SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
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[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
Halliburton Company
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(Name of Registrant as Specified In Its Charter)
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Notes:
[LOGO] Halliburton
March 19, 2002
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 15, 2002, at
9:00 a.m. in the Parisian Room of the Fairmont Hotel, 1717 North Akard Street,
Dallas, Texas 75201. 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 twelve Directors to serve for the coming
year;
. act on a proposal to approve the Halliburton Company 2002 Employee Stock
Purchase Plan; and
. consider a shareholder proposal.
Please refer to the proxy statement for detailed information on each of these
proposals.
Since early this year, our management, Audit Committee and Board have been
closely monitoring developments relating to Arthur Andersen LLP, Halliburton's
independent auditor since 1946. As a result of recent extraordinary events
concerning the firm, we are currently in the process of interviewing and
evaluating a number of audit firms for the purpose of selecting the independent
auditor to examine Halliburton's financial statements for 2002. Since the
selection process is not yet complete, we are not asking our stockholders to
ratify the appointment of the independent auditor at this year's Annual Meeting.
It is very important that your shares are represented and voted at the
meeting. Your shares may be voted by returning the enclosed proxy card, by
telephone or via the Internet. If you attend the meeting, you may vote in
person even if you have previously mailed a proxy card or voted by telephone or
via the Internet. We would appreciate your 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
[LOGO] Halliburton
Notice of Annual Meeting of Stockholders
to be Held May 15, 2002
The Annual Meeting of Stockholders of Halliburton Company, a Delaware
corporation, will be held on Wednesday, May 15, 2002, at 9:00 a.m., in the
Parisian Room of the Fairmont Hotel, 1717 North Akard Street, Dallas, Texas
75201. 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 twelve (12) Directors to serve for the ensuing year and until
their successors shall be elected and shall qualify.
2. To consider and act upon management's proposal to approve the
Halliburton Company 2002 Employee Stock Purchase Plan.
3. To consider and act upon a shareholder proposal, if properly presented
at the meeting.
4. 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 18, 2002,
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. You may mark your votes, date, sign
and return the proxy card or voting instruction form. If you have shares
registered in your own name, you may choose to vote those shares via the
Internet at http://www.eproxy.com/hal, or you may vote telephonically, within
the U.S. and Canada only, by calling 1-800-435-6710 (toll-free). 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.
By order of the Board of Directors,
/s/ SUSAN S. KEITH
SUSAN S. KEITH
Vice President and Secretary
March 19, 2002
-----------------
Stockholders are urged to vote their shares as promptly as possible by (1)
signing, dating and returning the enclosed proxy card or (2) following the
enclosed voting instructions to vote via the Internet or by telephone.
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............................................ 10
Compensation Committee Report on Executive Compensation........ 10
Comparison of Cumulative Total Return.......................... 15
Summary Compensation Table..................................... 16
Option Grants for Fiscal 2001.................................. 17
Option Exercises and Values for Fiscal 2001.................... 17
Long-Term Incentive Plans - Awards in Fiscal 2001.............. 18
Employment Contracts and Change-In-Control Arrangements........ 19
Certain Relationships and Related Transactions.................... 21
Directors' Compensation........................................... 21
Audit Committee Report............................................ 22
Audit Information................................................. 24
Selection of Auditors............................................. 24
Item 2 - Proposal to Approve the 2002 Employee Stock Purchase Plan....... 25
Item 3 - Shareholder Proposal............................................ 27
Additional Information................................................... 29
Other Matters............................................................ 30
Appendix A - Audit Committee Charter..................................... A-1
Appendix B - Policy on Services of Principal Independent Auditors........ B-1
Appendix C - Halliburton Company 2002 Employee Stock Purchase Plan....... C-1
i
PROXY STATEMENT
GENERAL INFORMATION
The accompanying proxy is solicited by the Board of Directors of Halliburton
Company. 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.
If you attend the meeting, you may vote in person. If you are not present,
your shares can be voted only if you have returned a properly executed proxy or
followed the instructions for voting by telephone or via the Internet. If you
have returned a properly executed proxy or followed the instructions for voting
by telephone or via the Internet, 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 18, 2002. Halliburton's
Common Stock, par value $2.50, is the only class of capital stock that is
outstanding. As of March 18, 2002, there were 435,609,780 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 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 as set forth below, 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 be considered a vote against the
matter.
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.
