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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-12
BJ SERVICES COMPANY
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
January 25, 2001
--------------------
The Annual Meeting of the Stockholders of BJ Services Company (the
"Company") will be held on Thursday, January 25, 2001, at 11:00 a.m. local
time, at The Westin Galleria, located at 5060 West Alabama, Houston, Texas
77056 for the following purposes:
1. To elect two Class II directors to serve a three-year term.
2. To approve the BJ Services Company 2000 Incentive Plan.
3. To transact such other business as may properly come before the meeting
and any adjournments.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
All stockholders of record at the close of business on December 1, 2000 are
entitled to notice of and to vote at the meeting or any adjournment. At least
a majority of the outstanding shares of the Company are required to be present
at the meeting or represented by proxy to constitute a quorum.
By Order of the Board of Directors,
/s/ J. W. Stewart
J. W. Stewart
Chairman of the Board, President
and Chief Executive Officer
Houston, Texas
December 20, 2000
YOUR VOTE IS IMPORTANT
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND
RETURN YOUR PROXY AS PROMPTLY AS POSSIBLE. AN ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES, IS ENCLOSED FOR THIS PURPOSE.
<PAGE>
BJ SERVICES COMPANY
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PROXY STATEMENT
---------------------
This proxy statement is furnished to stockholders of BJ Services Company, a
Delaware corporation (the "Company"), in connection with the solicitation of
proxies on behalf of the Board of Directors of the Company to be voted at the
Annual Meeting of Stockholders of the Company (the "2001 Annual Meeting"), to
be held at The Westin Galleria located at 5060 West Alabama, Houston, Texas
77056, on Thursday, January 25, 2001, at 11:00 a.m. local time, and at any and
all adjournments. Stockholders of record at the close of business on December
1, 2000 will be entitled to notice of and to vote at the meeting and at all
adjournments.
When a properly executed proxy is received prior to the meeting, the shares
represented will be voted at the meeting in accordance with the directions
noted. A proxy may be revoked at any time before it is exercised by submitting
a written revocation or a later-dated proxy to the Secretary of the Company at
the mailing address of the Company provided below, or by attending the meeting
in person and so notifying the inspector of elections.
Management does not intend to present any business for a vote at the
meeting, other than (i) the election of directors, and (ii) the approval of
the BJ Services Company 2000 Incentive Plan. Unless stockholders specify
otherwise in their proxies, proxies will be voted FOR the election of director
nominees listed in this proxy statement and FOR the approval of the BJ
Services Company 2000 Incentive Plan. If other matters requiring the vote of
stockholders properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote proxies held by them in
accordance with their judgment on such matters.
The complete mailing address of the Company's executive offices is 5500
Northwest Central Drive, Houston, Texas 77092. The approximate date on which
this proxy statement and the accompanying proxy card were first sent or given
to the stockholders of the Company is December 20, 2000.
VOTING SECURITIES
On December 1, 2000, the record date, there were outstanding and entitled
to vote 82,108,985 shares of the Company's Common Stock, held of record by
approximately 2,028 persons. Stockholders are entitled to one vote,
exercisable in person or by proxy, for each share of Common Stock held on the
record date. Cumulative voting is not permitted under the Company's
Certificate of Incorporation or Bylaws.
Owners of more than 5% of the outstanding voting securities of the Company
are set forth in the following table. At the record date, management knew of
no person that beneficially owned more than 5% of the outstanding Common Stock
other than as set forth in the table.
<TABLE>
<CAPTION>
Title of Name and Address of Beneficial Number of Percent
Class Owners Shares of Class
-------- ------------------------------ --------- --------
<C> <S> <C> <C>
Common Stock FMR Corp. 7,423,376(a) 9.04%
82 Devonshire Street
Boston, Massachusetts 02109
Common Stock T. Rowe Price Associates, Inc. 5,355,400(b) 6.52%
100 E. Pratt Street
Baltimore, Maryland 21202
</TABLE>
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(a) Based on information filed in February 2000 by FMR Corp., Edward C.
Johnson 3d and Abigail P. Johnson, FMR Corp. has sole voting power of
511,700 shares and sole dispositive power of 7,423,376 shares. According
to the information filed, (i) Fidelity Management & Research Company, a
wholly owned subsidiary of FMR Corp. and a registered investment adviser,
is the beneficial owner of 6,870,776 of such shares as a result of acting
as investment adviser, (ii) Fidelity Management Trust Company, a bank and
a
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wholly owned subsidiary of FMR Corp., is the beneficial owner of 371,700 of
such shares as a result of acting as investment adviser and (iii) Fidelity
International Limited is the beneficial owner of 180,900 of such shares as
a result of providing investment advisory and management services and has
sole dispositive power of 180,900 shares and sole voting power of 140,000
shares.
(b) Based on information filed in February 2000 by T. Rowe Price Associates,
Inc., T. Rowe Price Associates, Inc. has sole voting power of 883,500
such shares, no shared voting power or shared dispositive power and sole
dispositive power of 5,355,400 shares. T. Rowe Price Associates, Inc. is
a registered investment adviser and disclaims beneficial ownership of
such shares.
ELECTION OF DIRECTORS
The Company's Bylaws provide for the Board of Directors to serve in three
classes having staggered terms of three years each. Two Class II directors
will be elected at the 2001 Annual Meeting of Stockholders to serve for a
three-year term expiring at the Annual Meeting of Stockholders in the year
2004. Pursuant to the Company's Bylaws, in case of a vacancy on the Board of
Directors, a majority of the remaining directors of the class in which the
vacancy occurs will be empowered to elect a successor, and the person so
elected will hold office for the remainder of the full term of the director
whose death, retirement, resignation, disqualification or other cause created
the vacancy, and thereafter until the election of a successor director.
The persons whose names are set forth as proxies in the enclosed proxy card
will vote all shares over which they have discretionary authority "FOR" the
election of the nominees named below unless otherwise directed. Although the
Board of Directors of the Company does not anticipate that any of the nominees
will be unable to serve, if such a situation should arise prior to the
meeting, the appointed proxies will use their discretionary authority pursuant
to the proxy and vote in accordance with their best judgment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES NAMED
BELOW. THE AFFIRMATIVE VOTE OF HOLDERS OF A MAJORITY OF THE SHARES OF COMMON
STOCK PRESENT IN PERSON OR REPRESENTED BY PROXY AT THE MEETING AND ENTITLED TO
VOTE IS REQUIRED TO ELECT EACH DIRECTOR NOMINEE.
The following table sets forth, for each nominee for election as a Class II
director, his name, his principal occupation, his age and the year in which he
first became a director of the Company. The nominees have consented to be
named in this proxy statement and to serve as directors, if elected.
<TABLE>
<CAPTION>
Director
Name Principal Occupation Age Since Class
---- ------------------------------------- --- -------- -----
<C> <S> <C> <C> <C>
Don D. Jordan Retired Chairman of the Board of 68 1990 II
Reliant Energy, Inc., a diversified
international energy services company
that has operations in all segments
of the energy chain that bring
natural gas and electricity to
customers. Mr. Jordan was employed by
various subsidiaries of Reliant
Energy, Inc. from 1956 until his
retirement in December 1999. He
currently serves as a director of
Reliant Energy, Inc., Chase Bank of
Texas, N.A., Utech Joint Venture, and
AEGIS Insurance Services.
Michael McShane Senior Vice President--Finance and 46 1990 II
Chief Financial Officer of the
Company since 1998, and Vice
President--Finance and Chief
Executive Officer of the Company
since 1990. Mr. McShane joined the
Company in 1987 from Reed Tool
Company, an oilfield tool company,
where he was employed for seven
years. At Reed Tool Company, he held
various financial management
positions.
</TABLE>
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Information Concerning Other Directors
The following table sets forth certain information for those directors whose
present terms will continue after the 2001 Annual Meeting. The terms of the
Class I and Class III directors named below will expire at the 2002 and 2003
Annual Meetings of Stockholders, respectively.
<TABLE>
<CAPTION>
Director
Name Principal Occupation Age Since Class
---- ------------------------------------- --- -------- -----
<C> <S> <C> <C> <C>
R. A. LeBlanc Mr. LeBlanc served in various 70 1994 I
executive positions with Keystone
International, Inc., a manufacturer
of flow control products, including
Chairman of the Board, Chief
Executive Officer and a director,
from 1959 until his retirement in
1995.
Michael E. Patrick Vice President and Chief Investment 56 1995 I
Officer for The Meadows Foundation,
Inc. since December 1, 1995. Managing
Director, M. E. Zukerman
EnergyAdvisors from July 1994 to
November 1995. Executive Vice
President, Chief Financial Officer
and a director of Lomas Financial
Corporation, parent, and President
and Chief Operating Officer of two
subsidiaries, Lomas Mortgage USA and
Lomas Information Systems, Inc., from
1992 to December 31, 1993. The Lomas
companies were engaged in mortgage
banking, real estate and information
systems. From 1984 to 1991, Mr.
Patrick was Executive Vice Chancellor
for Asset Management of the
University of Texas System, where he
was responsible for the investment of
all endowment funds. Mr. Patrick is
also currently a director of Cooper
Cameron Corporation.
John R. Huff Chairman and Chief Executive Officer 54 1992 I
of Oceaneering International, Inc.,
an oilfield services corporation
("Oceaneering"). Mr. Huff has been
President, Chief Executive Officer
and a director of Oceaneering since
1986 and Chairman of the Board since
1990. Mr. Huff is also a director of
Triton Energy and Suncor Energy.
L. William Currently, a private investor and 58 1992 III
Heiligbrodt consultant to Service Corporation
International, a funeral services
corporation ("SCI"). President and
Chief Operating Officer of SCI until
February 1999, he had served in
various management positions with SCI
since February 1990. Prior to joining
SCI, Mr. Heiligbrodt served as
President of Provident Services, Inc.
from March 1988 to February 1990.
Prior to that, he served for five
years as Vice Chairman and Chief
Executive Officer of WEDGE Group,
Incorporated, a multi-industry
holding company.
J. W. Stewart Chairman of the Board, President and 56 1990 III
Chief Executive Officer of the
Company. Mr. Stewart joined Hughes
Tool Company in 1969 as Project
Engineer and served as Vice
President--Legal and Secretary of
Hughes Tool Company and as Vice
President--Operations for a
predecessor of the Company prior to
being named President of the Company
in 1986.
James L. Payne Currently Vice Chairman and a 63 1999 III
director of Devon Energy Corporation
("Devon"), a company engaged in the
development and production of crude
oil and natural gas. At the time of
the merger of Devon and Santa Fe
Synder Corporation ("SFS"), Mr. Payne
was Chairman and CEO of SFS. Prior to
the merger of Santa Fe Energy ("Santa
Fe") and Snyder in May 1999, Mr.
Payne served as Chairman and CEO of
Santa Fe from 1990 until May 1999.
Mr. Payne has announced his intention
to retire from his positions with
Devon effective January 31, 2001. Mr.
Payne is also a director of Nabors
Industries, Southern Minerals, and
Global Industries Incorporated.
</TABLE>
3
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The following table sets forth the beneficial ownership of Common Stock as
of December 1, 2000 by each current director and nominee, by each executive
officer named in the Summary Compensation Table and by all current directors
and executive officers as a group.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial
Name or Group Ownership(1)(2)
------------- ---------------
<S> <C>
L. William Heiligbrodt................................... 16,000
John R. Huff............................................. 26,000
Don D. Jordan............................................ 39,000
R. A. LeBlanc............................................ 16,000
Michael E. Patrick....................................... 8,000
James L. Payne........................................... 8,000
J. W. Stewart............................................ 832,238
Michael McShane.......................................... 123,139
Kenneth A. Williams...................................... 119,248
Thomas H. Koops.......................................... 83,770
David D. Dunlap.......................................... 106,748
All current directors and executive officers as a group
(15 persons)(3)......................................... 1,630,094
</TABLE>
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(1) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned by them. As of
December 1, 2000, no officer or director owned in excess of 1% of the
Company's Common Stock. Mr. Stewart owns 1.0%.
(2) Includes the following shares subject to options granted pursuant to the
BJ Services Company 1990 Stock Incentive Plan (the "1990 Stock Incentive
Plan"), the BJ Services Company 1995 Incentive Plan (the "1995 Incentive
Plan") and the BJ Services Company 1997 Incentive Plan (the "1997
Incentive Plan") and exercisable within 60 days: Mr. Heiligbrodt--8,000
shares; Mr. Huff--26,000 shares; Mr. Jordan--38,000 shares; Mr. LeBlanc--
8,000 shares; Mr. Patrick--8,000 shares; Mr. Payne--8,000 shares; Mr.
Stewart--642,540 shares; Mr. McShane--26,260 shares; Mr. Williams--53,782
shares; Mr. Koops--33,520 shares; and Mr. Dunlap--79,964 shares.
(3) All current directors and executive officers as a group owned
beneficially an aggregate of approximately 1.95% of the Company's Common
Stock.
Board of Directors and Committees of the Board
During fiscal 2000, the Board of Directors held eight meetings of the full
Board and seven meetings of committees. During fiscal 2000, each director
attended at least 75% of the aggregate number of meetings of the Board of
Directors and meetings of committees of the Board on which he served. During
fiscal 2000, directors who were not employees of the Company were paid a
monthly retainer of $2,500 for service on the Board, an attendance fee of
$1,250 for the first meeting of the Board or any of its committees attended in
one day, and $800 for each additional meeting attended in the same day.
Committee chairmen who are not Company employees receive an additional 50% of
the meeting fee. Beginning in 2001, the retainer will be increased to an
annual amount of $35,000, paid monthly. In addition, under the terms of the
Company's 1997 Incentive Plan, the non-employee directors receive annual
automatic grants of options to purchase 8,000 shares of Common Stock effective
the fourth Thursday of October each year at an exercise price equal to the per
share price of the last sale of Common Stock in regular trading on the New
York Stock Exchange on the trading day prior to the date of grant. Employees
of the Company are not paid any directors' fees. No member of the Board of
Directors was paid any compensation in the Company's 2000 fiscal year for his
service as a director of the Company other than the standard compensation
arrangement for directors and reimbursement of expenses.
Under the Directors' Deferred Compensation Plan which was adopted in 2000,
each director serving on the board more than three years will earn an annual
benefit for each year of service on the board of directors, equal to the
annual retainer in effect for directors at the time of termination of his
board service. The benefit will start
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following the director's termination of service and will be paid for the
number of years equal to his years of service as a director of the Company, up
to a maximum of ten years. In the event of the death of a participant, benefit
payments will be made to the director's beneficiaries over the remainder of
the benefit period. The three-year minimum period is waived in the case of
death. Years of service for each current Director eligible for benefits are:
Mr. Heiligbrodt--8 years; Mr. Huff--8 years; Mr. Jordan--10 years; Mr.
LeBlanc--6 years; and Mr. Patrick, 5 years.
On January 27, 2000, the Board of Directors appointed members to serve on
the Audit Committee, the Executive Compensation Committee and the Nominating
Committee. The Nominating Committee held one meeting during fiscal 2000. The
Executive Compensation Committee met four times and the Audit Committee met
two times formally during that period and the Audit Committee chairman
conducted regular quarterly reviews with the Company's independent auditors
and management.
As required by the New York Stock Exchange and Securities and Exchange
Commission rules regarding Audit Committees, the Company's Board of Directors
has reviewed the qualifications of its Audit Committee and has determined that
all members of the current Audit Committee have no relationship to the Company
that may interfere with the exercise of their independence from management and
the Company. In addition, the Audit Committee has adopted and the Board of
Directors has ratified a new Audit Committee Charter (See Appendix A). The
responsibilities of the Audit Committee, which in 2000 was composed of Messrs.
Huff (Chairman), Jordan, LeBlanc and Patrick, include reviewing interim
financial information, reviewing the scope and results of the annual audit of
the Company's consolidated financial statements with the independent auditors,
internal auditors and management; reviewing the independence of the
independent auditors and the internal auditors; reviewing actions by
management on the independent and internal auditors' recommendations; and
meeting with management, the internal auditors and the independent auditors to
review the effectiveness of the Company's system of internal controls and
internal audit procedures. To promote the independence of the audit, the Audit
Committee consults separately and jointly with the independent auditors, the
internal auditors and management.
Audit Committee Report
The Audit Committee of the Board of Directors includes four directors who
are independent, as defined by the standards of the New York Stock Exchange.
The Committee assists the Board in overseeing matters relating to the
accounting and financial reporting practices of the Company, the adequacy of
its internal controls and the quality and integrity of its financial
statements. In May 2000, the Committee adopted the charter appearing at
Appendix A to this proxy statement.
The Committee met two times during the year ended September 30, 2000. Also,
the Committee Chairman, on behalf of the Committee, reviewed with management
and the independent auditors the interim financial information included in the
March 31, 2000, and June 30, 2000, Form 10-Qs prior to their being filed with
the Securities and Exchange Commission.
The independent auditors provided the Committee a written statement
describing all the relationships between the auditors and the Company that
might bear on the auditors' independence consistent with Independence
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees". The Committee also discussed with the auditors any relationships
that may impact their objectivity and independence and satisfied itself as to
the auditors' independence.
The Committee discussed and reviewed with the independent auditors all
communications required by generally accepted auditing standards, including
those described in Statement of Auditing Standards No. 61, as amended,
"Communication with Audit Committees".
