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 Section 240.14a-12
Halliburton 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)(1) 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.
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[ ] 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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[HALLIBURTON LOGO]
March 25, 2003
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Halliburton Company. The meeting will be held on Wednesday, May 21, 2003, at
9:00 a.m. in Ballroom B of the Four Seasons Hotel, 1300 Lamar Street, Houston,
Texas 77010. The Notice of Annual Meeting, proxy statement and proxy card from
the Board of Directors are enclosed. The materials provide further information
concerning the Annual Meeting.
At the meeting, stockholders are being asked to:
-- elect a Board of Directors of eleven Directors to serve for the coming
year;
-- ratify the selection of KPMG LLP as independent accountants to examine
the financial statements and books and records of Halliburton for
2003;
-- act on a proposal to amend and restate the Halliburton Company 1993
Stock and Incentive Plan; and
-- consider one stockholder proposal.
Please refer to the proxy statement for detailed information on each of these
proposals.
It is very important that your shares are represented and voted at the
meeting. Your shares may be voted electronically on the Internet, by telephone
or by returning the enclosed proxy card. If you attend the meeting, you may vote
in person even if you have previously voted. We would appreciate you informing
us on the proxy card if you expect to attend the meeting so that we can provide
adequate seating.
The continuing interest of our stockholders in the business of Halliburton
is appreciated and we hope many of you will be able to attend the Annual
Meeting.
Sincerely,
/s/ DAVID J. LESAR
DAVID J. LESAR
Chairman of the Board, President
and Chief Executive Officer
[HALLIBURTON LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 2003
The Annual Meeting of Stockholders of Halliburton Company, a Delaware
corporation, will be held on Wednesday, May 21, 2003, at 9:00 a.m., in Ballroom
B of the Four Seasons Hotel, 1300 Lamar Street, Houston, Texas 77010. At the
meeting, the stockholders will be asked to consider and act upon the matters
discussed in the attached proxy statement as follows:
1. To elect eleven (11) Directors to serve for the ensuing year and until
their successors shall be elected and shall qualify.
2. To consider and act upon a proposal to ratify the appointment of KMPG LLP
as independent accountants to examine the financial statements and books
and records of Halliburton for the year 2003.
3. To consider and act upon management's proposal to amend and restate the
Halliburton Company 1993 Stock and Incentive Plan.
4. To consider and act upon one stockholder proposal, if properly presented
at the meeting.
5. To transact any other business that properly comes before the meeting or
any adjournment or adjournments of the meeting.
These items are fully described in the following pages, which are made a
part of this Notice. The Board of Directors has fixed Monday, March 24, 2003, at
the close of business, as the record date for the determination of stockholders
entitled to notice of and to vote at the meeting and at any adjournment of the
meeting.
The Company requests that you vote your shares as promptly as possible. You
may vote your shares in a number of ways if you have shares registered in your
own name:
-- electronically on the Internet at http://www.eproxy.com/hal,
-- by telephone if you are in the U.S. and Canada, by calling
1-800-435-6710 (toll-free), or
-- by marking your votes, dating, signing the proxy card or voting
instruction form enclosed and returning it in the postage-paid
envelope provided.
If you hold Halliburton shares with a broker or bank, you may also be
eligible to vote via the Internet or by telephone if your broker or bank
participates in the proxy voting program provided by ADP Investor Communication
Services.
Either an admission ticket or proof of ownership of Halliburton stock must
be presented in order to be admitted to the Annual Meeting. If you are a
stockholder of record, your admission ticket is attached to your proxy card. If
your shares are held in the name of a bank, broker or other holder of record,
you must bring a current bank or brokerage statement or other proof of ownership
with you to the Meeting, or you may request an admission ticket in advance. (See
"Annual Meeting Admission" for further details.)
By order of the Board of Directors,
/s/ MARGARET E. CARRIERE
MARGARET E. CARRIERE
Vice President and
Secretary
March 25, 2003
---------------------
STOCKHOLDERS ARE URGED TO VOTE THEIR SHARES AS PROMPTLY AS POSSIBLE BY (1)
FOLLOWING THE ENCLOSED VOTING INSTRUCTIONS TO VOTE VIA THE INTERNET OR BY
TELEPHONE, OR (2) SIGNING, DATING AND RETURNING THE ENCLOSED PROXY CARD.
TABLE OF CONTENTS
PAGE
----
General Information................................................... 1
Item 1 - Election of Directors..................................... 2
Information about Nominees for Director................... 2
Stock Ownership of Certain Beneficial Owners and
Management............................................. 5
Corporate Governance...................................... 7
The Board of Directors and Standing Committees of
Directors.............................................. 7
Executive Compensation
Compensation Committee Report on Executive
Compensation...................................... 10
Comparison of Cumulative Total Return............. 15
Summary Compensation Table........................ 16
Option Grants for Fiscal 2002..................... 17
Option Exercises and Values for Fiscal 2002....... 18
Equity Compensation Plan Information.............. 18
Long-Term Incentive Plans - Awards in Fiscal
2002.............................................. 19
Employment Contracts and Change-In-Control
Arrangements...................................... 20
Certain Relationships and Related Transactions............ 23
Directors' Compensation................................... 23
Audit Committee Report.................................... 25
Audit Information......................................... 26
Item 2 - Ratification of Selection of Auditors....................... 27
Item 3 - Proposal to Amend and Restate the 1993 Stock and Incentive
Plan........................................................ 27
Item 4 - Stockholder Proposal on Executive Severance Agreements...... 33
Additional Information...................................... 35
Other Matters......................................................... 36
Appendix A - Audit Committee Charter.................................. A-1
Appendix B - Halliburton Company 1993 Stock and Incentive Plan........ B-1
i
PROXY STATEMENT
GENERAL INFORMATION
The accompanying proxy is solicited by the Board of Directors of Halliburton
Company ("Halliburton", the "Company", "we" or "us"). By executing and returning
the enclosed proxy or by following the enclosed voting instructions, you
authorize the persons named in the proxy to represent you and vote your shares
on the matters described in the Notice of Annual Meeting.
ANNUAL MEETING ADMISSION
An admission ticket, which is required for entry into the Annual Meeting, is
attached to your proxy card if you hold shares directly in your name as a
stockholder of record. If you plan to attend the Annual Meeting, please vote
your proxy but keep the admission ticket and bring it to the Annual Meeting.
If your shares are held in the name of a bank, broker or other holder of
record and you plan to attend the Meeting, you must present proof of your
ownership of Halliburton stock, such as a current bank or brokerage account
statement, to be admitted to the Meeting. If you would rather have an admission
ticket, you can obtain one in advance by mailing a written request, along with
proof of your ownership of Halliburton stock, to:
Halliburton Company
Attn: Margaret Carriere
5 Houston Center
1401 McKinney, Suite 2400
Houston, Texas 77010
NO CAMERAS, RECORDING EQUIPMENT, ELECTRONIC DEVICES, LARGE BAGS, BRIEFCASES
OR PACKAGES WILL BE PERMITTED IN THE MEETING.
If you attend the Meeting, you may vote in person. If you are not present,
your shares can be voted only if you have followed the instructions for voting
via the Internet or by telephone or returned a properly executed proxy; and in
these cases, your shares will be voted as you specify. If no specification is
made, the shares will be voted in accordance with the recommendations of the
Board of Directors. You may revoke the authorization given in your proxy at any
time before the shares are voted at the Meeting.
The record date for determination of the stockholders entitled to vote at
the Annual Meeting is the close of business on March 24, 2003. Halliburton's
common stock, par value $2.50, is the only class of capital stock that is
outstanding. As of March 24, 2003, there were 437,195,953 shares of common stock
outstanding. Each of the outstanding shares of common stock is entitled to one
vote on each matter submitted to the stockholders for a vote at the Meeting. A
complete list of stockholders entitled to vote will be kept at our offices at
the address specified below for ten days prior to, and will be available at, the
Annual Meeting.
Votes cast by proxy or in person at the Annual Meeting will be counted by
the persons appointed by us to act as election inspectors for the Meeting.
Except for the election of Directors, the affirmative vote of the majority of
shares present in person or represented by proxy at the Meeting and entitled to
vote on the subject matter will be the act of the stockholders. Shares for which
a holder has elected to abstain on a matter will count for purposes of
determining the presence of a quorum and will have the effect of a vote against
the matter. In addition, approval of the proposal to amend and restate the 1993
Stock and Incentive Plan requires that the total votes cast on the matter exceed
50% of the shares of common stock outstanding and entitled to vote.
In the election of Directors, the candidates for election receiving the
highest number of affirmative votes of the shares entitled to be voted, whether
or not a majority of the shares present, up to the number of Directors to be
elected by those shares, will be elected. Shares present but not voting on the
election of Directors will be disregarded, except for quorum purposes, and will
have no legal effect.
1
The election inspectors will treat shares held in street name which cannot
be voted by a broker on specific matters in the absence of instructions from the
beneficial owner of the shares, known as broker non-vote shares, as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum. In determining the outcome of any matter for which the broker does not
have discretionary authority to vote, however, those shares will not have any
effect on that matter. Those shares may be entitled to vote on other matters.
In accordance with our confidential voting policy, no vote of any
stockholder will be disclosed to Halliburton's officers, Directors or employees,
except:
-- as necessary to meet legal requirements and to assert claims for and
defend claims against Halliburton;
-- when disclosure is voluntarily made or requested by the stockholder;
-- when stockholders write comments on proxy cards; or
-- in the event of a proxy solicitation not approved and recommended by
the Board of Directors.
The proxy solicitor, the election inspectors and the tabulators of all proxies,
ballots and voting tabulations that identify stockholders are independent and
are not employees of Halliburton.
This proxy statement, the form of proxy and voting instructions are being
sent to stockholders on or about April 9, 2003. Our Annual Report to
Stockholders, including financial statements, for the fiscal year ended December
31, 2002 accompanies this proxy statement. The Annual Report is not to be
considered as a part of the proxy solicitation material or as having been
incorporated by reference.
Our principal executive office is located at 5 Houston Center, 1401
McKinney, Suite 2400, Houston, Texas 77010.
ELECTION OF DIRECTORS
(ITEM 1)
Lawrence S. Eagleburger, who has served as a Director since 1998, is
retiring from the Board immediately prior to the Annual Meeting of Stockholders
on May 21, 2003. He will not be a candidate for reelection for the ensuing year.
Due to Mr. Eagleburger's retirement, the number of Directors constituting the
Board of Directors will be reduced from twelve to eleven effective 9:00 a.m.
(CDT) on May 21, 2003.
Eleven Directors are to be elected to serve for the ensuing year and until
their successors are elected and qualify. The common stock represented by the
proxies will be voted for the election as Directors of the eleven nominees
unless we receive contrary instructions. If any of the nominees are unwilling or
unable to serve, favorable and uninstructed proxies will be voted for a
substitute nominee designated by the Board of Directors. If a suitable
substitute is not available, the Board of Directors will reduce the number of
Directors to be elected. Each nominee has indicated approval of his or her
nomination and his or her willingness to serve if elected.
INFORMATION ABOUT NOMINEES FOR DIRECTOR
(PHOTO) ROBERT L. CRANDALL, 67, Chairman Emeritus, AMR
Corporation/American Airlines, Inc. (engaged primarily in
the air transportation business); Chairman, President and
Chief Executive Officer, AMR Corporation and Chairman and
Chief Executive Officer, American Airlines, Inc. 1985-1998;
President, American Airlines, Inc., 1985-1995; joined
Halliburton Company Board in 1986; Chairman of the
Compensation Committee and member of the Audit and the
Management Oversight Committees; Director of Celestica Inc.,
Anixter International Inc., i2 Technologies, Inc., and
Advisory Board of American International Group.
2
(PHOTO) KENNETH T. DERR, 66, Retired Chairman of the Board,
Chevron Corporation (an international oil company); Chairman
and Chief Executive Officer, Chevron Corporation, 1989-1999;
joined Halliburton Company Board in 2001; member of the
Audit, the Nominating and Corporate Governance and the
Management Oversight Committees; Director of AT&T Corp.,
Citigroup Inc. and Calpine Corporation.
(PHOTO) CHARLES J. DIBONA, 71, Retired President and Chief
Executive Officer, American Petroleum Institute (a major
petroleum industry trade association), 1979-1997; joined
Halliburton Company Board in 1997; Chairman of the Health,
Safety and Environment Committee, member of the Compensation
and the Management Oversight Committees; Chairman of the
Board of Trustees, Logistics Management Institute.
(PHOTO) W. R. HOWELL, 67, Chairman Emeritus, J.C. Penney
Company, Inc. (a major retailer); Chairman of the Board,
J.C. Penney Company, Inc., 1983-1996; Chief Executive
Officer, J.C. Penney Company, Inc., 1983-1995; joined
Halliburton Company Board in 1991; Chairman of the
Management Oversight Committee and member of the Audit and
the Compensation Committees; Director of Exxon Mobil
Corporation, Pfizer Inc., Deutsche Bank Trust Company
Americas (formerly Bankers Trust Company and Bankers Trust
New York Corporation), Williams Companies, Inc., American
Electric Power Company, Inc. and VISEON, Inc.
(PHOTO) RAY L. HUNT, 59, For more than five years, Chairman
of the Board and Chief Executive Officer, Hunt Oil Company
(oil and gas exploration and development); Chairman of the
Board, Chief Executive Officer and President, Hunt
Consolidated, Inc.; joined Halliburton Company Board in
1998; Chairman of the Nominating and Corporate Governance
Committee and member of the Audit and the Management
Oversight Committees; Director of Electronic Data Systems
Corporation, PepsiCo, Inc., King Ranch Company, and Chairman
of the Board of Directors of the Federal Reserve Bank of
Dallas.
(PHOTO) DAVID J. LESAR, 49, Chairman of the Board,
President and Chief Executive Officer of the Company;
President of the Company, 1997-2000; Executive Vice
President and Chief Financial Officer, 1995-1997; joined
Halliburton Company Board in 2000; Director of Lyondell
Chemical Company and Mirant Corporation.
(PHOTO) AYLWIN B. LEWIS, 48, President, Chief Multibranding
& Operating Officer, YUM! Brands, Inc. (a quick service
restaurant company); Chief Operating Officer 2000-2003;
Executive Vice President, Operations and New Business
Development, YUM! Brands, Inc., January-July 2000; Chief
Operating Officer, Pizza Hut, Inc., 1997-1999; Senior Vice
President, Operations, Pizza Hut, Inc., 1996-1997; Senior
Vice President, Marketing and Operations Development,
KFC - Pepsico, Inc., 1995-1996; joined Halliburton Company
Board in 2001; member of the Compensation, the Health,
Safety and Environment and the Management Oversight
Committees.
3
(PHOTO) J. LANDIS MARTIN, 57, For more than five years,
President and Chief Executive Officer, NL Industries, Inc.
(a manufacturer and marketer of titanium dioxide pigments)
and Chairman and Chief Executive Officer, Titanium Metals
Corporation (an integrated producer of titanium metals);
President, Titanium Metals Corporation, since 2000; Chief
Executive Officer, Titanium Metals Corporation, since 1995;
Chairman of the Board and Chief Executive Officer, Baroid
Corporation (and its predecessor), acquired by Dresser
Industries, Inc. in 1994, 1990-1994; joined Halliburton
Company Board in 1998; member of the Health, Safety and
Environment, the Nominating and Corporate Governance and the
Management Oversight Committees; Director of NL Industries,
Inc., Titanium Metals Corporation, Tremont Corporation,
Apartment Investment and Management Corporation, Crown
Castle International Corporation and Special Metals
Corporation.
(PHOTO) JAY A. PRECOURT, 65, Chairman of the Board and
Chief Executive Officer, Scissor Tail Energy, LLC (a
gatherer, transporter and processor of natural gas and
natural gas liquids); Chairman of the Board, Hermes
Consolidated, Inc. (a gatherer, transporter and refiner of
crude oil and refined products); Vice Chairman and Chief
Executive Officer, Tejas Gas Corporation, 1986-1999;
President, Tejas Gas Corporation, 1996-1998; joined
Halliburton Company Board in 1998; member of the
Compensation, the Health, Safety and Environment and the
Management Oversight Committees; Director of Founders Funds,
Inc., Timken Company and Apache Corp.
(PHOTO) DEBRA L. REED, 46, President and Chief Financial
Officer, Southern California Gas Company and San Diego Gas &
Electric Company (regulated utility companies); President,
Energy Distribution Services, Southern California Gas
Company, 1998-2000; Senior Vice President, Southern
California Gas Company, 1995-1998; joined Halliburton
Company Board in 2001; member of the Health, Safety and
Environment, the Nominating and Corporate Governance and the
Management Oversight Committees.
(PHOTO) C. J. SILAS, 70, Retired Chairman of the Board and
Chief Executive Officer, Phillips Petroleum Company (engaged
in exploration and production of crude oil, natural gas and
natural gas liquids on a worldwide basis, the manufacture of
plastics and petrochemicals and other activities); Chairman
of the Board and Chief Executive Officer, Phillips Petroleum
Company, 1985-1994; joined Halliburton Company Board in
1993; Chairman of the Audit Committee and member of the
Compensation and the Management Oversight Committees.
4
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information about persons or groups, based on
information contained in Schedules 13G filed with the Securities and Exchange
Commission reflecting beneficial ownership at December 31, 2002, who own or have
the right to acquire more than five percent of our common stock.
AMOUNT AND
NATURE OF PERCENT
NAME AND ADDRESS BENEFICIAL OF
OF BENEFICIAL OWNER OWNERSHIP CLASS
------------------- ---------- -------
Wellington Management Company, LLP.......................... 37,168,271(1) 8.52%
75 State Street
Boston, MA 02109
----------------
(1) Wellington Management Company, LLP (WMC) is investment advisor to its
clients, who are the owners of record of the 37,168,271 shares listed here.
WMC has shared dispositive power over 37,168,271 shares, and shared power
to vote or to direct the vote of 25,844,797 shares of our common stock.
The following table sets forth, as of March 25, 2003, the amount of our
common stock owned beneficially by each Director, each of the executive officers
named in the Summary Compensation Table on page 16 and all Directors and
executive officers as a group.
