General Terms
Trade Date: October 25, 1999
Option Style: European
Option Type: Call
Seller: BofA
Buyer: Counterparty
Shares: The common stock of BJ Services
Company (the "Issuer") (Exchange
symbol "BJS")
Number of Options: 2,949,972
Option Entitlement: One Share per Option
Strike Price: U.S. $36.9741
Premium: U.S. $3,163,844.97
Premium Payment Date: October 28, 1999
Exchange(s): New York Stock Exchange
Related Exchange(s): The principal exchange(s) for options
contracts or futures contracts, if
any, with respect to the Shares
Procedure for Exercise:
Expiration Time: At the close of trading on the
Exchange
Expiration Date: April 17, 2000
In-the-Money: That the Reference price is greater
than the Strike Price
Automatic Exercise: Applicable
Valuation Date: The Expiration Date
For the avoidance of doubt, the first two lines of Section 4.3(a) of the
Equity Definitions are amended to read: 'Section 4.3 Market Disruption
Event. (a) "Market Disruption Event" in relation to a
Physically-settled Option Transaction" means:'
Reference Price: The closing price per Share on the
Exchange at the Valuation Time on the
Valuation Date
2
<PAGE>
Seller's Telephone
Number and Facsimile Number
and Contact Details for Purpose Telephone No.: 212-583-8373
of Giving Notice: Telecopy No.: 212-583-8573
Settlement Terms:
Physical Settlement: Applicable
Failure to Deliver: Applicable
Adjustments:
Method of Adjustment: Calculation Agent Adjustment
Extraordinary Events:
Consequences of Merger Events
(a) Share-for-Share: Alternative Obligation
(b) Share-for-Other: Cancellation and Payment
(c) Share-for-Combined: Cancellation and Payment
Nationalization or Insolvency: Negotiated Close-out
3. Calculation Agent: BofA
4. Accounts Details:
Payments to BofA:
Pay to: Bank of America, N.A.
F/A/O: Equity Derivatives - Bank
Account No. : 0659795652
Routing No. : 053000196
Payments to Counterparty:
Please provide to expedite payment.
5. Offices:
(a) The Office of BofA for the Transaction is: Charlotte
Address and phone numbers for Notices:
c/o Banc of America Securities LLC
9 West 57th Street, 40th floor
New York, NY 10019
Telephone: 212-583-8373
Facsimile: 212-583-8573
3
<PAGE>
(b) The Office of the Counterparty for the Transaction is:
Inapplicable. Counterparty is not a Multibranch Party.
Address and phone numbers for Notices:
5500 Northwest Central Drive
Houston, TX 77092
Attn. Vice President - Treasury
Telephone: 713-895-5847
Facsimile: 713-895-3420
6. Other Provisions
(a) NON-RELIANCE. It is acting for its own account, and it has made
its own independent decision to enter into this Transaction and as
to whether this Transaction is appropriate or proper for it based
upon its own judgement and upon advice from such advisors as it
has deemed necessary. It is not relying on any communication
(written or oral) of the other party as investment advice or as a
recommendation to enter into this Transaction; it being understood
that information and explanations related to the terms and
conditions of this Transaction shall not be considered investment
advice or a recommendation to enter into this Transaction. It has
not received from the other party any assurance or guarantee as to
the expected results of this Transaction.
(b) DESIGNATION BY BOFA. Notwithstanding any other provision in this
Confirmation to the contrary requiring or allowing BofA to
purchase, sell, receive or deliver any shares or other securities
to or from the Counterparty, BofA may designate any of its
affiliates to purchase, sell, receive or deliver such shares or
other securities and otherwise to perform BofA obligations in
respect of this Transaction and any such designee may assume such
obligations. BofA shall be discharged of its obligations to the
Counterparty to the extent of any such performance.
(c) RISK MANAGEMENT. It has entered into this Transaction for the
purpose of managing its borrowings or investments, hedging its
underlying assets or liabilities or in connection with its line of
business.
(d) EVALUATION AND UNDERSTANDING. It is capable of evaluating and
understanding (on its own behalf or through independent
professional advice), and understands and accepts, the terms,
conditions and risks of this Transaction. It is also capable of
assuming, and assumes, the financial and other risks of this
Transaction.
(e) STATUS OF PARTIES. The other party is not acting as a fiduciary or
an advisor for it in respect of this Transaction.
(f) NO INFORMATION. The Counterparty represents and warrants that it
and its affiliates are not entering into the Transaction on the
basis of any material non-public information with respect to the
Shares.
(g) PRIVATE PLACEMENT. Each of Counterparty and BofA represents that
it (A) is an "accredited investor" within the meaning of Rule
501(a) under the Securities Act of 1933 (the "Securities Act"),
(B) is acquiring the instruments described in the Transaction for
its own account, and not with a view to distribution and (C)
understands and acknowledges that the Transaction has not and will
not be registered under the Securities Act.
(h) PAYMENTS UPON CERTAIN EXTRAORDINARY EVENTS. Section 9.7(b)(i) of
the Equity Definitions is amended by deleting the words "two-year"
in the second line and replacing them with the words "180 calendar
day".
(i) CONDITIONS OF EFFECTIVENESS. If the purchase of the Second Tranche
Shares (as defined in the Purchase Agreement dated October 25,
1999 between BofA and the Counterparty) is not successfully
closed, then this Transaction shall be of no effect and no
financial compensation shall be due either party.
4
<PAGE>
Please confirm your acceptance and agreement with the foregoing by
immediately executing the copy of this Confirmation enclosed for that purpose
and returning it to Bank of America, N.A. by facsimile at 212-847-5124.
Very truly yours,
BANK OF AMERICA, N.A.
By: /s/ William Caccamise
-----------------------------
Authorized Signatory
Name: William Caccamise
Confirmed
as of the date first above written:
BJ SERVICES COMPANY
By: /s/ T. M. Whichard
----------------------------
Authorized Signatory
Name: T. M. Whichard
6
<PAGE>
October 27, 1999
To: BJ Services Company
5500 Northwest Central Drive
Houston, TX 77092
Attn. Vice President - Treasury
Telephone: 713-895-5847
Facsimile: 713-895-3420
From: Bank of America, N.A.
c/o Banc of America Securities LLC
9 West 57th Street, 40th floor
New York, NY 10019
Telephone 212-583-8373
Facsimile: 212-847-5124
Re: Share Option Transaction
Reference: NY-2967P
The purpose of this letter agreement is to confirm the terms and
conditions of the Transaction entered into between BANK OF AMERICA, N.A.,
("BofA") and BJ SERVICES COMPANY ("Counterparty") on the Trade Date specified
below (the "Transaction"). This letter agreement constitutes a
"Confirmation" as referred to in the ISDA Master Agreement specified below.