With and without management present, the Committee discussed and reviewed
the results of the independent auditors' examination of the Company's
September 30, 2000, financial statements. The discussion included matters
related to the conduct of the audit, such as the selection of and changes in
significant accounting policies,
5
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the methods used to account for significant or unusual transactions, the
effect of significant accounting policies in controversial or emerging areas,
the process used by management in formulating particularly sensitive
accounting estimates and the basis for the auditors' conclusions regarding the
reasonableness of those estimates, significant adjustments arising from the
audit and disagreements, if any, with management over the application of
accounting principles, the basis for management's accounting estimates and the
disclosures in the financial statements.
The Committee reviewed the Company's audited financial statements as of and
for the year ended September 30, 2000, and discussed them with management and
the independent auditors. Based on such review and discussions the Committee
recommended to the Board that the Company's audited financial statements be
included in its Annual Report on Form 10-K for the fiscal year ended September
30, 2000, for filing with the Securities and Exchange Commission.
This report of the Audit Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such acts.
John R. Huff, Chairman
Don D. Jordan
R.A. LeBlanc
Michael E. Patrick
November 16, 2000
The responsibilities of the Executive Compensation Committee, composed of
Messrs. Jordan (Chairman), Heiligbrodt, Huff, Patrick and Payne, include
reviewing the Company's executive salary and bonus and overall compensation
structure; reviewing the Company's employee stock incentive plans, thrift plan
and employee stock purchase plan as well as other incentive alternatives;
reviewing the Company's perquisite program; and recommending directors' fees.
The responsibilities of the Nominating Committee, composed of Messrs.
Heiligbrodt (Chairman), LeBlanc and Payne, include selecting candidates to
fill vacancies on the Board of Directors; reviewing the structure and
composition of the Board; and considering qualifications required for
continued Board service. The Committee also considers nominees recommended by
stockholders in accordance with the Company's Bylaws. Stockholders desiring to
make such recommendations should timely submit the candidate's name, together
with biographical information and the candidate's written consent to be
nominated and, if elected, to serve to: Chairman, Nominating Committee of the
Board of Directors of BJ Services Company, P.O. Box 4442, Houston, Texas
77210-4442.
6
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PROPOSED ADOPTION OF THE
BJ SERVICES COMPANY 2000 INCENTIVE PLAN
The Board of Directors has unanimously approved the adoption of the 2000
Incentive Plan and unanimously recommends that the Company stockholders vote
FOR approval of the adoption of the 2000 Incentive Plan. The affirmative vote
of holders of a majority of the shares of Common Stock present in person or
represented by proxy and entitled to vote at the 2001 Annual Meeting is
required to approve the proposed Plan.
General
The purpose of the 2000 Incentive Plan is to promote the interests of the
Company and its stockholders by encouraging employees of the Company, its
subsidiaries and affiliated entities and its non-employee directors to acquire
or increase their equity interest in the Company, and, with respect to
employees, to enable them to relate incentive compensation to performance
goals of the Company, thereby giving them an added incentive to work toward
the continued growth and success of the Company. The Board of Directors also
contemplates that through the 2000 Incentive Plan, the Company, its
subsidiaries and its affiliated entities will be better able to compete for
the services of personnel needed for growth and success. However, nothing in
the 2000 Incentive Plan shall operate or be construed to prevent the Company
from granting awards outside of such plan. In the opinion of the Company, the
2000 Incentive Plan is not subject to any of the provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
The full text of the 2000 Incentive Plan is set forth in Appendix B to this
Proxy Statement. Certain features of the 2000 Incentive Plan are summarized
below, but such summary is qualified in its entirety by reference to the full
text of the 2000 Incentive Plan. All capitalized terms not defined herein
shall have the meanings set forth in the 2000 Incentive Plan.
Types of Awards
The 2000 Incentive Plan would permit the granting of the following types of
awards: stock options ("Options") to purchase shares of Common Stock to
employees, officers and non-employee directors ("Optionees"), which may be
either incentive stock options ("Incentive Stock Options") within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
or options that do not constitute Incentive Stock Options ("Nonqualified
Options"); stock-based awards ("Performance Stock," "Performance Units" and
"Bonus Stock") to employees and officers ("Employee Grantees") and cash awards
("Tandem Cash Tax Rights," "Performance Cash Awards" or "Bonus Cash Awards,"
collectively referred to as "Cash Awards") to Employee Grantees. Options,
Performance Stock, Performance Units, Bonus Stock and Cash Awards are
collectively referred to herein as "Awards."
Eligibility for Participation
Incentive Stock Options may be granted only to individuals who are
employees and officers (whether or not they are directors) of the Company or
any "Parent Corporation" or any "Subsidiary Corporation" (as defined in
Section 424 of the Code) of the Company, and Nonqualified Options, Performance
Stock, Performance Units, Bonus Stock and Cash Awards may be granted only to
individuals who are employees and officers (whether or not they are directors)
of the Company, its subsidiaries and affiliated entities. Options granted to
non-employee directors shall be Nonqualified Options, and non-employee
directors shall not be eligible to receive any other Award. As of the date of
this Proxy Statement, approximately 365 employees and six non-employee
directors are eligible to participate in the 2000 Incentive Plan.
7
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Administration
Under the terms of the 2000 Incentive Plan, the 2000 Incentive Plan will be
administered by the Executive Compensation Committee of the Board of
Directors, consisting of two or more directors of the Company appointed by the
Board of Directors. The members of the Executive Compensation Committee, as of
the date of this Proxy Statement, are Messrs. Don D. Jordan, Michael E.
Patrick, L. William Heiligbrodt, John R. Huff and James L. Payne. No person
shall be eligible to serve on the Executive Compensation Committee unless such
person is a "Non-Employee Director" as defined in Rule 16b-3 promulgated under
the Exchange Act of 1934, as amended (the "Exchange Act"), if and as such is
then in effect, and also an "outside director" within the meaning of Section
162(m) of the Code. Subject to the terms and conditions of the 2000 Incentive
Plan, the Executive Compensation Committee has authority to determine the
employees who are to be granted Awards, within the limits of the 2000
Incentive Plan, the number of shares to be issued pursuant to such Awards and,
within the limits of the 2000 Incentive Plan, the exercise price of Options
(other than Options granted to non-employee directors), to interpret the 2000
Incentive Plan and all Options and Awards and to administer the 2000 Incentive
Plan. The Executive Compensation Committee, in its sole discretion, may
delegate any or all of its powers and duties under the 2000 Incentive Plan to
the President of the Company, subject to such limitations on such delegated
powers and duties as the committee may impose, except that the President may
not grant Awards to, or take any action with respect to any Award previously
granted to, a person who is an officer or a director of the Company or
otherwise subject to Section 16(b) of the Securities Act of 1933, as amended.
Such delegation shall not limit the President's right to receive Awards under
the 2000 Incentive Plan.
Amendment and Termination
The Board of Directors in its discretion may amend, suspend or terminate
the 2000 Incentive Plan; provided that any amendment would require the
approval of the stockholders of the Company if the amendment would (i) extend
the period within which Awards may be granted under the 2000 Incentive Plan,
(ii) increase the aggregate number of shares of Common Stock to be optioned or
awarded under the 2000 Incentive Plan (other than as prescribed for changes in
capitalization as described herein), (iii) reduce the Option exercise prices
per share of Common Stock provided in the 2000 Incentive Plan, (iv) change the
class of persons to whom Awards may be made under the 2000 Incentive Plan, (v)
modify provisions relating to the grant of Options to non-employee directors
or (vi) grant Options to non-employee directors other than pursuant to
existing provisions of the 2000 Incentive Plan; and provided, further, that no
amendment, suspension or termination of the 2000 Incentive Plan may cause the
2000 Incentive Plan to fail to meet the requirements of Rule 16b-3 of the
Exchange Act or may, without the consent of the holder of an Award, terminate
an Award or adversely affect such person's rights in any material respect.
The Executive Compensation Committee may, with the consent of the person or
persons entitled to exercise an Option, amend an Option (other than an Option
granted to a non-employee director); provided, however, that any such
amendment of an Incentive Stock Option increasing the number of shares of
Common Stock subject to an Incentive Stock Option or reducing the exercise
price per share of Common Stock (other than as prescribed for changes in
capitalization as described herein) will be subject to the approval of the
stockholders of the Company in order for the Incentive Stock Option to remain
qualified under the Code. The Executive Compensation Committee may at any time
or from time to time, in its discretion (other than for Options granted to
non-employee directors), accelerate the time or times at which such Option may
be exercised to any earlier time or times.
Term of the 2000 Incentive Plan
The 2000 Incentive Plan was adopted by the Board of Directors on December
7, 2000, subject to approval by the Company's stockholders. No Awards will be
exercisable or payable prior to approval of the 2000 Incentive Plan by the
Company's stockholders. Except with respect to Awards then outstanding, if not
sooner terminated, the 2000 Incentive Plan will terminate on December 7, 2010,
and no further Awards may be granted after such date.
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Shares Subject to the 2000 Incentive Plan
The 2000 Incentive Plan provides for the issuance upon the purchase of
Common Stock acquired through the 2000 Incentive Plan's Awards of up to an
aggregate of 3,000,000 shares of Common Stock, subject to adjustment in the
event of stock splits and certain other corporate events; see "--Adjustments
to Shares." Such shares of Common Stock may be authorized but unissued shares
or reacquired shares. Each share of Common Stock issued pursuant to the 2000
Incentive Plan will be fully paid and nonassessable and will include an
associated preferred share purchase right.
Options
The Executive Compensation Committee has the authority to grant to the
Employee Optionees, prior to the termination of and subject to the terms and
conditions of the 2000 Incentive Plan, Options that will be in such form as
the Executive Compensation Committee may from time to time approve. (For a
description of Options automatically granted to non-employee directors of the
Company, see "--Non-Employee Directors' Options.") The Executive Compensation
Committee also has the authority to determine whether Options granted to
Employee Optionees will be Incentive Stock Options or Nonqualified Options;
provided, however, only employees of the Company, its Parent Corporation or a
Subsidiary Corporation (as such terms are defined in Section 424 of the Code)
may be granted Incentive Stock Options. No Employee Optionee may receive more
than 250,000 Options under the 2000 Incentive Plan during any calendar year.
To exercise an Option granted under the 2000 Incentive Plan, the person
entitled to exercise the Option must deliver to the Company payment in full
for the shares being purchased, together with any required withholding tax in
the case of the exercise of a Nonqualified Option. The payment must either be
in cash or check acceptable to the Company or through delivery to the Company
of shares of Common Stock already owned by the person (provided that if such
shares were acquired pursuant to the prior exercise of a Company-granted
option, such shares must have been owned for at least six months) or sale
through broker, or by any combination thereof. The value of each share of
Common Stock delivered will be deemed to be equal to the per share price of
the last sale of Common Stock in regular trading on the New York Stock
Exchange on the trading day prior to the date the Option is exercised, based
on the composite transactions in the Common Stock as reported in The Wall
Street Journal.
The price at which shares of Common Stock may be purchased upon the
exercise of a Nonqualified Option shall be equal to the fair market value per
share of Common Stock at the time of the grant as determined by the Executive
Compensation Committee, based on the composite transactions in the Common
Stock as reported by The Wall Street Journal, and shall not be less than the
per share price of the last sale of Common Stock in regular trading on the New
York Stock Exchange on the trading day prior to the grant of such Option.
In the case of Options granted to non-employee directors, the exercise
price of each Option shall be equal to the per share price of the last sale of
Common Stock in regular trading on the New York Stock Exchange on the trading
day prior to the date of grant relating to such Option, based on the composite
transactions in the Common Stock as reported by The Wall Street Journal.
In the case of the exercise of an Incentive Stock Option, the purchase
price per share of Common Stock will be equal to the fair market value per
share of Common Stock at the time the Incentive Stock Option is granted as
determined by the Executive Compensation Committee, based on the composite
transactions in the Common Stock as reported by The Wall Street Journal, and
shall not be less than the per share price of the last sale of Common Stock in
regular trading on the New York Stock Exchange on the trading day prior to the
date of grant; provided, however, that the exercise price per share of Common
Stock shall be at least 110% of the fair market value per share of Common
Stock at the time of grant if the Employee Optionee, at the time such Option
is granted, owns (within the meaning of Section 424(d) of the Code) more than
10% of the total combined voting power of all classes of stock of the Company
or any Parent Corporation or Subsidiary Corporation.
The exercise price for Options shall be subject to appropriate adjustments
in the event that the outstanding shares of Common Stock are changed into or
exchanged for a different number or kind of shares or other
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securities by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares or the
like.
The Executive Compensation Committee may, in its discretion, provide in an
option agreement (other than an Incentive Stock Option agreement) that the
option right granted to the individual may be transferred as provided in such
option agreement.
Performance Stock, Performance Units and Bonus Stock
The Executive Compensation Committee has the authority to grant Awards
(subject to the limitations set forth below) to Employee Grantees, which in
the case of Performance Stock will be shares of Common Stock subject to a
Performance Period (as defined below), in the case of Performance Units will
represent a phantom share of Common Stock subject to a Performance Period, and
in the case of Bonus Stock will be shares of Common Stock that are not subject
to a Performance Period. The aggregate number of shares underlying awards of
Performance Stock, Performance Units and Bonus Stock granted by the Executive
Compensation Committee under the Plan may not exceed 600,000. No individual
may receive more than 250,000 Performance Stock and/or Performance Unit Awards
under the 2000 Incentive Plan during any calendar year.
Subject to amendment with the consent of the affected Employee Grantee of
the performance objectives or period applicable to Awards of Performance Stock
and Performance Units, and subject to acceleration upon a Change of Control,
no shares of Performance Stock or Performance Units granted under the 2000
Incentive Plan shall be subject to becoming vested (in other words, earned and
nonforfeitable) earlier than six months from the date of grant nor later than
ten years after the date of grant (the "Performance Period"). To the extent
not prohibited by other provisions of the 2000 Incentive Plan, each share of
Performance Stock and each Performance Unit shall be subject to becoming
vested upon the achievement of such performance goals (by the Company and/or
individual), if any, over such Performance Period as the Executive
Compensation Committee in its discretion may determine at or prior to the
grant of such Award. With respect to any Performance Stock or Performance Unit
Award that is intended to meet the requirements of Section 162(m) of the Code
(as designated by the Executive Compensation Committee at the time of granting
such Award), the performance goal or goals for such Award shall be with
respect to one or more of the following: earnings per share; earnings before
interest, taxes, depreciation and amortization expenses ("EBITDA"); earnings
before interest and taxes ("EBIT"); EBITDA, EBIT or earnings before taxes and
unusual or nonrecurring items as measured either against the annual budget or
as a ratio to revenue; market share; sales; costs; return on equity; operating
cash flow; return on net capital employed ("RONCE") and/or stock price
performance. The goals may be applied, where appropriate, with respect to an
individual, a business unit or the Company as a whole and need not be based on
increases or positive results, but may be based on maintaining the status quo
or limiting economic losses, for example. Which goals to use with respect to
an Award of Performance Stock or Performance Units, the weighting of the goals
if more than one is used, and whether the goal is to be measured against an
established budget or target, an index or a peer group of companies, shall
also be determined by the Executive Compensation Committee at the time of
grant of the Award. With respect to any outstanding Performance Stock or
Performance Unit, the Executive Compensation Committee may, at any time or
times, without the consent of the Employee-Grantee, amend the performance
objectives and/or the Performance Period for earning such Award. Upon the
occurrence of a Change of Control, each share of Performance Stock and each
Performance Unit that was previously granted under the 2000 Incentive Plan and
that is not then immediately vested in full will be immediately vested in
full. Bonus Stock represents shares of Common Stock that are not subject to a
Performance Period under the 2000 Incentive Plan.
Tandem Cash Tax Rights, Performance Cash Awards and Bonus Cash Awards
With respect to a Performance Stock or Performance Unit Award, the
Executive Compensation Committee may grant a Tandem Cash Tax Right that will
entitle a recipient to receive a cash amount from the Company sufficient to
gross up the value of such Award to equal its value before any federal, state
and other taxes payable
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thereon. Cash Awards may also include Performance Cash Awards, which shall not
be paid prior to six months from the beginning of the Performance Period,
subject to achievement of certain performance goals (as determined by the
Executive Compensation Committee, in its discretion). With respect to any
Performance Cash Award grant that is intended to meet the requirements of
Section 162(m) of the Code (as designated by the Executive Compensation
Committee at the time of granting such Award), the performance goal or goals
for such Award shall be with respect to one or more of the following: earnings
per share; EBITDA; EBIT; EBITDA, EBIT or earnings before taxes and unusual or
nonrecurring items as measured either against the annual budget or as a ratio
to revenue; market share; sales; costs; return on equity; operating cash flow;
RONCE and/or stock price performance. The goals may be applied, where
appropriate, with respect to an individual, a business unit or the Company as
a whole and need not be based on increases or positive results, but may be
based on maintaining the status quo or limiting economic losses, for example.
Which goals to use with respect to a Performance Cash Award, the weighting of
the goals if more than one is used, and whether the goal is to be measured
against an established budget or target, and index or a peer group of
companies, shall also be determined by the Executive Compensation Committee at
the time of grant of the Award. With respect to any outstanding Performance
Cash Award, the Executive Compensation Committee may, at any time or times,
without the consent of the Employee-Grantee, amend the performance objectives
and/or the Performance Period for earning such Award. No individual may
receive a Performance Cash Award in excess of $2 million under the 2000
Incentive Plan during any calendar year.