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
--------------------
SOLE SHARED
VOTING AND VOTING OR
NAME OF BENEFICIAL OWNER OR INVESTMENT INVESTMENT PERCENT
NUMBER OF PERSONS IN GROUP POWER(1) POWER(2) OF CLASS
--------------------------- ---------- ---------- --------
Lester L. Coleman........................................... 198,649 *
Robert L. Crandall.......................................... 8,000 *
Kenneth T. Derr............................................. 10,800 *
Charles J. DiBona........................................... 5,000 *
Lawrence S. Eagleburger..................................... 6,990 *
Douglas L. Foshee........................................... 142,430 *
Robert R. Harl.............................................. 295,035 *
W. R. Howell................................................ 6,900 *
Ray L. Hunt................................................. 83,047 69,712(3) *
David J. Lesar.............................................. 1,475,999 20,000(3) *
Aylwin B. Lewis............................................. 7,800 *
J. Landis Martin............................................ 32,401 *
Edgar J. Ortiz.............................................. 358,853 *
Jay A. Precourt............................................. 24,040 *
Debra L. Reed............................................... 7,800 250(3) *
C. J. Silas................................................. 7,000 *
Shares owned by all current Directors and executive officers
as a group (22 persons)................................... 3,159,106 *
----------------
* Less than 1% of shares outstanding.
(1) Included in the table are shares of common stock that may be purchased
pursuant to outstanding stock options within 60 days of the date of this
proxy statement for the following: Mr. Coleman - 198,649; Mr.
Crandall - 3,000; Mr. Derr - 7,000; Mr. DiBona - 3,000; Mr.
Eagleburger - 4,500; Mr. Foshee - 8,649; Mr. Harl - 137,982; Mr.
Howell - 3,000; Mr. Hunt - 11,500; Mr. Lesar - 795,704; Mr. Lewis - 7,000;
Mr. Martin - 11,500; Mr. Ortiz - 196,649; Mr. Precourt - 11,500; Ms.
Reed - 7,000; Mr. Silas - 3,000 and six unnamed executive
officers - 249,433. Until the options are exercised, these individuals will
neither have voting nor investment power over the underlying shares of
common stock but only have the right to acquire beneficial ownership of the
shares through exercise of their respective options.
5
(2) The Halliburton Stock Fund is an investment fund established under the
Halliburton Company Employee Benefit Master Trust to hold Halliburton
common stock for some of Halliburton's profit sharing, retirement and
savings plans. The Fund held 8,220,411 shares of common stock at March 6,
2003. Mr. Foshee and three executive officers not named in the above table
have beneficial interests in the Fund. Shares held in the Fund are not
allocated to any individual's account. A total of 504 shares which might be
deemed to be beneficially owned as of March 6, 2003 by Mr. Foshee and a
total of 1,810 shares which might be deemed to be beneficially owned as of
March 6, 2003 by the unnamed executive officers are not included in the
table above. The Trustee, State Street Bank and Trust Company, votes shares
held in the Halliburton Stock Fund in accordance with voting instructions
from the participants. Under the terms of the plans, a participant has the
right to determine whether up to 15% of his account balance in a plan is
invested in the Halliburton Stock Fund. The Trustee, however, determines
when sales or purchases are to be made.
(3) Mr. Hunt holds 69,712 shares as the trustee of trusts established for the
benefit of his children. Mr. Lesar holds 20,000 shares in a family
partnership. Ms. Reed has shared voting and investment power over 250
shares held in her husband's Individual Retirement Account.
6
CORPORATE GOVERNANCE
In 1997, our Board of Directors adopted a formal statement of its
responsibilities and corporate governance guidelines to ensure effective
governance in all areas of its responsibilities. Since 1997, our guidelines have
been reviewed periodically and revised as appropriate to reflect the dynamic and
evolving processes relating to the operation of the Board. Our Board's statement
of responsibilities and the corporate governance guidelines, as revised in July
2001, can be found on the Investor Relations page of our web site. If you do not
have access to our web site, you can request a hard copy of the guidelines by
contacting the Vice President and Secretary at the address set forth on page 2
of this proxy statement.
THE BOARD'S ROLE IN STRATEGIC PLANNING
Our Board believes that its primary responsibility is to oversee
Halliburton's affairs for the benefit of our stockholders. Our governance
guidelines specify several core areas that are included within this
responsibility. One of them, strategic planning, is discussed in more detail
below.
Our Board has the responsibility for reviewing and approving Halliburton's
strategic and business plans and for monitoring Halliburton's performance
against those plans. There are several provisions of the governance guidelines
that directly address our Board's role in carrying out its duties concerning
Halliburton's long-range strategic plans.
-- The Chief Executive Officer's performance is evaluated by the Board using
specific criteria that include:
-- performance of the business, including achievement of financial
objectives and goals;
-- development and implementation of initiatives to provide long-term
economic benefit to Halliburton; and
-- accomplishment of strategic objectives.
-- Each year at one of its regular meetings, our Board reviews and approves
Halliburton's long-term strategic and business plans.
-- At subsequent Board meetings throughout the year, our Directors monitor
Halliburton's performance against those strategic and business plans.
-- To keep our Directors informed about Halliburton's business and
performance between meetings, we routinely provide Board members with
monthly financial statements, earnings reports, press releases and other
pertinent information about the Company.
Halliburton's Board wants our stockholders to understand how it conducts its
affairs in all areas of its responsibility, not just its role in strategic
planning. For that reason, we have made the full text of our corporate
governance guidelines available on our web site.
THE BOARD OF DIRECTORS
AND
STANDING COMMITTEES OF DIRECTORS
The Board of Directors has standing Audit; Compensation; Nominating and
Corporate Governance; Health, Safety and Environment; and Management Oversight
Committees. Each of the standing committees is comprised entirely of outside
Directors, none of whom is an employee or former employee of Halliburton. During
the last fiscal year, the Board of Directors met on 10 occasions, the Audit
Committee met on 10 occasions, the Compensation Committee met on 4 occasions,
the Nominating and Corporate Governance Committee met on 2 occasions, the
Health, Safety and Environment Committee met on 2 occasions, and the Management
Oversight Committee met on 4 occasions. Except for Mr. Eagleburger, who was
absent from several meetings due to health reasons, no other member of the Board
attended fewer than 75 percent of the total number of meetings of the Board and
the committees on which he or she served during the last fiscal year.
7
AUDIT COMMITTEE
The Audit Committee's role is one of oversight, while Halliburton's
management is responsible for preparing financial statements. The independent
auditors are responsible for auditing those financial statements. The Audit
Committee is not providing any expert or special assurance as to Halliburton's
financial statements or any professional certification as to the independent
auditor's work. The following functions are the key responsibilities of the
Audit Committee in carrying out its oversight:
-- recommending the appointment of the independent auditors to the Board
of Directors;
-- reviewing the scope of the independent auditors' examination and the
scope of activities of the internal audit department;
-- reviewing Halliburton's financial policies and accounting systems and
controls;
-- reviewing audited financial statements and interim financial
statements;
-- preparing a report for inclusion in Halliburton's proxy statement
regarding the Audit Committee's review of audited financial statements
for the last fiscal year which includes a statement on whether it
recommends that the Board include those financial statements in the
Annual Report on Form 10-K;
-- approving the services to be performed by the independent auditors;
and
-- reviewing and assessing the adequacy of the Audit Committee's Charter
annually and recommending revisions to the Board.
The Audit Committee also reviews Halliburton's compliance with its Code of
Business Conduct which was formally adopted by the Board in 1992. The Audit
Committee meets separately with the independent auditors and with members of the
internal audit staff, outside the presence of company management or other
employees, to discuss matters of concern, to receive recommendations or
suggestions for change and to exchange relevant views and information. The Audit
Committee and the Board of Directors are ultimately responsible for the
appointment, compensation, retention and oversight of the work of the
independent auditors.
Halliburton's Audit Committee Charter is attached as Appendix A.
COMPENSATION COMMITTEE
Duties of the Compensation Committee include:
-- developing and approving an overall executive compensation philosophy,
strategy and framework consistent with corporate objectives and
stockholder interests;
-- reviewing and approving all actions relating to compensation,
promotion and employment-related arrangements for specified officers
of Halliburton, its subsidiaries and affiliates;
-- establishing annual performance criteria and reward schedules under
Halliburton's annual incentive pay plans and certifying the
performance level achieved and reward payments at the end of each plan
year;
-- approving any other incentive or bonus plans applicable to specified
officers of Halliburton, its subsidiaries and affiliates;
-- administering awards under Halliburton's 1993 Stock and Incentive Plan
and its Supplemental Retirement Plan;
-- selecting an appropriate comparator group against which Halliburton's
total executive compensation program is measured;
-- reviewing and approving or recommending to the Board, as appropriate,
major changes to, and taking administrative actions associated with,
any other forms of non-salary compensation under its purview;
-- reviewing and approving the stock allocation budget among all employee
groups within Halliburton; and
-- monitoring and reviewing periodically overall compensation program
design and practice to ensure continued competitiveness,
appropriateness and alignment with established philosophies,
strategies and guidelines.
8
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The Nominating and Corporate Governance Committee has responsibility for:
-- reviewing and periodically updating the criteria for Board membership
and evaluating the qualifications of each Director candidate against
the criteria;
-- assessing the appropriate mix of skills and characteristics required
of Board members;
-- identifying and screening candidates for Board membership;
-- establishing procedures for stockholders to recommend individuals for
consideration by the committee as possible candidates for election to
the Board;
-- reviewing annually each Director's continuation on the Board and
recommending to the Board a slate of Director nominees for election at
the Annual Meeting of Stockholders;
-- recommending candidates to fill vacancies on the Board;
-- reviewing periodically the status of each Director to assure
compliance with the Board's policy that at least a majority of
Directors meet the Board's definition of independent Director;
-- recommending members to serve on the standing committees of the Board
and as Chairmen of the committees;
-- reviewing periodically the corporate governance guidelines adopted by
the Board of Directors and recommending revisions to the guidelines as
appropriate; and
-- reviewing periodically Halliburton's Director compensation practices
and recommending changes, if any, to the Board.
The Nominating and Corporate Governance Committee will consider qualified
nominees recommended by stockholders who may submit recommendations to the
committee in care of the Vice President and Secretary at the address set forth
on page 2 of this proxy statement. Stockholder nominations must be submitted
prior to year-end and must be accompanied by a description of the qualifications
of the proposed candidate and a written statement from the proposed candidate
that he or she is willing to be nominated and desirous of serving, if elected.
Nominations by stockholders may also be made at an Annual Meeting of
Stockholders in the manner provided in our By-laws. The By-laws provide that a
stockholder entitled to vote for the election of Directors may make nominations
of persons for election to the Board at a meeting of stockholders by complying
with required notice procedures. Nominations shall be made pursuant to written
notice to the Secretary, and must be received at our principal executive offices
not less than ninety (90) days prior to the anniversary date of the immediately
preceding Annual Meeting of Stockholders. The notice shall set forth:
-- as to each person the stockholder proposes to nominate for election or
reelection as a Director:
-- the name, age, business address and residence address of the
person;
-- the principal occupation or employment of the person;
-- the class and number of shares of Halliburton capital stock that
are beneficially owned by the person; and
-- all other information relating to the person that is required to
be disclosed in solicitations for proxies for election of
Directors pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended; and
-- as to the stockholder giving the notice:
-- the name and record address of the stockholder; and
-- the class and number of shares of Halliburton capital stock that
are beneficially owned by the stockholder.
The proposed nominee may be required to furnish other information as
Halliburton may reasonably require to determine the eligibility of the proposed
nominee to serve as a Director. At any meeting of stockholders, the presiding
officer may disregard the purported nomination of any person not made in
compliance with these procedures.
9
HEALTH, SAFETY AND ENVIRONMENT COMMITTEE
The Health, Safety and Environment Committee has responsibility for:
-- reviewing and assessing Halliburton's health, safety and environmental
policies and practices and proposing modifications or additions as
needed;
-- overseeing the communication and implementation of these policies
throughout Halliburton;
-- reviewing annually the health, safety and environmental performance of
Halliburton's operating units and their compliance with applicable
policies and legal requirements; and
-- identifying, analyzing and advising the Board on health, safety and
environmental trends and related emerging issues.
MANAGEMENT OVERSIGHT COMMITTEE
The Management Oversight Committee has responsibility for:
-- evaluating the performance of the Chief Executive Officer;
-- reviewing succession plans for senior management of Halliburton and
its major operating units;
-- evaluating management development programs and activities; and
-- reviewing other internal matters of broad corporate significance.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Halliburton's primary mission is to enhance long-term stockholder value by
providing a broad spectrum of high quality services and related products within
the energy services and engineering and construction business segments in which
Halliburton operates. We believe that Halliburton's total compensation package
for executives should emphasize compensation plans that are linked to measures
that drive stockholder value.
Under our charter, we are generally responsible for overseeing Halliburton's
overall compensation philosophy and objectives and have specific responsibility
for reviewing, approving and monitoring the compensation program for senior
executives of Halliburton and its business units. Our principal function is to
ensure that Halliburton's compensation program is effective in attracting,
retaining and motivating key employees, that it reinforces business strategies
and objectives to enhance stockholder value and that it is administered in a
fair and equitable manner consistent with established policies and guidelines.
OVERALL EXECUTIVE COMPENSATION PHILOSOPHY AND STRATEGY
The primary objectives of Halliburton's total compensation package for
senior executives are to:
-- emphasize operating performance drivers that enhance stockholder
value; and
-- establish and maintain competitive executive compensation programs
that enable Halliburton to attract, retain and motivate high caliber
executives who will assure the long-term success of the business.
Halliburton's compensation program is designed and regularly reviewed to
ensure that the program's components support Halliburton's strategies and
incentivize employees to achieve business success. In determining what we deem
to be appropriate types and amounts of compensation for executive officers, we
consult with outside compensation consultants and review compensation data
obtained from independent sources.
In the design and administration of executive compensation programs, we
generally target current market levels of compensation at the 50th percentile
for good performance and between the 50th and 75th percentile competitive level
for outstanding performance. In doing so, we consider the market data for a
comparator group
10
which reflects the markets in which Halliburton competes for business and
people. The comparator group is composed of:
-- specific peer companies within the energy services and engineering and
construction industries; and
-- selected companies from general industry having similar revenue size,
number of employees and market capitalization and which, in our
opinion, provide comparable references.
Regression analysis is used in assessing all market compensation data to
provide appropriate comparisons based on company size, complexity and
performance, and individual role and job content. A consistent present value
methodology is used in assessing stock-based and other long-term incentive
awards.
The focus and mix of executive compensation elements and opportunities are
tailored by individual position to reflect an appropriate balance among fixed
and variable pay, short and long-term focus, and business/organization unit or
corporate accountability.
We believe that Halliburton's objectives can be optimized by providing
executives with a compensation package that consists of:
-- a cash base salary;
-- a results-oriented annual incentive program;
-- long-term incentive awards; and
-- supplemental retirement and other executive benefits.
2002 SPECIAL COMPENSATION-RELATED CONSIDERATIONS
The uncertain legal environment related to the asbestos issues continued
throughout 2002, and investor concerns over our asbestos exposure kept our stock
price depressed relative to our competitors. Despite this, Halliburton achieved
operating performance results above target levels providing most participants in
the annual short-term incentive plan with rewards in the form of cash payments.
However, the depressed stock prices made it difficult to achieve comparative
levels of compensation, particularly long-term compensation, for our executives
relative to our comparator group.
To ameliorate the adverse effect of asbestos concerns on Halliburton's
compensation program, we implemented several compensation measures focused on
retaining key personnel and providing additional economic value with respect to
long-term incentives. These included:
-- equity grants to selected senior and key executives;
-- cash retention awards to selected senior and key executives; and
-- dividend equivalent payments on outstanding stock options for all
actively employed option holders.
These measures are intended to be short-term features to Halliburton's
compensation program. We believe them to be necessary to attract and retain
qualified personnel in this difficult legal environment. Each measure is
discussed under the appropriate section below.
BASE SALARY; 2002 RETENTION AWARDS
Executive salaries are referenced to market data for comparable positions
within the comparator group. In addition to considering market comparisons in
making salary decisions, we exercise discretion and judgment based on the
following factors:
-- level of responsibility;
-- experience in current role and equitable compensation relationships
among all Halliburton executives;
-- performance; and
-- external factors involving competitive positioning, expected corporate
performance, and general economic conditions.
11
No specific formula is applied to determine the weight of each factor.
As a consequence of the uncertainty regarding energy prices and the overall
business climate in early 2002, we did not adjust the base salary of Mr. Lesar
or the other executives named in the Summary Compensation Table for 2002. The
majority of other senior and key executives did not receive increases in 2002
for the same reason. Generally, few adjustments to executive salaries were made
in 2002 except those recognizing promotions or significant changes in job
responsibilities.
2002 Retention Awards. The adverse business environment, the asbestos
situation and Halliburton's depressed stock price made it necessary to establish
retention arrangements in early 2002 for a select group of high performing
senior and key executives whose continued leadership we deemed critical to the
continuing operations of the Company. The retention period lasted from February
1, 2002 until January 1, 2003 and payments were made in January 2003.
Accordingly, the payments will be included in next year's Summary Compensation
Table.
SHORT-TERM INCENTIVE PLANS
In 1995 we established the Annual Performance Pay Plan to provide a means to
link total compensation to Halliburton's performance, as measured by cash value
added, or CVA. CVA measures the difference between after tax cash income and a
capital charge, based upon Halliburton's weighted average cost of capital, to
determine the amount of value, in terms of cash flow, added to Halliburton's
business. Since the inception of the plan, CVA has provided a close correlation
to total stockholder return. Although Halliburton's performance in 2002 exceeded
target expectations for most of our businesses and the Company as a whole, this
performance was not reflected in the price of our stock. We believe that this is
an anomaly caused by the reaction of investors to Halliburton's asbestos-related
issues and does not impact the long-term viability of CVA as a predictor of
stockholder return.
At the beginning of each plan year, we establish a reward schedule that
aligns specific CVA performance beyond a threshold level with reward
opportunities. The level of achievement of annual CVA performance determines the
dollar amount of incentive compensation payable to participants.
Officers of Halliburton and its business units and specific senior managers
were eligible to participate in the Annual Performance Pay Plan during 2002. In
2002, consolidated CVA performance exceeded the established target level.
Accordingly, Mr. Lesar and the other executives named in the Summary
Compensation Table earned incentive compensation in the amounts shown in the
table.
LONG-TERM INCENTIVE PLANS
The 1993 Stock and Incentive Plan (the "1993 Plan") provides for a variety
of cash and stock-based awards, including stock options, restricted stock, and
performance shares, among others. Under the 1993 Plan, we may, in our
discretion, select from these types of awards to establish individual long-term
incentive awards.