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 be treated
as not present and not entitled to vote 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, 2002. Our Annual Report to
Stockholders, including financial statements, for the fiscal year ended
December 31, 2001 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.
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Our principal executive office is located at 3600 Lincoln Plaza, 500 North
Akard Street, Dallas, Texas 75201-3391.
ELECTION OF DIRECTORS
(Item 1)
Lord Clitheroe, who has served as a Director since 1987, is retiring from
the Board immediately prior to the Annual Meeting of Stockholders on May 15,
2002. He will not be a candidate for reelection for the ensuing year. Due to
Lord Clitheroe's retirement, the number of Directors constituting the Board of
Directors will be reduced from thirteen to twelve effective 9:00 a.m. (CDT) on
May 15, 2002.
Twelve 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 twelve 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, 66, 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., Allied World
Assurance Company, Ltd. and i2 Technologies, Inc.
[PHOTO]
KENNETH T. DERR, 65, 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, 70, Retired President and Chief Executive
Officer, American Petroleum Institute (a major petroleum
industry trade association), 1979-1997; joined Halliburton
Company Board in 1997; member of the Health, Safety and
Environment, the Compensation and the Management Oversight
Committees; Chairman of the Board of Trustees, Logistics
Management Institute.
[PHOTO]
LAWRENCE S. EAGLEBURGER, 71, Senior Foreign Policy Advisor,
Baker, Donelson, Bearman & Caldwell (a Washington, D.C. law
firm); Chairman, International Commission on Holocaust Era
Insurance Claims; United States Secretary of State, Department
of State, 1992-1993; Acting Secretary of State, 1992; Deputy
Secretary of State, 1989-1992; joined Halliburton Company Board
in 1998; member of the Audit, the Management Oversight and the
Nominating and Corporate Governance Committees.
2
[PHOTO]
W. R. HOWELL, 66, 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., Bankers Trust Company, Bankers
Trust New York Corporation, The Williams Companies, Inc.,
American Electric Power Company, Inc. and VISEON, Inc.
[PHOTO]
RAY L. HUNT, 58, 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. and
Chairman of the Board, Chief Executive Officer and President,
RRH Corporation; 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.
and Security Capital Group Incorporated; Class C Director of the
Federal Reserve Bank of Dallas.
[PHOTO]
DAVID J. LESAR, 48, 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, 47, Chief Operating Officer, TRICON Global
Restaurants, Inc. (a quick service restaurant company);
Executive Vice President, Operations and New Business
Development, TRICON Global Restaurants, 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.
[PHOTO]
J. LANDIS MARTIN, 56, 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, 64, 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 crude oil
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; Chairman of the Board and
Director of Founders Funds, Inc. and Director of the Timken
Company.
3
[PHOTO]
DEBRA L. REED, 45, President and Chief Financial Officer,
Southern California Gas Company and San Diego Gas & Electric
Company (a regulated utility company); 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, 69, 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; Director of Reader's Digest
Association, Inc.
4
Stock Ownership of Certain Beneficial Owners and Management
The following table sets forth information about persons or groups who,
based on information contained in Schedules 13G filed with the Securities and
Exchange Commission reflecting beneficial ownership at December 31, 2001, 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
------------------- ---------- -------
FMR Corp............. 37,190,722(1) 8.57%
82 Devonshire Street
Boston, MA 02109
--------
(1) The number of shares reported includes 36,272,936 shares beneficially owned
by Fidelity Management & Research Company, 616,086 shares owned by Fidelity
Management Trust Company, 1,500 shares owned by Strategic Advisers, Inc.,
6,500 shares owned by Geode Capital Management, LLC and 293,700 shares held
by Fidelity International Limited. FMR Corp., through control of Fidelity
Management & Research Company, Fidelity Management Trust Company and
Strategic Advisers, Inc. has sole dispositive power over 36,890,522 shares.
FMR Corp. has sole power to vote or to direct the vote of 536,386 shares of
Common Stock.