The Executive Compensation Committee may, from time to time and subject to
the provisions of the 2000 Incentive Plan, grant Bonus Cash Awards to
employees and officers (whether or not they are directors) of the Company, its
subsidiaries and affiliated entities. Bonus Cash Awards are cash payments that
are not subject to a Performance Period.
Non-Employee Directors' Options
Subject in each case to the limitation on the number of shares of Common
Stock included in the 2000 Incentive Plan, each director of the Company who is
neither an employee nor officer of the Company, its subsidiaries or affiliated
entities, is eligible to receive an automatic grant of Options. Each non-
employee director who is first elected to the Board of Directors of the
Company on or after the date director options may no longer be granted under
the terms of either the Company's 1995 Incentive Plan or the 1997 Incentive
Plan will be granted, as of the date of his initial election, a Nonqualified
Option under the 2000 Incentive Plan to purchase 2,000 shares of Common Stock.
Annually, beginning on the fourth Thursday of October of 2001 and each year
thereafter until the expiration of the 2000 Incentive Plan, each person who is
a non-employee director on such date will receive a grant of a Nonqualified
Option to purchase 8,000 shares of Common Stock, subject to reduction by the
number of shares subject to annual grants made to each non-employee director
on such date under the Company's 1995 Incentive Plan and 1997 Incentive Plan.
All Options granted to non-employee directors are Nonqualified Options. Other
than the foregoing provisions, the terms and provisions of Options granted to
non-employee directors are generally the same as the terms and provisions of
Nonqualified Options. If, as of any date that the 2000 Incentive Plan is in
effect, there are not sufficient shares of Common Stock available under the
2000 Incentive Plan to allow for the grant to each non-employee director of an
Option for the number of shares provided for in the 2000 Incentive Plan, then
each non-employee director shall receive an Option for his pro rata share of
the total number of shares of Common Stock then available under the 2000
Incentive Plan.
Change in Control
Upon the occurrence of a change of control (defined generally as certain
acquisitions by a person, entity or group of 25% or more of the Company's
outstanding Common Stock or 25% of the combined voting power of the then
outstanding voting securities of the Company or certain reorganizations,
mergers, consolidations or liquidations), each Option that is not then
immediately exercisable in full shall be immediately exercisable in full. In
addition, upon the occurrence of a Change of Control, each share of
Performance Stock and each
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Performance Unit that was previously granted under the 2000 Incentive Plan and
that is not then immediately vested in full will be immediately vested in
full.
Upon the occurrence of a change of control in which the consideration
offered to stockholders of the Company is common stock of a publicly traded
entity acquiring the Company (the "Acquiring Entity"), outstanding Options
will be assumed by the Acquiring Entity and will become new options ("New
Options") to purchase common stock of the Acquiring Entity ("Acquiror Stock").
Each such Option will be exercisable for the remainder of its original term
regardless of any termination of employment or, in the case of a non-employee
director, board membership. Each employee or non-employee director may
surrender the New Options to the Acquiring Entity during the 90-day period
following the change of control in return for cash or shares of Acquiror
Stock, as determined by the Acquiring Entity, equal in value to the higher of
(a) the per share consideration received by stockholders of the Company in the
change of control or (b) the highest per share price for the Common Stock of
the Company during the period beginning with the public announcement of the
proposed change of control and ending at the date of the change of control, in
each case minus the original option exercise price and multiplied by the
number of shares subject to the original option.
Other Transactions
Upon the occurrence of a change of control in which the consideration
offered to stockholders of the Company consists of cash or stock that is not
publicly traded, each optionee will surrender his outstanding options in
exchange for a cash payment equal to the Black-Scholes value of such options
as of the date of the change of control, without discount for risk of
forfeiture and non-transferability.
Adjustments to Shares
In the event the outstanding shares of Common Stock are changed into or
exchanged for a different number or kind of shares of the Company or other
securities by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares or the
like, the Executive Compensation Committee will make an appropriate and
equitable adjustment in the number and kind of shares of Common Stock subject
to the 2000 Incentive Plan (including shares of Common Stock as to which all
outstanding Options, or portions thereof then unexercised, are exercisable) so
that after such event the shares of Common Stock subject to the 2000 Incentive
Plan and the proportionate interest of each Option or Award will be maintained
as before the occurrence of such event. Any such adjustment made by the
Executive Compensation Committee will be final and binding upon the Company
and all other interested persons. Additional provisions apply to adjustments
related to Options received by non-employee directors.
Information on Continuing Plans
Between September 30, 2000, the Company's fiscal year-end, and December 1,
2000, a total of 627,470 awards were made under the Company's 1995 Incentive
Plan and 1997 Incentive Plan, leaving 399 shares available for future awards
under the 1995 Incentive Plan and 1,125,612 shares available for future awards
under the 1997 Incentive Plan. No further awards may be made under the
Company's 1990 Stock Incentive Plan. The Compensation Committee of the Board
of Directors of the Company has determined to limit the number of future
performance units and other non-option awards under the 1997 Plan to 200,000.
As of December 1, 2000, the weighted average price of options outstanding
under all of the Company's plans was $23.31, and the average remaining term of
such options was 7 1/2 years.
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FEDERAL INCOME TAX CONSEQUENCES OF THE 2000 INCENTIVE PLAN
In General
The 2000 Incentive Plan is not qualified under Section 401(a) of the Code.
The following summary is based on the applicable provisions of the Code as
currently in effect and the income tax regulations and proposed income tax
regulations thereunder.
Status of Options
Options granted under the 2000 Incentive Plan may be either Incentive Stock
Options or Nonqualified Options. Under certain circumstances, an Incentive
Stock Option may be treated as a Nonqualified Option. The tax consequences
both to the Optionee and to the Company differ depending on whether an Option
is an Incentive Stock Option or a Nonqualified Option.
Nonqualified Options
No federal income tax is imposed on the Optionee upon the grant of a
Nonqualified Option. Upon the exercise of a Nonqualified Option, the Optionee
will be treated as receiving compensation, taxable as ordinary income in the
year of exercise. The amount recognized as ordinary income upon exercise is
the excess of the fair market value of the shares of Common Stock at the time
of exercise over the exercise price paid for such Common Stock. At the time
Common Stock received upon exercise of a Nonqualified Option is disposed of,
any difference between the fair market value of the shares of Common Stock at
the time of exercise and the amount realized on the disposition would be
treated as capital gain or loss. The gain, if any, realized upon such a
disposition will be treated as long-term or short-term capital gain, depending
on the holding period of the shares of Common Stock. Any loss realized upon
such a disposition will be treated as a long-term or short-term capital loss,
depending on the holding period of the shares of Common Stock.
Upon an Optionee's exercise of a Nonqualified Option, and subject to the
application of Section 162(m) of the Code as discussed below, the Company may
claim a deduction for the compensation paid at the same time and in the same
amount as compensation is treated as being received by the Optionee, assuming
the Company satisfies the federal income tax reporting requirements with
respect to such compensation. The Company is not entitled to any tax deduction
in connection with a subsequent disposition by the Optionee of the shares of
Common Stock.
If the shares of Common Stock received upon the exercise of a Nonqualified
Option are transferred to the Optionee subject to certain restrictions, then
the taxable income realized by the Optionee, unless the Optionee elects
otherwise, and the Company's tax deduction (assuming any federal income tax
reporting requirements are satisfied) should be deferred and should be
measured at the fair market value of the shares at the time the restrictions
lapse. The restrictions imposed on officers, directors and 10% shareholders by
Section 16(b) of the Exchange Act is such a restriction during the period
prescribed thereby if other shares have been purchased by such an individual
within six months of the exercise of a Nonqualified Option.
Incentive Stock Options
No federal income tax is imposed on the Optionee upon the grant of an
Incentive Stock Option. The Optionee would recognize no taxable income upon
exercise of an Incentive Stock Option if the Optionee (a) does not dispose of
the shares of Common Stock acquired pursuant to the exercise of an Incentive
Stock Option within two years from the date the Option was granted or within
one year after the shares of Common Stock were transferred to the Optionee
(the "Holding Period") and (b) is an employee of either (i) the company
granting the Option, (ii) the parent company or a subsidiary of such
corporation or (iii) a corporation which has assumed such Option of another
corporation as a result of a corporate reorganization, merger or similar
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transaction. Such employment must continue for the entire time from the date
the Option was granted until three months before the date of exercise, or 12
months before the date of exercise if employment ceases due to permanent and
total disability. If Common Stock received upon exercise of an Incentive Stock
Option is disposed of after completion of the Holding Period, any difference
between the exercise price paid for such Common Stock and the amount realized
on the disposition would be treated as a capital gain or loss. The gain, if
any, realized upon such a disposition will be treated as long-term capital
gain. Any loss realized upon such a disposition will be treated as a long-term
capital loss. The Company would not be entitled to any deduction in connection
with the grant or exercise of the Option or the disposition of the shares of
Common Stock so acquired.
If, however, an Optionee disposes of shares of Common Stock acquired
pursuant to exercise of an Incentive Stock Option before the Holding Period
has expired (a "Disqualifying Disposition"), the Optionee would be treated as
having received, at the time of disposition, compensation taxable as ordinary
income. In such event, subject to the application of Section 162(m) of the
Code as discussed below, the Company may claim a deduction for compensation
paid at the same time and in the same amount as compensation is treated as
being received by the Optionee. The amount treated as compensation is the
lesser of (i) the excess of the fair market value of the Common Stock at the
time of exercise over the exercise price or (ii) the excess of the amount
realized on disposition over the exercise price. The balance of the gain, if
any, realized upon such a disposition will be treated as long-term or short-
term capital gain depending on the holding period. If the amount realized at
the time of the disposition is less than the exercise price, the Optionee will
not be required to treat any amount as ordinary income, provided that the
disposition is of a type that would give rise to a recognizable loss. In such
event, the loss will be treated as a long-term or short-term capital loss
depending upon the holding period. A disposition generally includes a sale,
exchange or gift, but does not include certain other transfers, such as by
reason of death or a pledge or exchange of shares described in Section 424(c)
of the Code.
Alternative Minimum Tax
Although the exercise of an Incentive Stock Option does not result in
current taxable income, there are implications with regard to the Alternative
Minimum Tax ("AMT"). The excess of the fair market value of shares of Common
Stock acquired upon exercise of an Incentive Stock Option over the exercise
price paid for such shares of Common Stock is an adjustment to AMT income for
the Optionee's taxable year in which such exercise occurs (unless the shares
of Common Stock are disposed of in the same taxable year and the amount
realized is less than the fair market value of the shares on the date of
exercise, in which event the amount included in AMT income will not exceed the
amount realized on the disposition over the adjusted basis of the shares).
Payment of Option Price in Shares
In the case of a Nonqualified Option, if the Option price is paid by the
delivery of shares of Common Stock previously acquired by the Optionee having
a fair market value equal to the Option price ("Previously Acquired Shares"),
no gain or loss would be recognized on the exchange of the Previously Acquired
Shares for a like number of shares of Common Stock. The Optionee's basis and
holding period in the number of shares of Common Stock received (to the extent
equal to the number of Previously Acquired Shares used) would be the same as
his or her basis and holding period in the Previously Acquired Shares used.
The Optionee would treat the fair market value of the number of shares of
Common Stock received in excess of the number of Previously Acquired Shares
used as ordinary compensation income. The Optionee's basis in such excess
shares of Common Stock would be equal to their fair market value at the time
of exercise. The Optionee's holding period in such excess shares of Common
Stock begins on the date the Optionee acquires those shares of Common Stock.
In the case of an Incentive Stock Option, the federal income tax
consequences to the Optionee of the payment of the Option price with
Previously Acquired Shares depends on the nature of the Previously Acquired
Shares. If the Previously Acquired Shares were acquired through the exercise
of a qualified stock option, an Incentive Stock Option or an option granted
under an employee stock purchase plan ("Statutory Option") and if such
Previously Acquired Shares are being transferred prior to expiration of the
applicable Holding Period, the
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transfer would be treated as a Disqualifying Disposition of the Previously
Acquired Shares. If the Previously Acquired Shares were acquired other than
pursuant to the exercise of a Statutory Option, or were acquired pursuant to
the exercise of a Statutory Option but have been held for the applicable
Holding Period, no gain or loss should be recognized on the exchange of the
Previously Acquired Shares. In either case, (i) the Optionee's basis and
holding period in the number of shares of Common Stock received (to the extent
equal to the number of Previously Acquired Shares used) would be the same as
his or her basis and holding period in the Previously Acquired Shares used,
increased by any income recognized to the Optionee upon the Disqualifying
Disposition of the Previously Acquired Shares, (ii) the Optionee's basis in
the number of shares of Common Stock received in excess of the number of
Previously Acquired Shares used would be zero, (iii) the Optionee's holding
period in such excess shares of Common Stock begins on the date the Optionee
acquires those shares of Common Stock and (iv) the other incentive stock
option rules would apply. Upon a subsequent Disqualifying Disposition of the
shares of Common Stock so received, the shares with the lowest basis would be
treated as disposed of first.
Performance Stock and Performance Units
In general, a Company employee who receives either a Performance Stock
Award or a Performance Unit Award will not be taxed on receipt of the Award,
but instead the fair market value of the Common Stock will be taxable as
ordinary compensation income (i) with respect to a Performance Stock Award, on
the date that the shares of Common Stock cease to be subject to forfeiture and
(ii) with respect to a Performance Unit Award, on the date that the shares of
Common Stock are received in payment of the Award. Subject to the application
of Section 162(m) of the Code as discussed below, the Company will be entitled
to a deduction for a corresponding amount. If, upon a taxable disposition of
the shares of Common Stock, the employee receives proceeds more or less than
his or her basis in the shares of Common Stock, any gain will be long-term or
short-term capital gain, and any loss will be long-term or short-term capital
loss, depending on the holding period of the shares of Common Stock, measured
from the date that the receipt of the shares of Common Stock was a taxable
event to such employee.
Bonus Stock
In general, a person will treat the fair market value of Bonus Stock Awards
on the date such amount is received as compensation, taxable as ordinary
income. Subject to the application of Section 162(m) of the Code as discussed
below, the Company will be entitled to a deduction for the corresponding
amount assuming any federal income tax reporting requirements are satisfied.
Cash Awards
Generally, a Cash Award would be compensation income, subject to tax at
ordinary income tax rates when paid. Subject to the application of Section
162(m) of the Code as discussed below, the Company will be entitled to a
deduction for the corresponding amount.
Withholding for Taxes
No issuance of Common Stock under the 2000 Incentive Plan shall be made
until arrangements satisfactory to the Company have been made for the
withholding of taxes. As to Awards that are payable in shares of Common Stock,
to the extent provided in the Award agreement, an Optionee or Employee Grantee
may direct the Company to withhold a number of shares of Common Stock from
such Award having an aggregate fair market value equal to the amount of any
tax required to be withheld with respect to such Award. Such withholding of
shares of Common Stock shall otherwise be allowed only at the discretion of
the Executive Compensation Committee.
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Additional Tax Consequences
Code Section 4999 golden parachute provisions may apply to a participant
who receives any payment in the nature of compensation contingent on the
change of ownership or effective control of the Company. In the event that the
acceleration of vesting or any payment, distribution or issuance of stock is
subject to a golden parachute excise tax pursuant to Section 4999(a) of the
Code, the participant whose benefit is subject to such tax (generally,
officers or highly compensated employees) is entitled to receive a gross-up
payment from the Company so that the amount of the "net" benefit received by
such participant shall equal the amount of the benefit that would have been
received in the absence of a golden parachute tax. Section 280G of the Code
disallows a deduction to the Company for amounts subject to the excise tax
under Code Section 4999.
Section 162(m) of the Code places a $1 million cap on the deductible
compensation that may be paid to certain executives of publicly traded
corporations. Amounts that qualify as "performance based" compensation under
Section 162(m)(4)(C) of the Code are exempt from the cap and do not count
toward the $1 million limit. Generally, Nonqualified Options granted with an
exercise price at least equal to the fair market value of the stock on the
date of grant will qualify as performance based compensation. Other Awards may
or may not so qualify, depending on their terms.
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EXECUTIVE COMPENSATION
Executive Compensation Committee Report
The Executive Compensation Committee of the Board of Directors consists of
five directors who are not employees of the Company. The Committee reviews the
Company's executive compensation program and policies each year and determines
the compensation of the executive officers.
The Committee's overall policy regarding compensation of the Company's
executive officers, including Mr. Stewart, is to provide competitive salary
levels and compensation incentives that (i) attract and retain individuals of
outstanding ability in these key positions, (ii) recognize individual
performance and the performance of the Company relative to the performance of
other companies of comparable size, complexity and quality, and (iii) support
both the short-term and long-term goals of the Company. The Executive
Compensation Committee believes this approach closely links the compensation
of the Company's executives to accomplishment of Company goals that coincide
with shareholder objectives.
In addition, the Executive Compensation Committee considers the anticipated
tax treatment of the Company's executive compensation program. Section 162(m)
of the Code generally limits the corporate tax deduction for compensation paid
to executive officers named in the Summary Compensation Table to $1 million,
unless certain conditions are met. The Company's policy is to qualify all
executive compensation for deduction under applicable tax laws to the maximum
extent possible.
The executive compensation program has in the past included three elements
that, taken together, constitute a flexible and balanced method of
establishing total compensation for the Company's executive officers. These
elements are (i) base salary, (ii) annual bonus plan awards, and (iii) long-
term incentive awards, which include stock option grants and performance unit
awards.