The definitions and provisions contained in the 1996 ISDA Equity
Derivatives Definitions (the "Equity Definitions"), as published by the
International Swaps and Derivatives Association, Inc., are incorporated into
this Confirmation. In the event of any inconsistency between the Equity
Definitions and this Confirmation, this Confirmation shall govern. This
Confirmation evidences a complete binding agreement between the Counterparty
and BofA as to the terms of the Transaction to which this Confirmation
relates.
Each party is hereby advised, and each such party acknowledges, that
the other party has engaged in, or refrained from engaging in, substantial
financial transactions and has taken other material actions in reliance upon
the parties' entry into the Transaction to which this Confirmation relates on
the terms and conditions set forth below.
1. If the Counterparty and BofA have entered into an ISDA Master
Agreement (the "Agreement"), then this Confirmation supplements, forms a part
of, and is subject to, that Agreement, as amended and supplemented from time
to time. All provisions contained in the Agreement govern this Confirmation
except as expressly modified below. If the Counterparty and BofA have not
entered into an ISDA Master Agreement, then they agree to use all reasonable
efforts to promptly negotiate, execute and deliver an agreement in the form
of the ISDA Master Agreement (Multicurrency-Cross Border) (the "ISDA Form"),
with such modifications as the Counterparty and BofA will in good faith
agree. Upon the execution of such an agreement, this Confirmation will
supplement, form a part of, and be subject to, that agreement. All
provisions contained or incorporated by reference in that agreement upon its
execution will govern this Confirmation except as expressly modified below.
Until the parties execute and deliver that agreement, this Confirmation,
together with all other documents relating to the ISDA Form (each a
"Confirmation") confirming transactions (each a "Transaction") entered into
between us (notwithstanding anything to the contrary in a Confirmation),
shall supplement, form a part of, and be subject to an agreement in the form
of the ISDA Form as if we had executed an agreement in such form (but without
any Schedule) on the Trade Date of the first such Transaction between us
(such agreement, or the ISDA Form, hereinafter the "Agreement"). In the
event of any inconsistency between the provisions of the agreement and this
Confirmation, this Confirmation will prevail for the purpose of this
Transaction.
1
<PAGE>
2. The terms of the particular Transaction to which this Confirmation
relates are as follows:
General Terms
Trade Date: October 25, 1999
Option Style: European
Option Type: Put
Seller: Counterparty
Buyer: BofA
Shares: The common stock of BJ Services
Company (the "Issuer") (Exchange
symbol "BJS")
Number of Options: 2,949,972
Option Entitlement: One Share per Option
Strike Price: U.S. $36.9741
Premium: U.S. $6,327,689.94
Premium Payment Date: October 28, 1999
Exchange(s): New York Stock Exchange
Related Exchange(s): The principal exchange(s) for options
contracts or futures contracts, if
any, with respect to the Shares
Procedure for Exercise:
Expiration Time: At the close of trading on the
Exchange
Expiration Date: April 17, 2000
In-the-Money: That the Reference Price is less than
the Strike Price
Automatic Exercise: Applicable
Valuation Date: The Expiration Date
Valuation Time The Expiration Time
For the avoidance of doubt, the first two lines of Section 4.3(a) of the
Equity Definitions are amended to read: 'Section 4.3 Market Disruption
Event. (a) "Market Disruption Event" in relation to a
Physically-settled Option Transaction" means:'
Reference Price: The closing price per Share on the
Exchange at the Valuation Time on the
Valuation Date
Seller's Telephone
Number and Facsimile Number Attention: Vice President - Treasury
2
<PAGE>
and Contact Details for Purpose Telephone. 713-895-5847
of Giving Notice: Facsimile: 713-895-3420
Settlement Terms:
Physical Settlement: Applicable
Failure to Deliver: Applicable
Adjustments:
Method of Adjustment: Calculation Agent Adjustment
Extraordinary Events:
Consequences of Merger Events
(a) Share-for-Share: Alternative Obligation
(b) Share-for-Other: Cancellation and Payment
(c) Share-for-Combined: Cancellation and Payment
Nationalization or Insolvency: Negotiated Close-out
3. Calculation Agent: BofA
4. Accounts Details:
Payments to BofA:
Pay to: Bank of America, N.A.
F/A/O: Equity Derivatives - Bank
Account No. : 0659795652
Routing No. : 053000196
Payments to Counterparty:
Please provide to expedite payment.
5. Offices:
(a) The Office of BofA for the Transaction is: Charlotte
Address and phone numbers for Notices:
c/o Banc of America Securities LLC
9 West 57th Street, 40th floor
New York, NY 10019
Telephone: 212-583-8373
Facsimile: 212-583-8573
(b) The Office of the Counterparty for the Transaction is:
Inapplicable. Counterparty is not a Multibranch Party.
Address and phone numbers for Notices:
5500 Northwest Central Drive
Houston, TX 77092
3
<PAGE>
Attn. Vice President - Treasury
Telephone: 713-895-5847
Facsimile: 713-895-3420
6. Other Provisions
(a) NON-RELIANCE. It is acting for its own account, and it has made
its own independent decision to enter into this Transaction and as
to whether this Transaction is appropriate or proper for it based
upon its own judgement and upon advice from such advisors as it
has deemed necessary. It is not relying on any communication
(written or oral) of the other party as investment advice or as a
recommendation to enter into this Transaction; it being understood
that information and explanations related to the terms and
conditions of this Transaction shall not be considered investment
advice or a recommendation to enter into this Transaction. It has
not received from the other party any assurance or guarantee as to
the expected results of this Transaction.
(b) DESIGNATION BY BOFA. Notwithstanding any other provision in this
Confirmation to the contrary requiring or allowing BofA to
purchase, sell, receive or deliver any shares or other securities
to or from the Counterparty, BofA may designate any of its
affiliates to purchase, sell, receive or deliver such shares or
other securities and otherwise to perform BofA obligations in
respect of this Transaction and any such designee may assume such
obligations. BofA shall be discharged of its obligations to the
Counterparty to the extent of any such performance.
(c) RISK MANAGEMENT. It has entered into this Transaction for the
purpose of managing its borrowings or investments, hedging its
underlying assets or liabilities or in connection with its line of
business.
(d) EVALUATION AND UNDERSTANDING. It is capable of evaluating and
understanding (on its own behalf or through independent
professional advice), and understands and accepts, the terms,
conditions and risks of this Transaction. It is also capable of
assuming, and assumes, the financial and other risks of this
Transaction.