The following table sets forth, as of March 18, 2002, 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
-------------------------- ---------- ---------- --------
Lord Clitheroe.............................................. 6,200 *
Lester L. Coleman........................................... 277,323 *
Robert L. Crandall.......................................... 6,600 *
Kenneth T. Derr............................................. 8,400 *
Charles J. DiBona........................................... 3,600 *
Lawrence S. Eagleburger..................................... 13,957 *
Robert R. Harl.............................................. 228,111 *
W. R. Howell................................................ 5,500 *
Ray L. Hunt................................................. 80,647 69,712(3) *
David J. Lesar.............................................. 1,117,504 20,000(3) *
Aylwin B. Lewis............................................. 5,400 *
J. Landis Martin............................................ 30,001 *
Gary V. Morris.............................................. 317,411 *
Edgar J. Ortiz.............................................. 334,572 *
Jay A. Precourt............................................. 21,640 *
Debra L. Reed............................................... 5,400 250(3) *
C. J. Silas................................................. 5,600 *
Shares owned by all current Directors and executive officers
as a group (23 persons)................................... 2,897,221 89,962 *
--------
* 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: Lord Clitheroe--2,000; Mr.
Coleman--162,000; Mr. Crandall--2,000; Mr. Derr--5,000; Mr. DiBona--2,000;
Mr. Eagleburger--3,500; Mr. Harl--101,333; Mr. Howell--2,000; Mr.
Hunt--9,500; Mr. Lesar--570,402; Mr. Lewis--5,000; Mr. Martin--9,500; Mr.
Morris--165,000; Mr. Ortiz--160,000; Mr. Precourt--9,500; Ms. Reed--5,000;
Mr. Silas--2,000 and six unnamed executive officers--125,400. 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 9,050,848 shares of Common Stock at March 6,
2002. 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 727 shares which might be deemed to be
beneficially owned as of March 6, 2002 by the unnamed executive officers is
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, may be found on the Investor Relations page of our web
site. If you do not have access to our web site, you may 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 for all who are interested.
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 12 occasions, the
Audit Committee met on 8 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
7
Committee met on 4 occasions. Except for Mr. Eagleburger, no other incumbent
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.
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
auditors' work. The following functions are the key responsibilities of the
Audit Committee in carrying out its oversight:
. recommending the appointment of 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
recommended that the Board include those financial statements in the
Annual Report on Form 10-K;
. approving and ratifying the duties and compensation of the independent
auditors, both for audit and non-audit services; and
. reviewing and assessing the adequacy of the Audit Committee's Charter
annually and recommending revisions to the Board.
The Committee also reviews Halliburton's compliance with its Code of
Business Conduct. The 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 selection, evaluation and replacement 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 Long-Term
Incentive Plan and 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;
8
. 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.
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 the 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, which 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
9
. 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.
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 shareholder 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 shareholder 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 for enhanced shareholder value and that it is administered in a
fair and equitable manner consistent with established policies and guidelines.
10
Overall Executive Compensation Philosophy and Strategy
The primary objectives of Halliburton's total compensation package for
senior executives are to:
. emphasize the enhancement of shareholder 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 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 individual,
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.
2001 Special Considerations
2001 was an unusual year during which we had difficulty achieving our
compensation objectives. Halliburton achieved outstanding operating results and
most participants in the annual incentive plan achieved or exceeded their
performance goals. Despite these accomplishments, the market price of the
common stock declined dramatically due to investor concerns about Halliburton's
asbestos exposure. In order for Halliburton to continue its success in this
difficult legal environment, we adjusted our compensation programs in various
ways. Among other things, we made equity grants to executives periodically
throughout the year for retention purposes. We expect that the uncertain legal
environment will continue, and it is likely that additional retention-based
awards will be necessary for selected executives in 2002.
11
Base Salary
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 the executive's role and equity issues relating to pay for
other Halliburton executives;
. performance; and
. external factors involving competitive positioning, projected corporate
performance, and general economic conditions.
No specific formula is applied to determine the weight of each factor.
Ordinarily, we review Halliburton executive officers' base salaries,
including Mr. Lesar's, each December for the coming year. However, in light of
Mr. Lesar's promotion to Chief Executive Officer in August 2000, we increased
his annual salary to $1,100,000 at our September 2000 meeting and his salary
continued at that rate throughout 2001. Additionally, we did not adjust the
salaries of the executives named in the Summary Compensation Table for 2002.
Annual Performance Pay Plan
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 shareholder return. Although Halliburton's
performance in 2001 reached record levels for most of our businesses, this
performance was not reflected in the price of our stock. We believe that this
is an anomaly caused by an overreaction by investors to Halliburton's
asbestos-related issues and does not impact the long-term viability of CVA as a
predictor of shareholder return.
At the beginning of each plan year, we establish a reward schedule that
aligns given levels of 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 2001. In
2001, consolidated CVA performance exceeded the maximum level that we
established. Accordingly, Mr. Lesar and the other executives named in the
Summary Compensation Table earned incentive compensation in the amounts shown.