Providing Competitive Levels of Compensation. The Executive Compensation
Committee attempts to provide the Company's executives, including Mr. Stewart,
with a total compensation package that is targeted at the 75th percentile of
the market for executives holding comparable positions when the Company's
performance justifies the payment of compensation at such levels. The
Committee determines a competitive level of compensation for each executive
based on information drawn from a variety of sources, including proxy
statements of other companies and surveys conducted by compensation
consultants. An independent consultant periodically reviews and provides
survey data to the chief executive officer and the Executive Compensation
Committee to compare the Company's executive compensation with compensation
levels at companies in an industry peer group.
While the targeted value of an executive's compensation package may be
competitive, its actual value may exceed or fall below competitive levels
depending on performance, as discussed below.
Base Salaries. The Committee periodically reviews and establishes executive
base salaries. Generally, base salaries are determined according to the
following factors: the individual's experience level, scope and complexity of
the position held and annual performance of the individual. In addition, the
Committee obtained an independent survey in the fall of 1999 for the purpose
of determining 2000 base salaries. The survey data compares the Company's
executives with those from both general industry and an industry peer group.
Based on the survey and year 2000 performance, all executives received
increases for 2001 including Mr. Stewart.
The Annual Bonus Plan. The purpose of the annual bonus plan is to provide
motivation toward and reward the accomplishment of corporate annual objectives
and to provide a competitive compensation package that will attract, reward
and retain individuals of the highest quality. As a pay-for-performance plan,
cash bonus awards are paid based upon the achievement of corporate performance
objectives established for the fiscal year.
Targeted bonus award levels for the Company's executive officers are
established by the Committee each year. The Company's annual performance
measures are established jointly by the Committee and management.
17
<PAGE>
For 2000, bonus targets for the Company's Chief Executive Officer and its
other executive officers were based on earnings per share objectives. These
objectives are established at three levels: entry level, expected value
(target level) and over achievement level. The Committee chooses not to
disclose the specific earnings per share objectives because it believes such
disclosure would be detrimental to the Company's competitive position with
respect to the industry. The Company's fiscal 2000 earnings per share
objectives fell in the over-achievement level and all of the executive
officers, including Mr. Stewart, received the maximum bonus for fiscal year
2000.
Long-Term Incentive Program: Performance Units and Stock Option Grants. The
long-term incentive program was introduced in fiscal 1993 to focus management
attention on Company performance over a period of time longer than one year in
recognition of the long-term horizons for return on investments and strategic
decisions in the energy services industry. The program is designed to motivate
management to assist the Company in achieving a high level of long-term
performance and serves to link this portion of executive compensation to long-
term stockholder value. Pursuant to the long-term incentive program, the
Executive Compensation Committee may award performance awards to executive
officers on an annual basis. From 1993 to 1999, the Committee awarded
performance units to executive officers on an annual basis, except for 1998,
when performance units were not awarded. The awards generally vest at the end
of a three-year period of time, based on Company performance over such time
period measured against pre-established objectives. The numbers of shares
represented by such awards are designed to place the Chief Executive Officer
and other executive officers at the 75th percentile of the market for total
compensation when expected performance is met. Aggregate stock or option
holdings of the executive have no bearing on the size of a performance award.
Awards made in November 2000 under the long-term incentive program
consisted of performance units and stock options granted under the Company's
1997 Incentive Plan. The performance unit awards will vest at the end of three
years according to the Company's three year stock price performance as
compared to an industry peer group index. Such performance must exceed peer
group performance by predetermined percentages in order for the performance
units to vest in full. Notwithstanding the foregoing, the Executive
Compensation Committee is permitted by the terms of the 1997 Incentive Plan to
amend the performance objectives or the vesting period for any performance
award. In addition, the performance awards will vest in full upon the
occurrence of a "change of control". Mr. Stewart and the other executive
officers were awarded performance units in November 2000, based on the
criteria described above.
On November 16, 2000, the Committee reviewed the Company's performance for
the three-year period ending September 30, 2000 for purposes of determining
the performance criteria achievement level for the performance unit awards
made in November 1997. The Company's stock price for the three-year
measurement period exceeded the performance targets set by the Committee at
the time of award, and the Compensation Committee decided that the 1997
performance units should vest at the maximum level. These targets were a
comparison of the Company's stock price to the peer group established at the
time of grant, which changed significantly due to mergers and acquisitions in
the oilfield sector. A total of 29,702 units were converted into Common Stock
and issued to executive officers.
Under the Company's 1995 Incentive Plan and 1997 Incentive Plan, the
Committee may make grants of stock options to the Company's executive
officers. These plans allow the Committee to promote the interests of the
Company and its stockholders by encouraging the executive officers to increase
their equity interest in the Company, thereby giving them added incentive to
work toward the continued growth and success of the Company. Stock option
grants were made following fiscal year 2000 to each of the executive officers
including Mr. Stewart based on the criteria described above.
Key Employee Share Option Plan. In 1997, the Committee approved the BJ
Services Company Key Employee Share Option Plan, called the "Keysop Plan,"
which allows participants to elect to receive, in lieu of salary and bonus,
options to purchase certain designated mutual funds. An executive will not be
taxed on the value of the mutual funds until the Keysop option is exercised,
and the Company does not deduct such amount for tax purposes as compensation
until the option is exercised.
18
<PAGE>
Supplemental Executive Retirement Plan. In 2000, the Committee approved the
BJ Services Company Supplemental Executive Retirement Plan, which provides
supplemental retirement benefits to the Company's executive officers. The
purpose of this plan is to insure that the Company's overall compensation
program for its executives is competitive.
This report of the Executive Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, except to the
extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such acts.
---------------------
Don D. Jordan, Chairman
L. William Heiligbrodt
John R. Huff
Michael E. Patrick
James L. Payne
December 7, 2000
19
<PAGE>
PERFORMANCE GRAPH-TOTAL STOCKHOLDER RETURN
September 1995 through September 2000
The Securities and Exchange Commission (the "SEC") requires that the
Company include in its proxy statement a line graph presentation comparing
cumulative, five-year total shareholder return with a general market index
(S&P 500) and either an industry index or custom group of peers as selected by
the Company. In the past, the Company has compared its performance against a
group of companies (the "Peer Group") that for 1997 included Baker Hughes
Incorporated; Camco International, Inc.; Dresser Industries, Inc.; Halliburton
Company; Schlumberger N.V.; Smith International, Inc.; Western Atlas Inc. and
Weatherford International Incorporated. During fiscal 1998, Baker Hughes
Incorporated acquired Western Atlas Inc.; Halliburton Company acquired Dresser
Industries, Inc.; Schlumberger N.V. acquired Camco International, Inc.; and
Energy Ventures Inc. acquired Weatherford International Incorporated. Due to
these changes, the Peer Group includes only the following companies: Baker
Hughes Incorporated, Halliburton Company, Schlumberger N.V., and Smith
International, Inc.
As required by the SEC, the Peer Group data is presented in the following
chart. The graph assumes investments of $100 on September 30, 1995, and
reinvestment of all dividends.
This performance graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such acts.
Indexed Total Stockholder Return
September 1995-September 2000
[PERFORMANCE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BJ Services Company $100 $144 $294 $129 $252 $484
----------------------------------------------------------------
S&P 500 Index $100 $118 $162 $174 $219 $246
----------------------------------------------------------------
Peer Group $100 $154 $299 $146 $200 $304
</TABLE>
20
<PAGE>
The following information relates to compensation paid by the Company for
fiscal 1998, 1999 and 2000 to the Company's Chief Executive Officer and each
of the other four most highly compensated executive officers in 2000:
Summary Compensation Table
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Long-Term Compensation
Annual --------------------------------------
Compensation Awards Payouts
------------ ------ -------
Securities All Other
Name and Other Annual Restricted Underlying LTIP Compen-
Principal Position Year Salary Bonus(1) Compensation(2) Stock Awards Option/SARs(3) Payouts(4) sation(5)
---------------------------------------------------------------------------------------------------------------
($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J.W. Stewart 2000 664,168 911,250 47,648 836,178 49,086
Chairman of the Board, 1999 610,010 0 0 703,927 42,999
President and Chief 1998 604,508 198,189 240,000 376,599 42,123
Executive Officer
Michael McShane 2000 295,500 315,000 15,893 376,778 16,770
Senior Vice President-- 1999 273,000 0 0 315,062 16,932
Finance and Chief 1998 270,834 68,987 76,000 461,371 17,685
Financial Officer
Kenneth A. Williams 2000 250,834 229,500 15,893 308,689 15,444
Vice President--North 1999 230,004 0 0 261,478 12,050
American Operations 1998 227,170 49,818 75,000 382,833 12,365
Thomas H. Koops 2000 245,840 225,007 15,893 301,423 17,505
Vice President-- 1999 225,000 0 0 253,389 15,902
Technology and 1998 222,168 48,735 76,000 370,416 16,293
Logistics
David Dunlap 2000 245,840 225,007 15,893 292,702 11,119
Vice President-- 1999 225,000 0 0 227,986 10,232
International 1998 221,168 48,735 76,000 362,563 10,544
Operations
</TABLE>
---------------------
(1) Includes bonuses earned in the reported fiscal year and paid in the
following fiscal year.
(2) Perquisites and other personal benefits paid or distributed during 2000 to
the persons listed in the compensation table above did not exceed, with
respect to any individual, the lesser of $50,000 or 10 percent of such
individual's total salary and bonus.
(3) Includes options earned in the reported fiscal year and granted subsequent
to the end of the reported fiscal year.
(4) Reflects shares of Common Stock issued with respect to performance awards
granted under the 1990 Stock Incentive Plan. Also includes cash awards to
offset the federal income tax payable by the recipients of such shares.
(5) The amount shown in this column is the annual Company contribution to the
Company's 401(k) defined contributions plan on behalf of each executive
officer.
21
<PAGE>
Options/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual
Rates of Stock
Price Appreciation
Individual Grants for Option Term
------------------------------------------------- -------------------
(a) (b) (c) (d) (e) (f) (g)
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Expiration
Name Granted(#)(1) Fiscal Year Price($/Sh) Date 5%($) 10%($)
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
J.W. Stewart 47,648(2) 8.2% 61.19 11/16/2010 1,833,593 4,646,685
Michael McShane 15,893(2) 2.7% 61.19 11/16/2010 611,595 1,549,903
Kenneth A. Williams 15,893(2) 2.7% 61.19 11/16/2010 611,595 1,549,903
Thomas H. Koops 15,893(2) 2.7% 61.19 11/16/2010 611,595 1,549,903
David Dunlap 15,893(2) 2.7% 61.19 11/16/2010 611,595 1,549,903
</TABLE>
---------------------
(1) All options reflected in this table were earned in fiscal 2000. No stock
appreciation rights ("SARs") were granted in tandem with the options
reflected in this table.
(2) Includes options granted on November 16, 2000. Such options will become
exercisable ratably over a three year period, with one-third of each grant
vesting on each of the first, second and third anniversaries of the date
of grant.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs at
Shares Options/SARs at FY-End(#) FY-End($)
Acquired on Value ------------------------- -------------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
J.W. Stewart 184,306 8,222,054 561,057 201,483 26,363,363 9,003,788
Michael McShane 222,486 7,604,283 0 64,260 0 2,862,769
Kenneth A. Williams 103,694 4,645,665 30,076 61,206 1,185,261 2,769,199
Thomas H. Koops 122,122 4,981,282 9,680 61,840 245,025 2,801,513
David Dunlap 9,828 260,442 56,264 61,700 2,390,397 2,797,969
</TABLE>
Long-Term Incentive Plans--Awards in Last Fiscal Year
<TABLE>
<CAPTION>
Estimated Future Payouts
Under Non-Stock Price-Based Plans
---------------------------------
(a) (b) (c) (d) (e) (f)
------------------------ ---------------- ----------- ------------ --------- ----------
Performance
or Other
Period
Number of Until
Shares, Units or Maturation
Other or
Name Rights(#)(1),(2) Payout(3) Threshold(#) Target(#) Maximum(#)
---- ---------------- ----------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
J.W. Stewart............ 21,211 3 Years 3,394 13,999 21,211
Michael McShane......... 7,075 3 Years 1,132 4,670 7,075
Kenneth A. Williams..... 7,075 3 Years 1,132 4,670 7,075
Thomas H. Koops......... 7,075 3 Years 1,132 4,670 7,075
David Dunlap............ 7,075 3 Years 1,132 4,670 7,075
</TABLE>
---------------------
(1) Awards reflected in this table represent performance units awarded under
the Company's 1997 Incentive Plan. These awards were earned during fiscal
2000 and granted on November 16, 2000. For additional information
regarding these awards, see the Executive Compensation Committee Report--
Long-Term Incentive Program elsewhere in this Proxy Statement.
(2) Excludes the following awards earned during fiscal 1999 and granted on
December 9, 1999: Mr. Stewart--33,626 units; Mr. McShane--9,667 units; Mr.
Williams--9,247 units; Mr. Koops--8,995 units; Mr. Dunlap--8,995 units.
(3) The performance period is three fiscal years unless a change of control
occurs, in which case the performance units would vest immediately.
22
<PAGE>
Supplemental Executive Retirement Plan
The Company has implemented a supplemental executive retirement plan for
its senior executives, including Mr. Stewart, effective October 1, 2000.
The following table indicates the approximate annual benefit that would be
received by a participant under the plan based on the following assumptions:
(i) retirement at age 60 and (ii) an election by the participant to receive
payments over a period of 20 years (the participant may elect payment over a
period of five to 30 years). This benefit would be reduced by the Social
Security and other benefits listed below.
Pension Plan Table
<TABLE>
<CAPTION>
Years of Service
-----------------------------------------------
Final Average Compensation 5 10 15 20 25 30
-------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$ 200,000..................... 19,273 38,547 57,820 77,093 96,367 115,640
$ 400,000..................... 38,547 77,093 115,640 154,187 192,733 231,280
$ 600,000..................... 57,820 115,640 173,460 231,280 289,100 346,920
$ 800,000..................... 77,093 154,187 231,280 308,373 385,466 462,560
$1,000,000..................... 96,367 192,733 289,100 385,466 481,833 578,200
$1,200,000..................... 115,640 231,280 346,920 462,560 578,200 693,840
</TABLE>
The credited years of service at September 30, 2000 of the named executive
officers are as follows: Mr. Stewart, 31 years; Mr. McShane, 20 years;
Mr. Williams, 27 years; Mr. Koops, 24 years; and Mr. Dunlap, 10 years.
The maximum benefit payable under the plan is based on a single life
annuity computation starting at age 60, and using 60% of the participant's
"highest average compensation", which is the average base salary and bonus
paid for the three highest consecutive years out of the participant's last ten
years of employment. The benefit is reduced by (i) the Social Security benefit
payable at age 62, (ii) certain contributions by the Company for the
participant's account under the Company's 401(k) plan, and (iii) any annual
benefit the participant will receive under a defined benefit pension plan
maintained by predecessors of the Company. The average reduction in benefit
currently projected by the Company for the five named executive officers is
$65,817. In the case of early retirement, death, disability or change in
control before the participant reaches age 60, the benefit is reduced. The
compensation covered by the plan for the most recent three years does not
differ by more than 10% from the annual compensation shown in the Summary
Compensation Table.
A participant's benefit is fully vested upon the later of the participant's
fifty-fifth birthday or the date the participant completes five full years of
service. Prior to age 55, no part of the benefit is vested, unless the
participant dies, becomes disabled, or a change of control occurs. If one of
these events occurs, the participant's benefit will be fully vested. In the
event of a change in control, the participant will be given three years'
credit for years of service and age in calculating the benefit.
A participant's interest in the plan is generally distributed upon
retirement in accordance with the participant's distribution election. The
Compensation Committee may, however, direct that the benefits be paid as a
lump sum. A lump sum payment will be paid in the event of death or a change of
control, and may be paid by the Committee at the request of the participant in
the case of disability. In the event of a change of control, the participant
will receive a "gross-up" payment sufficient to satisfy any excise tax
payments that may be imposed by Section 4999 of the Code and any additional
taxes imposed with respect to such gross-up payments, in accordance with the
provisions of the plan.
The Company has purchased life insurance to fund the benefits under this
plan.
23
<PAGE>
SEVERANCE AGREEMENTS
The Company has severance agreements with certain executive officers,
including each of the named executive officers shown in the Summary
Compensation Table, as well as with Matthew D. Fitzgerald,
Margaret B. Shannon, Taylor M. Whichard III, and Stephen A. Wright. The
severance agreements were effective August 27, 1993, except for Ms. Shannon's
agreement, which was effective February 14, 1994 and Mr. Dunlap's agreement,
which was effective November 27, 1995. As reported in the Company's proxy
statement for its January 2000 annual meeting of shareholders, in 1999, the
Board of Directors approved amendments to the form of executive severance
agreements. The following describes the terms of the form of severance
agreement, as so amended. The agreements are automatically extended for an
additional year at the end of each year of the agreements unless the Company
has given one year's prior notice of termination. These agreements are
intended to provide for continuity of management in the event of a change in
control of the Company. The agreements provide that covered executive officers
could be entitled to certain severance benefits following a change in control
of the Company. If, following a change in control, the executive is terminated
by the Company for any reason, other than for death, disability or for cause,
or if such executive officer terminates his or her employment for good reason
(as this term is defined in the agreements), then the executive officer is
entitled to a severance payment that will be three times the sum of the
executive officer's base salary and bonus amount, as defined in the
agreements, plus an amount equal to three times the value of the executive's
largest stock option and/or performance unit grant in the prior three years.