In 2002, we continued the Performance Unit Program, which is a long-term
program designed to provide key executives with specified incentive
opportunities contingent on achievement of pre-established corporate performance
objectives and continued employment. The 2002 cycle began on January 1, 2002 and
will end on December 31, 2004 (the "2002 Cycle"). Performance measures for the
2002 Cycle include two equally weighted components, both based on Halliburton's
consolidated Return on Capital Employed ("ROCE"). The first component is based
on Halliburton's actual level of achievement of ROCE, and the second is
Halliburton's achievement level as compared to the comparator group. Individual
incentive opportunities are established based on market references. The Program
allows for rewards to be paid in cash, stock or a combination of cash and stock.
To help address the employee retention issue, we established a temporary
program to pay dividend equivalents on outstanding stock options to actively
employed option holders. The objective of this program is to provide additional
economic value to offset some or all of the equity compensation lost as a
consequence of the decline in share price. The program was very well received by
option holders and will be continued through 2003. As part of this program, Mr.
Lesar and the other named executive officers received stock option dividend
equivalent payments.
12
Prior to 2002, stock options were the principal long-term incentive granted
to executive officers. However, in 2002, as was the case in 2001, we used
restricted stock awards more extensively and have reduced the importance of
stock options in the mix of overall compensation. We intend to use a mix of
stock options, restricted stock and performance units, along with short-term
incentive programs at varying levels within the organization to achieve the
motivation necessary to retain highly qualified executives.
Our determination of the size of equity-based grants to executive officers,
including the grants made to Mr. Lesar, are based on market references to
long-term incentive compensation for comparable positions within the comparator
group and on our subjective assessment of organizational roles and internal job
relationships. Mr. Lesar received restricted stock awards in each of January and
April 2002 equal to 154,407 and 154,403 shares, respectively. These awards were
made primarily for the purpose of retention.
Proposed Plan Amendment. On February 12, 2003, the Board of Directors, upon
recommendation of the Compensation Committee, adopted an amendment and
restatement of the 1993 Plan. The proposed changes would extend the 1993 Plan's
duration by removing the expiration date, update the corporate change provisions
and qualify certain award vehicles under Section 162(m) of the Internal Revenue
Code. The amendment and restatement will become effective if approved by the
stockholders at the 2003 Annual Meeting. The proposed changes to the 1993 Plan
are discussed on pages 27-33 of this proxy statement and the full text of the
1993 Plan as proposed to be amended is attached as Appendix B. The Compensation
Committee believes that the 1993 Plan changes are necessary in order to continue
to attract, retain and motivate eligible individuals through performance-
related incentives.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Supplemental Executive Retirement Plan (formerly the Senior Executives'
Deferred Compensation Plan) was established to provide supplemental
discretionary retirement benefits to key executives. Determinations as to who
will receive an allocation for a particular plan year and the amount of the
allocation are made in our sole discretion. However, in making our
determinations, we consider guidelines that include references to:
-- retirement benefits provided from other company programs;
-- compensation;
-- length of service; and
-- years of service to normal retirement,
in order to achieve a 75% base pay replacement assuming retirement at age 65
with 25 or more years of service.
Interest on active and retired participants' supplemental retirement benefit
accounts is accrued at the rate of five and ten percent per annum. The accounts
are 100% vested at all times. No amounts may be received by a participant under
the plan prior to termination of the participant's employment.
We authorized a 2002 supplemental retirement benefit addition for Mr. Lesar
of $235,000.
POLICY REGARDING SECTION 162(m) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation paid to the chief executive
officer or any of the four other most highly compensated officers to the extent
the compensation exceeds $1 million in any year. Qualifying performance-based
compensation is not subject to this sanction if specific requirements are met.
Our policy is to utilize available tax deductions whenever appropriate and
consistent with our compensation philosophy. When designing and implementing
executive compensation programs, we consider all relevant factors, including the
availability of tax deductions with respect to compensation. Accordingly, we
have attempted to preserve the federal tax deductibility of compensation in
excess of $1 million a year to the extent doing so is consistent with the
intended objectives of our executive compensation philosophy, but we may from
time to time pay compensation to our executive officers that may not be fully
deductible. Because of the elective deferral by
13
some executive officers of portions of their salary and incentive compensation,
the loss of deductibility for 2002 earned compensation is not expected to be
significant.
The 1993 Plan was amended by the stockholders in 1996 and 2000 to qualify
stock options, stock appreciation rights and performance share awards under the
1993 Plan as Section 162(m) performance-based compensation. If approved by the
stockholders, the 1993 Plan, as proposed to be amended and restated, would
extend the ability to qualify stock options, stock appreciation rights and
performance share awards, as well as enable qualification of certain short-term
and long-term cash performance plans, under Section 162(m).
We believe that the interests of Halliburton and its stockholders are well
served by the executive compensation programs currently in place. These programs
encourage and promote Halliburton's compensation objectives and permit the
exercise of our discretion in the design and implementation of compensation
packages. We will continue to review our executive compensation plans
periodically to determine what changes, if any, should be made as the result of
the limitation on deductibility.
Respectfully submitted,
THE COMPENSATION COMMITTEE OF
DIRECTORS
Robert L. Crandall, Chairman
Charles J. DiBona
W. R. Howell
Aylwin B. Lewis
Jay A. Precourt
C. J. Silas
14
COMPARISON OF CUMULATIVE TOTAL RETURN
The following graph compares the cumulative total stockholder return on our
common stock for the five-year period ended December 31, 2002, with the Standard
& Poor's 500 Stock Index and the Standard & Poor's Energy Composite Index over
the same period. This comparison assumes the investment of $100 on December 31,
1997 and the reinvestment of all dividends. The stockholder return set forth on
the chart below is not necessarily indicative of future performance.
TOTAL STOCKHOLDERS' RETURN - FIVE YEARS
ASSUMES INVESTMENT OF $100 ON DECEMBER 31, 1997 AND REINVESTMENT OF DIVIDENDS
(PERFORMANCE GRAPH)
------------------------------------------------------------------------------------------------
12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
-------- -------- -------- -------- -------- --------
Halliburton....... 100 57.91 79.74 72.65 26.67 39.26
S&P 500........... 100 128.58 155.63 141.45 124.64 97.09
S&P Energy........ 100 100.63 119.47 138.20 123.83 110.05
15
The following table sets forth information regarding the Chief Executive
Officer and the next four most highly compensated executive officers of
Halliburton (collectively, the "named executive officers"). The notes to the
table set forth additional information regarding the compensation described in
the table.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
AWARDS PAYOUTS
------ -------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($)(1) ($)(2) (#) ($) ($)(3)
------------------ ---- ------ ----- ------------ ---------- ---------- ------- ------------
David J. Lesar.................. 2002 1,100,000 1,719,972 4,482,368 0 N/A 448,678
Chairman of the Board, President 2001 1,100,000 2,200,000 -- 3,381,513 154,408 N/A 538,795
and Chief Executive Officer 2000 958,333 2,012,709 -- 1,216,250 300,000 N/A 478,515
of the Company
Lester L. Coleman............... 2002 475,008 371,364 1,004,247 0 N/A 173,205
Executive Vice President and 2001 475,008 475,008 -- 757,609 34,594 N/A 179,403
Chief Legal Officer of the 2000 475,008 498,800 -- 417,000 39,000 N/A 137,837
Company
Douglas L. Foshee............... 2002 500,004 390,906 1,004,247 0 N/A 141,696
Executive Vice President and 2001 202,653 166,667 1,463,609 34,594 N/A 189,767
Chief Financial Officer 2000 N/A N/A -- N/A N/A N/A N/A
of the Company
Robert R. Harl.................. 2002 425,000 166,134 1,004,247 0 N/A 126,604
President and Chief Executive 2001 425,000 212,500 -- 757,609 34,594 N/A 153,804
Officer of Kellogg 2000 N/A N/A -- N/A N/A N/A N/A
Brown & Root
Edgar J. Ortiz.................. 2002 550,000 406,773 1,004,247 0 N/A 279,982
President and Chief Executive 2001 550,000 550,000 -- 757,609 34,594 N/A 353,985
Officer of Halliburton Energy 2000 N/A N/A -- N/A N/A N/A N/A
Services Group
----------------
(1) The dollar value of perquisites and other personal benefits for each of the
named executive officers was less than established reporting thresholds.
(2) In 2000, Mr. Lesar was granted 35,000 shares with restrictions lapsing over
10 years; and Mr. Coleman was granted 12,000 shares with restrictions
lapsing over 10 years. In 2001, Mr. Lesar was granted 154,407 shares with
restrictions lapsing over 10 years; Mr. Coleman was granted 34,594 shares
with restrictions lapsing over 10 years; Mr. Foshee was granted 54,594
shares with restrictions lapsing over 10 years; Mr. Harl was granted 34,594
shares with restrictions lapsing over 10 years and Mr. Ortiz was granted
34,594 shares with restrictions lapsing over 10 years. In 2002, Mr. Lesar
was granted 308,810 shares with restrictions lapsing over 10 years; Mr.
Coleman was granted 69,187 shares with restrictions lapsing over 10 years;
Mr. Foshee was granted 69,187 shares with restrictions lapsing over 10
years; Mr. Harl was granted 69,187 shares with restrictions lapsing over 10
years and Mr. Ortiz was granted 69,187 shares with restrictions lapsing
over 10 years. Dividends are paid on the restricted shares. The total
number and value of restricted shares held by each of the above individuals
as of December 31, 2002 were as follows:
TOTAL AGGREGATE
RESTRICTED MARKET
NAME SHARES VALUE
---- ---------- ---------
Mr. Lesar................................................... 614,793 $11,502,777.03
Mr. Coleman................................................. 129,296 2,419,128.16
Mr. Foshee.................................................. 118,322 2,213,804.62
Mr. Harl.................................................... 133,393 2,495,783.03
Mr. Ortiz................................................... 0 0
16
(3) "All Other Compensation" includes the following accruals for or
contributions to various plans for the fiscal year ending December 31,
2002: (i) company contributions to qualified defined contribution plans for
Mr. Lesar -- $1,720, Mr. Coleman -- $1,720, Mr. Foshee -- $1,720, Mr.
Harl -- $0, and Mr. Ortiz -- $1,720; (ii) 401(k) plan matching
contributions for Mr. Lesar -- $8,000, Mr. Coleman -- $8,000, Mr. Foshee
-- $8,000, Mr. Harl -- $8,000, and Mr. Ortiz -- $0; (iii) benefit
restoration accruals for Mr. Lesar -- $150,660, Mr. Coleman -- $36,451, Mr.
Foshee -- $22,680, Mr. Harl -- $18,891, and Mr. Ortiz -- $43,205; (iv)
supplemental retirement plan contributions for Mr. Lesar -- $235,000, Mr.
Coleman -- $77,000, Mr. Foshee -- $102,000, Mr. Harl -- $92,000, and Mr.
Ortiz -- $173,000; (v) above-market earnings on benefit restoration account
for Mr. Lesar -- $13,689, Mr. Coleman -- $10,235, Mr. Foshee -- $178, Mr.
Harl -- $7,713, and Mr. Ortiz -- $5,145; and (vi) above-market earnings on
amounts deferred under elective deferral plans for Mr. Lesar -- $36,609,
Mr. Coleman -- $39,799, Mr. Foshee -- $7,118, Mr. Harl -- $0, and Mr.
Ortiz -- $56,912.
OPTION GRANTS FOR FISCAL 2002
INDIVIDUAL GRANTS(1)
-------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE 5% 10%
---- ----------- ------------ --------- ---------- -- ---
David J. Lesar................ 0 0 -- -- $ 0 $ 0
Lester L. Coleman............. 0 0 -- -- 0 0
Douglas L. Foshee............. 0 0 -- -- 0 0
Robert R. Harl................ 0 0 -- -- 0 0
Edgar J. Ortiz................ 0 0 -- -- 0 0
All Optionees................. 2,661,377 100.00 12.6180 (3) 21,119,070.82 53,519,871.93
All Stockholders.............. N/A N/A N/A N/A 3,463,370,573.25 8,776,861,023.50(4)
----------------
(1) All options granted under the 1993 Plan are granted at the fair market
value of the common stock on the grant date and generally expire ten years
from the grant date. During employment, options vest over a three year
period, with one-third of the shares becoming exercisable on each of the
first, second and third anniversaries of the grant date. The options
granted to designated executives are transferable by gift to individuals
and entities related to the optionee, subject to compliance with guidelines
adopted by the Compensation Committee.
(2) The assumed values result from the indicated rates of stock price
appreciation. Values were calculated based on a 10-year exercise period for
all grants. The actual value of the option grants is dependent on future
performance of the common stock. There is no assurance that the values
reflected in this table will be achieved. Halliburton did not use an
alternative formula for a grant date valuation, as it is not aware of any
formula that will determine with reasonable accuracy a present value based
on future unknown or volatile factors.
(3) The exercise price shown is an average of the price of all options granted
in 2002. Options expire on one or more of the following dates: January 2,
2009, January 22, 2009, February 13, 2009, February 20, 2009, April 1,
2009, April 26, 2009, May 13, 2009, July 23, 2009, August 1, 2009,
September 30, 2009, December 18, 2009, January 2, 2012, January 22, 2012,
February 13, 2012, February 20, 2012, February 29, 2012, March 29, 2012,
April 1, 2012, April 26, 2012, May 13, 2012, May 15, 2012, May 16, 2012,
July 23, 2012, August 1, 2012, August 28, 2012, September 25, 2012,
September 30, 2012, October 9, 2012 and December 4, 2012.
(4) "All Stockholders" values are calculated using the average exercise price
for all options awarded in 2002, $12.6180, based on the outstanding shares
of common stock on December 31, 2002.
17
AGGREGATED OPTION EXERCISES IN FISCAL 2002
AND DECEMBER 31, 2002 OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL YEAR-END IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE (SHARES) FISCAL YEAR-END($)
ON EXERCISE REALIZED -------------------------- -----------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
David J. Lesar.......................... 0 0 757,102 254,408 25,774 0
Lester L. Coleman....................... 0 0 190,000 47,594 0 0
Douglas L. Foshee....................... 0 0 0 34,594 0 0
Robert R. Harl.......................... 0 0 129,333 47,594 0 0
Edgar J. Ortiz.......................... 0 0 188,000 47,594 51,540 0
EQUITY COMPENSATION PLAN INFORMATION
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER EQUITY
ISSUED UPON EXERCISE OF EXERCISE PRICE OF COMPENSATION PLANS
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN(A))
PLAN CATEGORY (a) (b) (c)
------------------------------------------- -------------------------- --------------------- -----------------------------
Equity compensation plans approved by
security holders......................... 16,853,065 $31.77 30,423,721
Equity compensation plans not approved by
security holders......................... -- -- --
---------- ------ ----------
Total...................................... 16,853,065 $31.77 30,423,721
----------------
Note: There are 1,664,050 million shares with a weighted average exercise price
of $35.11 to be issued upon exercise of outstanding options that were
assumed in the 1998 Dresser merger, the 1996 Landmark acquisition and
other business combinations. No further grants can be issued under these
assumed plans.
LONG-TERM INCENTIVE COMPENSATION
As noted in the Compensation Committee's report, the Performance Unit
Program was established in 2001 to provide selected key executives with
incentive opportunities based on the level of achievement of pre-established
corporate performance objectives over three-year performance cycles. The purpose
of the program is to reinforce Halliburton's objectives for sustained long-term
performance and value creation, to reinforce strategic planning processes and to
balance short and long-term decision making. Performance measures for the
three-year cycle that began January 1, 2001, include two equally weighted
components tied to Halliburton's consolidated weighted average return on capital
employed (ROCE). One-half (50%) of the award is based on Halliburton's actual
level of achievement of ROCE (Absolute Goal) and the other half (50%) is based
on Halliburton's achievement level as compared to the comparator group (Relative
Goal). Each goal is calculated separately as follows:
-- the average salary of all participants in a particular participation
category, multiplied by
-- the incentive opportunity level associated with the applicable
performance levels attained for the Absolute Goal (threshold, target
and maximum), multiplied by
-- 50%.
The process is repeated for the Relative Goal and the two results are added
together to determine the award for the particular performance cycle. Incentive
payments are calculated on a straight-line basis for results achieved between
performance levels. No incentive will be earned or payment made for performance
below the threshold level.
18
LONG-TERM INCENTIVE PLANS - AWARDS IN FISCAL 2002
ESTIMATED FUTURE PAYOUTS UNDER NON-
STOCK PRICE-BASED PLANS
PERFORMANCE PERFORMANCE -----------------------------------
CATEGORY OR OTHER
AVERAGE PERIOD UNTIL
SALARY MATURATION OR THRESHOLD TARGET MAXIMUM
NAME ($) PAYOUT ($) ($) ($)
---- ----------- ------------- --------- ------ -------
David J. Lesar.......................... 1,100,000 2000-2005 412,500 1,650,000 2,475,000
Lester L. Coleman....................... 0 Fiscal Years 0 0 0
Douglas L. Foshee....................... 518,750 97,266 389,063 583,594
Robert R. Harl.......................... 436,667 65,500 262,000 393,000
Edgar J. Ortiz.......................... 518,750 97,266 389,063 583,594
19
EMPLOYMENT CONTRACTS AND
CHANGE-IN-CONTROL ARRANGEMENTS
EMPLOYMENT CONTRACTS
Mr. Lesar. Mr. Lesar entered into an employment agreement with Halliburton
as of August 1, 1995 which provided for his employment as Executive Vice
President and Chief Financial Officer of Halliburton. The agreement also
provides that, while Mr. Lesar is employed by Halliburton, management will
recommend to the Compensation Committee:
-- annual supplemental retirement benefit allocations under the
Supplemental Executive Retirement Plan (formerly part of the Senior
Executives' Deferred Compensation Plan); and
-- annual grants of stock options under the 1993 Plan.
These recommendations are to be consistent with the criteria utilized by the
Compensation Committee for similarly situated executives.
Under the terms of his employment agreement, in the event Mr. Lesar is
involuntarily terminated by Halliburton for any reason other than termination
for cause (as defined in the agreement), Halliburton is obligated to pay Mr.
Lesar a severance payment equal to:
-- the value of any restricted shares that are forfeited because of
termination; and
-- five times his annual base salary.
Mr. Foshee. Mr. Foshee entered into an employment agreement with Halliburton
effective August 6, 2001 providing for his employment as Executive Vice
President and Chief Financial Officer. His employment agreement further provides
that he will receive an annual base salary of not less than $500,000 and will
participate in Halliburton's Annual Performance Pay Plan. Also, he was granted
an award under the 1993 Plan of 34,594 shares of common stock subject to
restrictions.