Long-Term Incentive Programs
The 1993 Stock and Long-Term 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 2001, we established the Performance Unit Program, which is a long-term
program designed to provide key executives with specified incentive
opportunities contingent on the level of achievement of pre-established
corporate performance objectives and continued employment. The first cycle
began on January 1, 2001 and will end on December 31, 2003 (the "2001 Cycle").
Performance measures for the 2001 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 and work in association with stock
option grants to provide an integrated long-term approach.
12
Ordinarily, stock options have been the principal long-term incentive
granted to executive officers. However, in 2001, we used restricted stock
awards more extensively than in the past, primarily to assure that market
aberrations attributable to investors' asbestos concerns did not cause
retention problems.
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 a stock option for 154,408 shares in July
2001 and a restricted stock award of 154,407 in October 2001.
Supplemental Executive Retirement Plan
The Supplemental Executive Retirement Plan (formerly part of 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 percentage of pay replacement assuming retirement at age
65 with 25 or more years of service.
Interest on active participants' supplemental retirement benefit accounts is
accrued at the rate of five percent per annum, while interest on retired
participants' accounts is accrued at 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 2001 supplemental discretionary retirement benefit of
$378,000 for Mr. Lesar.
Policy Regarding Section 162(m) of the Internal Revenue Code
Section 162(m) of the Internal Revenue Code and applicable regulations
generally disallow a federal income tax deduction by a public company 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. Specific performance-based compensation and compensation which is
deferred is excluded from this calculation.
Halliburton's policy is to utilize available tax deductions whenever
appropriate. When determining executive compensation programs, we consider all
relevant factors, including the tax deductions that may result from the
compensation. Accordingly, Halliburton has 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.
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
plan as performance-based compensation under IRS rules.
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. Accordingly, Halliburton may from time to time pay compensation to
its executive officers that may not be fully
13
deductible. Because of the elective deferral by some executive officers of
portions of their salary and incentive compensation, the loss of deductibility
for 2001 is not expected to be significant. We will continue to review
Halliburton's 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
Lord Clitheroe*
Robert L. Crandall
Charles J. DiBona
Lawrence S. Eagleburger*
W. R. Howell
Ray L. Hunt*
Aylwin B. Lewis*
Jay A. Precourt
C. J. Silas
--------
* Lord Clitheroe and Messrs. Eagleburger and Hunt served on the Compensation
Committee from January 1, 2001 through May 14, 2001, and Mr. Lewis served on
the Compensation Committee from May 15, 2001 through December 31, 2001.
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, 2001, 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, 1996 and the reinvestment of all dividends. The stockholder return
set forth on the chart below is not necessarily indicative of future
performance.
[CHART]
Total Stockholders' Return - Five Years
Assumes Investment of $100 on December 31, 1996 and Reinvestment of Dividends
Halliburton S&P 500 S&P Energy
12/96 100 100 100
12/97 174.28 133.36 125.25
12/98 100.93 171.47 125.92
12/99 138.96 207.56 149.85
12/00 126.60 188.62 171.04
12/01 44.68 166.19 153.52
15
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
-------------------------------- -----------------------------
Awards Payouts
--------------------- -------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Principal Salary Bonus Compensation Awards Options Payouts Compensation
Position Year ($) ($) ($)(1) ($)(2) (#) ($) ($)(3)
------------------ ---- --------- --------- ------------ ---------- ---------- ------- ------------
David J. Lesar................ 2001 1,100,000 2,200,000 -- 3,381,513 154,408 N/A 538,795