Option awards that are intended as two-year awards will be annualized for
purposes of this calculation. The severance payment is generally made in the
form of a lump sum. For a period of up to three years, the Company would also
provide life, disability, accident and health insurance coverage substantially
similar to the benefits provided before termination. The Company would also
provide outplacement services, and would also provide retiree medical coverage
if the executive were within five years of eligibility at the time of
termination following a change in control.
If a change in control occurs, the severance agreements are effective for a
period of two years from the date of such change in control. Under the
severance agreements, a change in control would generally include any of the
following events: (i) any "person" as defined in the Securities Exchange Act
of 1934, as amended, acquires 25 percent or more of the Company's voting
securities; (ii) a majority of the Company's directors are replaced during a
two-year period; (iii) stockholders approve a merger, resulting in (a) 60% or
less of the common stock and voting securities of the surviving corporation
being owned by the same persons that owned the Common Stock of the Company
immediately prior to such merger, (b) a person owning 25% or more of the
surviving corporation's common stock or voting securities, or (c) replacement
of a majority of the members of the Board of Directors; or (iv) the Company's
stockholders approve a liquidation or sale of the Company's assets. In the
event that any payments made in connection with a change in control would be
subject to the excise tax imposed by Section 4999 of the Code, the Company
would pay an additional payment (a "gross-up" payment) sufficient to satisfy
such excise tax obligations and any additional taxes imposed with respect to
such gross-up payment.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of reports on Forms 3 and 4 and amendments
thereto furnished to the Company during its most recent fiscal year and
reports on Form 5 and amendments thereto furnished to the Company with respect
to its most recent fiscal year, and written representations from officers and
directors that no Form 5 was required, the Company believes that all filing
requirements applicable to its officers, directors and beneficial owners under
Section 16(a) of the Exchange Act were complied with during fiscal 2000 except
that a late Form 4 was filed for Mr. McShane and Mr. Koops with respect to one
transaction for each person.
24
<PAGE>
SOLICITATION
The Company will bear the cost of the solicitation of proxies. In addition
to solicitation by mail, certain of the directors, officers or regular
employees of the Company may, without extra compensation, solicit the return
of proxies by telephone or electronic media. Arrangements will be made with
brokerage houses, custodians and other fiduciaries to send proxy material to
their principals, and they will be reimbursed by the Company for any our-of-
pocket expenses. Georgeson & Company Inc. will assist the Company in proxy
solicitation and will receive a fee of $8,000 plus reimbursement of certain
charges and expenses.
VOTING PROCEDURES
A majority of the outstanding shares of Common Stock present in person or
represented by proxy at the 2001 Annual Meeting constitutes a quorum for the
transaction of business. The inspector of elections appointed by the Company
will count all votes cast, in person or by submission of a properly executed
proxy, before the closing of the polls at the meeting. The affirmative vote of
holders of a majority of the Common Stock present or represented by proxy at
the meeting and entitled to vote is required for the election of each director
nominee and for the approval of the BJ Services Company 2000 Incentive Plan.
Therefore, abstentions have the effect of a negative vote. Broker non-votes
will not be taken into account in determining the outcome of the election of
directors or the approval of the BJ Services Company 2000 Incentive Plan.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, independent public accountants, audited the
Company's consolidated financial statements for fiscal 2000, and have advised
the Company that they will have a representative available at the 2001 Annual
Meeting to respond to appropriate questions. Such representative will be
permitted to make a statement if he desires to do so. The Company has not yet
selected independent public accountants to audit its 2001 consolidated
financial statements. The Company intends to engage its accountants for such
purpose in May 2001.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the 2002 Annual
Meeting of Stockholders must be received by the Secretary of the Company at
its principal executive offices by August 22, 2001 to be considered for
inclusion in the proxy statement and form of proxy relating to the 2002 Annual
Meeting. Under the Company's Bylaws, in order for any stockholder proposal
that is not included in such proxy statement and form of proxy to be brought
before the 2002 Annual Meeting, such proposal must be received by the
Secretary of the Company at its principal executive offices by
October 29, 2001.
The Annual Report of the Company for the year ended September 30, 2000,
including audited financial statements, is enclosed with this proxy statement
but does not constitute a part of the proxy soliciting material. Additional
copies of the Annual Report are available without charge, upon request.
BJ Services Company will furnish a copy of its Annual Report on Form 10-K
for the year ended September 30, 2000, without exhibits, without charge to
each person who forwards a written request to Robert C. Coons, Director,
Corporate Communications, BJ Services Company, 5500 Northwest Central Drive,
Houston, Texas 77092-2036.
25
<PAGE>
APPENDIX A
CHARTER OF THE
AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS
The Board of Directors of BJ Services Company (the "Company") has
heretofore constituted and established an Audit Committee (the "Committee")
with authority, responsibility and specific duties as described in this
Charter. This document replaces and supersedes in its entirety the previous
Charter of Responsibilities of the Audit Committee adopted by the Board of
Directors of the Company (the "Board") on November 19, 1990.
COMPOSITION
The Committee shall be elected by the Board and shall be comprised of not
less than three non-employee Directors who are independent (as defined by the
New York Stock Exchange ("NYSE")). Each member of the Committee should be
financially literate and at least one member should have accounting or related
financial management expertise, as such qualifications are interpreted by the
Board in its business judgment. The Board shall also elect a chairman of the
Committee.
PRIMARY RESPONSIBILITIES AND DUTIES
The primary responsibilities of the Committee are to provide assistance to
the Board in fulfilling its oversight responsibility to the stockholders in
matters relating to the accounting and financial reporting practices of the
Company, the adequacy of the Company's internal controls and the quality and
integrity of the financial statements of the Company. The outside auditor is
ultimately accountable to the Board and the Committee, as representatives of
the Company's stockholders; and the Board and the Committee have the ultimate
authority and responsibility to select, evaluate, and where appropriate,
replace the outside independent auditor after giving consideration to
management's recommendations. The internal audit function is also responsible
to the Board through the Committee.
With regard to its accounting and financial reporting oversight
responsibilities, the Committee shall:
1. Review the independence of the outside independent auditors, giving
consideration to the range of audit and non-audit services performed by
them, as well as the review of a formal written statement, consistent
with standards established by the Independence Standards Board, from
the independent auditors delineating all relationships with the
Company. Discuss with the independent auditors any disclosed
relationships or services that may impact the objectivity and
independence of the auditors. Approve significant non-audit services
provided by the auditors, prior to the performance of such service
where feasible. After consulting with management, recommend to the
Board the independent auditors to be employed by the Company.
2. Prior to commencement of the annual external audit, review with
management, the internal auditors and the independent auditors the
proposed scope of the audit plan and fees, including the areas of
business to be examined, the people to be assigned to the audit, the
procedures to be followed, special areas to be investigated, as well as
the program for integration of the independent and internal audit
efforts.
3. Review the annual internal audit plan, including the process used to
develop the plan and the staffing levels necessary to execute the plan.
At each regularly scheduled meeting of the Committee, review
significant findings from internal audit projects and the overall
status of accomplishing the plan. The Committee will annually review a
report on the internal audit of the expenses of the senior management
of the Company.
4. Inquire of management, the internal auditors and the independent
auditors whether material information has been withheld from any of
them, whether any disagreements among them have not been
A-1
<PAGE>
satisfactorily resolved, and whether restrictions were placed by
management on implementation of the independent or internal auditors'
examinations. Regularly scheduled executive sessions will be held for
this purpose.
5. Prior to quarterly and annual earnings filings, review results with
management and independent auditors. This review should include a
discussion of quality of earnings, review of highly judgmental areas,
items affecting comparability between periods, passed audit adjustments
(for the annual audit) and other inquiries as may be appropriate. If
there are no significant accounting or auditing matters to discuss (as
required by SAS 61), the review may be held only between the Committee
Chairman, management and the external auditors and may be held
telephonically.
6. Prior to public release of the annual audited financial statements,
review and discuss the financial statements and results of the annual
audit with management, the internal auditors and the independent
auditors. Inquire of the independent auditors about the
appropriateness, not just the acceptability of the accounting
principles and the clarity of the financial disclosure practices used.
Determine, with regard to new transactions or events, the auditor's
reasoning for concurring with the appropriateness of the accounting
principles and disclosure practices adopted by management. Based on the
review and discussion, the Committee is responsible for recommending to
the Board that the audited consolidated financial statements be
included in the Company's Annual Report on Form 10-K.
7. Meet with management, the internal auditors and the independent
auditors to review the effectiveness of the Company's system of
internal controls, including computerized information systems controls
and security, and internal audit procedures, including the adequacy of
internal audit staffing and budget.
8. Annually, review and reassess the adequacy of the Committee Charter.
9. Issue report to be included in the Company's annual proxy statement
meeting the Securities and Exchange Commission requirements concerning
review of financial statements, discussions with independent auditors
and auditor independence.
10. Any other duties or responsibilities as dictated by the Board.
11. Report periodically to the Board on significant results of the
foregoing activities.
MEETINGS
The Committee will meet at least two times per year as determined by the
Board. The Chairman will hold a telephonic meeting with management and the
independent auditors prior to filing of the quarterly financial statements
(Form 10-Q). Special meetings may be called, as needed, by the Chairman of the
Board or the Chairman of the Committee. In addition, the Committee will make
itself available to the independent auditors and the internal auditors of the
Company as requested and will periodically meet in executive session with the
independent auditors and the internal auditors to discuss any matters that the
Committee or these groups believe should be discussed privately with the
Committee. All meetings of the Committee will be held pursuant to the Bylaws
of the Company with regard to notice and waiver thereof, and written minutes
of each meeting will be duly filed in the Company records. Reports of meetings
of the Committee shall be made to the Board at its next regularly scheduled
meeting following the Committee meeting accompanied by any recommendations to
the Board approved by the Committee.
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APPENDIX B
BJ SERVICES COMPANY
2000 INCENTIVE PLAN
ARTICLE I
Introduction
1. Purpose. The BJ SERVICES COMPANY 2000 INCENTIVE PLAN (the "Plan") is
intended to promote the interests of BJ SERVICES COMPANY (the "Company") and
its stockholders by encouraging employees of the Company, its subsidiaries and
affiliated entities and non-employee directors of the Company to acquire or
increase their equity interest in the Company and, with respect to employees,
to be able to relate cash bonuses to Company performance goals, thereby giving
them an added incentive to work toward the continued growth and success of the
Company. The Board of Directors of the Company (the "Board") also contemplates
that through the Plan, the Company, its subsidiaries and affiliated entities
will be better able to compete for the services of personnel needed for the
continued growth and success of the Company. However, nothing in this Plan
shall operate or be construed to prevent the Company from granting bonuses and
other stock awards outside of this Plan.
2. Shares Subject to the Plan. The aggregate number of shares of Common
Stock, $.10 par value per share, of the Company ("Common Stock") that may be
issued under the Plan shall not exceed 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. Further, Awards (as hereinafter
defined) other than options and Cash Awards shall not be granted with respect
to more than an aggregate of 600,000 shares of Common Stock (subject to
adjustment in the same manner as provided above with respect to shares of
Common Stock available under the Plan). In the event the number of shares to
be delivered upon the exercise in full of any option granted under the Plan is
reduced for any reason whatsoever or in the event any option granted under the
Plan can no longer under any circumstances be exercised, the number of shares
no longer subject to such option shall thereupon be released from such option
and shall thereafter be available under the Plan. If shares of Performance
Stock (as hereinafter defined) awarded under the Plan are forfeited to the
Company, such shares shall thereafter be available for new grants and awards
under the Plan. Shares issued pursuant to the Plan shall be fully paid and
nonassessable.
3. Administration of the Plan. The Plan shall be administered by a
committee (the "Committee") of two or more directors of the Company appointed
by the Board. Subject to the provisions of the Plan, the Committee shall
interpret the Plan and all awards under the Plan, shall make such rules as it
deems necessary for the proper administration of the Plan, shall make all
other determinations necessary or advisable for the administration of the Plan
and shall correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any award under the Plan in the manner and to
the extent that the Committee deems desirable to effectuate the Plan. Any
action taken or determination made by the Committee pursuant to this and the
other paragraphs of the Plan shall be binding on all parties. The act or
determination of a majority of the Committee shall be deemed to be the act or
determination of the Committee.
No person shall be eligible to serve on the Committee unless he is a "Non-
Employee Director" as defined in Rule 16b-3 ("Rule 16b-3") promulgated under
the Securities Exchange Act of 1934, as amended (the "Act"), if and as such
rule is then in effect and also an "outside director" within the meaning of
Section 162(m) of the
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Internal Revenue Code of 1986, as amended (the "Code"). Notwithstanding any
provision in the Plan to the contrary, other than options granted to Non-
Employee Directors pursuant to Article IV, no options, Performance Stock,
Performance Units, Bonus Stock, Cash Awards, or Other Stock-Based Awards
(collectively, "Awards") may be granted under the Plan to any member of the
Committee during the term of his membership on the Committee. Subject to the
following, the Committee, in its sole discretion, may delegate any or all of
its powers and duties under the Plan, including the power to grant Awards
under the Plan, to the President of the Company, subject to such limitations
on such delegated powers and duties as the Committee may impose. Upon any such
delegation all references in the Plan to the "Committee" shall be deemed to
include the President; provided, however, that such delegation shall not limit
the President's right to receive Awards under the Plan. Notwithstanding the
foregoing, the President may not grant Awards to, or take any action with
respect to any Award previously granted to, a person who is an officer or a
director of the Company or otherwise subject to Section 16(b) of the Act.
4. Amendment and Discontinuance of the Plan. The Board may amend, suspend
or terminate the Plan; provided, however, that each such amendment of the Plan
(a) extending the period within which Awards may be made under the Plan, (b)
increasing the number of shares of Common Stock to be awarded under the Plan,
except as provided in Article I, Paragraph 2, (c) reducing the option exercise
price per share provided in the Plan, (d) modifying the provisions of Article
IV, (e) changing the class of persons to whom Awards may be made under the
Plan, or (f) granting options to Non-Employee Directors other than pursuant to
Article IV, shall, in each case, be subject to approval by the stockholders of
the Company; provided, further, however, that no amendment, suspension or
termination of the Plan may cause the Plan to fail to meet the requirements of
Rule 16b-3 or may, without the consent of the holder of an Award, terminate
such Award or adversely affect such person's rights in any material respect.
5. Granting of Discretionary Awards. The Committee shall have the authority
to grant, prior to the expiration date of the Plan, to such employees and
officers as may be selected by it (with respect to options, "Employee
Optionees" and, with respect to Performance Stock, Performance Units, Bonus
Stock and Cash Awards, "Employee Grantees"), options to purchase shares of
Common Stock and awards of Performance Stock, Performance Units, Bonus Stock
and/or, Cash Awards on the terms and conditions hereinafter set forth. Stock
issued with respect to an Award under the Plan may be authorized but unissued,
or reacquired shares of Common Stock. The Committee shall also have the
authority to determine whether options granted to Employee Optionees are
granted pursuant to Article II or Article III, as hereinafter set forth;
provided, however, only employees of the Company, its Parent Corporation or a
Subsidiary Corporation (as such terms are defined in Section 424 of the Code)
may be granted options pursuant to Article III. Options granted to Employee
Optionees under Article III shall be "incentive stock options" as defined in
Section 422 of the Code, and are hereinafter referred to as "incentive stock
options." All other options granted to Employee Optionees under the Plan shall
be granted pursuant to Article II and shall be options which do not constitute
incentive stock options ("nonqualified options"). In selecting Employee
Optionees and Employee Grantees, and in determining the number of shares to be
covered by each Award granted to such individual, the Committee may consider
such factors which it may consider relevant. Further, the Committee shall have
the authority to grant options in substitution for options held by individuals
employed by corporations who become employees of the Company, its
subsidiaries, or affiliated entities as a result of a merger or consolidation
or other business combination of such individual's employing corporation with
the Company, any such subsidiary, or any such affiliated entity.
6. Granting of Options to Non-Employee Directors. All options granted to
Non-Employee Directors shall be options to purchase, on the terms and
conditions hereinafter set forth in Article IV, authorized but unissued, or
reacquired shares of Common Stock and shall be nonqualified options. Non-
Employee Directors shall not be eligible to receive any other Award.
7. Term of Plan. This Plan shall be effective upon the date of its adoption
by the Board, provided the Plan is approved by the stockholders of the Company
within twelve months after the date of such adoption. In the event that the
Plan is not approved by the stockholders of the Company within twelve months
after the date
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of its adoption by the Board, the Plan shall be null and void. No Award shall
be exercisable or payable under the Plan prior to its approval by the
stockholders and, if the Plan is not approved by the stockholders of the
Company within such twelve-month period, all Awards granted under the Plan
shall be automatically canceled. Except with respect to Awards then
outstanding, if not sooner terminated under the provisions of Article I,
Paragraph 4, the Plan shall terminate upon and no further Awards shall be made
after the tenth anniversary of the date the Plan is adopted by the Board.
8. Miscellaneous. All references in the Plan to "Articles," "Paragraphs"
and other subdivisions refer to the corresponding Articles, Paragraphs, and
subdivisions of the Plan.
9. Rule 16b-3 Compliance. The Company intends:
(a) that the Plan meet the requirements of Rule 16b-3;
(b) that transactions of the type specified in Rule 16b-3 by Non-
Employee Directors pursuant to Article IV of the Plan will be exempt from
the operation of Section 16(b) of the Act; and
(c) that transactions of the type specified in Rule 16b-3 by officers
of the Company (whether or not they are directors) pursuant to the Plan
will be exempt from the operation of Section 16(b) of the Act.