(e) STATUS OF PARTIES. The other party is not acting as a fiduciary or
an advisor for it in respect of this Transaction.
(f) NO INFORMATION. The Counterparty represents and warrants that it
and its affiliates are not entering into the Transaction on the
basis of any material non-public information with respect to the
Shares.
(g) PRIVATE PLACEMENT. Each of Counterparty and BofA represents that
it (A) is an "accredited investor" within the meaning of Rule
501(a) under the Securities Act of 1933 (the "Securities Act"),
(B) is acquiring the instruments described in the Transaction for
its own account, and not with a view to distribution and (C)
understands and acknowledges that the Transaction has not and will
not be registered under the Securities Act.
(h) PAYMENTS UPON CERTAIN EXTRAORDINARY EVENTS. Section 9.7(b)(i) of
the Equity Definitions is amended by deleting the words "two-year"
in the second line and replacing them with the words "180 calendar
day".
(i) CONDITIONS OF EFFECTIVENESS. If the purchase of the Second Tranche
Shares (as defined in the Purchase Agreement dated October 25,
1999 between BofA and the Counterparty) is not successfully
closed, then this Transaction shall be of no effect and no
financial compensation shall be due either party.
4
<PAGE>
Please confirm your acceptance and agreement with the foregoing by
immediately executing the copy of this Confirmation enclosed for that purpose
and returning it to Bank of America, N.A. by facsimile at 212-847-5124.
Very truly yours,
BANK OF AMERICA, N.A.
By: /s/ William Caccamise
----------------------------
Authorized Signatory
Name: William Caccamise
Confirmed
as of the date first above written:
BJ SERVICES COMPANY
By: /s/ T. M. Whichard
----------------------------
Authorized Signatory
Name: T. M. Whichard
5
<PAGE>
AMENDMENT TO
BJ SERVICES COMPANY
1990 STOCK INCENTIVE PLAN
(AS AMENDED)
WHEREAS, BJ Services Company (the "Company") has heretofore adopted the
BJ Services Company 1990 Stock Incentive Plan (as amended) (the "Plan"); and
WHEREAS, the Company desires to amend the Plan in certain respects;
NOW, THEREFORE, the Plan shall be amended as follows, effective as of the
date of adoption of this amendment by the Company:
1. The first sentence of Article I, Paragraph 2 of the Plan shall be
deleted and the following shall be substituted therefor:
"The aggregate number of shares of Common Stock, $.10 par value
per share, of the Company ("Common Stock") that may be issued
under the Plan shall not exceed 3,000,000 shares; provided,
however, that in the event that at any time after the effective
date of the Plan the outstanding shares of Common Stock are
changed into or exchanged for a different number or kind of shares
or other securities by reason of merger, consolidation,
recapitalization, reclassification, stock split, stock dividend,
combination of shares or the like, the aggregate number and class
of securities available under the Plan shall be ratably adjusted
by the Committee (as hereinafter defined), whose determination
shall be final and binding upon the Company and all other
interested persons."
2. Article II, Paragraph 3(b)(v) of the Plan shall be deleted and the
following shall be substituted therefor:
"(v) If the Employee Optionee's employment is terminated
after the one-year period following the date of grant for any
reason (other than on account of such person's death, retirement,
disability or Cause termination), at the expiration of a period of
three months after the Employee Optionee's employment is so
terminated except (A) as otherwise provided for in the option
agreement (but for no longer than one year) or (B) as provided in
Article VIII; provided, however, notwithstanding anything to the
contrary, no option shall ever be exercisable later than the
Nonqualified Option Expiration Date;"
3. Article II, Paragraph 3(b)(vi) of the Plan shall be deleted.
4. The first sentence of Article II, Paragraph 3(e) of the Plan shall
be deleted and the following shall be substituted therefor:
<PAGE>
"In the event that at any time after the effective date of the
Plan the outstanding shares of Common Stock are changed into or
exchanged for a different number or kind of shares or other
securities by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of
shares or the like, the Committee shall make an appropriate and
equitable adjustment in the number and kind of shares as to which
all outstanding nonqualified options granted under Article II, or
portions thereof then unexercised, shall be exercisable, to the
end that after such event the shares subject to Article II of the
Plan and each Employee Optionee's proportionate interest shall be
maintained as before the occurrence of such event."
5. Article III, Paragraph 3(b)(v) of the Plan shall be deleted and
the following shall be substituted therefor:
"(v) If the Employee Optionee's employment is terminated
after the one-year period following the date of grant for any
reason (other than on account of such person's death, retirement,
disability or Cause termination), at the expiration of a period of
three months after the Employee Optionee's employment is so
terminated except (A) as otherwise provided for in the option
agreement (but for no longer than one year) or (B) as provided in
Article VIII; provided, however, notwithstanding anything to the
contrary, no option shall ever be exercisable later than the ISO
Expiration Date;"
6. Article III, Paragraph 3(b)(vi) of the Plan shall be deleted.
7. The first sentence of Article III, Paragraph 3(e) of the Plan
shall be deleted and the following shall be substituted therefor:
"In the event that at any time after the effective date of the
Plan the outstanding shares of Common Stock are changed into or
exchanged for a different number or kind of shares or other
securities by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of
shares or the like, the Committee shall make an appropriate and
equitable adjustment in the number and kind of shares as to which
all outstanding incentive stock options granted under Article III,
or portions thereof then unexercised, shall be exercisable, to the
end that after such event the shares subject to Article III of the
Plan and each Employee Optionee's proportionate interest shall be
maintained as before the occurrence of such event."
8. The last sentence of Article III, Paragraph 3(e) of the Plan shall
be deleted.