Chairman of the Board, 2000 958,333 2,012,709 -- 1,216,250 300,000 N/A 478,515
President and Chief 1999 823,000 0 -- 0 260,100 N/A 349,265
Executive Officer of the
Company
Lester L. Coleman............. 2001 475,008 475,008 -- 757,609 34,594 N/A 179,403
Executive Vice President 2000 475,008 498,800 -- 417,000 39,000 N/A 137,837
and General Counsel of 1999 450,000 0 -- 0 45,000 N/A 130,489
the Company
Robert R. Harl................ 2001 425,000 212,500 -- 757,609 34,594 N/A 153,804
President and Chief 2000 N/A N/A -- N/A N/A N/A N/A
Executive Officer of 1999 N/A N/A -- N/A N/A N/A N/A
Kellogg Brown & Root
Gary V. Morris................ 2001 550,000 550,000 -- 757,609 34,594 N/A 243,849
Executive Vice President 2000 475,008 498,800 -- 834,000 39,000 N/A 171,005
of the Company 1999 450,000 0 -- 0 45,000 N/A 160,334
Edgar J. Ortiz ............... 2001 550,000 550,000 -- 757,609 34,594 N/A 353,985
President and Chief 2000 N/A N/A -- N/A N/A N/A N/A
Executive Officer of 1999 N/A N/A -- N/A N/A N/A N/A
Halliburton Energy
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; Mr. Coleman was granted 12,000 shares with restrictions lapsing
over 10 years; and Mr. Morris was granted 24,000 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. Harl was granted 34,594 shares
with restrictions lapsing over 10 years; Mr. Morris 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. The total number and
value of restricted shares held by each of the above individuals as of
December 31, 2001 were as follows:
Total Aggregate
Restricted Market
Name Shares Value
---- ---------- -------------
Mr. Lesar.. 364,430 $4,774,033.00
Mr. Coleman 72,654 951,767.40
Mr. Harl... 76,700 1,004,770.00
Mr. Morris. 99,354 1,301,537.40
Mr. Ortiz.. 111,682 1,463,034.20
(3) "All Other Compensation" includes the following accruals for or
contributions to various plans for the fiscal year ending December 31,
2001: (i) company contributions to qualified defined contribution plans for
Mr. Lesar--$7,820, Mr. Coleman--$7,820, Mr. Harl--$1,190,
Mr. Morris--$7,820, and Mr. Ortiz--$8,500; (ii) 401(k) plan matching
contributions for Mr. Lesar--$6,800, Mr. Coleman--$6,800, Mr. Harl--$6,800,
Mr. Morris--$6,800, and Mr. Ortiz--$6,800; (iii) benefit restoration
accruals for Mr. Lesar--$79,980, Mr. Coleman--$26,231, Mr. Harl--$18,763,
Mr. Morris --$32,680, and Mr. Ortiz--$34,200; (iv) supplemental retirement
plan contributions for Mr. Lesar--$378,000, Mr. Coleman--$91,000, Mr.
Harl--$121,000, Mr. Morris--$164,000, and Mr. Ortiz--$260,000; (v)
above-market earnings on benefit restoration account for Mr. Lesar--$9,077,
Mr. Coleman--$7,983, Mr. Harl--$6,051, Mr. Morris--$3,897, and Mr.
Ortiz--$3,264; and (vi) above-market earnings on amounts deferred under
elective deferral plans for Mr. Lesar--$57,118, Mr. Coleman--$39,570, Mr.
Harl--$0, Mr. Morris--$28,652, and Mr. Ortiz--$41,221.
16
OPTION GRANTS FOR FISCAL 2001
Potential Realizable Value
Number of % of Total at Assumed Annual Rates of
Securities Options Stock Price Appreciation
Underlying Granted to Exercise for Option Term(2)
Individual Grants(1) Options Employees in Price Expiration ------------------------------------
Name Granted(#) Fiscal Year ($/Share) Date 5% 10%
-------------------- ---------- ------------ --------- ---------- ----------------- ------------------
David J. Lesar..... 154,408 4.30 $ 31.55 7/19/2011 $ 3,063,705.71 $ 7,764,031.78
Lester L. Coleman.. 34,594 0.96 31.55 7/19/2011 686,401.19 1,739,475.39
Robert R. Harl..... 34,594 0.96 31.55 7/19/2011 686,401.19 1,739,475.39
Gary V. Morris..... 34,594 0.96 31.55 7/19/2011 686,401.19 1,739,475.39
Edgar J. Ortiz..... 34,594 0.96 31.55 7/19/2011 686,401.19 1,739,475.39
All Optionees...... 3,604,646 100.00 35.5195(3) (3) 77,278,117.42 194,631,716.07
All Stockholders... N/A N/A N/A N/A 9,702,949,881.88 24,589,180,057.41(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 a weighted average of all options granted in
2001. Options expire on one or more of the following dates: January 10,
2011, February 19, 2011, February 23, 2011, March 6, 2011, March 30, 2011,
April 3, 2011, April 17, 2011, April 25, 2011, April 30, 2011, May 15,
2011, June 27, 2011, July 2, 2011, July 16, 2011, July 19, 2011, August 6,
2011, August 22, 2011, September 10, 2011, October 1, 2011, October 17,
2011, December 5, 2011 and December 19, 2011.