In all cases, the terms, provisions, conditions and limitations of the Plan
shall be construed and interpreted consistent with the Company's intent as
stated in this Article 1, Paragraph 9.
10. Definition of the Term "Change of Control". As used in the Plan, a
"Change of Control" shall be deemed to have occurred upon, and shall mean (a)
the acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Act) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Act) of 25% or more of
either (i) the then outstanding shares of Common Stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not constitute a
Change of Control: (A) any acquisition directly from the Company (excluding an
acquisition by virtue of the exercise of a conversion privilege), (B) any
acquisition by the Company, (C) any acquisition by any employee benefit
plan(s) (or related trust(s)) sponsored or maintained by the Company or any
corporation controlled by the Company, or (D) any acquisition by any
corporation pursuant to a reorganization, merger or consolidation, if,
immediately following such reorganization, merger or consolidation, the
conditions described in clause (i), (ii) and (iii) of clause (c) of this
Paragraph 10 are satisfied; (b) the approval by the Company's stockholders of
the sale or disposition of all or substantially all of the Company's assets or
the dissolution or liquidation of the Company; or (c) the approval by the
stockholders of the Company of a reorganization, merger or consolidation, in
each case, unless immediately following such reorganization, merger or
consolidation (i) more than 60% of, respectively, the then outstanding shares
of common stock of the corporation resulting from such reorganization, merger
or consolidation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or consolidation, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be, (ii) no Person (excluding the Company, any employee benefit
plan(s) (or related trust(s)) of the Company and/or its subsidiaries or such
corporation resulting from such reorganization, merger or consolidation and
any Person beneficially owning, immediately prior to such reorganization,
merger or consolidation, directly or indirectly, 25% or more of the
Outstanding Company Common Stock or Outstanding Company Voting Securities, as
the case may be) beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation or the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of
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directors and (iii) at least a majority of the members of the board of
directors of the corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board (as defined below) at the
time of the execution of the initial agreement providing for such
reorganization, merger or consolidation. The "Incumbent Board" shall mean
individuals who, as of the date the Plan is adopted by the Board, constitute
the Board; provided, however, that any individual becoming a director
subsequent to such date whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either (1) an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Act), or an
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board or (2) a plan or agreement to replace a majority
of the members of the Board then comprising the Incumbent Board.
ARTICLE II
Nonqualified Stock Options
1. Eligible Individuals. Employees and officers (whether or not they are
directors) of the Company, its subsidiaries and affiliated entities shall be
eligible to receive nonqualified options under this Article II; provided,
however, no such person may receive more than 250,000 nonqualified options
and/or incentive stock options hereunder during any calendar year (subject to
adjustment in the same manner provided in Article I, Paragraph 2 with respect
to shares of Common Stock available under the Plan).
2. Calculation of Exercise Price. The exercise price to be paid for each
share of Common Stock deliverable upon exercise of each nonqualified option
granted under Article II shall be equal to the fair market value per share of
Common Stock at the time of grant as determined by the Committee, based on the
composite transactions in the Common Stock as reported by The Wall Street
Journal, and shall not be less than the per share price of the last sale of
Common Stock in regular trading on the New York Stock Exchange on the trading
day prior to the grant of such option. The exercise price for each
nonqualified option granted under Article II shall be subject to adjustment as
provided in Article II, Paragraph 3(e).
3. Terms and Conditions of Options. Nonqualified options granted under
Article II shall be in such form as the Committee may from time to time
approve. Options granted under Article II shall be subject to the following
terms and conditions and may contain such additional terms and conditions, not
inconsistent with Article II, as the Committee shall deem desirable:
(a) Option Period and Conditions and Limitations on Exercise. To the
extent not prohibited by other provisions of the Plan, each nonqualified
option granted under Article II shall be exercisable no later than the date
which is ten years after the date of grant (the "Nonqualified Option
Expiration Date") and at such time or times as the Committee, in its
discretion, may establish in the option agreement.
(b) Termination of Employment and Death. For purposes of Article II and
each nonqualified option granted under Article II, an Employee Optionee's
employment shall be deemed to have terminated at the close of business on
the day preceding the first date on which he is no longer for any reason
whatsoever (including his death) employed by the Company or a subsidiary or
affiliated entity of the Company. Unless otherwise provided in the Option
Agreement, upon an Employee Optionee's termination of employment for any
reason whatsoever (including his death), each nonqualified option granted
to him under Article II and all of his rights thereunder shall wholly and
completely terminate:
(i) At the time the Employee Optionee's employment is terminated if
his employment is terminated because he is discharged for (A) fraud,
theft or embezzlement committed against the Company or a subsidiary,
affiliated entity or customer of the Company, (B) Employee's willful
misconduct in performance of the duties of Employee's employment or (C)
Employee's final conviction of a felony (collectively, "Cause"); or
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(ii) At the expiration of a period of one year after the Employee
Optionee's death (but in no event later than the Nonqualified Option
Expiration Date) if the Employee Optionee's employment is terminated
after the six-month period following the date of grant by reason of his
death. To the extent exercisable, a nonqualified option granted under
Article II may be exercised by the Employee Optionee's estate or by the
person or persons who acquire the right to exercise his option by
bequest or inheritance with respect to any or all of the shares
remaining subject to his option at the time of his death; or
(iii) At the expiration of a period of three years after the
Employee Optionee's employment is terminated if the Employee Optionee's
employment is terminated after the six-month period following the date
of grant because of retirement or disability (but in no event later
than the Nonqualified Option Expiration Date); or
(iv) 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
Nonqualified Option Expiration Date; or
(v) Notwithstanding the foregoing, the Committee, in its
discretion, may extend the period for exercise of any option upon an
Employee Optionee's termination, but in no event later than the
Nonqualified Option Expiration Date.
As used in this Plan the term "retirement" means the termination of an
employee's employment with the Company, its subsidiaries and affiliated
entities (i) on or after reaching age 65 or (ii) on or after reaching age
55 with the consent of the Board, for reasons other than death, disability
or Cause, and the term "disability" shall mean an employee is suffering
from a mental or physical disability, which, in the opinion of the Board,
prevents the employee from performing his regular duties and is expected to
be of long continued duration or to result in death.
(c) Manner of Exercise. In order to exercise a nonqualified option
granted under Article II, the person or persons entitled to exercise it
shall deliver to the Company payment in full for the shares being
purchased, together with any required withholding tax as provided in
Article X. The payment of the exercise price for each option granted under
Article II shall be (i) in cash or check payable and acceptable to the
Company, (ii) through tendering to the Company shares of Common Stock
already owned by the person (provided that if such shares were acquired
pursuant to the prior exercise of a Company granted option, such shares
must have been owned for at least six months, and provided further, that
the Company may, upon confirming that the person owns the number of shares
being tendered, issue a new certificate for the number of shares being
acquired pursuant to the exercise of the option less the number of shares
being tendered upon the exercise and return to the person (or not require
surrender of) the certificate for the shares being tendered upon the
exercise), (iii) by the person delivering to the Company a properly
executed exercise notice together with irrevocable instructions to a broker
to promptly deliver to the Company cash or a check payable and acceptable
to the Company to pay the option exercise price and any applicable
withholding taxes; provided that in the event the person chooses to pay the
option exercise price as provided in (iii) above, the person and the broker
shall comply with such procedures and enter into such agreements of
indemnity and other agreements as the Committee shall prescribe as a
condition of such payment procedure or (iv) by any combination of the
above. The value of each share of Common Stock tendered pursuant to (ii)
above shall be deemed to be equal to the per share price of the last sale
of Common Stock in regular trading on the New York Stock Exchange on the
trading day prior to the date the option is exercised, based on the
composite transactions in the Common Stock as reported in The Wall Street
Journal. The date of sale of the shares by the broker pursuant to a
"cashless exercise" under (iii) above shall be the date of exercise of the
option. If the Committee so requires, such person or persons shall also
deliver a written representation that all shares being purchased are being
acquired for investment and not with a view to or for resale in connection
with, any distribution of such shares.
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(d) Options not Transferable. Except as provided in Article IX, no
nonqualified option granted under Article II shall be transferable
otherwise than by will or by the laws of descent and distribution and,
during the lifetime of the Employee Optionee to whom any such option is
granted, it shall be exercisable only by the Employee Optionee. Any attempt
to transfer, assign, pledge, hypothecate or otherwise dispose of, or to
subject to execution, attachment or similar process, any nonqualified
option granted under Article II, or any right thereunder, contrary to the
provisions hereof, shall be void and ineffective, shall give no right to
the purported transferee and shall, at the sole discretion of the
Committee, result in forfeiture of the option with respect to the shares
involved in such attempt.
(e) Adjustment of Shares. In the event that at any time after the
effective date of the Plan the outstanding shares of Common Stock are
changed into or exchanged for a different number or kind of shares or other
securities by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares or the
like, the Committee shall make an appropriate and equitable adjustment in
the number and kind of shares as to which all outstanding nonqualified
options granted under Article II, or portions thereof then unexercised,
shall be exercisable, and with any necessary corresponding adjustment in
exercise price per share, to the end that after such event the shares
subject to Article II of the Plan and each Employee Optionee's
proportionate interest shall be maintained as before the occurrence of such
event. Any such adjustment made by the Committee shall be final and binding
upon all Employee Optionees, the Company, and all other interested persons.
(f) Listing and Registration of Shares. Each nonqualified option
granted under Article II shall be subject to the requirement that if at any
time the Committee determines, in its discretion, that the listing,
registration, or qualification of the shares subject to such option under
any securities exchange or under any state or federal law, or the consent
or approval of any governmental regulatory body, is necessary or desirable
as a condition of, or in connection with, the issue or purchase of shares
thereunder, such option may not be exercised in whole or in part unless
such listing, registration, qualification, consent or approval shall have
been free of any conditions not acceptable to the Committee.
4. Amendment. The Committee may, with the consent of the person or persons
entitled to exercise any outstanding nonqualified option granted under Article
II, amend such nonqualified option. The Committee may at any time or from time
to time, in its discretion, in the case of any nonqualified option previously
granted under Article II which is not then immediately exercisable in full,
accelerate the time or times at which such option may be exercised to any
earlier time or times.
5. Acceleration upon a Change of Control. Notwithstanding any provision in
Article II or in any document or instrument evidencing a nonqualified option
granted under Article II, upon the occurrence of a Change of Control each
nonqualified option previously granted under Article II which is not then
immediately exercisable in full shall be immediately exercisable in full.
6. Other Provisions.
(a) The person or persons entitled to exercise, or who have exercised,
a nonqualified option granted under Article II shall not be entitled to any
rights as a stockholder of the Company with respect to any shares subject
to such option until he shall have become the holder of record of such
shares.
(b) No nonqualified option granted under Article II shall be construed
as limiting any right which the Company or any subsidiary or affiliated
entity of the Company may have to terminate at any time, with or without
Cause, the employment of any person to whom such option has been granted.
(c) Notwithstanding any provision of the Plan or the terms of any
nonqualified option granted under Article II, the Company shall not be
required to issue any shares hereunder if such issuance would, in the
judgment of the Committee, constitute a violation of any state or federal
law or of the rules or regulations of any governmental regulatory body.
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(d) The Committee, in its discretion, may permit any Employee Optionee
to surrender unexercised any nonqualified option for the receipt of another
Award or other arrangement in order to defer the "spread" on exercise of
such option.
ARTICLE III
Incentive Stock Options
1. Eligible Employees. Employees and officers (whether or not they are
directors) of the Company or its Parent Corporation or any Subsidiary
Corporation of the Company shall be eligible to receive incentive stock
options under this Article III; provided, however, no such person may receive
more than 250,000 incentive stock options and/or nonqualified options
hereunder during any calendar year (subject to adjustment in the same manner
provided in Article I, Paragraph 2 with respect to shares of Common Stock
available under the Plan).
2. Calculation of Exercise Price. The exercise price to be paid for each
share of Common Stock deliverable upon exercise of each incentive stock option
granted under Article III shall be equal to the fair market value per share of
Common Stock (the "Market Value Per Share") at the time of grant as determined
by the Committee, based on the composite transactions in the Common Stock as
reported by The Wall Street Journal, and shall not be less than the per share
price of the last sale of Common Stock in regular trading on the New York
Stock Exchange on the trading day prior to the grant of such option; provided,
however, than in the case of an Employee Optionee who, at the time such option
is granted, owns (within the meaning of Section 424(d) of the Code) more than
10% of the total combined voting power of all classes of stock of the Company
or of its Parent Corporation or any Subsidiary Corporation, then the exercise
price per share shall be at least 110% of the fair market value per share of
Common Stock at the time of grant. The exercise price for each incentive stock
option shall be subject to adjustment as provided in Article III, Paragraph
3(e).
3. Terms and Conditions of Options. Incentive stock options granted under
Article III shall be in such form as the Committee may from time to time
approve. Options granted under Article III shall be subject to the following
terms and conditions and may contain such additional terms and conditions, not
inconsistent with Article III, as the Committee shall deem desirable:
(a) Option Period and Conditions and Limitations on Exercise. No
incentive stock option granted under Article III shall be exercisable later
than the date which is ten years after the date of grant; provided,
however, that in the case of an Employee Optionee who, at the time such
option is granted, owns (within the meaning of Section 424(d) of the Code)
more than 10% of the total combined voting power of all classes of stock of
the Company or of its Parent Corporation or any Subsidiary Corporation,
then such option shall not be exercisable with respect to any of the shares
subject to such option later than the date which is five years after the
date of grant. The date on which an incentive stock option ultimately
becomes unexercisable under the previous sentence is hereinafter referred
to as the "ISO Expiration Date." To the extent not prohibited by other
provisions of the Plan, each incentive stock option granted under Article
III shall be exercisable at such time or times as the Committee in its
discretion may determine.
(b) Termination of Employment and Death. For purposes of Article III
and each incentive stock option granted under Article III, an Employee
Optionee's employment shall be deemed to have terminated at the close of
business on the day preceding the first date on which he is no longer for
any reason whatsoever (including his death) employed by the Company or a
subsidiary or affiliated entity of the Company. Unless otherwise provided
in the Option Agreement, upon an Employee Optionee's termination of
employment by any reason whatsoever (including his death), each incentive
stock option granted to him and all of his rights thereunder shall wholly
and completely terminate:
(i) At the time the Employee Optionee's employment is terminated if
his employment is terminated due to Cause; or
(ii) At the expiration of a period of one year after the Employee
Optionee's death (but in no event later than the ISO Expiration Date)
if the Employee Optionee's employment is terminated after the six-
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month period following the date of grant by reason of his death. To the
extent exercisable, an incentive stock option granted under Article III
of the Plan may be exercised by the Employee Optionee's estate or by
the person or persons who acquire the right to exercise his option by
bequest or inheritance with respect to any or all of the shares
remaining subject to his option at the time of his death; or
(iii) At the expiration of a period of three years after the
Employee Optionee's employment is terminated if the Employee Optionee's
employment is terminated after the six-month period following the date
of grant because of retirement or disability (but in no event later
than the ISO Expiration Date); or
(iv) 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; or
(v) Notwithstanding the foregoing, the Committee, in its discretion
may extend the period for exercise of any option upon an Employee
Optionee's termination, but in no event later than the ISO Expiration
Date.
In the event and to the extent that an incentive stock option granted
under Article III is not exercised (A) within three months after the
Employee Optionee's termination of employment or (B) within one year after
the Employee Optionee's employment is terminated because of disability
within the meaning of Section 22(e)(3) of the Code, whichever is
applicable, such option shall be taxed as a nonqualified option and shall
be subject to the manner of exercise provisions described in Article II,
Paragraph 3(c). Further, in the event that an Employee Optionee ceases to
be employed by the Company, its Parent Corporation or any Subsidiary
Corporation, but continues to be employed by an affiliate, then, to the
extent an incentive stock option granted under Article III is not exercised
within three months after the date of such cessation of employment with the
Company, its Parent Corporation or any Subsidiary Corporation, such option
shall be taxed as a nonqualified option and shall be subject to the manner
of exercise provisions described in Article II, Paragraph 3(c).
(c) Manner of Exercise. In order to exercise an incentive stock option
granted under Article III, the person or persons entitled to exercise it
shall deliver to the Company payment in full for the shares being
purchased. The payment of the exercise price for each option granted under
Article III shall be in (i) cash or check payable and acceptable to the
Company, (ii) through tendering to the Company shares of Common Stock
already owned by the person (provided that if such shares were acquired
pursuant to the prior exercise of a Company granted option, such shares
must have been owned for at least six months, and provided further, that
the Company may, upon confirming that the person owns the number of shares
being tendered, issue a new certificate for the number of shares being
acquired pursuant to the exercise of the option less the number of shares
being tendered upon the exercise and return to the person (or not require
surrender of) the certificate for the shares being tendered upon the
exercise), (iii) by the person delivering to the Company a properly
executed exercise notice together with irrevocable instructions to a broker
to promptly deliver to the Company cash or a check payable and acceptable
to the Company to pay the option exercise price; provided that in the event
the person chooses to pay the option exercise price as provided in (iii)
above, the person and the broker shall comply with such procedures and
enter into such agreements of indemnity and other agreements as the
Committee shall prescribe as a condition of such payment procedure or (iv)
by any combination of the above. The value of each share of Common Stock
tendered pursuant to (ii) above shall be deemed to be equal to the per
share price of the last sale of Common Stock in regular trading on the New
York Stock Exchange on the trading day prior to the date the option is
exercised, based on the composite transactions in the Common Stock as
reported in The Wall Street Journal. The date of sale of the shares by the
broker pursuant to a "cashless exercise" under (iii) above, shall be the
date of exercise of the
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option. If the Committee so requires, such person or persons shall also
deliver a written representation that all shares being purchased are being
acquired for investment and not with a view to, or for resale in connection
with any distribution of such shares.