<PAGE>
9. The following new Article VIII shall be added to the Plan:
"ARTICLE VIII
CHANGE OF CONTROL
Notwithstanding any provision to the contrary in the Plan,
the following additional provisions shall become effective upon
the occurrence of a Change of Control:
(a) PUBLICLY-TRADED STOCK TRANSACTION. If the
consideration offered to shareholders of the Company in connection
with a Change of Control consists of shares of the common stock
('New Stock') of the entity acquiring the Company or the parent
company of the entity acquiring the Company (the 'Acquiring
Entity') that are publicly traded, upon the occurrence of such
Change of Control, the Acquiring Entity shall assume the each
Employee Optionee's outstanding options to purchase Common Stock
('Prior Options') and each such Prior Option shall become an
option (a 'New Option') (i) to purchase that number of shares of
New Stock determined by multiplying the number of shares of Common
Stock issuable upon exercise of such Prior Option by the exchange
ratio of Common Stock in the transaction, (ii) at an exercise
price per share determined by dividing the per share exercise
price of such Prior Option by the exchange ratio of Common Stock
in the transaction and (iii) otherwise upon the same terms and
conditions as such Prior Option, except that (A) such New Option
shall be exercisable until the applicable Nonqualified Option
Expiration Date or ISO Expiration Date regardless of any
termination of Employee Optionee's employment following the Change
of Control, and (B) such New Option may be surrendered to the
Acquiring Entity during the 90-day period following the occurrence
of the Change of Control in return for a payment in cash or shares
of New Stock or a combination of cash and shares of New Stock as
determined by the Acquiring Entity, equal in value to the excess
of (I) the higher of (1) the per share value of the consideration
received by shareholders of the Company upon the occurrence of the
Change of Control (valued for such purpose as of the date of the
Change of Control) or (2) the highest per share price for Common
Stock of the Company during the period commencing with the public
announcement of the proposed Change of Control transaction and
ending upon the occurrence of the Change of Control over (II) the
per share exercise price of the Common Stock of the Company under
the Prior Option, multiplied by the number of shares of Common
Stock of the Company subject to the Prior Option.
(b) OTHER TRANSACTION. If the consideration offered to
shareholders of the Company in connection with a Change of Control
consists of cash or of New Stock that is not publicly traded, upon
the
<PAGE>
occurrence of such Change of Control, each Employee Optionee shall
surrender each of his outstanding options to purchase Common Stock
to the Acquiring Entity in return for a payment in cash equal to the
Black-Scholes value of such option as of the date of the Change of
Control, without discount for risk of forfeiture and non-transferability.
Any Black-Scholes valuation for this purpose shall be performed on a
basis consistent with the methodology set forth on Exhibit A to this
Plan."
10. The following new Exhibit A shall be added to the Plan:
"EXHIBIT A
BJ SERVICES CORPORATION
BLACK-SCHOLES OPTION VALUATION
<TABLE>
<S> <C>
The stock's current market value $ __________
Estimated future dividend yield __________%
The option's exercise or strike price $ __________
Option term (in years) __________
Risk free rate for option term* __________%
Estimated future annual stock volatility** __________
Present value as a percent of market value __________%
Present value per share $ __________"
</TABLE>
11. As amended hereby, the Plan is specifically ratified and
reaffirmed
*As determined by the then current rate on Treasury bills with
a maturity approximating the remaining option life.
**Based on the prior twelve months volatility.
<PAGE>
AMENDMENT TO
BJ SERVICES COMPANY
1995 INCENTIVE PLAN
WHEREAS, BJ Services Company (the "Company") has heretofore adopted the
BJ Services Company 1995 Incentive Plan (the "Plan"); and
WHEREAS, the Company desires to amend the Plan in certain respects;
NOW, THEREFORE, the Plan shall be amended as follows, effective as of the
date of adoption of this amendment by the Company:
1. The first sentence of Article I, Paragraph 2 of the Plan shall be
deleted and the following shall be substituted therefor:
"The aggregate number of shares of Common Stock, $.10 par value
per share, of the Company ('Common Stock') that may be issued
under the Plan shall not exceed 3,000,000 shares; provided,
however, that in the event that at any time after the effective
date of the Plan the outstanding shares of Common Stock are
changed into or exchanged for a different number or kind of shares
or other securities by reason of merger, consolidation,
recapitalization, reclassification, stock split, stock dividend,
combination of shares or the like, the aggregate number and class
of securities available under the Plan shall be ratably adjusted
by the Committee (as hereinafter defined), whose determination
shall be final and binding upon the Company and all other
interested persons."
2. The following shall be added at the end of the first sentence of
Article II, Paragraph 1 of the Plan:
"(subject to adjustment in the same manner as provided in Article
I, Paragraph 2 with respect to shares of Common Stock available
under the Plan)"
3. Article II, Paragraph 3(b)(v) of the Plan shall be deleted and the
following shall be substituted therefor:
"(v) If the Employee Optionee's employment is terminated
after the six-month period following the date of grant for any
reason (other than on account of such person's death, retirement,
disability or Cause termination), at the expiration of a period of
three months after the Employee Optionee's employment is so
terminated except (A) as otherwise provided in the option
agreement (but for no longer than one year) or (B) as provided in
Article X; provided, however, notwithstanding
<PAGE>
anything to the contrary, no option shall ever be exercisable later
than the Nonqualified Option Expiration Date;"
4. Article II, Paragraph 3(b)(vi) of the Plan shall be deleted.
5. The first sentence of Article II, Paragraph 3(e) of the Plan shall
be deleted and the following shall be substituted therefor:
"In the event that at any time after the effective date of the
Plan the outstanding shares of Common Stock are changed into or
exchanged for a different number or kind of shares or other
securities by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of
shares or the like, the Committee shall make an appropriate and
equitable adjustment in the number and kind of shares as to which
all outstanding nonqualified options granted under Article II, or
portions thereof then unexercised, shall be exercisable, and with
any necessary corresponding adjustment in exercise price per
share, to the end that after such event the shares subject to
Article II of the Plan and each Employee Optionee's proportionate
interest shall be maintained as before the occurrence of such
event."
6. The following shall be added at the end of the first sentence of
Article III, Paragraph 1 of the Plan:
"(subject to adjustment in the same manner as provided in Article
I, Paragraph 2 with respect to shares of Common Stock available
under the Plan)"
7. Article III, Paragraph 3(b)(v) of the Plan shall be deleted and
the following shall be substituted therefor:
"(v) If the Employee Optionee's employment is terminated
after the six-month period following the date of grant for any
reason (other than on account of such person's death, retirement,
disability or Cause termination), at the expiration of a period of
three months after the Employee Optionee's employment is so
terminated except (A) as otherwise provided in the option
agreement (but for no longer than one year) or (B) as provided in
Article X; provided, however, notwithstanding anything to the
contrary, no option shall ever be exercisable later than the ISO
Expiration Date;"
8. Article III, Paragraph 3(b)(vi) of the Plan shall be deleted.
9. The first sentence of Article III, Paragraph 3(e) of the Plan
shall be deleted and the following shall be substituted therefor:
<PAGE>
"In the event that at any time after the effective date of the
Plan the outstanding shares of Common Stock are changed into or
exchanged for a different number or kind of shares or other
securities by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of
shares or the like, the Committee shall make an appropriate and
equitable adjustment in the number and kind of shares as to which
all outstanding incentive stock options granted under Article III,
or portions thereof then unexercised, shall be exercisable, and
with any necessary corresponding adjustment in exercise price per
share, to the end that after such event the shares subject to
Article III of the Plan and each Employee Optionee's proportionate
interest shall be maintained as before the occurrence of such
event."