(4) "All Stockholders" values are calculated using the weighted average
exercise price for all options awarded in 2001, $35.5195, based on the
outstanding shares of Common Stock on December 31, 2001.
AGGREGATED OPTION EXERCISES IN FISCAL 2001
AND DECEMBER 31, 2001 OPTION VALUES
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at Fiscal Year-End In-the-Money Options at
Acquired Value (Shares) Fiscal Year-End ($)
on Exercise Realized -------------------------- -------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
David J. Lesar... 0 0 570,402 441,108 0 0
Lester L. Coleman 34,000 875,135 162,000 75,594 0 0
Robert R. Harl... 0 0 101,333 75,594 0 0
Gary V. Morris... 0 0 165,000 75,594 0 0
Edgar J. Ortiz... 0 0 160,000 75,594 0 0
17
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.
LONG-TERM INCENTIVE PLANS -- AWARDS IN FISCAL 2001
Performance Estimated Future Payouts Under
Performance Or Other Non-Stock Price-Based Plans
Category Period Until -------------------------------
Average Maturation Threshold Target Maximum
Name Salary ($) or Payout ($) ($) ($)
---- ----------- ------------ --------- ---------- ----------
David J. Lesar...... $1,100,000 2001-2003 $412,500 $1,650,000 $2,475,000
Lester L. Coleman... 525,000 Fiscal Years 98,438 393,750 590,625
Robert R. Harl...... 427,000 64,050 256,200 384,300
Gary V. Morris...... 525,000 98,438 393,750 590,625
Edgar J. Ortiz...... 525,000 98,438 393,750 590,625
18
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.
Messrs. Coleman and Morris. Messrs. Coleman and Morris entered into
employment agreements with Halliburton effective September 29, 1998, providing
for their employment as Executive Vice President and General Counsel, and
Executive Vice President and Chief Financial Officer, respectively. Each
executive's 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, each executive was granted an
award under the 1993 Plan of 15,000 shares of Common Stock subject to
restrictions.
Under the terms of the employment agreements, in the event of either
executive'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 were forfeited because of the
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. Harl. Mr. Harl entered into an employment agreement with Halliburton
and Halliburton's subsidiary, Brown & Root Services Corporation ("BRSC"), on
September 29, 1998, which provided for his employment as President of BRSC. 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 the 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), BRSC is obligated to make severance payments equal
to:
. the value of any restricted shares that were forfeited because of the
termination;
19
. 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 the 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 were forfeited because of the
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.
Change-In-Control Arrangements
Pursuant to the 1993 Plan, in the event of a change-in-control:
A. The Compensation Committee, acting in its sole discretion, will act to
effect one or more of the following alternatives for outstanding stock options:
. accelerate the time at which options may be exercised;
. cancel the options and pay the optionees the excess of the per share
value offered to stockholders in the change-in-control transaction over
the exercise price(s) of the shares subject to options;
. make adjustments to the options as deemed appropriate to reflect the
change-in-control; or
. convert the options to rights to purchase a proportionate amount of
shares of stock or other securities or property paid to stockholders in
the change-in-control transaction.
B. The Compensation Committee may provide for full vesting of all shares of
outstanding restricted stock and termination of all restrictions applicable to
the restricted stock.
Pursuant to 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
20
. 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, if approved by the stockholders, 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dresser 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 Dresser 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 by the committee appointed to administer
the plan in its discretion. 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, 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
21
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.
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: Lord Clitheroe--15,
Mr. Crandall--17, Mr. DiBona--5, Mr. Eagleburger--4, Mr. Howell--11, and Mr.
Silas--9. Assets are transferred to State Street Bank and Trust Company, as
Trustee, to be held pursuant to the terms of an irrevocable grantor trust to
aid Halliburton in meeting its obligations under the Directors' Retirement
Plan. The corpus 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.
AUDIT COMMITTEE REPORT
Halliburton's Audit Committee of the Board of Directors consists of
directors who, in the business judgment of the Board of Directors, are
independent under 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. 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's responsibility. 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.
22
In fulfilling our oversight role for the year ended December 31, 2001, we:
. reviewed and discussed Halliburton's audited financial statements with
management;
. discussed with Arthur Andersen LLP, Halliburton's independent auditors,
the matters required by Statement on Auditing Standards No. 61 relating
to the conduct of the audit;
. received from Arthur Andersen the written disclosures and letter
required by Independence Standards Board Standard No. 1;
. discussed with Arthur Andersen its independence; and
. received a report from Halliburton's Executive Vice President and Chief
Financial Officer on Arthur Andersen's qualifications, independence and
responses to Halliburton's due diligence questions.