(d) Options not Transferable. No incentive stock option granted under
Article III shall be transferable otherwise than by will or by the laws of
descent and distribution and, during the lifetime of the Employee Optionee
to whom any option is granted, it shall be exercisable only by such
Employee Optionee. Any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of, or to subject to execution, attachment or similar
process, any incentive stock option granted under Article III, or any right
thereunder, contrary to the provisions hereof, shall be void and
ineffective, shall give no right to the purported transferee, and shall, at
the sole discretion of the Committee, result in forfeiture of the option
with respect to the shares involved in such attempt.
(e) Adjustment of Shares. In the event that at any time after the
effective date of the Plan the outstanding shares of Common Stock are
changed into or exchanged for a different number or kind of shares or other
securities by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares or the
like, the Committee shall make an appropriate and equitable adjustment in
the number and kind of shares as to which all outstanding incentive stock
options granted under Article III, or portions thereof then unexercised,
shall be exercisable, and with any necessary corresponding adjustment in
exercise price per share, to the end that after such event the shares
subject to Article III of the Plan and each Employee Optionee's
proportionate interest shall be maintained as before the occurrence of such
event. Any such adjustment made by the Committee shall be final and binding
upon all Employee Optionees, the Company, and all other interested persons.
(f) Listing and Registration of Shares. Each incentive stock option
granted under Article III shall be subject to the requirement that if at
any time the Committee determines, in its discretion, that the listings
registration, or qualification of the shares subject to such option upon
any securities exchange or under any state or federal law, or the consent
or approval of any governmental regulatory body, is necessary or desirable
as a condition of, or in connection with, the issue or purchase of shares
thereunder, such option may not be exercised in whole or in part unless
such listing, registration, qualification, consent or approval shall have
been effected or obtained and the same shall have been free of any
conditions not acceptable to the Committee.
(g) Limitation on Amount. Notwithstanding any other provision of the
Plan, to the extent that the aggregate fair market value (determined as of
the time the respective incentive stock option is granted) of the Common
Stock with respect to which incentive stock options are exercisable for the
first time by an Employee Optionee during any calendar year under all
incentive stock option plans of the Company and its Parent Corporation and
Subsidiary Corporations exceeds $100,000, such incentive stock options
shall be taxed as nonqualified options and shall be subject to the manner
of exercise provisions described in Article II, Paragraph 3(c). The
Committee shall determine, in accordance with applicable provisions of the
Code, Treasury Regulations and other administrative pronouncements, which
of an Employee Optionee's incentive stock options will be treated as
nonqualified options because of such limitation and shall notify the
Employee Optionee of such determination as soon as practicable after such
determination.
4. Amendment. The Committee may, with the consent of the person or persons
entitled to exercise any outstanding incentive stock option granted under
Article III, amend such incentive stock option. The Committee may at any time
or from time to time, in its discretion, in the case of any incentive stock
option previously granted under Article III which is not then immediately
exercisable in full, accelerate the time or times at which such option may be
exercised to any earlier time or times.
5. Acceleration upon a Change of Control. Notwithstanding any provision in
Article III or in any document or instrument evidencing an incentive stock
option granted under Article III, upon the occurrence of a Change of Control,
each incentive stock option previously granted under Article III which is not
then immediately exercisable in full shall be immediately exercisable in full.
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6. Other Provisions.
(a) The person or persons entitled to exercise, or who have exercised,
an incentive stock option granted under Article III shall not be entitled
to any rights as a stockholder of the Company with respect to any shares
subject to such option until he shall have become the holder of record of
such shares.
(b) No incentive stock option granted under Article III shall be
construed as limiting any right which the Company or any subsidiary or
affiliated entity of the Company may have to terminate at any time, with or
without Cause, the employment of any person to whom such option has been
granted.
(c) Notwithstanding any provision of the Plan or the terms of any
incentive stock option granted under Article III, the Company shall not be
required to issue any shares hereunder if such issuance would, in the
judgment of the Committee constitute a violation of any state or federal
law or of the rules or regulations of any governmental regulatory body.
(d) The Committee may require any person who exercises an incentive
stock option to give prompt notice to the Company of any disposition of
shares of Common Stock acquired upon exercise of an incentive stock option
within two years after the date of grant of such option or within one year
after the transfer of shares to such person.
ARTICLE IV
Non-Employee Director Stock Options
1. Eligible Persons. Persons who are members of the Board but are neither
employees nor officers of the Company, its subsidiaries or affiliated entities
("Non-Employees Directors") shall receive options under, and solely under,
this Article IV.
2. Initial Granting of Options to Non-Employee Directors After 1995 and
1997 Plan Terminations. Subject to stockholder approval of the Plan pursuant
to Article I, Paragraph 7, and to the limitation of the number of shares of
Common Stock set forth in Article I, Paragraph 2, each Non-Employee Director
who is first elected to the Board on or after the date director options may no
longer be granted under the terms of either the Company's 1995 Incentive Plan
or the 1997 Incentive Plan, is hereby granted effective on the date of his
initial election (which date shall be the date of grant for purposes hereof),
a nonqualified option to purchase 2,000 shares of Common Stock (subject to
adjustment in the same manner provided in Article IV, Paragraph 5(e) with
respect to shares of Common Stock subject to options then outstanding).
3. Annual Granting of Options to Non-Employee Directors. Subject to
stockholder approval of the Plan pursuant to Article I, Paragraph 7, and to
the limitation of the number of shares of Common Stock set forth in Article I,
Paragraph 2, a nonqualified option to purchase 8,000 shares of Common Stock
(subject to adjustment in the same manner provided in Article IV, Paragraph
5(e) with respect to shares of Common Stock subject to options then
outstanding) is hereby granted, effective the fourth Thursday of October of
2001 and each year thereafter until the expiration of the Plan, to each person
who is a Non-Employee Director on each such date (which date shall be the date
of grant for purposes hereof); provided, however, the number of shares of
Common Stock subject to such annual grant shall be reduced by the number of
shares subject to annual grants made to each Non-Employee Director on such
date under the Company's 1995 Incentive Plan and 1997 Incentive Plan.
4. Calculation of Exercise Price. The exercise price to be paid for each
share of Common Stock deliverable upon exercise of each option granted under
Article IV shall be equal to the fair market value per share of Common Stock
at the time of grant, which shall be the per share price of the last sale of
Common Stock in regular trading on the New York Stock Exchange on the trading
day prior to the grant of such option as reported by The Wall Street Journal.
The exercise price for each option granted under Article IV shall be subject
to adjustment as provided in Article IV, Paragraph 5(e).
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5. Terms and Conditions of Options. Options granted under Article IV shall
be subject to the following terms and conditions:
(a) Option Period and Conditions and Limitations on Exercise. Each
option granted under Article IV shall be exercisable from time to times in
whole or in part, at any time after the date of grant and prior to the date
which is ten years after the date of grant (the "Option Expiration Date").
Notwithstanding the foregoing or any provision in any document or
instrument evidencing an option granted under Article IV, upon the
occurrence of a Change of Control, each option previously granted under
Article IV which is not then immediately exercisable in full shall be
immediately exercisable in full.
(b) Termination of Directorship and Death. For purposes of Article IV
and each option granted under Article IV, a Non-Employee Director's
directorship shall be deemed to have terminated at the close of business on
the day preceding the first date on which he ceases to be a member of the
Board for any reason whatsoever (including his death). If a Non-Employee
Director's directorship is terminated for any reason whatsoever (including
his death), each option granted to him under Article IV and all of his
rights thereunder shall wholly and completely terminate:
(i) At the time the Non-Employee Director's directorship is
terminated if his directorship is terminated as a result of his removal
from the Board for (A) fraud, theft or embezzlement committed against
the Company or a Subsidiary, affiliated entity or customer of the
Company, (B) Non-Employee Director's willful misconduct in performance
of his duties as Non-Employee Director or (C) Non-Employee Director's
final conviction of a felony; or
(ii) At the expiration of a period of one year after the Non-
Employee Director's death (but in no event later than the Option
Expiration Date). An option granted under Article IV may be exercised
by the Non-Employee Director's estate or by the person or persons who
acquire the right to exercise his option by bequest or inheritance with
respect to any or all of the shares remaining subject to his option at
the time of his death; or
(iii) At the expiration of a period of three years after the Non-
Employee Director's directorship is terminated if such person's
directorship is terminated as a result of such person's resignation or
removal from the Board because of disability or in accordance with the
provisions of the Company's Bylaws regarding automatic termination of
directors' terms of office (but in no event later than the Option
Expiration Date); or
(iv) If the Non-Employee Director's directorship is terminated for
any reason (other than for the reasons specified in Article IV,
Paragraphs 5(b)(i), 5(b)(ii) or 5(b)(iii)), at the expiration of a
period of three months after the Non-Employee Director's directorship
is so terminated except as provided in Article IV, Paragraph 5(g);
provided however, notwithstanding anything to the contrary, no option
shall ever be exercisable later than the Option Expiration Date.
(c) Manner of Exercise. In order to exercise a nonqualified option
granted under Article II, the person or persons entitled to exercise it
shall deliver to the Company payment in full for the shares being
purchased, together with any required withholding tax as provided in
Article XI. The payment of the exercise price for each option granted under
Article IV shall be (i) in cash or check payable and acceptable to the
Company, (ii) through tendering to the Company shares of Common Stock
already owned by the person (provided that if such shares were acquired
pursuant to the prior exercise of a Company granted option, such shares
must have been owned for at least six months, and provided further, that
the Company may, upon confirming that the person owns the number of shares
being tendered issue a new certificate for the number of shares being
acquired pursuant to the exercise of the option less the number of shares
being tendered upon the exercise and return to the person (or not require
surrender of) the certificate for the shares being tendered upon the
exercise), (iii) by the person delivering to the Company a properly
executed exercise notice together with irrevocable instructions to a broker
to promptly deliver to the Company cash or a check payable and acceptable
to the Company to pay the option exercise price and any applicable
withholding taxes; provided that in the event the person chooses to pay the
option exercise price as provided in (iii)
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above, the person and the broker shall comply with such procedures and
enter into such agreements of indemnity and other agreements as the
Committee shall prescribe as a condition of such payment procedure or (iv)
by any combination of the above. The value of each share of Common Stock
tendered pursuant to (ii) above shall be deemed to be equal to the per
share price of the last sale of Common Stock in regular trading on the New
York Stock Exchange on the trading day prior to the date the option is
exercised, based on the composite transactions in the Common Stock as
reported in The Wall Street Journal. The date of sale of the shares by the
broker pursuant to a "cashless exercise" under (iii) above shall be the
date of exercise of the option. If the Committee so requires, such person
or persons shall also deliver a written representation that all shares
being purchased are being acquired for investment and not with a view to,
or for resale in connection with, any distribution of such shares.
(d) Options Not Transferable. Except as provided in Article IX, no
option granted under Article IV shall be transferable otherwise than by
will or by the laws of descent and distribution and, during the lifetime of
the Non-Employee Director to whom any such option is granted, it shall be
exercisable only by such Non-Employee Director. Any attempt to transfer,
assign, pledge, hypothecate or otherwise dispose of, or to subject to
execution, attachment or similar process, any option granted under Article
IV, or any right thereunder, contrary to the provisions hereof, shall be
void and ineffective and shall give no right to the purported transferee
and shall, at the sole discretion of the Committee, result in forfeiture of
the option with respect to the shares involved in such attempt.
(e) Adjustment of Shares. In the event that at any time after the
effective date of the Plan the outstanding shares of Common Stock are
changed into or exchanged for a different number or kind of shares or other
securities by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares or the
like, the number and kind of shares as to which all outstanding options
granted under Article IV, or portions thereof then unexercised, shall be
exercisable shall be appropriately adjusted to reflect the occurrence of
such event, with any necessary corresponding adjustment in exercise price
per share, so that the holder of each option exercised after the occurrence
of such event shall be entitled to receive the aggregate number and kind of
shares which, if such option had been exercised immediately prior to such
event, the holder would have owned upon such exercise and been entitled to
receive by virtue of such event. Any adjustment provided for in the
preceding provisions of this Paragraph 5(e) shall be subject to any
required stockholder action.
(f) Listing and Registration of Shares. Each option granted under
Article IV shall be subject to the requirement that if at any time the
Committee determines, in its discretion, that the listing, registration, or
qualification of the shares subject to such option under any securities
exchange or under any state or federal law, or the consent or approval of
any governmental regulatory body, is necessary or desirable as a condition
of, or in connection with, the issue or purchase of shares thereunder, such
option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected
or obtained and the same shall have been free of any conditions not
acceptable to the Committee.
(g) 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:
(i) Publicly-Traded Stock Transaction. If the consideration offered
to stockholders 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
each Non-Employee Director's outstanding options to purchase Common
Stock ("Prior Options") and each such Prior Option shall become an
option (a "New Option") (A) 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, (B) 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 (C)
otherwise upon the same terms and conditions as such Prior Option,
except that (1) such New
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Option shall be exercisable until the applicable Option Expiration Date
regardless of any termination of a Non-Employee Director's membership
on the Board or the board of directors of the Acquiring Entity
following the Change of Control, and (2) 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 (a) the per share value of the consideration received
by stockholders 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 (b) 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.
(ii) Other Transaction. If the consideration offered to
stockholders 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 Non-Employee Director 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 using a risk free rate for option term as determined by the
then current rate on Treasury bills with a maturity approximating the
remaining option life, and estimated future annual stock volatility
based on the prior twelve months volatility.
6. Other Provisions
(a) The person or persons entitled to exercise, or who have exercised,
an option granted under Article IV shall not be entitled to any rights as a
stockholder of the Company with respect to any shares subject to such
option until he shall have become the holder of record of such shares.
(b) No option granted under Article IV shall be construed as limiting
any right which either the stockholders of the Company or the Board may
have to remove at any time, with or without Cause, any person to whom such
option has been granted from the Board.
(c) Notwithstanding any provision of the Plan or the terms of any
option granted under Article IV, the Company shall not be required to issue
any shares hereunder if such issuance would, in the judgment of the
Committee, constitute a violation of any state or federal law or of the
rule or regulations of any governmental regulatory body.
(d) If, as of any date that the Plan is in effect, there are not
sufficient shares of Common Stock available under the Plan to allow for the
grant to each Non-Employee Director of an option for the number of shares
provided for in Article IV, each Non-Employee Director shall receive an
option for his pro-rata share of the total number of shares of Common Stock
then available under the Plan.
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ARTICLE V
Performance Stock and Performance Units
1. Eligible Individuals. Employees and officers (whether or not they are
directors) of the Company, its subsidiaries and affiliated entities shall be
eligible to receive awards of Performance Stock and/or Performance Units (as
hereinafter defined) under this Article V; provided, however, no such
individual may receive more than 250,000 Performance Stock and/or Performance
Unit awards hereunder during any calendar year (subject to adjustment in the
same manner provided in Article I, Paragraph 2 with respect to shares of
Common Stock available under the Plan).
2. Terms and Conditions of Performance Awards. Shares of Performance Stock
and Performance Units granted under Article V to an eligible individual (an
"Employee Grantee") shall be, with respect to Performance Stock, a share of
Common Stock and, with respect to a Performance Unit, a phantom share of
Common Stock. Both types of Awards shall be subject to the following terms and
conditions and may contain such additional terms and conditions, not
inconsistent with Article V, as the Committee shall deem desirable:
(a) Performance Period and Vesting. Subject to Article V, Paragraphs 3
and 4, no shares of Performance Stock or Performance Units granted under
Article V shall be subject to becoming vested; i.e., earned and
nonforfeitable, earlier than the date which is six months from the date of
grant nor later than the date which is ten years after the date of grant
(the "Performance Period "). To the extent not prohibited by other
provisions of the Plan, each share of Performance Stock and each
Performance Unit granted under Article V shall be subject to becoming
vested upon the achievement of such performance goals (Company and/or
individual), if any, over such Performance Period as the Committee, in its
discretion, may determine at or prior to the grant of such performance
Award. The Committee shall also designate, at the date of grant, whether a
performance Award is intended to meet the requirements of Section 162(m) of
the Code. With respect to any Performance Stock or Performance Unit grant
that is intended to meet the requirements of Section 162(m) of the Code,
the performance goal or goals for such Award shall be with respect to one
or more of the following: earnings per share; earnings before interest,
taxes, depreciation and amortization expenses ("EBITDA"); earnings before
interest and taxes ("EBIT"); EBITDA, EBIT or earnings before taxes and
unusual or nonrecurring items as measured either against the annual budget
or as a ratio to revenue; market share; sales; costs; return on equity;
operating cash flow; return on net capital employed ("RONCE") and/or stock
price performance. The goals can be applied, where appropriate, with
respect to an individual, a business unit or the Company as a whole and
need not be based on increases or positive results, but can be based on
maintaining the status quo or limiting economic losses, for example. Which
goals to use with respect to a performance Award, the weighting of the
goals if more than one is used, and whether the goal is to be measured
against a Company-established budget or target, an index or a peer group of
companies, shall also be determined by the Committee at the time of grant
of the Award.