Under the terms of his employment agreement, in the event of Mr. Foshee's
termination for any reason other than voluntary termination (as defined in the
agreement), death, permanent disability, retirement (either at or after age 65
or voluntarily prior to age 65), or termination by Halliburton for cause (as
defined in the agreement), Halliburton is obligated to make severance payments
equal to:
-- the value of any restricted shares that are forfeited because of
termination;
-- two years' base salary;
-- any unpaid bonus earned in prior years; and
-- any bonus payable for the year in which his employment is terminated
determined as if he had remained employed for the full year.
Mr. Coleman. Mr. Coleman entered into an employment agreement with
Halliburton effective September 29, 1998 providing for his employment as
Executive Vice President and General Counsel. His employment agreement further
provides that he will receive an annual base salary of not less than $450,000
and will participate in Halliburton's Annual Performance Pay Plan. Also, he was
granted an award under the 1993 Plan of 15,000 shares of common stock subject to
restrictions.
Under the terms of his employment agreement, in the event of Mr. Coleman's
termination for any reason other than voluntary termination (as defined in the
agreement), death, permanent disability, retirement (either at or after age 65
or voluntarily prior to age 65), or termination by Halliburton for cause (as
defined in the agreement), Halliburton is obligated to make severance payments
equal to:
-- the value of any restricted shares that are forfeited because of
termination;
-- two years' base salary;
-- any unpaid bonus earned in prior years; and
20
-- any bonus payable for the year in which his employment is terminated
determined as if he had remained employed for the full year.
Mr. Harl. Mr. Harl entered into an employment agreement with Halliburton and
Halliburton's subsidiary, Brown & Root Services Corporation (which was merged
into Kellogg Brown & Root, Inc. or KBR), on September 29, 1998, which provided
for his employment as President of KBR. Mr. Harl's employment agreement also
provides for an annual salary of not less than $325,000 and participation in
Halliburton's Annual Performance Pay Plan. In addition, Mr. Harl was granted
15,000 restricted shares under the 1993 Plan.
Under the terms of his employment agreement, in the event of Mr. Harl's
termination for any reason other than voluntary termination (as defined in the
agreement), death, permanent disability, retirement (either at age 65 or
voluntarily prior to age 65), or termination by Halliburton for cause (as
defined in the agreement), KBR is obligated to make severance payments equal to:
-- the value of any restricted shares that are forfeited because of
termination;
-- two years' base salary;
-- any unpaid bonus earned in prior years; and
-- any bonus payable for the year in which his employment is terminated
determined as if he had remained employed for the full year.
Mr. Ortiz. Mr. Ortiz entered into an employment agreement with Halliburton
and Halliburton's subsidiary, Halliburton Energy Services, Inc. (HESI) effective
May 1, 1998, which provided for his employment as President of HESI's
Halliburton Energy Services division. Mr. Ortiz's employment agreement also
provides for an annual salary of not less than $350,004 and participation in
Halliburton's Annual Performance Pay Plan.
Under the terms of his employment agreement, in the event of Mr. Ortiz's
termination for any reason other than voluntary termination (as defined in the
agreement), death, permanent disability, retirement (either at age 65 or
voluntarily prior to age 65), or termination by Halliburton for cause (as
defined in the agreement), HESI is obligated to make severance payments equal
to:
-- the value of any restricted shares that are forfeited because of
termination;
-- two years' base salary;
-- any unpaid bonus earned in prior years; and
-- any bonus payable for the year in which his employment is terminated
determined as if he had remained employed for the full year.
ARRANGEMENTS RELATING TO EXECUTIVE OFFICER RETIREMENTS
Mr. Coleman. In connection with Mr. Coleman's retirement, his employment
agreement was amended as of November 7, 2002, to:
-- extend the term of the agreement to January 1, 2003, at which time he
would retire as a Halliburton employee; and
-- provide for his resignation as Executive Vice President and Chief
Legal Officer, and from all other positions with Halliburton or its
affiliates on January 1, 2003.
Also, as a result of Mr. Coleman's retirement, restrictions lapsed on 1,200
restricted shares of common stock granted under the Career Executive Incentive
Stock Plan and 128,096 restricted shares granted under the 1993 Stock and
Incentive Plan for a total of 129,296 shares. The fair market value of the
shares on December 31, 2002 (the business day preceding January 1, 2003) was
$18.38 per share for the 1,200 shares granted under the Career Plan and $18.71
per share for the 128,096 shares granted under the 1993 Plan. The Career Plan
uses the average of the high and low price while the 1993 Plan uses the closing
price.
21
Mr. Ortiz. In connection with Mr. Ortiz's retirement on December 31, 2002,
his employment agreement was supplemented and amended to:
-- provide for his resignation as President and Chief Executive Officer
of the Energy Services Group, and from all other positions with
Halliburton or its affiliates on December 31, 2002; and
-- provide for a one year consulting services agreement commencing
January 1, 2003, with a company office available on an as-needed
basis.
Also, as a result of Mr. Ortiz's retirement, restrictions lapsed on 163,081
shares of common stock. The fair market value of the shares on December 31, 2002
was $18.71 per share.
CHANGE-IN-CONTROL ARRANGEMENTS
Under the proposed amendment of the 1993 Plan, which is subject to
stockholder approval, in the event of a Corporate Change, unless an Award
Document otherwise provides, as of the Corporate Change Effective Date, the
following will occur automatically:
-- any outstanding options and stock appreciation rights shall become
immediately vested and fully exercisable;
-- any restrictions on restricted stock awards shall immediately lapse;
-- all performance measures upon which an outstanding performance award
is contingent shall be deemed achieved and the Holder shall receive a
payment equal to the maximum amount of the award he or she would have
been entitled to receive, prorated to the Corporate Change Effective
Date; and
-- any outstanding cash awards including, but not limited to, stock value
equivalent awards shall immediately vest and be paid based on the
vested value of the award.
Under the Career Executive Incentive Stock Plan:
-- the Compensation Committee may, in the event of a tender offer for all
or a part of Halliburton's common stock, accelerate the lapse of
restrictions on any or all shares on which restrictions have not
previously lapsed.
Under the Annual Performance Pay Plan:
-- in the event of a change-in-control during a plan year, a participant
will be entitled to an immediate cash payment equal to the maximum
dollar amount he or she would have been entitled to for the year,
prorated through the date of the change-in-control; and
-- in the event of a change-in-control after the end of a plan year but
before the payment date, a participant will be entitled to an
immediate cash payment equal to the incentive earned for the plan
year.
Under the Performance Unit Program:
-- in the event of a change-in-control during a performance cycle, a
participant will be entitled to an immediate cash payment equal to the
maximum amount he or she would have been entitled to receive for the
performance cycle, prorated to the date of the change-in-control; and
-- in the event of a change-in-control after the end of a performance
cycle but before the payment date, a participant will be entitled to
an immediate cash payment equal to the incentive earned for that
performance cycle.
Under the Employee Stock Purchase Plan, in the event of a change-in-control,
unless the successor corporation assumes or substitutes new stock purchase
rights:
-- the purchase date for the outstanding stock purchase rights will be
accelerated to a date fixed by the Compensation Committee prior to the
effective date of the change-in-control; and
-- on the effective date, any unexercised stock purchase rights will
expire and Halliburton will promptly refund the unused amount of each
participant's payroll deductions.
22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
DII Industries, LLC has outstanding approximately $6.1 million in letters of
credit under a bank facility that was established in connection with some
insurance relationships of NL Industries, Inc., of which Mr. Martin is a
director and executive officer. NL is obligated to indemnify DII for any losses
or expenses in respect of these letters of credit.
DIRECTORS' COMPENSATION
Directors' Fees and Deferred Compensation Plan
All non-employee Directors receive an annual fee of $30,000 and an
attendance fee of $2,000 for each meeting of the Board of Directors. The
Directors also receive an attendance fee of $2,000 per meeting for committee
service. The Chairmen of the Audit; Compensation; Nominating and Corporate
Governance; Health, Safety and Environment; and Management Oversight Committees
each receive an additional $10,000 retainer annually. Under the Directors'
Deferred Compensation Plan, Directors are permitted to defer their fees, or a
portion of their fees, until after they cease to be a Director. A participant
may elect, on a prospective basis, to have his or her deferred compensation
account either credited quarterly with interest at the prime rate of Citibank,
N.A. or translated on a quarterly basis into common stock equivalents.
Distribution will be made either in a lump sum or in annual installments over a
5- or 10-year period, as determined in the discretion of the committee appointed
to administer the plan. Distributions of common stock equivalents are made in
shares of common stock, while distributions of deferred compensation credited
with interest are made in cash. Messrs. Crandall, Derr, DiBona, Eagleburger,
Hunt, Lewis and Precourt and Ms. Reed have elected to participate in the plan.
Directors' Restricted Stock Plan
Pursuant to the terms of the Restricted Stock Plan for Non-Employee
Directors, which was approved by the stockholders at the 1993 Annual Meeting,
each non-employee Director receives an annual award of 400 restricted shares of
common stock as a part of his or her compensation. The awards are in addition to
the Directors' annual retainer and attendance fees. Shares awarded under the
Directors' Restricted Stock Plan may not be sold, assigned, pledged or otherwise
transferred or encumbered until the restrictions are removed. Restrictions will
be removed following termination of Board service under specified circumstances,
which include, among others, death or disability, retirement under the Director
mandatory retirement policy, or early retirement after at least four years of
service. During the restriction period, Directors have the right to vote, and to
receive dividends on, the restricted shares. Any shares that under the plan's
provisions remain restricted following termination of service will be forfeited.
Directors' Stock Options
At the 2000 Annual Meeting, the stockholders approved an amendment to the
1993 Plan that, among other things, broadened the eligibility provisions to
permit non-employee Directors to be granted awards under the plan. Under the new
stock option program for non-employee Directors:
-- Each Director elected after the 2000 Annual Meeting will receive an
option for 5,000 shares of Halliburton common stock at the time of
initial election to the Board and an option for 2,000 shares each year
thereafter at the time of the Director's reelection. The option grants
are in lieu of benefits under the Directors' Retirement Plan
(discussed below) which is closed to Directors elected after the 2000
Annual Meeting.
-- Each Director who continues to participate in the Directors'
Retirement Plan will receive an annual option for 1,000 shares at the
time of reelection to the Board.
-- Each "grandfathered" Director who opted out of the Directors'
Retirement Plan (Messrs. Hunt, Martin and Precourt) received a
one-time option grant for 5,000 shares and will receive an annual
option for 2,000 shares at the time of reelection.
23
Options granted under the stock option program:
-- have an exercise price equal to the closing price of Halliburton's
common stock on the grant date;
-- become exercisable six months after the grant date; and
-- are exercisable for 10 years from the date of grant or three years
after termination of service, whichever is the shorter period.
Directors' Retirement Plan
As noted above, the Directors' Retirement Plan is closed to new Directors
elected after May 16, 2000. Each individual who was serving as a non-employee
Director on May 16, 2000 continued to be eligible to participate in the plan but
had a one-time right to opt out of the plan and receive the same level of option
grants as a new Director. Messrs. Hunt, Martin and Precourt elected to cease
participation in the plan in exchange for the right to receive additional grants
of options.
Under the Directors' Retirement Plan, each non-employee Director who
continues as a participant will receive an annual benefit upon the benefit
commencement date. The benefit commencement date is the later of a participant's
termination date or attainment of age 65. The benefit will be equal to the last
annual retainer for the participant for a period of years equal to the
participant's years of service on his or her termination date. The minimum
benefit payment period for each participant is 5 years. Upon the death of a
participant, benefit payments will be made to the surviving spouse, if any, over
the remainder of the retirement benefit payment period. Years of service for
each Director participant under the plan are: Mr. Crandall - 18, Mr. DiBona - 6,
Mr. Eagleburger - 5, Mr. Howell - 12, and Mr. Silas - 10. Assets are transferred
to State Street Bank and Trust Company, as Trustee, to be held under an
irrevocable grantor trust to aid Halliburton in meeting its obligations under
the Directors' Retirement Plan. The principal and income of the trust are
treated as assets and income of Halliburton for federal income tax purposes and
are subject to the claims of general creditors of Halliburton to the extent
provided in the plan.
24
AUDIT COMMITTEE REPORT
Halliburton's Audit Committee consists of Directors who, in the business
judgment of the Board of Directors, are independent under SEC regulations and
the New York Stock Exchange listing standards. In addition, in the business
judgment of the Board of Directors, at least one of us has accounting or related
financial management experience required under the listing standards and will
qualify as an "audit committee financial expert" under SEC regulations. We
operate under a written charter, a copy of which is included as Appendix A to
this proxy statement. As required by the charter, we review and reassess the
charter annually and recommend any changes to the Board of Directors for
approval.
Under the charter, Halliburton's management is responsible for preparing
Halliburton's financial statements and the independent auditors are responsible
for auditing those financial statements. The Audit Committee's role under the
charter is to provide oversight of management in carrying out management's
responsibility and to appoint, compensate, retain and oversee the work of the
independent auditors. The Audit Committee is not providing any expert or special
assurance as to Halliburton's financial statements or any professional
certification as to the independent auditors' work.
In fulfilling our oversight role for the year ended December 31, 2002, we:
-- reviewed and discussed Halliburton's audited financial statements with
management;
-- discussed with KPMG LLP, Halliburton's independent auditors, the
matters required by Statement on Auditing Standards No. 61 relating to
the conduct of the audit;
-- received from KPMG LLP the written disclosures and letter required by
Independence Standards Board Standard No. 1; and
-- discussed with KPMG LLP its independence.
Based on our:
-- review of the audited financial statements,
-- discussions with management,
-- discussions with KPMG LLP, and
-- review of KPMG LLP's written disclosures and letter,
we recommended to the Board of Directors that the audited financial statements
be included in Halliburton's Annual Report on Form 10-K for the fiscal year
ended December 31, 2002 for filing with the Securities and Exchange Commission.
Our recommendation considers our review of that firm's qualifications as
independent accountants for the Company. Our review also included matters
required to be considered under U.S. Securities and Exchange Commission Rules on
Auditor Independence, including the nature and extent of non-audit services. In
our business judgment the nature and extent of non-audit services performed by
KPMG LLP during the year did not impair the firm's independence.
Respectfully submitted,
THE AUDIT COMMITTEE OF DIRECTORS
Robert L. Crandall
Kenneth T. Derr
Lawrence S. Eagleburger
W. R. Howell
Ray L. Hunt
C. J. Silas, Chairman
25
AUDIT INFORMATION
AUDIT FEES
The aggregate fees for professional services rendered by KPMG LLP for the
audit of our annual financial statements for the fiscal year ended December 31,
2002, including audits of many of our subsidiaries in regards to compliance with
statutory requirements in foreign countries, and the reviews of our financial
statements included in the Forms 10-Q we filed for fiscal year 2002 totaled
$10.2 million.
AUDIT-RELATED FEES
Audit-related fees primarily include professional services rendered by KPMG
LLP for audits of our employee benefit plans. The aggregate fees for these
services rendered by KPMG LLP for fiscal year 2002 totaled $0.5 million.
TAX FEES
The aggregate fees for tax services rendered during 2002 by KPMG LLP totaled
$1.2 million, which primarily consisted of international tax compliance, and
services related to our expatriate employees including tax and immigration
related services.
ALL OTHER FEES
All other fees comprise professional services rendered by KPMG LLP related
to the SEC investigation and our legal reorganization in 2002. Fees for these
services totaled $4.3 million.
AUDIT COMMITTEE CONSIDERATION
Our Audit Committee considered whether KPMG LLP's provision of tax services
and All Other Fees as reported above is compatible with maintaining KPMG LLP's
independence as our principal independent accounting firm.
WORK PERFORMED BY PRINCIPAL ACCOUNTANT'S FULL TIME, PERMANENT EMPLOYEES
KPMG LLP's work on Halliburton's audit was performed by KPMG LLP partners
and employees.
26
PROPOSAL FOR RATIFICATION OF THE SELECTION OF AUDITORS
(ITEM 2)
KPMG LLP was engaged on April 17, 2002 to examine our financial statements
for the year ending December 31, 2002. The decision to engage KPMG LLP to
examine our financial statements in 2002 was unanimously recommended by the
Audit Committee and approved by the Board of Directors. A resolution will be
presented at the Annual Meeting to ratify the Board of Directors' appointment of
KPMG LLP as independent accountants to examine our financial statements and the
books and records for the year ending December 31, 2003. The appointment was
made upon the recommendation of the Audit Committee. KPMG LLP has advised that
neither the firm nor any member of the firm has any direct financial interest or
any material indirect interest in Halliburton. Also, during at least the past
three years, neither the firm nor any member of the firm has had any connection
with us in the capacity of promoter, underwriter, voting trustee, director,
officer or employee.
For the year ending December 31, 2001 and prior years, Arthur Andersen LLP
served as our independent auditors. We dismissed Arthur Andersen LLP on April
17, 2002. After a thorough evaluation process that reviewed several audit firms,
the Board of Directors concluded that KPMG LLP would bring the best combination
of talent and experience to the auditing effort.
Arthur Andersen LLP's report on our financial statements for 2001 did not
contain an adverse opinion or disclaimer of opinion, and was not qualified or
modified as to uncertainty, audit scope or accounting principles. There were no
disagreements with Arthur Andersen LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
if not resolved to Arthur Andersen LLP's satisfaction would have caused it to
make reference to the subject matter in connection with its report.
Representatives of KPMG LLP are expected to be present at the Annual
Meeting, will have an opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions from
stockholders.
The affirmative vote of the holders of a majority of the shares of our
common stock represented at the Annual Meeting and entitled to vote on the
matter is needed to approve the proposal.
If the stockholders do not ratify the selection of KPMG LLP, the Board of
Directors will reconsider the selection of independent accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT
OF KPMG LLP AS INDEPENDENT ACCOUNTANTS TO EXAMINE THE FINANCIAL STATEMENTS AND
BOOKS AND RECORDS OF HALLIBURTON FOR THE YEAR 2003.
PROPOSAL TO AMEND AND RESTATE THE
1993 STOCK AND INCENTIVE PLAN
(ITEM 3)
INTRODUCTION
On February 18, 1993, the Board of Directors adopted the Halliburton Company
1993 Stock and Long-Term Incentive Plan (which has been renamed the 1993 Stock
and Incentive Plan, the "1993 Plan") that was approved by the stockholders on
May 18, 1993. A total of 11,000,000 shares of Halliburton's common stock, par
value $2.50 per share, were initially authorized for issuance under the 1993
Plan, of which no more than 3,200,000 could be issued in the form of restricted
stock awards. (All share amounts in this Introduction section have been
adjusted, where applicable, to reflect the 2-for-1 stock split distributed on
July 21, 1997.)