In addition, the Chairman of the Audit Committee met with representatives of
Arthur Andersen, Halliburton's Executive Vice President and Chief Financial
Officer and other members of Halliburton's management and staff to review
Arthur Andersen's qualifications, independence and responses to Halliburton's
due diligence questions.
Based on our:
. review of the audited financial statements,
. discussions with management,
. discussions with Arthur Andersen, and
. review of Arthur Andersen'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, 2001 for filing with the Securities and Exchange Commission.
Our recommendation considers our review of that firm's qualifications as
independent accountants for the Company. Among other things we reviewed the
qualifications of the firm and the engagement team and the firm's quality
control procedures. In addition, 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
Arthur Andersen during the year did not impair the firm's independence.
Finally, we recommended to the full Board of Directors, and the Board
adopted, a Company policy that restricts the kinds of services that may be
performed by Halliburton's independent auditors. The full text of that policy
is set out in Appendix B to this proxy statement. In general, the policy
permits our outside auditors to provide only non-audit services that (i)
facilitate the performance of the audit, (ii) improve the financial reporting
process and internal controls environment or (iii) relate to tax consulting or
advice. Other non-audit services, including consulting services and information
systems design and implementation, will be prohibited under the new policy
unless expressly authorized by the Audit Committee. The policy also provides
that the fees for non-audit services in any calendar year may not exceed the
fees paid for core audit services without the specific approval of the Audit
Committee.
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
23
AUDIT INFORMATION
Audit Fees
The aggregate fees billed for professional services rendered by Arthur
Andersen LLP for the audit of Halliburton's annual financial statements for
fiscal year 2001 and the reviews of Halliburton's financial statements included
in Halliburton's Forms 10-Q for fiscal year 2001 totaled $7.2 million.
Financial Information Systems Design and Implementation Fees
The aggregate fees billed for the professional services as financial
information systems design and implementation rendered by Arthur Andersen LLP
for fiscal year 2001 totaled $7.2 million which consisted primarily of:
. $4.6 million for an intercompany database project and
. $2.6 million for a tax system database project.
All Other Fees
The aggregate fees billed for services rendered in year 2001 by Arthur
Andersen LLP, other than the services covered in the paragraphs above headed
Audit Fees and Financial Information Systems Design and Implementation Fees
totaled $12.1 million which primarily consisted of:
. $4.7 million of audit related fees which included benefit plan audits,
international statutory audits, acquisition due diligence, registration
statements, comfort letters and consents,
. $4.8 million of tax services,
. $1.5 million for a real estate database, and
. $1.1 million for other projects.
Audit Committee Consideration
Halliburton's Audit Committee considered whether Arthur Andersen LLP's
provision of Financial Information Systems Design and Implementation Fees and
All Other Fees as reported above is compatible with maintaining Arthur Andersen
LLP's independence as Halliburton's principal independent accounting firm.
Work Performed by Principal Accountant's Full Time, Permanent Employees
Arthur Andersen's work on Halliburton's audit was performed by full time,
permanent employees and partners of Arthur Andersen.
SELECTION OF AUDITORS
Arthur Andersen LLP has examined Halliburton's financial statements since
1946. Management, the Board of Directors and the Audit Committee have been
closely monitoring and reviewing ongoing developments concerning that firm. As
a result of recent events, the Audit Committee has directed that a search be
conducted for an independent audit firm to audit Halliburton's financial
statements for 2002. When the process has been completed, the Audit Committee
will evaluate the results and make a recommendation to the Board on which firm
should be selected for 2002. The Board of Directors will then make its
selection based on what is in the best interests of Halliburton and our
stockholders.
24
In previous years, a resolution has been presented at the Annual Meeting
asking our stockholders to ratify the Board's appointment of the independent
accountants. However, due to:
. the extraordinary events surrounding Arthur Andersen LLP,
. the timing of those events, and
. the ongoing selection process,
we will not ask our stockholders to ratify the appointment of independent
accountants at this year's Annual Meeting. Accordingly, the Board has passed a
resolution waiving, for this year only, the provision in the Audit Committee
Charter that relates to stockholder ratification of auditor selection. We
intend to resume this practice at the 2003 Annual Meeting.