10. The last sentence of Article III, Paragraph 3(e) of the Plan shall
be deleted.
11. The following shall be added at the end of the first sentence of
Article V, Paragraph 1 of the Plan:
"(subject to adjustment in the same manner as provided in Article I,
Paragraph 2 with respect to shares of Common Stock available under
the Plan)"
12. The following new Article X shall be added to the Plan:
"ARTICLE X
CHANGE OF CONTROL
Notwithstanding any provision to the contrary in the Plan,
the following additional provisions shall become effective upon
the occurrence of a Change of Control:
(a) PUBLICLY-TRADED STOCK TRANSACTION. If the
consideration offered to shareholders of the Company in connection
with a Change of Control consists of shares of the common stock
('New Stock') of the entity acquiring the Company or the parent
company of the entity acquiring the Company (the 'Acquiring
Entity') that are publicly traded, upon the occurrence of such
Change of Control, the Acquiring Entity shall assume the each
Employee Optionee's outstanding options to purchase Common Stock
('Prior Options') and each such Prior Option shall become an
option (a 'New Option') (i) to purchase that number of shares of
New Stock determined by multiplying the number of shares of Common
Stock issuable upon exercise of such Prior Option by the exchange
ratio of Common Stock in the transaction, (ii) at an exercise
price per share determined by dividing the per share exercise
price of such Prior Option by the exchange ratio of Common Stock
in the transaction and (iii)
<PAGE>
otherwise upon the same terms and conditions as such Prior Option,
except that (A) such New Option shall be exercisable until the
applicable Nonqualified Option Expiration Date or ISO Expiration Date
regardless of any termination of Employee Optionee's employment
following the Change of Control, and (B) such New Option may be
surrendered to the Acquiring Entity during the 90-day period following
the occurrence of the Change of Control in return for a payment in
cash or shares of New Stock or a combination of cash and shares of New
Stock as determined by the Acquiring Entity, equal in value to the
excess of (I) the higher of (1) the per share value of the consideration
received by shareholders of the Company upon the occurrence of the
Change of Control (valued for such purpose as of the date of the
Change of Control) or (2) the highest per share price for Common Stock
of the Company during the period commencing with the public announcement
of the proposed Change of Control transaction and ending upon the
occurrence of the Change of Control over (II) the per share exercise
price of the Common Stock of the Company under the Prior Option,
multiplied by the number of shares of Common Stock of the Company subject
to the Prior Option.
(b) OTHER TRANSACTION. If the consideration offered to
shareholders of the Company in connection with a Change of Control
consists of cash or of New Stock that is not publicly traded, upon
the occurrence of such Change of Control, each Employee Optionee
shall surrender each of his outstanding options to purchase Common
Stock to the Acquiring Entity in return for a payment in cash
equal to the Black-Scholes value of such option as of the date of
the Change of Control, without discount for risk of forfeiture and
non-transferability. Any Black-Scholes valuation for this purpose
shall be performed on a basis consistent with the methodology set
forth on Exhibit A to this Plan."
13. The following new Exhibit A shall be added to the Plan:
"EXHIBIT A
BJ SERVICES CORPORATION
BLACK-SCHOLES OPTION VALUATION
<TABLE>
<S> <C>
The stock's current market value $ __________
Estimated future dividend yield __________%
The option's exercise or strike price $ __________
Option term (in years) __________
Risk free rate for option term* __________%
Estimated future annual stock volatility** __________
Present value as a percent of market value __________%
Present value per share $ __________"
</TABLE>
<PAGE>
14. As amended hereby, the Plan is specifically ratified and
reaffirmed
*As determined by the then current rate on Treasury bills with
a maturity approximating the remaining option life.
**Based on the prior twelve months volatility.
<PAGE>
AMENDMENT TO
BJ SERVICES COMPANY
1997 INCENTIVE PLAN
WHEREAS, BJ Services Company (the "Company") has heretofore adopted the
BJ Services Company 1997 Incentive Plan (the "Plan"); and
WHEREAS, the Company desires to amend the Plan in certain respects;
NOW, THEREFORE, the Plan shall be amended as follows, effective as of the
date of adoption of this amendment by the Company:
1. The first sentence of Article I, Paragraph 2 of the Plan shall be
deleted and the following shall be substituted therefor:
"The aggregate number of shares of Common Stock, $.10 par value
per share, of the Company ('Common Stock') that may be issued
under the Plan shall not exceed 3,000,000 shares; provided,
however, that in the event that at any time after the effective
date of the Plan the outstanding shares of Common Stock are
changed into or exchanged for a different number or kind of shares
or other securities by reason of merger, consolidation,
recapitalization, reclassification, stock split, stock dividend,
combination of shares or the like, the aggregate number and class
of securities available under the Plan shall be ratably adjusted
by the Committee (as hereinafter defined), whose determination
shall be final and binding upon the Company and all other
interested persons."
2. The following shall be added at the end of the first sentence of
Article II, Paragraph 1 of the Plan:
"(subject to adjustment in the same manner as provided in Article
I, Paragraph 2 with respect to shares of Common Stock available
under the Plan)"
3. Article II, Paragraph 3(b)(iv) of the Plan shall be deleted and
the following shall be substituted therefor:
"(iv) If the Employee Optionee's employment is terminated
after the six-month period following the date of grant for any
reason (other than such person's death, retirement, disability or
Cause termination), at the expiration of a period of three months
after the Employee Optionee's employment is so terminated except
(A) as otherwise provided for in the option agreement (but for no
longer than one year) or (B) as provided in Article XII; provided
however, notwithstanding anything to the contrary,
<PAGE>
no option shall ever be exercisable later than the Nonqualified
Option Expiration Date;"
4. Article II, Paragraph 3(b)(v) of the Plan shall be deleted.
5. The first sentence of Article II, Paragraph 3(e) of the Plan shall
be deleted and the following shall be substituted therefor:
"In the event that at any time after the effective date of the
Plan the outstanding shares of Common Stock are changed into or
exchanged for, a different number or kind of shares or other
securities by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of
shares or the like, the Committee shall make an appropriate and
equitable adjustment in the number and kind of shares as to which
all outstanding nonqualified options granted under Article II, or
portions thereof then unexercised, shall be exercisable, and with
any necessary corresponding adjustment in exercise price per
share, to the end that after such event the shares subject to
Article II of the Plan and each Employee Optionee's proportionate
interest shall be maintained as before the occurrence of such
event."