27
In early 1997, there were only about 440,000 shares remaining available for
issuance under the 1993 Plan. The Board of Directors determined that it was in
the best interests of Halliburton and the stockholders to authorize additional
shares for issuance under the 1993 Plan so that an adequate number of shares
would be available for plan purposes. Accordingly, on February 20, 1997, the
Board of Directors adopted an amendment and restatement to the 1993 Plan, which
was approved by the stockholders on May 20, 1997. The amendment provided for an
increase in the total number of shares issuable under the 1993 Plan from
11,000,000 to 27,000,000 shares, of which no more than 4,000,000 (increased from
3,200,000) could be issued in the form of restricted stock awards. Additionally,
the amendment limited to 4,000,000 the number of shares that could be issued
pursuant to performance share awards and limited the terms of stock options and
stock appreciation rights ("SAR") to ten years.
On February 17, 2000, the Board of Directors adopted an amendment and
restatement to the 1993 Plan, which was approved by the stockholders on May 16,
2000. The amendment:
-- provided for an increase of 22,000,000 in the total number of shares
that may be issued under the 1993 Plan to 49,000,000 shares;
-- combined the limit on the number of shares that may be issued in the
form of restricted stock or pursuant to performance share awards
(there were separate limits for restricted stock and for performance
share awards of 4,000,000 each) and increased the combined limit from
8,000,000 to 16,000,000 shares;
-- modified the eligibility provisions to permit a broader group of
Halliburton employees and the non-employee Directors to be eligible to
participate;
-- expanded the 500,000 share annual limit on awards to a participant to
include awards of performance shares, in addition to stock option and
SAR grants;
-- specified performance criteria for performance share awards; and
-- prohibited repricing of options and SARs.
On February 12, 2003, the Board of Directors adopted an amendment and
restatement to the 1993 Plan, subject to approval by the stockholders on May 21,
2003. The amendments are summarized immediately below:
SUMMARY OF CHANGES TO THE 1993 PLAN
The full text of the 1993 Plan, as proposed to be amended and restated, is
attached as Appendix B to this proxy statement. The summary of the proposed
amendment and restatement of the 1993 Plan is set forth below, which summary is
qualified by reference to the full text of the Plan:
-- In order to extend the term, the amended 1993 Plan eliminates the
expiration date, and provides for an indefinite duration.
-- Provisions were added to permit cash as well as equity awards that
would qualify as performance-based compensation and be exempt from the
$1 million deduction limit for compensation under section 162(m) of
the Internal Revenue Code of 1986.
-- The amended 1993 Plan includes a more modern definition of "Corporate
Change." In general, a "Corporate Change" will occur when (1) an
individual or entity (with certain exceptions) acquires 20% or more of
the combined voting power of the company's outstanding securities (the
"Company Voting Stock"), (2) the current members of the Board of
Directors and any new Director who is approved or recommended by a
vote of at least 2/3 of the Directors still in office, cease to
constitute a majority of the number of directors, (3) there is a
merger or consolidation of the company, except for (a) a merger or
consolidation where the stockholders of the company retain at least
50% of the Company Voting Stock and (b) a merger or consolidation
effected to implement a recapitalization where no individual or entity
(with some exceptions) acquires 20% or more of the Company Voting
Stock, or (4) the company's stockholders approve a plan of complete
liquidation or dissolution of the company or there is an agreement for
the sale, disposition, lease or exchange of all or substantially all
of the company's assets, except for such a sale, disposition, lease or
exchange to an entity in which the company's stockholders hold at
least 50% of the voting securities in substantially the same
proportions as their ownership in the company prior to the
transaction.
28
-- The amended 1993 Plan includes automatic "vesting" upon a Corporate
Change. Automatic vesting eliminates the need for Compensation
Committee action with respect to outstanding awards at the time of a
Corporate Change. In particular, the amended Plan provides that, upon
a Corporate Change, (1) any outstanding options and stock appreciation
rights will become immediately vested and fully exercisable, (2) any
restrictions on restricted stock awards will immediately lapse, (3)
all performance measures upon which an outstanding performance award
is contingent will be deemed achieved and the holder of such award
will receive a payment equal to the maximum amount of the award he or
she would have been entitled to receive, prorated to the effective
date of the Corporate Change, and (4) any outstanding cash awards
including, but not limited to, stock value equivalent awards will
immediately vest and be paid based on the vested value of the award.
The Compensation Committee could provide for different treatment,
including no vesting, by specific provisions in an award agreement.
THE 1993 PLAN
TYPES OF AWARDS
The 1993 Plan provides for the grant of any or all of the following types of
awards:
-- stock options, including Incentive Stock Options and non-qualified
stock options;
-- stock appreciation rights, in tandem with stock options or
freestanding;
-- restricted stock;
-- performance share awards; and
-- stock value equivalent awards.
Any stock option granted in the form of an Incentive Stock Option must
satisfy the requirements of Section 422 of the Internal Revenue Code. Awards may
be made to the same person on more than one occasion and may be granted singly,
in combination, or in tandem as determined by the Compensation Committee. To
date only awards of non-qualified stock options and restricted stock have been
made under the 1993 Plan.
TERM
The amended 1993 Plan, if approved by the stockholders, will be of an
indefinite duration.
ADMINISTRATION
The Board of Directors has appointed the Compensation Committee to
administer the 1993 Plan. The Compensation Committee is appointed by, and serves
at the pleasure of, the Board of Directors. Only those Directors who are both
"non-employee directors" for purposes of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, and "outside directors" for purposes of the
regulations promulgated under Section 162(m) of the Internal Revenue Code, will
act as Compensation Committee members. Subject to the terms of the 1993 Plan,
and to any approvals and other authority as the Board of Directors may reserve
to itself from time to time, the Compensation Committee, consistent with the
terms of the 1993 Plan, will have authority to:
-- select the individuals to receive awards;
-- determine the timing, form, amount or value and term of grants and
awards, and the conditions and restrictions, if any, subject to which
grants and awards will be made and become payable under the 1993 Plan;
-- construe the 1993 Plan and to prescribe rules and regulations for the
administration of the 1993 Plan; and
-- make any other determinations authorized under the 1993 Plan as the
Compensation Committee deems necessary or appropriate.
29
ELIGIBILITY
A broad group of employees of Halliburton and its affiliates are eligible to
participate in the 1993 Plan. The selection of participants from eligible
employees is within the discretion of the Compensation Committee. Non-employee
Directors are eligible to participate in the 1993 Plan. Currently there are
approximately 4,500 active participants in the 1993 Plan.
SHARES SUBJECT TO THE PLAN
The amended 1993 Plan does not increase the total shares currently
authorized under the 1993 Plan (49,000,000), of which no more than 16,000,000
shares may be issued in the form of restricted stock or pursuant to performance
share awards. To date, 6,557,396 shares have been issued in the form of
restricted stock and no shares have been issued pursuant to performance share
awards. This leaves a total of 9,442,604 shares available for issuance for
future restricted stock and performance share awards. There is a 500,000 share
limit on the total number of shares which may be awarded to a participant in any
calendar year, including performance share awards, stock options and SARs.
Repricing or the cancellation and reissuance of stock options or SARs is
prohibited.
STOCK OPTIONS
Under the 1993 Plan, the Compensation Committee may grant awards in the form
of stock options to purchase shares of common stock. The Compensation Committee
will determine the number of shares subject to the option, the manner and time
of the option's exercise, and the exercise price per share of stock subject to
the option. The term of an option may not exceed ten years. No consideration is
received by Halliburton for granting stock options. The exercise price of a
stock option will not be less than the fair market value of the common stock on
the date the option is granted. The Compensation Committee will designate each
option as a non-qualified or an Incentive Stock Option.
The option exercise price may, at the discretion of the Compensation
Committee, be paid by a participant in cash, shares of common stock or a
combination of cash and common stock. Except as set forth in this proxy
statement with regard to specific corporate changes, no option will be
exercisable within six months of the date of grant.
The effect of an optionee's death, disability, retirement or other
termination of service will be specified in the option agreement that evidences
each option grant.
STOCK APPRECIATION RIGHTS
The 1993 Plan also authorizes the Compensation Committee to grant stock
appreciation rights either independent of, or in connection with, a stock
option. The exercise price of a SAR will not be less than the fair market value
of the common stock on the date the SAR is granted. If granted with a stock
option, exercise of SARs will result in the surrender of the right to purchase
the shares under the option as to which the SARs were exercised. Upon exercising
a SAR, the holder receives for each share for which the SAR is exercised, an
amount equal to the difference between the exercise price and the fair market
value of the common stock on the date of exercise. Payment of that amount may be
made in shares of common stock, cash, or a combination of cash and common stock,
as determined by the Compensation Committee. The SARs will not be exercisable
within six months of the date of grant. The term of a SAR grant may not exceed
ten years. No consideration is received by Halliburton for granting SARs.
Each grant of a SAR will be evidenced by an agreement that specifies the
terms and conditions of the award, including the effect of death, disability,
retirement or other termination of service on the exercisability of the SAR.
RESTRICTED STOCK
The 1993 Plan provides that shares of common stock subject to specific
restrictions may be awarded to eligible individuals as determined by the
Compensation Committee. These awards are subject to the 16,000,000 share limit
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on the total number of shares that may be issued in the form of restricted stock
or performance share awards. The Compensation Committee will determine the
nature and extent of the restrictions on the shares, the duration of the
restrictions, and any circumstance under which restricted shares will be
forfeited. With a limited exception, the restriction period may not be less than
three years from the date of grant. During the period of restriction, recipients
will have the right to receive dividends and the right to vote the shares. The
Compensation Committee will determine the effect of a restricted stock
recipient's death, disability, retirement or other termination of service prior
to the lapse of any applicable restrictions.
PERFORMANCE SHARE AWARDS
The 1993 Plan permits the Compensation Committee to grant performance share
awards to eligible individuals. Performance share awards are awards that are
contingent on the achievement of one or more performance measures. These awards
are subject to the 16,000,000 share limit on the total number of shares that may
be issued in the form of restricted stock or performance share awards.
The performance criteria that may be used by the Compensation Committee in
granting performance share awards consist of objective tests based on the
following:
-- earnings -- cash value added performance
-- cash flow -- stockholder return and/or value
-- customer satisfaction -- operating profits (including EBITDA)
-- revenues -- net profits
-- financial return ratios -- earnings per share
-- profit return and margins -- stock price
-- market share -- cost reduction goals
-- working capital -- debt to capital ratio
-- economic value added performance
The Compensation Committee may select one criterion or multiple criteria for
measuring performance. The measurement may be based on corporate, subsidiary or
business unit performance, or based on comparative performance with other
companies or other external measures of selected performance criteria. The
Compensation Committee will also determine the length of time over which
performance will be measured and the effect of an awardee's death, disability,
retirement or other termination of service during the performance period.
STOCK VALUE EQUIVALENT AWARDS
The 1993 Plan permits the Compensation Committee to grant stock value
equivalent awards to eligible individuals. Stock value equivalent awards are
rights to receive the fair market value of a specified number of shares of
common stock, or the appreciation in the fair market value of the shares, over a
specified period of time, pursuant to a vesting schedule, all as determined by
the Compensation Committee. Payment of the vested portion of a stock value
equivalent award shall be made in cash, based on the fair market value of the
common stock on the payment date. The Compensation Committee will also determine
the effect of an awardee's death, disability, retirement or other termination of
service during the applicable period.
AMENDMENT
The 1993 Plan, as proposed to be amended, provides that the Board of
Directors may at any time terminate or amend the plan. However, the Board may
not, without approval of the stockholders, amend the 1993 Plan to effect a
"material revision" of the Plan, where a "material revision" includes, but is
not limited to, a revision that:
-- materially increases the benefits accruing to a Holder under the plan;
-- materially increases the aggregate number of securities that may be
issued under the plan;
-- materially modifies the requirements as to eligibility for
participation in the plan;
-- changes the types of awards available under the plan; or
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-- amends or deletes the provisions that prevent the Compensation
Committee from amending the terms and conditions of an outstanding
option or stock appreciation rights to alter the exercise price.
No amendment or termination of the 1993 Plan shall, without the consent of
the optionee or participant, alter or impair rights under any options or other
awards previously granted.
CHANGE-IN-CONTROL
Under the proposed amendment of the 1993 Plan, which is subject to
stockholder approval, in the event of a Corporate Change, unless an Award
Document otherwise provides, as of the Corporate Change Effective Date, the
following will occur automatically:
-- any outstanding options and stock appreciation rights shall become
immediately vested and fully exercisable;
-- any restrictions on restricted stock awards shall immediately lapse;
-- all performance measures upon which an outstanding performance award
is contingent shall be deemed achieved and the Holder shall receive a
payment equal to the maximum amount of the award he or she would have
been entitled to receive, prorated to the Corporate Change Effective
Date; and
-- any outstanding cash awards including, but not limited to, stock value
equivalent awards shall immediately vest and be paid based on the
vested value of the award.
FEDERAL INCOME TAX TREATMENT
The following summarizes the current U.S. federal income tax consequences
generally arising for awards under the 1993 Plan.
A participant who is granted an Incentive Stock Option does not realize any
taxable income at the time of the grant or at the time of exercise, but in some
circumstances may be subject to an alternative minimum tax as a result of the
exercise. Similarly, Halliburton is not entitled to any deduction at the time of
grant or at the time of exercise. If the participant makes no disposition of the
shares acquired pursuant to an Incentive Stock Option before the later of two
years from the date of grant and one year from the date of exercise, any gain or
loss realized on a subsequent disposition of the shares will be treated as a
long-term capital gain or loss. Under these circumstances, Halliburton will not
be entitled to any deduction for federal income tax purposes. If the participant
fails to hold the shares for that period, the disposal is treated as a
disqualifying disposition. The gain on the disposition is ordinary income to the
participant to the extent of the difference between the option price and the
fair market value on the exercise date. Any excess is long-term or short-term
capital gain, depending on the holding period. Under these circumstances,
Halliburton will be entitled to a tax deduction equal to the ordinary income
amount the participant recognizes in a disqualifying disposition.
A participant who is granted a non-qualified stock option does not have
taxable income at the time of grant, but does have taxable income at the time of
exercise. The income equals the difference between the exercise price of the
shares and the market value of the shares on the date of exercise. Halliburton
is entitled to a corresponding tax deduction for the same amount.
The grant of a SAR will produce no U.S. federal tax consequences for the
participant or Halliburton. The exercise of a SAR results in taxable income to
the participant, equal to the difference between the exercise price of the
shares and the market price of the shares on the date of exercise, and a
corresponding tax deduction to Halliburton.
A participant who has been granted an award of restricted shares of common
stock will not realize taxable income at the time of the grant, and Halliburton
will not be entitled to a tax deduction at the time of the grant, unless the
participant makes an election to be taxed at the time of the award. When the
restrictions lapse, the participant will recognize taxable income in an amount
equal to the excess of the fair market value of the shares at that time over the
amount, if any, paid for the shares. Halliburton will be entitled to a
corresponding tax deduction. Dividends paid to the participant during the
restriction period will also be compensation income to the participant
32
and deductible as compensation expense by Halliburton. The holder of a
restricted stock award may elect to be taxed at the time of grant of the
restricted stock award on the market value of the shares, in which case:
-- Halliburton will be entitled to a deduction at the same time and in
the same amount;
-- dividends paid to the participant during the restriction period will
be taxable as dividends to the participant and not deductible by
Halliburton; and
-- there will be no further federal income tax consequences when the
restrictions lapse.
A participant who has been granted a performance share award will not
realize taxable income at the time of the grant, and Halliburton will not be
entitled to a tax deduction at that time. A participant will realize ordinary
income at the time the award is paid equal to the amount of cash paid or the
value of shares delivered, and Halliburton will have a corresponding tax
deduction.
The grant of a stock value equivalent award produces no U.S. federal income
tax consequences for the participant or Halliburton. The payment of a stock
value equivalent award results in taxable income to the participant equal to the
amount of the payment received, valued with reference to the fair market value
of the common stock on the payment date. Halliburton is entitled to a
corresponding tax deduction for the same amount.
Halliburton may deduct in connection with any award any taxes required by
law to be withheld. The Compensation Committee may permit the participant to
surrender, or authorize Halliburton to withhold, shares of common stock in
satisfaction of Halliburton's withholding obligations.
GENERAL/VOTE REQUIRED
The closing price of Halliburton's common stock on March 24, 2003, as traded
on the New York Stock Exchange was $20.12 per share.
The affirmative vote of the holders of a majority of the shares of
Halliburton's common stock represented at the Annual Meeting and entitled to
vote on the matter is needed to approve the proposal. In addition, approval
requires that the total votes cast on the matter exceed 50% of the shares of
common stock outstanding and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE PROPOSED
AMENDMENT AND RESTATEMENT OF THE 1993 STOCK AND INCENTIVE PLAN.
STOCKHOLDER PROPOSAL ON EXECUTIVE SEVERANCE AGREEMENTS
(ITEM 4)
The Amalgamated Bank LongView Collective Investment Fund (the "Longview
Fund"), located at 11-15 Union Square, New York, New York 10003, has notified
Halliburton that it intends to present the resolution set forth below to the
Annual Meeting for action by the stockholders. The Longview Fund's supporting
statement for the resolution, along with the Board of Directors' statement in
opposition is set forth below. As of November 18, 2002, the Longview Fund
beneficially owned 146,937 shares of Halliburton's common stock. Proxies
solicited on behalf of the Board of Directors will be voted AGAINST this
proposal unless stockholders specify a contrary choice in their proxies.
PROPOSAL
RESOLVED: The shareholders of Halliburton Co. ("Halliburton" or the
"Company") urge the Board of Directors to seek shareholder approval for future
severance agreements with senior executives that provide benefits in an amount
that exceeds two times the sum of the executive's base salary plus bonus.
"Future severance agreements" include employment agreements containing severance
provisions; retirement agreements; change in control agreements; and agreements
renewing, modifying or extending existing such agreements. "Benefits" include
33
securities or the value of restricted shares or other stock; lump-sum cash
payments (including payments in lieu of medical and other benefits) and the
estimated present value of periodic retirement payments, fringe benefits and
consulting fees (including reimbursable expenses) to be paid to the executives.
SUPPORTING STATEMENT
Halliburton has entered in a series of severance agreements, commonly known
as "golden parachutes," that allow senior executives to receive payment if they
leave the Company in certain circumstances, as specified in the contracts.