(b) Termination of Employment and Death. For purposes of Article V, and
each share of Performance Stock and each Performance Unit granted
hereunder, an Employee Grantee's employment shall be deemed to have
terminated at the close of business on the day preceding the first date on
which he is no longer for any reason whatsoever (including his death)
employed by the Company or a subsidiary or an affiliated entity of the
Company. If an Employee Grantee's employment is terminated for any reason
whatsoever (including his death), all of his rights with respect to each
share of Performance Stock and each Performance Unit granted to him under
Article V which is not then vested shall wholly and completely terminate:
(i) At the time the Employee Grantee's employment is terminated if
termination is for any reason other than retirement, disability or
death; or
(ii) if the Employee Grantee's employment is terminated due to
retirement, disability or death, at the time of such termination but
only with respect to that portion of the Award which is equal to the
fraction, the numerator of which is the number of full calendar months
remaining in the Performance Period and the denominator of which is the
total number of calendar months in the Performance Period; provided,
however, the remaining, nonforfeited portion of the Award shall
continue to be subject to the
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terms and conditions of the Performance Period and at the end of such
Performance Period shall be forfeited and/or paid as unrestricted stock
to the Employee Grantee depending on the achievement of the goals for
such Performance Period; provided further, however, with respect to any
performance Award not intended on its date of grant to meet the
requirements of Section 162(m) of the Code, the Committee may, in its
sole discretion, deem the terms and conditions have been met at the
date of such termination for all or part of such remaining,
nonforfeited portion of the Performance Stock award or Performance Unit
award.
(c) Performance Awards not Transferable. No shares of Performance Stock
or Performance Units granted under Article V shall be transferable
otherwise than by will or by the laws of descent and distribution. Any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of,
or to subject to execution, attachment or similar process, any shares of
Performance Stock or Performance Units granted under Article V, or any
right thereunder, contrary to the provisions hereof, shall be void and
ineffective, shall give no right to the purported transferee, and shall, at
the sole discretion of the Committee, result in forfeiture of the shares of
the Performance Stock or Performance Units involved in such attempt.
3. Amendment. With respect to any outstanding Performance Stock or
Performance Unit, the Committee may, at any time or times, without the consent
of the Employee-Grantee, amend the performance objectives and/or the
Performance Period for earning such Award.
4. Acceleration upon a Change of Control. Notwithstanding any provision in
Article V or in any document or instrument evidencing Performance Stock or
Performance Units granted under Article V, upon the occurrence of a Change of
Control each share of Performance Stock and each Performance Unit previously
granted under Article V which is not then immediately vested in full shall be
immediately vested in full, all performance goals shall be deemed to have been
met to the fullest extent under the terms of such grant, and the Performance
Periods shall immediately end.
5. Other Provisions.
(a) No grant of Performance Stock or Performance Units under Article V
shall be construed as limiting any right which the Company or any
subsidiary or affiliated entity of the Company may have to terminate at any
time, with or without Cause, the employment of any person to whom such
Award has been granted.
(b) Each certificate representing Performance Stock awarded under the
Plan shall be registered in the name of the Employee Grantee and, during
the Performance Period, shall be left in deposit with the Company and a
stock power endorsed in blank. The grantee of Performance Stock shall have
all the rights of a stockholder with respect to such shares including the
right to vote and the right to receive dividends or other distributions
paid or made with respect to such shares. Any certificate or certificates
representing shares of Performance Stock shall bear a legend similar to the
following:
The shares represented by this certificate have been issued pursuant
to the terms of the BJ Services Company 2000 Incentive Plan and may not
be sold, pledged, transferred, assigned or otherwise encumbered in any
manner except as is set forth in the terms of such award dated
.
After certification by the Committee as to the satisfaction of the terms
and conditions set by the Committee with respect to an Award of (i)
Performance Stock, a certificate, without the legend set forth above, for
the number of shares of Common Stock that are no longer subject to such
restrictions, terms and conditions shall be delivered to the employee and
(ii) Performance Units, a certificate for the number of shares of Common
Stock equal to the number of Performance Units vested shall be delivered to
the employee. The remaining unearned shares of Performance Stock issued
with respect to such Award, if any, or unearned Performance Units, as the
case may be, shall either be forfeited back to the Company or, if
appropriate under the terms of the Award applicable to such shares or
units, shall continue to be subject to the restrictions, terms and
conditions set by the Committee with respect to such Award.
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(c) Notwithstanding any provision of the Plan or the terms of any
nonqualified Award granted under Article V, the Company shall not be
required to issue any shares hereunder if such issuance would, in the
judgment of the Committee, constitute a violation of any state or federal
law or of the rules or regulations of any governmental regulatory body.
ARTICLE VI
Bonus Stock
The Committee may, from time to time and subject to the provisions of the
Plan, grant shares of Bonus Stock to employees and officers (whether or not
they are directors) of the Company, its subsidiaries and affiliated entities.
Bonus Stock shall be shares of Common Stock that are not subject to a
Performance Period under Article V.
ARTICLE VII
Cash Awards
1. Eligible Individuals. Employees and officers (whether or not they are
directors) of the Company, its subsidiaries and affiliated entities shall be
eligible to receive Cash Awards, which may be Tandem Cash Tax Rights,
Performance Cash Awards or Bonus Cash Awards (as hereinafter defined) under
this Article VII.
2. Tandem Cash Tax Rights. The Committee may grant a Tandem Cash Tax Right
with respect to a Performance Stock or Performance Unit Award that, subject to
the further provisions hereof, entitles the Employee Grantee to receive from
the Company, upon the later of the vesting of the Performance Stock or
Performance Unit Award or the date such Performance Stock or Performance Unit
Award is taxable to the Employee Grantee, an amount of cash such that the
"net" benefit received by the Employee Grantee, after paying all applicable
federal, state and other taxes (assuming for this purpose, the highest
marginal income tax rate for individuals applies) on the Performance Stock or
Performance Unit Award and this Tandem Cash Tax Right, shall be equal to the
value of the Performance Stock or Performance Unit Award payment received by
the Employee Grantee before any such taxes thereon.
3. Terms and Conditions of Performance Cash Awards. Performance Cash Awards
granted an Employee Grantee shall be subject to the following terms and
conditions and may contain such additional terms and conditions, not
inconsistent with Article VII, as the Committee shall deem desirable:
(a) Performance Period and Vesting. Subject to Article VII, Paragraphs
4 and 5, no Performance Cash Awards granted under Article VII shall be
subject to becoming vested; i.e., earned and nonforfeitable, earlier than
the date which is six months from the date of grant nor later than the date
which is ten years after the date of grant (the "Performance Period"). To
the extent not prohibited by other provisions of the Plan, each Performance
Cash Award granted under Article VII shall be subject to becoming vested
upon the achievement of such performance goals (Company and/or individual)
over such Performance Period as the Committee in its discretion may
determine at or prior to the grant of such Performance Cash Award. The
Committee shall also designate at the date of grant whether a Performance
Cash Award is intended to meet the requirements of Section 162(m) of the
Code. With respect to any Performance Cash Award grant that is intended to
meet the requirements of Section 162(m) of the Code, the performance goal
or goals for such Award shall be with respect to one or more of the
following: earnings per share; earnings before interest, taxes,
depreciation and amortization expenses ("EBITDA"); earnings before interest
and taxes ("EBIT"); EBITDA, EBIT or earnings before taxes and unusual or
nonrecurring items as measured either against the annual budget or as a
ratio to revenue; market share; sales; costs; return on equity; operating
cash flow; return on net capital employed ("RONCE") and/or stock price
performance. The goals can be applied, where appropriate, with respect to
an individual, a business unit or the Company as a whole and need not be
based on increases or positive results, but can be based on maintaining the
status quo or limiting
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economic losses, for example. Which goals to use with respect to a
Performance Cash Award, the weighting of the goals if more than one is
used, and whether the goal is to be measured against a Company-established
budget or target, an index or a peer group of companies, shall also be
determined by the Committee at the time of grant of the Award.
(b) Termination of Employment and Death. For purposes of Article VII
and each Performance Cash Award granted hereunder, an Employee Grantee's
employment shall be deemed to have terminated at the close of business on
the day preceding the first date on which he is no longer for any reason
whatsoever (including his death) employed by the Company or a subsidiary or
an affiliated entity of the Company. If an Employee Grantee's employment is
terminated for any reason whatsoever (including his death), all of his
rights with respect to each Performance Cash Award granted to him under
Article VII which is not then vested shall wholly and completely terminate:
(i) At the time the Employee Grantee's employment is terminated if
termination is for any reason other than retirement, disability or
death; or
(ii) If the Employee Grantee's employment is terminated due to
retirement, disability or death, at the time of such termination but
only with respect to that portion of the Award which is equal to the
fraction, the numerator of which is the number of full calendar months
remaining in the Performance Period and the denominator of which is the
total number of calendar months in the Performance Period; provided,
however, the remaining, nonforfeited portion of the Award shall
continue to be subject to the terms and conditions of the Performance
Period and at the end of such Performance Period shall be forfeited
and/or paid in cash to the Employee Grantee depending on the
achievement of the goals for such Performance Period;
provided, however, notwithstanding the foregoing, with respect to any
Performance Cash Award not intended on its date of grant to meet the
requirements of Section 162(m) of the Code, the Committee may, in its sole
discretion, deem the terms and conditions of an Employee Grantee's
Performance Cash Award(s) to have been met in full or in part on the date
of such Employee Grantee's termination of employment, regardless of the
reason for such termination of employment.
(c) Performance Cash Awards not Transferable. No Performance Cash
Awards granted under Article VII shall be transferable otherwise than by
will or by the laws of descent and distribution. Any attempt to transfer,
assign, pledge, hypothecate or otherwise dispose of, or to subject to
execution, attachment or similar process, any Performance Cash Awards
granted under Article VII, or any right thereunder, contrary to the
provisions hereof, shall be void and ineffective, shall give no right to
the purported transferee, and shall, at the sole discretion of the
Committee, result in forfeiture of the Performance Cash Awards involved in
such attempt.
(d) Maximum Award. With respect to a Performance Cash Award that is
intended to qualify as performance based compensation under Section 162(m)
of the Code, the maximum aggregate of such awards that may be granted to
any one Employee Grantee during any calendar year shall not exceed $2
million.
4. Amendment. With respect to any outstanding Performance Cash Awards, the
Committee may, at any time or times, without the consent of the Employee-
Grantee, amend the performance objectives and/or the Performance Period for
earning such Award.
5. Acceleration upon a Change of Control. Notwithstanding any provision in
Article VII or in any document or instrument evidencing Performance Cash
Awards granted under Article VII, upon the occurrence of a Change of Control
each Performance Cash Award previously granted under Article VII which is not
then immediately vested in full shall be immediately vested and payable in
cash in full, all performance goals shall be deemed to have been met to the
fullest extent under the terms of such grant, and the Performance Periods
shall immediately end.
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6. Other Provisions.
(a) No grant of a Performance Cash Award under Article VII shall be
construed as limiting any right which the Company or any subsidiary or
affiliated entity of the Company may have to terminate at any time, with or
without Cause, the employment of any person to whom such Award has been
granted.
(b) After certification by the Committee as to the satisfaction of the
terms and conditions set by the Committee with respect to a Performance
Cash Award, the portion of such Award that is no longer subject to such
restrictions, terms and conditions shall be paid (in cash) to the Employee
Grantee. The remaining unearned portion of such Performance Award, if any,
shall either be forfeited or, if appropriate under the terms applicable to
such Award, shall continue to be subject to the restrictions, terms and
conditions set by the Committee with respect to such Award.
7. Bonus Cash Awards. The Committee may, from time to time and subject to
the provisions of the Plan, grant Bonus Cash Awards to employees and officers
(whether or not they are directors) of the Company, its subsidiaries and
affiliated entities. Bonus Cash Awards shall be cash payments that are not
subject to a Performance Period under Article VII.
ARTICLE VIII
Adjustment of Awards
In the event that at any time after the effective date of the Plan the
outstanding shares of Common Stock are changed into or exchanged for a
different number or kind of shares or other securities 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 Optionee's, Employee
Grantee's, or Non-Employee Director's ("Award Grantees") 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 Award
Grantees, the Company, and all other interested persons.
ARTICLE IX
Transferable Options
The Committee may, in its discretion, provide in an option agreement (other
than an incentive stock option) that the option right granted to the
individual may be transferred (in whole or in part and shall be subject to
such terms and conditions as the Committee may impose thereon) by the
individual to (i) the spouse, children or grandchildren of the individual
("Immediate Family Members"), (ii) a trust or trusts for the exclusive benefit
of the Immediate Family Members and, if applicable, the individual, (iii) a
partnership in which such Immediate Family Members and, if applicable, the
individual are the only partners, or (iv) as otherwise provided for in the
option agreement. Following transfer, any such transferred option rights shall
continue to be subject to the same terms and conditions as were applicable to
the option rights immediately prior to transfer; provided, however, that no
transferred option rights shall be exercisable unless arrangements
satisfactory to the Company have been made to satisfy any tax withholding
obligations the Company may have with respect to the option rights.
ARTICLE X
Withholding for Taxes
Notwithstanding anything in the Plan to the contrary any issuance of Common
Stock pursuant to the exercise of an option or payment of any other Award
under the Plan shall not be made until appropriate arrangements satisfactory
to the Company have been made for the payment of any tax amounts (federal,
state, local or other) that may be required to be withheld or paid by the
Company with respect thereto. Such
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arrangements may, at the discretion of the Committee, include allowing the
optionee or grantee to tender to the Company shares of Common Stock owned by
the optionee or grantee, or to request or, to the extent provided in the Award
agreement to direct, the Company to withhold a portion of the shares of Common
Stock being acquired pursuant to the Award, whether through the exercise of an
option or as a distribution of earned Performance Stock, payment of earned
Performance Units or as Bonus Stock, which have a fair market value per share
as of the date of such withholding that is not greater than the sum of all tax
amounts to be withheld with respect thereto, together with payment of any
remaining portion of such tax amounts in cash or by check payable and
acceptable to the Company.
ARTICLE XI
Parachute Tax Gross-up
To the extent that the grant, payment, or acceleration of vesting or
payment, whether in cash or stock, of any Award made to a participant under
the Plan (a "Benefit") is subject to a golden parachute excise tax under
Section 4999(a) of the Code (a "Parachute Tax"), the Company shall pay such
person an amount of cash (the "Gross-up Amount") such that the "net" Benefit
received by the person under this Plan, after paying all applicable Parachute
Taxes (including those on the Gross-up Amount) and any federal or state taxes
on the Gross-up Amount, shall be equal to the Benefit that such person would
have received if such Parachute Tax had not been applicable.
ARTICLE XII
Change of Control
Notwithstanding any provisions 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 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 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 purposes 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
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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. The Black-Scholes valuation for this
purpose shall be performed using a risk free rate for option term as
determined by the then current rate on Treasury bills with a maturity
approximating the remaining option life, and estimated future annual stock
volatility based on the prior twelve months volatility.
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BJ SERVICES COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON JANUARY 25, 2001
The Annual Meeting of the Stockholders of BJ Services Company (the
"Company") will be held on Thursday, January 25, 2001, at 11:00 a.m. local time,
at THE WESTIN GALLERIA located at 5060 WEST ALABAMA, HOUSTON, TEXAS, for the
purposes stated on the REVERSE side.
The undersigned having received the notice and accompanying Proxy Statement
for said meeting hereby constitutes and appoints J.W. Stewart, Michael McShane
and Margaret B. Shannon, and each of them, his true and lawful agents and
proxies with power of substitution and resubstitution in each, to represent
and vote at the Annual Meeting scheduled to be held on January 25, 2001, or at
any adjournment or postponement thereof on all matters coming before said
meeting, all shares of common stock of BJ Services Company which the undersigned
may be entitled to vote. The above proxies are hereby instructed to vote as
shown on the reverse side of this card.
YOUR VOTE IS IMPORTANT
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN YOUR
PROXY AS PROMPTLY AS POSSIBLE. AN ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED
IN THE UNITED STATES, IS ENCLOSED FOR THIS PURPOSE.
(Continued and to be dated and signed on the reverse side.)
________________________________________________________________________________
COMMENTS:_______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
(Please sign, date and return this proxy in the enclosed
postage prepaid envelope.)
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
BJSER 1 KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
________________________________________________________________________________
BJ SERVICES COMPANY
For address changes and/or comments, please check
this box and write them on the back where indicated. [_]
Vote On Directors
<TABLE>
<S> <C> <C>
1. To elect TWO Class II directors to serve a For Withhold For All To withhold authority to vote for
three-year term. Nominees for election as All All Except a nominee, mark "For All Except"
Class II directors: [_] [_] [_] and write the nominee's number
01) DON D. JORDAN 02) MICHAEL McSHANE on the line below.
_________________________________
</TABLE>
Vote On Proposals
2. To approve the adoption of the BJ Services Company 2000 Incentive Plan.
FOR [_] AGAINST [_] ABSTAIN [_]
3. In the discretion of the proxies, such other business as may properly come
before the meeting and at any adjournments or postponements thereof.
This proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR the election of the
nominees for Director and FOR the adoption of the BJ Services Company 2000
Incentive Plan.
The Board of Directors recommends a vote FOR the election of the nominees
for Director and FOR the adoption of the BJ Services Company 2000 incentive
Plan.
NOTE: Please sign, date and return your instructions promptly in the enclosed
envelope. Sign exactly as name(s) appear(s) hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian or
other fiduciary, please give full title as such.
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Signature (Please SIGN WITHIN BOX) Date
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Signature (Joint Owners) Date
________________________________________________________________________________