6. The following shall be added at the end of the first sentence of
Article III, Paragraph 1 of the Plan:
"(subject to adjustment in the same manner as provided in Article I,
Paragraph 2 with respect to shares of Common Stock available under
the Plan)"
7. Article III, Paragraph 3(b)(iv) of the Plan shall be deleted and
the following shall be substituted therefor:
"(iv) If the Employee Optionee's employment is terminated
after the six-month period following the date of grant for any
reason (other than such person's death, retirement, disability or
Cause termination), at the expiration of a period of three months
after the Employee Optionee's employment is so terminated except
(A) as otherwise provided for in the option agreement (but for no
longer than one year) or (B) as provided in Article XII; provided
however, notwithstanding anything to the contrary, no option shall
ever be exercisable later than the ISO Expiration Date;"
8. Article III, Paragraph 3(b)(v) of the Plan shall be deleted.
9. The first sentence of Article III, Paragraph 3(e) of the Plan
shall be deleted and the following shall be substituted therefor:
<PAGE>
"In the event that at any time after the effective date of the
Plan the outstanding shares of Common Stock are changed into or
exchanged for a different number or kind of shares or other
securities by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of
shares or the like, the Committee shall make an appropriate and
equitable adjustment in the number and kind of shares as to which
all outstanding incentive stock options granted under Article III,
or portions thereof then unexercised, shall be exercisable, and
with any necessary corresponding adjustment in exercise price per
share, to the end that after such event the shares subject to
Article III of the Plan and each Employee Optionee's proportionate
interest shall be maintained as before the occurrence of such
event."
10. The last sentence of Article III, Paragraph 3(e) of the Plan shall
be deleted.
11. The following shall be added at the end of the first sentence of
Article V, Paragraph 1 of the Plan:
"(subject to adjustment in the same manner as provided in Article
I, Paragraph 2 with respect to shares of Common Stock available
under the Plan)"
12. Article VIII of the Plan shall be deleted and the following shall
be substituted therefor:
"ARTICLE VIII
ADJUSTMENT OF AWARDS
"In the event that at any time after the effective date of
the Plan the outstanding shares of Common Stock are changed into
or exchanged for a different number or kind of shares or other
securities by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of
shares or the like, the Committee shall make an appropriate and
equitable adjustment in the number and kind of shares as to all
outstanding Awards, or portions thereof then unexercised, and with
any necessary corresponding adjustment in exercise price per
share, to the end that after such event the Awards and each
Employee's proportionate interest shall be maintained as before
the occurrence of such event. Any such adjustment made by the
Committee shall be final and binding upon all Employees, the
Company, and all other interested persons."
13. The following new Article XII shall be added to the Plan:
"ARTICLE XII
<PAGE>
CHANGE OF CONTROL
Notwithstanding any provision to the contrary in the Plan,
the following additional provisions shall become effective upon
the occurrence of a Change of Control:
(a) PUBLICLY-TRADED STOCK TRANSACTION. If the
consideration offered to shareholders of the Company in connection
with a Change of Control consists of shares of the common stock
('New Stock') of the entity acquiring the Company or the parent
company of the entity acquiring the Company (the 'Acquiring
Entity') that are publicly traded, upon the occurrence of such
Change of Control, the Acquiring Entity shall assume the each
Employee Optionee's outstanding options to purchase Common Stock
('Prior Options') and each such Prior Option shall become an
option (a 'New Option') (i) to purchase that number of shares of
New Stock determined by multiplying the number of shares of Common
Stock issuable upon exercise of such Prior Option by the exchange
ratio of Common Stock in the transaction, (ii) at an exercise
price per share determined by dividing the per share exercise
price of such Prior Option by the exchange ratio of Common Stock
in the transaction and (iii) otherwise upon the same terms and
conditions as such Prior Option, except that (A) such New Option
shall be exercisable until the applicable Nonqualified Option
Expiration Date or ISO Expiration Date regardless of any
termination of Employee Optionee's employment following the Change
of Control, and (B) such New Option may be surrendered to the
Acquiring Entity during the 90-day period following the occurrence
of the Change of Control in return for a payment in cash or shares
of New Stock or a combination of cash and shares of New Stock as
determined by the Acquiring Entity, equal in value to the excess
of (I) the higher of (1) the per share value of the consideration
received by shareholders of the Company upon the occurrence of the
Change of Control (valued for such purpose as of the date of the
Change of Control) or (2) the highest per share price for Common
Stock of the Company during the period commencing with the public
announcement of the proposed Change of Control transaction and
ending upon the occurrence of the Change of Control over (II) the
per share exercise price of the Common Stock of the Company under
the Prior Option, multiplied by the number of shares of Common
Stock of the Company subject to the Prior Option.
(b) OTHER TRANSACTION. If the consideration offered to
shareholders of the Company in connection with a Change of Control
consists of cash or of New Stock that is not publicly traded, upon
the occurrence of such Change of Control, each Employee Optionee
shall surrender each of his outstanding options to purchase Common
Stock to the Acquiring Entity in return for a payment in cash
equal to the Black-Scholes value of such option as of the date of
the Change of Control,
<PAGE>
without discount for risk of forfeiture and non-transferability. Any
Black-Scholes valuation for this purpose shall be performed on a basis
consistent with the methodology set forth on Exhibit A to this Plan."
14. The following new Exhibit A shall be added to the Plan:
"EXHIBIT A
BJ SERVICES CORPORATION
BLACK-SCHOLES OPTION VALUATION
<TABLE>
<S> <C>
The stock's current market value $ __________
Estimated future dividend yield __________%
The option's exercise or strike price $ __________
Option term (in years) __________
Risk free rate for option term* __________%
Estimated future annual stock volatility** __________
Present value as a percent of market value __________%
Present value per share $ __________"
</TABLE>
15. As amended hereby, the Plan is specifically ratified and
reaffirmed
*As determined by the then current rate on Treasury bills with
a maturity approximating the remaining option life.
**Based on the prior twelve months volatility.
<PAGE>
EXHIBIT B
AMENDMENT TO
BJ SERVICES COMPANY
1999 EMPLOYEE STOCK PURCHASE PLAN
WHEREAS, BJ SERVICES COMPANY (the "Company") has heretofore adopted the
BJ Services Company 1999 Employee Stock Purchase Plan (the "Plan"); and
WHEREAS, the Company desires to amend the Plan in certain respects;
NOW, THEREFORE, the Plan shall be amended as follows, effective as of the
date of adoption of this amendment by the Company:
1. The following sentence shall be added at the end of subparagraph
5(a) of the Plan:
"Notwithstanding the foregoing, if, as of any date that the Plan is in
effect, there are not sufficient shares of Stock available under the Plan
to allow for the grant to each participant of an option covering the
number of shares determined in accordance with the preceding sentence,
each participant shall be granted an option under the Plan for his or her
pro-rata share of the total number of shares of Stock then available
under the Plan."