The contract with CEO David J. Lesar provides that if he is involuntarily
terminated for any reason other than cause, Halliburton must pay five times his
base salary plus the value of any restricted shares that are forfeited because
of termination.
The other top four executives have contracts allowing them in defined
situations to recover two years' base salary, the value of restricted shares
that were forfeited because of the termination, any unpaid bonus earned in prior
years, and the bonus payable for the current year had they remained employed for
the full year.
The terms of these severance agreements are such that they would cost the
Company over $10 million if they are ever exercised by the five most senior
executives, assuming compensation at 2001 levels.
Severance agreements may be appropriate in some circumstances. Nonetheless,
we believe that the potential cost of such agreements entitles shareholders to
be heard when a company contemplates paying out more than twice the amount of an
executive's last salary and bonus.
The existence of such a shareholder approval requirement may induce
restraint when parties negotiate such agreements.
It may not always be practical to obtain prior shareholder approval. Thus,
Halliburton should have the option, in implementing this proposal, of seeking
approval after the material terms of the agreement are agreed upon.
Institutional investors such as the California Public Employees' Retirement
System recommend shareholder approval of these types of agreements in its proxy
voting guidelines. The Council of Institutional Investors favors shareholder
approval if the amount payable exceeds 200% of the senior executives' annual
base salary.
We urge shareholders to vote FOR this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING
REASONS:
The Board believes that this proposal, if adopted, would undermine
Halliburton's ability to attract and retain highly qualified senior executives.
Halliburton must have the flexibility and ability to tailor and offer
competitive employment packages to retain executives, as well as to motivate
other valuable executives to accept employment with Halliburton. We believe
adoption of this proposal would place Halliburton at a competitive disadvantage
because it would arbitrarily limit Halliburton's flexibility to design
employment arrangements that would attract and retain qualified executives.
The Compensation Committee, all the members of which are independent
Directors, determines whether Halliburton should enter into employment
agreements with its top executive officers. All employment arrangements with the
Chief Executive Officer must be recommended by the Compensation Committee, and
are subject to further review and approval by the Board. In the event that the
Compensation Committee determines that an employment agreement is in the best
interests of Halliburton and its stockholders, we believe Halliburton needs the
flexibility to make an offer of employment and enter into an employment
agreement without delay. This flexibility would be substantially undermined by a
requirement for stockholder approval. Although the proposal states that
stockholder approval can be obtained after the material terms of an agreement
are agreed upon, this solution is not practical. In order to attract the key
executives necessary for the operation of Halliburton's business, it cannot
afford to impose this kind of condition on the approval of an employment
agreement. The types of executives that
34
Halliburton seeks are typically being pursued by other companies as well, and
Halliburton could lose these individuals to competitors that do not have the
stockholder approval condition. Adoption of the proposal would require
Halliburton to incur significant time and expense to convene a special
stockholders' meeting for the sole purpose of voting on this type of agreement
or, alternatively, to delay finalizing such agreement until after its approval
at the annual stockholders' meeting. In either case, the Board believes that
Halliburton would be placed at a competitive disadvantage in attracting
qualified executives who do not want to be subject to the uncertainty created by
the stockholder approval provision, if this proposal was adopted.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE PROPOSAL. PROXIES
SOLICITED BY THE BOARD WILL BE VOTED AGAINST THE PROPOSAL UNLESS INSTRUCTED
OTHERWISE.
ADDITIONAL INFORMATION
ADVANCE NOTICE PROCEDURES
Under our By-laws, no business may be brought before an Annual Meeting
unless it is specified in the notice of the meeting or is otherwise brought
before the meeting by or at the direction of the Board or by a stockholder
entitled to vote who has delivered notice to Halliburton (containing the
information specified in the By-laws) not less than ninety (90) days prior to
the first anniversary of the preceding year's Annual Meeting. These requirements
are separate from and in addition to the SEC's requirements that a stockholder
must meet in order to have a stockholder proposal included in Halliburton's
proxy statement. This advance notice requirement does not preclude discussion by
any stockholder of any business properly brought before the Annual Meeting in
accordance with these procedures.
PROXY SOLICITATION COSTS
The proxies accompanying this proxy statement are being solicited by
Halliburton. The cost of soliciting proxies will be borne by Halliburton. We
have retained Georgeson Shareholder Communications Inc. to aid in the
solicitation of proxies. For these services, we will pay Georgeson a fee of
$12,500 and reimburse it for out-of-pocket disbursements and expenses. Officers
and regular employees of Halliburton may solicit proxies personally, by
telephone or other telecommunications from some stockholders if proxies are not
received promptly. We will, upon request, reimburse banks, brokers and others
for their reasonable expenses in forwarding proxies and proxy material to
beneficial owners of Halliburton's stock.
STOCKHOLDER PROPOSALS FOR THE 2004 ANNUAL MEETING
Stockholders interested in submitting a proposal for inclusion in the proxy
materials for the Annual Meeting of Stockholders in 2004 may do so by following
the procedures prescribed in SEC Rule 14a-8. To be eligible for inclusion,
stockholder proposals must be received by Halliburton's Secretary at 5 Houston
Center, 1401 McKinney, Suite 2400, Houston, Texas 77010, no later than December
11, 2003. The 2004 Annual Meeting will be held on May 19, 2004.
35
OTHER MATTERS
As of the date of this proxy statement, we know of no business that will be
presented for consideration at the Annual Meeting other than the matters
described in this proxy statement. If any other matters should properly come
before the meeting for action by stockholders, it is intended that proxies in
the accompanying form will be voted on those matters in accordance with the
judgment of the person or persons voting the proxies.
By Authority of the Board of Directors,
/s/ MARGARET E. CARRIERE
MARGARET E. CARRIERE
Vice President and
Secretary
March 25, 2003
36
APPENDIX A
HALLIBURTON COMPANY AUDIT COMMITTEE CHARTER
GENERAL
The Audit Committee of the Board of Directors of Halliburton Company shall
consist of at least three directors, all of whom shall be independent. Members
of the Committee shall be considered independent if they (i) have no
relationship to the Company that could interfere with the exercise of their
independence from management and the Company, (ii) do not, other than in the
capacity as a member of the Board of Directors or as a member of a committee of
the Board, accept any consulting, advisory or other compensatory fee from the
Company and (iii) are not an affiliated person of the Company other than as a
result of being a member of the Board of Directors. As determined by the Board
of Directors, the Members of the Committee will be financially literate with at
least one having accounting or related financial management expertise and being
an "audit committee financial expert" as defined by the Securities and Exchange
Commission. Company management, internal auditors and independent auditors and
the Company's General Counsel may attend each meeting or portions thereof as
required by the Committee. The Committee will have at least four meetings each
year on a regular basis and at such other times as it deems necessary to fulfill
its responsibilities.
ROLE
The Audit Committee's role is to:
1. assist the Board's oversight of:
-- the integrity of the Company's financial statements;
-- the Company's compliance with legal and regulatory requirements;
-- the independent auditor's qualifications and independence;
-- the performance of the Company's internal audit function and
independent auditors; and
-- the adequacy of the Company's financial disclosure and internal
controls;
2. appoint, compensate, retain and oversee the work of the independent
auditors, and to resolve any disagreements between management and the
independent auditors regarding financial reporting; and
3. prepare the report that the SEC rules require be included in the Company's
annual proxy statement.
RESPONSIBILITIES
The Audit Committee's role is one of oversight whereas the Company's management
is responsible for preparing the Company's financial statements and the
independent auditors are responsible for auditing those financial statements.
The Audit Committee is not providing any expert or special assurance as to the
Company's financial statements or any professional certification as to the
independent auditor's work. The following functions shall be the key
responsibilities of the Audit Committee in carrying out its oversight function.
1. Provide an open avenue of communications between the internal auditors, the
independent auditors, management and the Board of Directors, including
periodic private sessions with the internal auditors, the independent
auditors and management.
2. Receive and review reports from Company management relating to the Company's
financial reporting process, published financial statements and/or major
disclosures and the adequacy of the Company's system of internal controls.
A-1
3. Receive and review reports from Company management and the General Counsel
relating to legal and regulatory matters that may have a material impact on
the Company's financial statements and Company compliance policies.
4. Receive and review reports from internal auditors relating to major findings
and recommendations from internal audits conducted Company-wide. Consult
with and review reports from internal auditors relating to on-going
monitoring programs including the Company's Code of Business Conduct and
compliance with policies of the Company.
5. Inquire of Company management and independent auditors regarding the
appropriateness of accounting principles followed by the Company, changes in
accounting principles and their impact on the financial statements.
6. Review the internal audit program in terms of scope of audits conducted or
scheduled to be conducted.
7. The Committee and the Board shall be ultimately responsible for the
appointment, compensation, retention and oversight of the work of the
independent auditors, which will report directly to the Committee, and the
Committee will resolve any disagreements between management and the
independent auditors regarding financial reporting. The Committee's
responsibility includes the responsibility to approve in advance, except as
otherwise permitted by applicable law, all services performed by the
independent auditors for the Company.
8. The Committee will:
-- recommend annually the appointment of the independent auditors to the
Board for its approval and subsequent submission to the stockholders
for ratification, based upon an annual performance evaluation and a
determination of the auditors' independence;
-- determine the independence of the independent auditors by obtaining a
formal written statement delineating all relationships between the
independent auditors and the Company, including all non-audit services
and fees;
-- discuss with the independent auditors if any disclosed relationship or
service could impact the auditors' objectivity and independence; and
-- recommend that the Board take appropriate action in response to the
auditors' statement to ensure the independence of the independent
auditors.
9. Meet with independent auditors and review their report to the Committee
including comments relating to the system of internal controls, published
financial statements and related disclosures, the adequacy of the financial
reporting process and the scope of the independent audit. The independent
auditors are ultimately accountable to the Board and the Committee on all
such matters.
10. Review with the internal and independent auditors the coordination of their
respective audit activities.
11. Prepare a Report, for inclusion in the Company's proxy statement, disclosing
that the Committee reviewed and discussed the audited financial statements
with management and discussed certain other matters with the independent
auditors. Based upon these discussions, state in the Report whether the
Committee recommended to the Board that the audited financial statements be
included in the Annual Report.
12. As appropriate, retain and obtain the advice and assistance of outside
legal, accounting and other advisors, in addition to obtaining advice from
the Company's internal counsel or regular outside counsel.
13. Establish such procedures as necessary to timely implement the provisions of
the Sarbanes-Oxley Act of 2002 applicable to audit committees, including,
but not limited to, establishing procedures for:
-- the receipt, retention, and treatment of complaints received by the
Company regarding accounting, internal accounting controls or auditing
matters; and
A-2
-- the confidential, anonymous submission by employees of the Company of
concerns regarding questionable accounting or auditing matters.
14. Conduct an annual performance evaluation of the Committee and discuss those
results with the Board of Directors.
15. Review and reassess the adequacy of the Audit Committee's charter annually.
If any revisions therein are deemed necessary or appropriate, submit the
same to the Board for its consideration and approval.
QUORUM
For the transaction of business at any meeting of the Audit Committee, a
majority of the members shall constitute a quorum.
Approved as revised: Board of Directors of
Halliburton Company
February 12, 2003
Supercedes previous version dated:
February 17, 2000
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APPENDIX B
HALLIBURTON COMPANY
1993 STOCK AND INCENTIVE PLAN
AS AMENDED AND RESTATED FEBRUARY 12, 2003
I. PURPOSE
The purpose of the Halliburton Company 1993 Stock and Incentive Plan (the
"Plan") is to provide a means whereby Halliburton Company, a Delaware
corporation (the "Company"), and its Subsidiaries may attract, motivate and
retain highly competent employees and to provide a means whereby selected
employees can acquire and maintain stock ownership and receive cash awards,
thereby strengthening their concern for the long-term welfare of the Company.
The Plan is also intended to provide employees with additional incentive and
reward opportunities designed to enhance the profitable growth of the Company
over the long term. A further purpose of the Plan is to allow awards under the
Plan to Non-employee Directors in order to enhance the Company's ability to
attract and retain highly qualified Directors. Accordingly, the Plan provides
for granting Incentive Stock Options, Options which do not constitute Incentive
Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Performance
Awards, Stock Value Equivalent Awards, or any combination of the foregoing, as
is best suited to the circumstances of the particular employee or Non-employee
Director as provided herein. The Plan was established February 18, 1993, has
been amended from time to time thereafter, and effective as of February 12,
2003, is amended and restated to remove the expiration date of the Plan, to
rename the Plan and to make certain other changes.
II. DEFINITIONS
The following definitions shall be applicable throughout the Plan unless
specifically modified by any paragraph:
(a) "Award" means, individually or collectively, any Option, Stock
Appreciation Right, Restricted Stock Award, Performance Award or
Stock Value Equivalent Award.
(b) "Award Document" means the relevant award agreement or other
document containing the terms and conditions of an Award.
(c) "Beneficial Owners" shall have the meaning set forth in Rule 13d-3
promulgated under the Exchange Act.
(d) "Board" means the Board of Directors of Halliburton Company.
(e) "Change of Control Value" means, for the purposes of Paragraph (f)
of Article XII, the amount determined in Clause (i), (ii) or (iii),
whichever is applicable, as follows: (i) the per share price
offered to stockholders of the Company in any merger,
consolidation, sale of assets or dissolution transaction, (ii) the
per share price offered to stockholders of the Company in any
tender offer or exchange offer whereby a Corporate Change takes
place or (iii) if a Corporate Change occurs other than as described
in Clause (i) or Clause (ii), the fair market value per share
determined by the Committee as of the date determined by the
Committee to be the date of cancellation and surrender of an Option
or Stock Appreciation Right. If the consideration offered to
stockholders of the Company in any transaction described in this
Paragraph (e) consists of anything other than cash, the Committee
shall determine the fair cash equivalent of the portion of the
consideration offered which is other than cash.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any section of the Code shall be deemed to
include any amendments or successor provisions to such section and
any regulations under such section.
B-1
(g) "Committee" means the committee selected by the Board to administer
the Plan in accordance with Paragraph (a) of Article IV of the
Plan.
(h) "Common Stock" means the Common Stock, par value $2.50 per share,
of the Company.
(i) "Company" means Halliburton Company, a Delaware corporation.
(j) "Corporate Change" shall conclusively be deemed to have occurred
on a Corporate Change Effective Date if an event set forth in any
one of the following paragraphs shall have occurred:
(i) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in
the securities beneficially owned by such Person any
securities acquired directly from the Company or its
affiliates) representing 20% or more of the combined voting
power of the Company's then outstanding securities; or
(ii) the following individuals cease for any reason to constitute
a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board and
any new Director (other than a Director whose initial
assumption of office is in connection with an actual or
threatened election contest relating to the election of
Directors of the Company) whose appointment or election by
the Board or nomination for election by the Company's
stockholders was approved or recommended by a vote of at
least two-thirds (2/3) of the Directors then still in office
who either were Directors on the date hereof or whose
appointment, election or nomination for election was
previously so approved or recommended; or
(iii) there is consummated a merger or consolidation of the Company
or any direct or indirect Subsidiary of the Company with any
other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Company
outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving
entity or any parent thereof), in combination with the
ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or
any Subsidiary of the Company, at least 50% of the combined
voting power of the securities of the Company or such
surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (B) a
merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no Person is or becomes the Beneficial Owner, directly
or indirectly, of securities of the Company (not including in
the securities Beneficially Owned by such Person any
securities acquired directly from the Company or any of its
affiliates other than in connection with the acquisition by
the Company or any of its affiliates of a business)
representing 20% or more of the combined voting power of the
Company's then outstanding securities; or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is
consummated an agreement for the sale, disposition, lease or
exchange by the Company of all or substantially all of the
Company's assets, other than a sale, disposition, lease or
exchange by the Company of all or substantially all of the
Company's assets to an entity, at least 50% of the combined
voting power of the voting securities of which are owned by
stockholders of the Company in substantially the same
proportions as their ownership of the Company immediately
prior to such sale.
Notwithstanding the foregoing, a "Corporate Change" shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
Common Stock of the Company immediately prior to such transaction or series of
transactions
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continue to have substantially the same proportionate ownership in an entity
which owns all or substantially all of the assets of the Company immediately
following such transaction or series of transactions.
(k) "Corporate Change Effective Date" shall mean:
(i) the first date that the direct or indirect ownership of 20%
or more combined voting power of the Company's outstanding
securities results in a Corporate Change as described in
clause (i) of such definition above; or
(ii) the date of the election of Directors that results in a
Corporate Change as described in clause (ii) of such
definition; or
(iii) the date of the merger or consideration that results in a
Corporate Change as described in clause (iii) of such
definition; or
(iv) the date of stockholder approval that results in a Corporate
Change as described in clause (iv) of such definition.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any specified date, the closing
price of the Common Stock on the New York Stock Exchange (or, if
the Common Stock is not then listed on such exchange, such other
national securities exchange on which the Common Stock is then
listed) on that date, or if no prices are reported on that date, on
the last preceding date on which such prices of the Common Stock
are so reported or, in the sole discretion of the Committee for
purposes of determining the Fair Market Value of the Common Stock
at the time of exercise of an Option or a Stock Appreciation Right,
such Fair Market Value shall be the prevailing price of the Common
Stock as of the time of exercise. If the Common Stock is not then
listed or quoted on any national securities exchange but is traded
over the counter at the time a determination of its Fair Market
Value is required to be made hereunder, its Fair Market Value shall
be deemed to be equal to the average between the reported high and
low sales prices of Common Stock on the most recent date on which
Common Stock was publicly traded. If the Common Stock is not
publicly traded at the time a determination of its value is
required to be made hereunder, the determination of its Fair Market
Value shall be made by the Committee in such manner as it deems
appropriate.
(n) "Holder" means an employee or Non-employee Director of the Company
who has been granted an Award.
(o) "Immediate Family" means, with respect to a particular Holder, the
Holder's spouse, parent, brother, sister, children and
grandchildren (including adopted and step children and
grandchildren).
(p) "Incentive Stock Option" means an Option within the meaning of
Section 422 of the Code.
(q) "Minimum Criteria" shall have the meaning given such term in
Paragraph (a) of Article IX.
(r) "Non-employee Director" means a member of the Board who is not an
employee or former employee of the Company or its Subsidiaries.
(s) "Option" means an Award granted under Article VII of the Plan and
includes both Incentive Stock Options to purchase Common Stock and
Options which do not constitute Incentive Stock Options to purchase
Common Stock.
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(t) "Option Agreement" means a written agreement between the Company
and a Holder with respect to an Option.
(u) "Optionee" means a Holder who has been granted an Option.
(v) "Parent Corporation" shall have the meaning set forth in Section
424(e) of the Code.
(w) "Performance Award" means an Award granted under Article X of the
Plan.
(x) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (i) the Company or
any of its Subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of
its affiliates, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of stock
of the Company.
(y) "Plan" means the Halliburton Company 1993 Stock and Incentive Plan.
(z) "Restricted Stock Award" means an Award granted under Article IX of
the Plan.
(aa) "Restricted Stock Award Agreement" means a written agreement
between the Company and a Holder with respect to a Restricted
Stock Award.
(bb) "Restriction Period" shall have the meaning given such term in
Paragraph (a) of Article IX.
(cc) "Spread" means, in the case of a Stock Appreciation Right, an
amount equal to the excess, if any, of the Fair Market Value of a
share of Common Stock on the date such right is exercised over the
exercise price of such Stock Appreciation Right.
(dd) "Stock Appreciation Right" means an Award granted under Article
VIII of the Plan.
(ee) "Stock Appreciation Rights Agreement" means a written agreement
between the Company and a Holder with respect to an Award of Stock
Appreciation Rights.
(ff) "Stock Value Equivalent Award" means an Award granted under
Article XI of the Plan.
(gg) "Subsidiary" means a company (whether a corporation, partnership,
joint venture or other form of entity) in which the Company or a
corporation in which the Company owns a majority of the shares of
capital stock, directly or indirectly, owns a greater than 20%
equity interest, except that with respect to the issuance of
Incentive Stock Options the term "Subsidiary" shall have the same
meaning as the term "subsidiary corporation" as defined in Section
424(f) of the Code.
(hh) "Successor Holder" shall have the meaning given such term in
Paragraph (f) of Article XIV.
III. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan as amended and restated herein shall be effective February 12, 2003,
the date of its adoption by the Board, provided the Plan is approved by the
stockholders of the Company within twelve (12) months thereafter and on or prior
to the date of the first annual meeting of stockholders of the Company held
thereafter. Notwithstanding any provision of the Plan or in any Option Agreement
or Stock Appreciation Rights Agreement, no Option or Stock Appreciation Right
granted on or after February 12, 2003, shall be exercisable prior to such
stockholder approval. Subject to the provisions of Article XIII, the Plan shall
remain in effect until all Options and Stock Appreciation Rights granted under
the Plan have been exercised or expired by reason of lapse of time, all
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restrictions imposed upon Restricted Stock Awards have lapsed and all
Performance Awards and Stock Value Equivalent Awards have been satisfied.
IV. ADMINISTRATION
(a) Composition of Committee. The Plan shall be administered by a
Committee of Directors of the Company which shall be appointed by the
Board.
(b) Powers. The Committee shall have authority, in its discretion, to
determine which eligible individuals shall receive an Award, the time
or times when such Award shall be made, whether an Incentive Stock
Option, nonqualified Option or Stock Appreciation Right shall be
granted, the number of shares of Common Stock which may be issued
under each Option, Stock Appreciation Right and Restricted Stock
Award, and the value of each Performance Award and Stock Value
Equivalent Award. The Committee shall have the authority, in its
discretion, to establish the terms and conditions applicable to any
Award, subject to any specific limitations or provisions of the Plan.
In making such determinations the Committee may take into account the
nature of the services rendered by the respective individuals, their
responsibility level, their present and potential contribution to the
Company's success and such other factors as the Committee in its
discretion shall deem relevant.
(c) Additional Powers. The Committee shall have such additional powers as
are delegated to it by the other provisions of the Plan. Subject to
the express provisions of the Plan, the Committee is authorized to
construe the Plan and the respective Award Documents executed
thereunder, to prescribe such rules and regulations relating to the
Plan as it may deem advisable to carry out the Plan, and to determine
the terms, restrictions and provisions of each Award, including such
terms, restrictions and provisions as shall be requisite in the
judgment of the Committee to cause designated Options to qualify as
Incentive Stock Options, and to make all other determinations
necessary or advisable for administering the Plan. The Committee may
correct any defect or supply any omission or reconcile any
inconsistency in any Award Document relating to an Award in the
manner and to the extent the Committee shall deem expedient to carry
the Award into effect. The determinations of the Committee on the
matters referred to in this Article IV shall be conclusive.
(d) Delegation of Authority. The Committee may delegate some or all of
its power to the Chief Executive Officer of the Company as the
Committee deems appropriate; provided, however, that (i) the
Committee may not delegate its power with regard to the grant of an
Award to any person who is a "covered employee" within the meaning of
Section 162(m) of the Code or who, in the Committee's judgment, is
likely to be a covered employee at any time during the period an
Award to such employee would be outstanding; (ii) the Committee may
not delegate its power with regard to the selection for participation
in the Plan of an officer or other person subject to Section 16 of
the Exchange Act or decisions concerning the timing, pricing or
amount of an Award to such an officer or other person and (iii) any
delegation of the power to grant Awards shall be permitted by
applicable law.
V. GRANT OF OPTIONS, STOCK APPRECIATION RIGHTS, RESTRICTED STOCK
AWARDS, PERFORMANCE AWARDS AND STOCK VALUE EQUIVALENT
AWARDS; SHARES SUBJECT TO THE PLAN
(a) Award Limits. The Committee may from time to time grant Awards to one
or more individuals determined by it to be eligible for participation
in the Plan in accordance with the provisions of Article VI. The
aggregate number of shares of Common Stock that may be issued under
the Plan shall not exceed 49,000,000 shares, of which no more than
16,000,000 may be issued in the form of Restricted Stock Awards or
pursuant to Performance Awards. Notwithstanding anything contained
herein to the contrary, the number of Option shares or Stock
Appreciation Rights, singly or in combination, together with shares
or share equivalents under Performance Awards granted to any Holder
in any one calendar year, shall not in the aggregate exceed 500,000.
The cash value determined as of the date of grant of any Performance
Award not denominated in Common Stock
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granted to any Holder for any one calendar year shall not exceed
$5,000,000. Any shares which remain unissued and which are not
subject to outstanding Options or Awards at the termination of the
Plan shall cease to be subject to the Plan, but, until termination of
the Plan, the Company shall at all times reserve a sufficient number
of shares to meet the requirements of the Plan. Shares shall be
deemed to have been issued under the Plan only to the extent actually
issued and delivered pursuant to an Award. To the extent that an
Award lapses or the rights of its Holder terminate or the Award is
paid in cash, any shares of Common Stock subject to such Award shall
again be available for the grant of an Award. The aggregate number of
shares which may be issued under the Plan shall be subject to
adjustment in the same manner as provided in Article XII with respect
to shares of Common Stock subject to Options then outstanding. The
500,000-share limit on Stock Options and Stock Appreciation Rights
Awards to a Holder in any calendar year shall be subject to
adjustment in the same manner as provided in Article XII. Separate
stock certificates shall be issued by the Company for those shares
acquired pursuant to the exercise of an Incentive Stock Option and
for those shares acquired pursuant to the exercise of any Option
which does not constitute an Incentive Stock Option. The Committee
may from time to time adopt and observe such procedures concerning
the counting of shares against the Plan maximum as it may deem
appropriate.
(b) Stock Offered. The stock to be offered pursuant to the grant of an
Award may be authorized but unissued Common Stock or Common Stock
previously issued and reacquired by the Company.
VI. ELIGIBILITY
Awards made pursuant to the Plan may be granted to individuals who, at the time
of grant, are employees of the Company or any Parent Corporation or Subsidiary
of the Company or are Non-employee Directors. An Award may also be granted to a
person who has agreed to become an employee of the Company or any Parent
Corporation or Subsidiary of the Company within the subsequent three (3) months.
An Award made pursuant to the Plan may be granted on more than one occasion to
the same person, and such Award may include an Incentive Stock Option, an Option
which is not an Incentive Stock Option, an Award of Stock Appreciation Rights, a
Restricted Stock Award, a Performance Award, a Stock Value Equivalent Award or
any combination thereof. Each Award shall be evidenced in such manner and form
as may be prescribed by the Committee.
VII. STOCK OPTIONS
(a) Stock Option Agreement. Each Option shall be evidenced by an Option
Agreement between the Company and the Optionee which shall contain
such terms and conditions as may be approved by the Committee. The
terms and conditions of the respective Option Agreements need not be
identical. Specifically, an Option Agreement may provide for the
payment of the option price, in whole or in part, by the delivery of
a number of shares of Common Stock (plus cash if necessary) having a
Fair Market Value equal to such option price.
(b) Option Period. The term of each Option shall be as specified by the
Committee at the date of grant; provided that, in no case, shall the
term of an Option exceed ten (10) years.
(c) Limitations on Exercise of Option. An Option shall be exercisable in
whole or in such installments and at such times as determined by the
Committee.
(d) Option Price. The purchase price of Common Stock issued under each
Option shall be determined by the Committee, but such purchase price
shall not be less than the Fair Market Value of Common Stock subject
to the Option on the date the Option is granted.
(e) Options and Rights in Substitution for Stock Options Granted by Other
Corporations. Options and Stock Appreciation Rights may be granted
under the Plan from time to time in substitution for stock options
held by employees of corporations who become, or who became prior to
the effective date of the Plan, employees of the Company or of any
Subsidiary as a result of a merger or consolidation of the employing
corporation with the Company or such Subsidiary, or the acquisition
by the Company
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or a Subsidiary of all or a portion of the assets of the employing
corporation, or the acquisition by the Company or a Subsidiary of
stock of the employing corporation with the result that such
employing corporation becomes a Subsidiary.
(f) Repricing Prohibited. Except for adjustments pursuant to Article XII,
the purchase price of Common Stock for any outstanding Option granted
under the Plan may not be decreased after the date of grant nor may
an outstanding Option granted under the Plan be surrendered to the
Company as consideration for the grant of a new Option with a lower
purchase price. Any other action that is deemed to be a repricing
under any applicable rule of the New York Stock Exchange shall be
prohibited.
VIII. STOCK APPRECIATION RIGHTS
(a) Stock Appreciation Rights. A Stock Appreciation Right is the right to
receive an amount equal to the Spread with respect to a share of
Common Stock upon the exercise of such Stock Appreciation Right.
Stock Appreciation Rights may be granted in connection with the grant
of an Option, in which case the Option Agreement will provide that
exercise of Stock Appreciation Rights will result in the surrender of
the right to purchase the shares under the Option as to which the
Stock Appreciation Rights were exercised. Alternatively, Stock
Appreciation Rights may be granted independently of Options in which
case each Award of Stock Appreciation Rights shall be evidenced by a
Stock Appreciation Rights Agreement between the Company and the
Holder which shall contain such terms and conditions as may be
approved by the Committee. The terms and conditions of the respective
Stock Appreciation Rights Agreements need not be identical. The
Spread with respect to a Stock Appreciation Right may be payable
either in cash, shares of Common Stock with a Fair Market Value equal
to the Spread or in a combination of cash and shares of Common Stock.
Upon the exercise of any Stock Appreciation Rights granted hereunder,
the number of shares reserved for issuance under the Plan shall be
reduced only to the extent that shares of Common Stock are actually
issued in connection with the exercise of such Right.
(b) Exercise Price. The exercise price of each Stock Appreciation Right
shall be determined by the Committee, but such exercise price shall
not be less than the Fair Market Value of a share of Common Stock on
the date the Stock Appreciation Right is granted.
(c) Exercise Period. The term of each Stock Appreciation Right shall be
as specified by the Committee at the date of grant; provided that, in
no case, shall the term of a Stock Appreciation Right exceed ten (10)
years.
(d) Limitations on Exercise of Stock Appreciation Right. A Stock
Appreciation Right shall be exercisable in whole or in such
installments and at such times as determined by the Committee.
(e) Repricing Prohibited. Except for adjustments pursuant to Article XII,
the exercise price of a Stock Appreciation Right may not be decreased
after the date of grant nor may an outstanding Stock Appreciation
Right granted under the Plan be surrendered to the Company as
consideration for the grant of a new Stock Appreciation Right with a
lower exercise price. Any other action that is deemed to be a
repricing under any applicable rule of the New York Stock Exchange
shall be prohibited.
IX. RESTRICTED STOCK AWARDS
(a) Restricted Period To Be Established by the Committee. At the time a
Restricted Stock Award is made, the Committee shall establish a
period of time (the "Restriction Period") applicable to such Award;
provided, however, that, except as set forth below and as permitted
by Paragraph (b) of this Article IX, such Restriction Period shall
not be less than three (3) years from the date of grant (the "Minimum
Criteria"). An award which provides for the lapse of restrictions on
shares applicable to such Award in equal annual installments over a
period of at least three (3) years from the date of grant shall be
deemed to meet the Minimum Criteria. The foregoing notwithstanding,
with respect to
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Restricted Stock Awards of up to an aggregate 550,000 shares (subject
to adjustment as set forth in Article XII), the Minimum Criteria
shall not apply and the Committee may establish such lesser
Restriction Periods applicable to such Awards as it shall determine
in its discretion. Subject to the foregoing, each Restricted Stock
Award may have a different Restriction Period, in the discretion of
the Committee. The Restriction Period applicable to a particular
Restricted Stock Award shall not be changed except as permitted by
Paragraph (b) of this Article or by Article XII.
(b) Other Terms and Conditions. Common Stock awarded pursuant to a
Restricted Stock Award shall be represented by a stock certificate
registered in the name of the Holder of such Restricted Stock Award
or, at the option of the Company, in the name of a nominee of the
Company. The Holder shall have the right to receive dividends during
the Restriction Period, to vote the Common Stock subject thereto and
to enjoy all other stockholder rights, except that (i) the Holder
shall not be entitled to possession of the stock certificate until
the Restriction Period shall have expired, (ii) the Company shall
retain custody of the stock during the Restriction Period, (iii) the
Holder may not sell, transfer, pledge, exchange, hypothecate or
otherwise dispose of the stock during the Restriction Period, and
(iv) a breach of the terms and conditions established by the
Committee pursuant to the Restricted Stock Award shall cause a
forfeiture of the Restricted Stock Award. At the time of such Award,
the Committee may, in its sole discretion, prescribe additional
terms, conditions or restrictions relating to Restricted Stock
Awards, including, but not limited to, rules pertaining to the
termination of a Holder's service (by retirement, disability, death
or otherwise) prior to expiration of the Restriction Period as shall
be set forth in a Restricted Stock Award Agreement.
(c) Payment for Restricted Stock. A Holder shall not be required to make
any payment for Common Stock received pursuant to a Restricted Stock
Award, except to the extent otherwise required by law and except that
the Committee may, in its discretion, charge the Holder an amount in
cash not in excess of the par value of the shares of Common Stock
issued under the Plan to the Holder.
(d) Miscellaneous. Nothing in this Article shall prohibit the exchange of
shares issued under the Plan (whether or not then subject to a
Restricted Stock Award) pursuant to a plan of reorganization for
stock or securities in the Company or another corporation a party to
the reorganization, but the stock or securities so received for
shares then subject to the restrictions of a Restricted Stock Award
shall become subject to the restrictions of such Restricted Stock
Award. Any shares of stock received as a result of a stock split or
stock dividend with respect to shares then subject to a Restricted
Stock Award shall also become subject to the restrictions of the
Restricted Stock Award.
X. PERFORMANCE AWARDS
(a) Performance Period. The Committee shall establish, with respect to
and at the time of each Performance Award, a performance period over
which the performance applicable to the Performance Award of the
Holder shall be measured.
(b) Performance Awards. Each Performance Award may have a maximum value
established by the Committee at the time of such Award.
(c) Performance Measures. A Performance Award granted under the Plan that
is intended to qualify as qualified performance-based compensation
under Section 162(m) of the Code shall be awarded contingent upon the
achievement of one or more performance measures. The performance
criteria for Performance Awards shall consist of objective tests
based on the following: earnings, cash flow, cash value added
performance, stockholder return and/or value, revenues, operating
profits (including EBITDA), net profits, earnings per share, stock
price, cost reduction goals, debt to capital ratio, financial return
ratios, profit return and margins, market share, working capital and
customer satisfaction. The Committee may select one criterion or
multiple criteria for measuring performance. Performance criteria may
be measured on corporate, subsidiary or business unit performance, or
on a combination thereof. Further, the performance criteria may be
based on comparative performance with other companies or other
external measure of the selected performance criteria. A Performance
Award
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that is not intended to qualify as qualified performance-based
compensation under Section 162(m) of the Code shall be based on
achievement of such goals and be subject to such terms, conditions
and restrictions as the Committee or its delegate shall determine.
(d) Payment. Following the end of the performance period, the Holder of a
Performance Award shall be entitled to receive payment of an amount,
not exceeding the maximum value of the Performance Award, if any,
based on the achievement of the performance measures for such
performance period, as determined by the Committee in its sole
discretion. Payment of a Performance Award (i) may be made in cash,
Common Stock or a combination thereof, as determined by the Committee
in its sole discretion, (ii) shall be made in a lump sum or in
installments as prescribed by the Committee in its sole discretion,
and (iii) to the extent applicable, shall be based on the Fair Market
Value of the Common Stock on the payment date. If a payment of cash
or issuance of Common Stock is to be made on a deferred basis, the
Committee shall establish whether interest or dividend equivalents
shall be credited on the deferred amounts and any other terms and
conditions applicable thereto.
(e) Termination of Service. The Committee shall determine the effect of
termination of service during the performance period on a Holder's
Performance Award.
XI. STOCK VALUE EQUIVALENT AWARDS
(a) Stock Value Equivalent Awards. Stock Value Equivalent Awards are
rights to receive an amount equal to the Fair Market Value of shares
of Common Stock or rights to receive an amount equal to any
appreciation or increase in the Fair Market Value of Common Stock
over a specified period of time, which vest over a period of time as
established by the Committee, without payment of any amounts by the
Holder thereof (except to the extent otherwise required by law) or
satisfaction of any performance criteria or objectives. Each Stock
Value Equivalent Award may have a maximum value established by the
Committee at the time of such Award.
(b) Award Period. The Committee shall establish, with respect to and at
the time of each Stock Value Equivalent Award, a period over which
the Award shall vest with respect to the Holder.