2. Subparagraph 5(g) of the Plan shall be deleted and the following
shall be substituted therefor:
"(g) CONTINUING ELECTION. Subject to the limitation set forth in
subparagraph 5(e), a participant (i) who has elected to participate in
the Plan pursuant to subparagraph 5(b) as of a date of grant and (ii) who
takes no action to change or revoke such election as of the next
following date of grant and/or as of any subsequent date of grant prior
to any such respective date of grant shall be deemed to have made the
same election, including the same attendant payroll deduction
authorization, for such next following and/or subsequent date(s) of grant
as was in effect immediately prior to such respective date of grant. If a
participant's payroll deductions are limited by subparagraph 5(e) for the
option period beginning in any calendar year, then, subject to the
limitation set forth in= subparagraph 5(e), such payroll deductions shall
recommence at the rate provided .. in such participant's payroll
deduction authorization for the option period beginning in the following
calendar year, unless the participant changes the amount of his payroll
deduction authorization pursuant to paragraph 5, withdraws from the Plan
as provided in paragraph 7, or is terminated from participation in the
Plan as provided in paragraph 8."
3. The following new subparagraph 5(h) shall be added to Paragraph 5
of the Plan:
"(h) SPECIAL RULES FOR OPTION PERIOD COMMENCING ON OCTOBER 1,
1999. Notwithstanding any provision of the Plan to the contrary, with
respect to
<PAGE>
the option period commencing on October 1, 1999, each eligible
employee's; election to participate in the Company's employee stock
purchase plan shall apply first to the BJ Services 1990 Employee Stock
Purchase Plan (the `1990 Plan'). If the number of shares of Stock
available under the 1990 Plan is not sufficient to allow for the grant to
each participant of an option covering the number of shares of Stock
determined in accordance with the penultimate sentence of subparagraph
5(a) of the 1990 Plan (the `Elected Shares'); each participant (i) shall
be granted an option under the 1990 Plan covering such participant's
pro-rata share of the total number of shares of Stock then available
under the 1990 Plan in accordance with the last sentence of subparagraph
5(a) thereof, (ii) shall be deemed to have elected to participate in the
Plan to the extent of the excess of such participant's number of Elected
Shares over the number of shares of Stock subject to the option granted
to such participant under the 1990 Plan (the `Excess Shares') and (iii)
shall be granted an option under the Plan covering such Excess Shares.
With respect to the option period commencing on October 1, 1999, options
shall be granted under the Plan solely in accordance with the preceding
sentence. Finally, with respect to any option period commencing after
October 1, 1999, each eligible employee's election to participate in the
Company's employee stock purchase plan shall apply solely to the Plan."
4. As amended hereby, the Plan is specifically ratified and
reaffirmed.
<PAGE>
EXHIBIT 21.1
BJ SERVICES COMPANY
SUBSIDIARIES
<TABLE>
<CAPTION>
PERCENTAGE OWNED BY
------------------------
NAME OF ENTITY/JURISDICTION OF ORGANIZATION COMPANY SUBSIDIARY
- ------------------------------------------- -------- ----------
<S> <C> <C>
BJ SERVICES COMPANY (Delaware)
BJ Services Company Middle East (Delaware).................. 100%
Gulf Well Services Company (Kuwait) (Joint Venture)....... 40%
BJ Services Company Overseas (Delaware) (Inactive).......... 100%
BJ Services Company, U.S.A. (Delaware)...................... 100%
BJ Process and Pipeline Services Company (Texas).......... 100%
BJ-Rotary Petroleum Ltd. KFT (Hungary) (Joint Venture).... 64%
BJ Services Operating & Maintenance Company, L.L.C.
(Delaware).............................................. 100%
BJ Services, L.L. C. (Delaware)........................... 100%
CFC Holdings Inc. (Delaware).............................. 100%
CFC Partner L.L.C. (Delaware)............................. 100%
American Fracmaster L.P. (Texas)........................ 100%
Fracmaster U.S.A. Inc. (Delaware)......................... 100%
Western Oceanic, Inc. (Delaware).......................... 100%
Western Oceanic International, Inc. (Panama)............ 100%
Western Petroleum Services International Company
(Delaware).............................................. 100%
P.T. Western Petroleum Servindo (Indonesia)............. 100%
BJ Service International, Inc. (Delaware)................... 100%
BJ-Hughes C.I. Ltd. (Cayman Islands) (Inactive)........... 100%
BJ International Holdings Company......................... 100%
Nowsco-Fracmaster Company (Canada)...................... 100%
Biarritz Overseas Limited (Cyprus).................... 100%
ZAO BJ Services (Siberia)........................... 100%
BJ Services (Vietnam) Ltd............................. 100%
NMS Oil Field Limited (Cyprus)........................ 100%
Nowsco Americas S.A. (Argentina)...................... 100%
Nowsco International Limited (Barbados)............... 100%
Nowsco Well Service Company Limited (Barbados)........ 100%
Nowsco Well Service (Cyprus) Limited (Cyprus)......... 100%
Fracmaster International Limited (Cyprus)........... 100%
Canadian Fracmaster (China) Limited (Cyprus)...... 100%
FracmasterNeft (Cyprus) Limited (Cyprus)............ 100%
Canadian Fracmaster Offshore (Cyprus) Limited..... 100%
Strezhevoy Services JE (Russia)................. 50%
Verlinder Holdings Limited (Cyprus)............. 100%
ZAO Vasyugan Services (Russia).................. 50%
Chemfrac Trading Limited (Cyprus)................. 100%
ZAO FracNeftGaz (Russia)........................ 50%
Fracmaster Technical Services Limited (Cyprus).... 100%
Fracmaster Consultants Limited (Cyprus)........... 100%
Fracmaster Russia Holdings Limited (Cyprus)....... 100%
ZAO Samotlor Fracmaster Services................ 100%
Poseidon Treasury Services (Cyprus)............... 100%
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OWNED BY
------------------------