(c) Payment. Following the end of the determined period for a Stock Value
Equivalent Award, the Holder of a Stock Value Equivalent Award shall
be entitled to receive payment of an amount, not exceeding the
maximum value of the Stock Value Equivalent Award, if any, based on
the then vested value of the Award. Payment of a Stock Value
Equivalent Award (i) shall be made in cash, (ii) shall be made in a
lump sum or in installments as prescribed by the Committee in its
sole discretion, and (iii) shall be based on the Fair Market Value of
the Common Stock on the payment date. Cash dividend equivalents may
be paid during, or may be accumulated and paid at the end of, the
determined period with respect to a Stock Value Equivalent Award, as
determined by the Committee. If payment of cash is to be made on a
deferred basis, the Committee shall establish whether interest shall
be credited, the rate thereof and any other terms and conditions
applicable thereto.
(d) Termination of Service. The Committee shall determine the effect of
termination of service during the applicable vesting period on a
Holder's Stock Value Equivalent Award.
XII. RECAPITALIZATION OR REORGANIZATION
(a) Except as hereinafter otherwise provided, in the event of any
recapitalization, reorganization, merger, consolidation, combination,
exchange, stock dividend, stock split, extraordinary dividend or
divestiture (including a spin-off) or any other change in the
corporate structure or shares of Common Stock occurring after the date
of the grant of an Award, the Committee shall, in its discretion, make
such adjustment as to the number and price of shares of Common Stock
or other consideration subject to such Awards as the Committee shall
deem appropriate in order to prevent dilution or enlargement of rights
of the Holders.
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(b) The existence of the Plan and the Awards granted hereunder shall not
affect in any way the right or power of the Board or the stockholders
of the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or
its business, any merger or consolidation of the Company, any issue of
debt or equity securities having any priority or preference with
respect to or affecting Common Stock or the rights thereof, the
dissolution or liquidation of the Company or any sale, lease, exchange
or other disposition of all or any part of its assets or business or
any other corporate act or proceeding.
(c) The shares with respect to which Options or Stock Appreciation Rights
may be granted are shares of Common Stock as presently constituted,
but if, and whenever, prior to the expiration of an Option or Stock
Appreciation Rights, the Company shall effect a subdivision or
consolidation of shares of Common Stock or the payment of a stock
dividend on Common Stock without receipt of consideration by the
Company, the number of shares of Common Stock with respect to which
such Option or Stock Appreciation Rights may thereafter be exercised
(i) in the event of an increase in the number of outstanding shares
shall be proportionately increased, and the purchase price per share
shall be proportionately reduced, and (ii) in the event of a reduction
in the number of outstanding shares shall be proportionately reduced,
and the purchase price per share shall be proportionately increased.
(d) If the Company recapitalizes or otherwise changes its capital
structure, thereafter upon any exercise of an Option or Stock
Appreciation Rights theretofore granted, the Holder shall be entitled
to purchase or receive, as applicable, under such Option or Stock
Appreciation Rights, in lieu of the number of shares of Common Stock
as to which such Option or Stock Appreciation Rights shall then be
exercisable, the number and class of shares of stock and securities
and the cash and other property to which the Holder would have been
entitled pursuant to the terms of the recapitalization if, immediately
prior to such recapitalization, the Holder had been the holder of
record of the number of shares of Common Stock then covered by such
Option or Stock Appreciation Rights.
(e) In the event of a Corporate Change, unless an Award Document otherwise
provides, as of the Corporate Change Effective Date (i) any
outstanding Options and Stock Appreciation Rights shall become
immediately vested and fully exercisable, (ii) any restrictions on
Restricted Stock Awards shall immediately lapse, (iii) all performance
measures upon which an outstanding Performance Award is contingent
shall be deemed achieved and the Holder shall receive a payment equal
to the maximum amount of the Award he or she would have been entitled
to receive, prorated to the Corporate Change Effective Date, and (iv)
any outstanding cash Awards including, but not limited to, Stock Value
Equivalent Awards shall immediately vest and be paid based on the
vested value of the Award.
(f) In the relevant Award Document, the Committee may provide that, no
later than two (2) business days prior to any Corporate Change
referenced in Clause (ii), (iii) or (iv) of the definition thereof or
ten (10) business days after any Corporate Change referenced in Clause
(i) of the definition thereof, the Committee may, in its sole
discretion, (i) require the mandatory surrender to the Company by
selected Optionees of some or all of the outstanding Options held by
such Optionees (irrespective of whether such Options are then
exercisable under the provisions of the Plan) as of a date (before or
after a Corporate Change) specified by the Committee, in which event
the Committee shall thereupon cancel such Options and pay to each
Optionee an amount of cash per share equal to the excess, if any, of
the Change of Control Value of the shares subject to such Option over
the exercise price(s) under such Options for such shares, (ii) require
the mandatory surrender to the Company by selected Holders of Stock
Appreciation Rights of some or all of the outstanding Stock
Appreciation Rights held by such Holders (irrespective of whether such
Stock Appreciation Rights are then exercisable under the provisions of
the Plan) as of a date (before or after a Corporate Change) specified
by the Committee, in which event the Committee shall thereupon cancel
such Stock Appreciation Rights and pay to each Holder an amount of
cash equal to the Spread with respect to such Stock Appreciation
Rights with the Fair Market Value of the Common Stock at such time to
be deemed to be the Change of Control Value, or (iii) require the
mandatory surrender to the Company by selected Holders of Restricted
Stock Awards or Performance Awards of some or all of the outstanding
Awards
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held by such Holder (irrespective of whether such Awards are vested
under the provisions of the Plan) as of a date (before or after a
Corporate Change) specified by the Committee, in which event the
Committee shall thereupon cancel such Awards and pay to each Holder an
amount of cash equal to the Change of Control Value of the shares, if
the Award is denominated in Common Stock, or an amount of cash equal
to the Fair Market Value of the Common Stock at such time, if the
Award is not denominated in Common Stock.
(g) Except as hereinbefore expressly provided, the issuance by the Company
of shares of stock of any class or securities convertible into shares
of stock of any class, for cash, property, labor or services, upon
direct sale, upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, and in any case
whether or not for fair value, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number of shares of
Common Stock subject to Options or Stock Appreciation Rights
theretofore granted, the purchase price per share of Common Stock
subject to Options or the calculation of the Spread with respect to
Stock Appreciation Rights.
XIII. AMENDMENT OR TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan or alter or amend the Plan or
any part thereof from time to time; provided that no change in any Award
theretofore granted may be made which would impair the rights of the Holder
without the consent of the Holder, and provided, further, that the Board may
not, without approval of the stockholders, amend the Plan to effect a "material
revision" of the Plan, where a "material revision" includes, but is not limited
to, a revision that: (a) materially increases the benefits accruing to a Holder
under the Plan, (b) materially increases the aggregate number of securities that
may be issued under the Plan, (c) materially modifies the requirements as to
eligibility for participation in the Plan, (d) changes the types of awards
available under the Plan, or (e) amends or deletes the provisions that prevent
the Committee from amending the terms and conditions of an outstanding Option or
Stock Appreciation Rights to alter the exercise price.
XIV. OTHER
(a) No Right To An Award. Neither the adoption of the Plan nor any action
of the Board or of the Committee shall be deemed to give an employee
or a non-employee Director any right to be granted an Option, a Stock
Appreciation Right, a right to a Restricted Stock Award or a right to
a Performance Award or Stock Value Equivalent Award or any other
rights hereunder except as may be evidenced by an Award or by an
Option or Stock Appreciation Agreement duly executed on behalf of the
Company, and then only to the extent of and on the terms and
conditions expressly set forth therein. The Plan shall be unfunded.
The Company shall not be required to establish any special or
separate fund or to make any other segregation of funds or assets to
assure the payment of any Award.
(b) No Employment Rights Conferred. Nothing contained in the Plan or in
any Award made hereunder shall:
(i) confer upon any employee any right to continuation of
employment with the Company or any Subsidiary; or
(ii) interfere in any way with the right of the Company or any
Subsidiary to terminate his or her employment at any time.
(c) No Rights to Serve as a Director Conferred. Nothing contained in the
Plan or in any Award made hereunder shall confer upon any Director
any right to continue their position as a Director of the Company.
(d) Other Laws; Withholding. The Company shall not be obligated to issue
any Common Stock pursuant to any Award granted under the Plan at any
time when the offering of the shares covered by such Award has not
been registered under the Securities Act of 1933 and such other state
and federal laws, rules or regulations as the Company or the
Committee deems applicable and, in the opinion of legal
B-11
counsel for the Company, there is no exemption from the registration
requirements of such laws, rules or regulations available for the
issuance and sale of such shares. No fractional shares of Common
Stock shall be delivered, nor shall any cash in lieu of fractional
shares be paid. The Company shall have the right to deduct in
connection with all Awards any taxes required by law to be withheld
and to require any payments necessary to enable it to satisfy its
withholding obligations. The Committee may permit the Holder of an
Award to elect to surrender, or authorize the Company to withhold,
shares of Common Stock (valued at their Fair Market Value on the date
of surrender or withholding of such shares) in satisfaction of the
Company's withholding obligation, subject to such restrictions as the
Committee deems appropriate.
(e) No Restriction on Corporate Action. Nothing contained in the Plan
shall be construed to prevent the Company or any Subsidiary from
taking any corporate action which is deemed by the Company or such
Subsidiary to be appropriate or in its best interest, whether or not
such action would have an adverse effect on the Plan or any Award
made under the Plan. No Holder, beneficiary or other person shall
have any claim against the Company or any Subsidiary as a result of
any such action.
(f) Restrictions on Transfer. Except as otherwise provided herein, an
Award shall not be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated by a Holder other than by will or the laws
of descent and distribution or pursuant to a "qualified domestic
relations order" as defined by the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, and shall be
exercisable during the lifetime of the Holder only by such Holder,
the Holder's guardian or legal representative, a transferee under a
qualified domestic relations order or a transferee as described
below. The Committee may prescribe and include in the respective
Award Documents hereunder other restrictions on transfer. Any
attempted assignment or transfer in violation of this section shall
be null and void. Upon a Holder's death, the Holder's personal
representative or other person entitled to succeed to the rights of
the Holder (the "Successor Holder") may exercise such rights as are
provided under the applicable Award Document. A Successor Holder must
furnish proof satisfactory to the Company of his or her rights to
exercise the Award under the Holder's will or under the applicable
laws of descent and distribution. Notwithstanding the foregoing, the
Committee shall have the authority, in its discretion, to grant (or
to sanction by way of amendment to an existing grant) Awards (other
than Incentive Stock Options) which may be transferred by the Holder
for no consideration to or for the benefit of the Holder's Immediate
Family, to a trust solely for the benefit of the Holder and his
Immediate Family, or to a partnership or limited liability company in
which the Holder and members of his Immediate Family have at least
99% of the equity, profit and loss interest, in which case the Award
Document shall so state. A transfer of an Award pursuant to this
Paragraph (f) shall be subject to such rules and procedures as the
Committee may establish. In the event an Award is transferred as
contemplated in this Paragraph (f), such Award may not be
subsequently transferred by the transferee except by will or the laws
of descent and distribution, and such Award shall continue to be
governed by and subject to the terms and limitations of the Plan and
the relevant written instrument for the Award and the transferee
shall be entitled to the same rights as the Holder under Articles XII
and XIII hereof as if no transfer had taken place. No transfer shall
be effective unless and until written notice of such transfer is
provided to the Committee, in the form and manner prescribed by the
Committee. The consequences of termination of employment shall
continue to be applied with respect to the original Holder, following
which the Awards shall be exercised by the transferee only to the
extent and for the periods specified in the Plan and the related
Award Document.
The Option Agreement, Stock Appreciation Rights Agreement, Restricted
Stock Agreement or other Award Document shall specify the effect of
the death of the Holder on the Award.
(g) Governing Law. This Plan shall be construed in accordance with the
laws of the State of Texas, except to the extent that it implicates
matters which are the subject of the General Corporation Law of the
State of Delaware which matters shall be governed by the latter law.
B-12
(h) Foreign Awardees. Without amending the Plan, the Committee may grant
Awards to eligible persons who are foreign nationals on such terms
and conditions different from those specified in the Plan as may, in
the judgment of the Committee, be necessary or desirable to foster
and promote achievement of the purposes of the Plan and, in
furtherance of such purposes, the Committee may make such
modifications, amendments, procedures, subplans and the like as may
be necessary or advisable to comply with the provisions of laws and
regulations in other countries or jurisdictions in which the Company
or its Subsidiaries operate.
B-13
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' Please [ ]
RECOMMENDATIONS JUST SIGN BELOW; NO BOXES NEED TO Mark Here
BE CHECKED. THE BOARD OF DIRECTORS RECOMMENDS A for Address
VOTE FOR ITEMS 1, 2 AND 3 AND A VOTE AGAINST ITEM 4. Change or Comments
SEE REVERSE SIDE
Item 1 - Election of Directors.
NOMINEES: IN THE FUTURE, WOULD YOU
01 R.L. Crandall 02 K.T. Derr 03 C.J. DiBona CONSENT TO ACCESSING YOUR
04 W.R. Howell 05 R.L. Hunt 06 D.J. Lesar ANNUAL REPORT AND PROXY
07 A.B. Lewis 08 J.L. Martin 09 J.A. Precourt STATEMENT ELECTRONICALLY
10 D.L. Reed 11 C.J. Silas VIA THE INTERNET? YES [ ]
FOR all nominees WITHHOLD AUTHORITY
listed (except as marked to vote for all
to the contrary) nominees listed I PLAN TO ATTEND
THE MEETING YES [ ]
[ ] [ ]
(Instruction: To withhold authority to vote for an
individual nominee, write that nominee's name on
the space provided below.)
___________________________________________________
Item 2 - Proposal for ratification of selection FOR AGAINST ABSTAIN
of independent public accountants for [ ] [ ] [ ]
the Company for 2003.
Item 3 - Proposal to amend and restate the 1993 FOR AGAINST ABSTAIN
Stock and Incentive Plan. [ ] [ ] [ ]
Item 4 - Stockholder proposal on executive FOR AGAINST ABSTAIN
severance agreements. [ ] [ ] [ ]
Item 5 - In their discretion, upon such other
business as may properly come before
the meeting.
SIGNATURE________________________ SIGNATURE_____________________ DATE___________
NOTE: PLEASE SIGN AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN. WHEN
SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE
GIVE FULL TITLE AS SUCH.
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-- FOLD AND DETACH HERE --
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11PM EASTERN TIME
THE DAY PRIOR TO ANNUAL MEETING DAY.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
INTERNET TELEPHONE MAIL
http://www.eproxy.com/hal 1-800-435-6710
Use the Internet to Use any touch-tone
vote your proxy. Have telephone to vote your Mark, sign and date
your proxy card in hand OR proxy. Have your proxy OR your proxy card
when you access the web card in hand when you and
site. You will be call. You will be return it in the
prompted to enter your prompted to enter your enclosed postage-paid
control number, located control number, located envelope.
in the box below, to in the box below, and
create and submit an then follow the
electronic ballot. directions given.
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
YOU CAN VIEW THE ANNUAL REPORT AND PROXY STATEMENT ON THE INTERNET AT:
http://www.halliburton.com/annualmeeting.jsp
--------------------------------------------------------------------------------
ADMISSION TICKET
HALLIBURTON COMPANY
ANNUAL MEETING OF STOCKHOLDERS
DATE - May 21, 2003
TIME - 9:00 a.m.
(doors open at 8:00 a.m.)
LOCATION - Ballroom B, Four Seasons Hotel
1300 Lamar Street
Houston, Texas 77010
PROXY
HALLIBURTON COMPANY
PROXY FOR 2003 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints D.J. Lesar, A.O. Cornelison, Jr. and
M.E.Carriere, and any of them, proxies or proxy with full power of substitution
and revocation as to each of them, to represent the undersigned and to act and
vote, with all powers which the undersigned would possess if personally present,
at the Annual Meeting of Stockholders of Halliburton Company to be held in
Ballroom B at the Four Seasons Hotel, 1300 Lamar Street, Houston, Texas, on
Wednesday, May 21, 2003, on the following matters and in their discretion on any
other matters which may come before the meeting or any adjournments thereof.
Receipt of Notice-Proxy Statement dated March 25, 2003, is acknowledged.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED.
IN THE ABSENCE OF SUCH DIRECTION THE PROXY WILL BE VOTED FOR THE NOMINEES
LISTED IN ITEM 1, FOR THE PROPOSALS SET FORTH IN ITEMS 2 AND 3 AND AGAINST THE
PROPOSAL SET FORTH IN ITEM 4.
(Continued and to be signed on reverse side)
------------------------------------------------------------------------
ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
------------------------------------------------------------------------
------------------------------------------------------------------------
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-- FOLD AND DETACH HERE --
REGISTERED STOCKHOLDERS CAN NOW ACCESS THEIR HALLIBURTON COMPANY ACCOUNT ONLINE.
Access your Halliburton Company stockholder account online via Investor
ServiceDirect(R) (ISD).
Mellon Investor Services LLC, agent for Halliburton Company, now makes it easy
and convenient to get current information on your stockholder account. After a
simple, and secure process of establishing a Personal Identification Number
(PIN), you are ready to log in and access your account to:
o View account status o Make address changes o Obtain a duplicate 1099
tax form
o View certificate history o View payment history o Establish/change your PIN
for dividends
o View book-entry information
VISIT US ON THE WEB AT http://www.melloninvestor.com
AND FOLLOW THE INSTRUCTIONS SHOWN ON THIS PAGE.
STEP 1: FIRST TIME USERS - ESTABLISH A PIN
You must first establish a Personal Identification Number (PIN) online by
following the directions provided in the upper right portion of the web screen
as follows. You will also need your Social Security Number (SSN) or Investor ID
available to establish a PIN.
THE CONFIDENTIALITY OF YOUR PERSONAL INFORMATION IS PROTECTED USING SECURE
SOCKET LAYER (SSL) TECHNOLOGY.
o SSN or Investor ID
o PIN
-------------
o Then click on the ESTABLISH PIN button
-------------
Please be sure to remember your PIN, or maintain
it in a secure place for future reference.
STEP 2: LOG IN FOR ACCOUNT ACCESS
You are now ready to log in. To access your account please enter your:
o SSN or Investor ID
o PIN
------
o Then click on the SUBMIT button
------
If you have more than one account, you will now be
asked to select the appropriate account.
STEP 3: ACCOUNT STATUS SCREEN
You are now ready to access your account information. Click on the appropriate
button to view or initiate transactions.
o Certificate History
o Book-Entry Information
o Issue Certificate
o Payment History
o Address Change
o Duplicate 1099
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ADMISSION TICKET
Please present this admission ticket for admittance to the annual meeting. For
security purposes, bags and purses will be subject to search at the door.
Seating at the meeting will be limited and admittance will be based on space
availability.