NAME OF ENTITY/JURISDICTION OF ORGANIZATION COMPANY SUBSIDIARY
- ------------------------------------------- -------- ----------
<S> <C> <C>
Samotlor Holdings Limited (Cyprus)................ 100%
UFM Holdings Limited (Cyprus)..................... 100%
Tomsk Holdings Limited (Cyprus)................. 100%
ZAO Uganskfracmaster (Russia)................... 50%
ZAO FracmasterNeft (Russia)....................... 100%
Nowsco Well Service (Vostok) Limited (Russia)....... 100%
Nowsco Well Service International Limited (Bermuda)... 100%
Nowsco Well Service (Ireland) Limited (Ireland)....... 100%
PT Nowsco Well Service (Indonesia)(Joint Venture)..... 100%
BJ Oilwell Services (M) Sdn. Bhd. (Malaysia)(Joint
Venture)................................................ 30%
BJ Process & Pipeline Services Pte. Ltd. (Singapore)...... 100%
BJ Service Arabia Ltd. (Saudi Arabia) (Joint Venture)..... 70%
BJ Service International GmbH (Germany)................... 100%
BJ Service International (Thailand) Ltd................... 100%
BJ Services C.I., Ltd. (Cayman Islands)................... 100%
BJ Services Company B.V. (Netherlands).................... 100%
BJ Services AS (Norway)................................. 100%
BJ Services Company GmbH (Germany)...................... 100%
BJ Services Company Italia S.r.l. (Italy)............... 100%
BJ Services International BV (Netherlands).............. 100%
Nowsco (Neth) Group B.V. (Netherlands).................. 100%
BJ Tubular Services B.V. (Netherlands)................ 100%
Nowsco (UAE) LLC...................................... 100%
BJ Services Company Limited (UK).......................... 100%
BJ Petroleum Services Limited (UK)...................... 100%
BJ Process & Pipeline Services Limited (UK)............. 100%
BJ Services Company Africa Limited (UK)................. 100%
BJ Services International Limited (UK).................. 100%
McKenna & Sullivan Limited (UK)....................... 100%
BJ Services Company (Australia) Pty. Ltd. (Australia)... 100%
BJ Process & Pipeline Services (Australia) Pty.
Ltd................................................. 100%
Challenge Pipeline Services Pty. Ltd................ 100%
BJ Services Company (UK) Limited (UK)................... 100%
BJ Services (GB) Limited (UK)......................... 100%
BJ Tubular Services Limited (UK)........................ 100%
BJ Process & Pipeline Services AS (Norway)............ 100%
BJ Tubular Services A/S (Denmark)..................... 100%
Colony Drilling Company Limited (Scotland).............. 100%
BJ Services Company Mexicana S.A. de C.V. (Mexico)........ 100%
BJ Services Company, S.A. (Panama)........................ 100%
BJ Services Company (Sakhalin) Limited (Russia)........... 100%
BJ Services Company (Singapore) Pte. Ltd. (Singapore)..... 100%
ASPAC Region Ltd. (Singapore)........................... 100%
Nowsco-BJ Services Company (B) SDN BHD (Brunei)(Joint
Venture)............................................ 60%
Sarku Nowsco Well Services SDN BHD (Malaysia)(Joint
Venture)............................................ 40%
BJ Services Company (Hong Kong) Limited (Hong Kong)..... 100%
BJ Services Company (Mauritius) Ltd. (Mauritius)........ 100%
Indo-Chem Trading Limited (British Virgin Island)....... 100%
BJ Services de Venezuela, C.A. (Venezuela)................ 100%
</TABLE>
E-2
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OWNED BY
------------------------
NAME OF ENTITY/JURISDICTION OF ORGANIZATION COMPANY SUBSIDIARY
- ------------------------------------------- -------- ----------
<S> <C> <C>
BJ Services de Venezuela III, C.A. (Venezuela).......... 100%
BJ Services Do Brazil Ltda................................ 100%
SEBEP Quimica Industria e Comercio Ltda. (Brazil)....... 100%
SEBEX Oil Well Services, S.A. (Brazil).................. 100%
BJ Services International, S.A. (Panama).................. 100%
BJ Pumping Services Company S.A. (Panama) (Joint
Venture).............................................. 65%
Compania de Servicios Petroleros BJ Boliviana S.A. (BJ
Boliviana S.A.) (Bolivia)............................. 100%
International Chemical Specialities FZE (Jebel Ali)..... 100%
BJ Servicios International S.A. de C.V. (Mexico).......... 100%
BJ Services S.A. (Argentina).............................. 100%
Hughes Services Eastern Hemisphere S.A.R.L. (France)...... 100%
International Speciality Chemicals Ltd. (Cayman Islands)
(Joint Venture)......................................... 75%
Nowsco Norge AS (Norway).................................. 100%
Nowsco Well Service SRL (Italy)........................... 100%
P.T. BJ Services Indonesia (Indonesia) (Joint Venture).... 100%
Societe Algerienne de Puits Producteurs d'Hydrocarbures
(BJSP) (Algeria)........................................ 49%
</TABLE>
E-3
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement No. 33-36754 of BJ Services Company on Form S-8, in
Registration Statement No. 33-52506 of BJ Services Company on Form S-8,
in Registration Statement No. 33-62098 of BJ Services Company on Form S-8,
in Registration Statement No. 33-58637 of BJ Services Company on Form S-8,
in Registration Statement No. 33-58639 of BJ Services Company on Form S-8
and in Registration Statement No. 33-58017 of BJ Services Company on Form S-4
of our report dated November 23, 1999 appearing in this Annual Report on
Form 10-K of BJ Services Company for the year ended September 30, 1999.
DELOITTE & TOUCHE LLP
Houston, Texas
December 17, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<CASH> 3,924
<SECURITIES> 0
<RECEIVABLES> 297,975
<ALLOWANCES> 20,572
<INVENTORY> 97,287
<CURRENT-ASSETS> 438,963
<PP&E> 1,139,835
<DEPRECIATION> 480,118
<TOTAL-ASSETS> 1,824,764
<CURRENT-LIABILITIES> 445,146
<BONDS> 0
0
0
<COMMON> 7,638
<OTHER-SE> 869,451
<TOTAL-LIABILITY-AND-EQUITY> 1,824,764
<SALES> 1,131,334
<TOTAL-REVENUES> 1,131,334
<CGS> 970,280
<TOTAL-COSTS> 970,280
<OTHER-EXPENSES> 175,819
<LOSS-PROVISION> 3,301
<INTEREST-EXPENSE> 31,365
<INCOME-PRETAX> (44,909)
<INCOME-TAX> (15,221)
<INCOME-CONTINUING> (29,688)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (29,688)
<EPS-BASIC> (.42)
<EPS-DILUTED> (.42)
</TABLE>