PROPOSAL TO APPROVE THE HALLIBURTON COMPANY
2002 EMPLOYEE STOCK PURCHASE PLAN
(Item 2)
On March 6, 2002, the Board of Directors adopted, subject to stockholder
approval, the Halliburton Company 2002 Employee Stock Purchase Plan (the
"ESPP"), effective July 1, 2002, and reserved 12,000,000 shares for issuance
under the ESPP.
Our Board recommends approval of the ESPP and the reservation of shares for
issuance thereunder for the purpose of qualifying those shares for special tax
treatment under Internal Revenue Code Section 423.
The following is a summary of the principal features of the ESPP. This
summary, however, is subject in all respects to the express provisions of the
ESPP. The full text of the ESPP is set forth in Appendix C to this proxy
statement and reference is made to that Appendix for a complete statement of
its terms and provisions.
Summary of the ESPP
Purpose. The purpose of the ESPP is to provide employees of Halliburton and
its designated subsidiaries with the opportunity to purchase Halliburton common
stock and, therefore, to have an additional incentive to contribute to the
prosperity of Halliburton.
Administration. The ESPP will be administered by the Compensation Committee
of Directors (the "Committee"). None of the members of the Committee is an
officer or employee, or former officer or employee, of Halliburton or its
subsidiaries. Subject to the terms of the ESPP, the Committee has the power to
make, amend and repeal rules and regulations for the interpretation and
administration of the ESPP. The decisions of the Committee are final and
binding upon all parties.
Shares Subject to the ESPP. There are 12,000,000 shares reserved for
issuance under the ESPP, subject to adjustment as described below. On March 15,
2002, the closing price per share of Halliburton common stock was $16.67.
Eligibility. In general, any employee of Halliburton or a designated
subsidiary who, on an enrollment date, has a minimum of six months of service
and is regularly employed for at least 20 hours per week or at least five
months in a calendar year is eligible to participate in the ESPP during a
purchase period. A "purchase period" is a period of approximately six months
that begins on the first trading day of each July or January. The first
purchase period will begin on July 1, 2002. An "enrollment date" is first day
of each purchase period. Eligible employees become participants in the ESPP by
filing with Halliburton a payroll deduction authorization form within the time
prescribed by the Committee prior to an enrollment date. As of December 31,
2001, approximately 36,705 employees, including 11 executive officers, would
have been eligible to participate in the ESPP.
Plan Participation. Each participant is granted a right to purchase shares
of Halliburton stock on his or her enrollment date. A participant in the ESPP
may make contributions through payroll deductions from one percent
25
to ten percent of his or her eligible compensation each pay period, but not
less than $10 for any pay period. Stock purchase rights may not accrue at a
rate that exceeds $25,000 in fair market value of the common stock per calendar
year. The participant's contributions are used to purchase shares of
Halliburton's common stock at the end of each purchase period. The right to
purchase Halliburton shares is exercised automatically on the last trading day
of each purchase period ("purchase date") to the extent of the payroll
deductions accumulated during the purchase period, provided that the number of
shares that may be purchased by a participant in any purchase period is limited
to 10,000 shares.
Purchase Price; Shares Purchased. The purchase price per share is equal to
85% of the fair market value of the common stock on the enrollment date or the
purchase date, whichever is less. The number of whole shares of Halliburton
common stock a participant purchases in each purchase period is determined by
dividing the total amount of payroll deductions during the purchase period by
the purchase price. If any balance remains in a participant's account, it is
carried forward to the next purchase period.
Termination of Employment. Termination of a participant's employment for
any reason, including death, immediately cancels his or her participation in
the ESPP. In that event, the payroll deductions credited to the participant's
account will be refunded to him or her, in the case of death, to his or her
estate or personal representative.
Changes in Stock; Adjustments. In the event that Halliburton's stock is
changed by reason of any stock split, stock dividend, recapitalization,
combination or other similar change in Halliburton's capital structure,
appropriate action will be taken by the Committee to adjust any or all of (i)
the number and type of shares subject to the ESPP, (ii) the number and type of
shares subject to outstanding stock purchase rights and (iii) the purchase
price. In the event of a Corporate Change (as defined in the ESPP), 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 Committee prior to the effective date
of the Corporate Change; 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.
Amendment and Termination of the Plan. The Board may terminate the ESPP at
any time with respect to common stock that is not subject to stock purchase
rights. The Board may amend the ESPP at any time, provided that no change may
be made in any outstanding stock purchase right that would materially impair
that right without the consent of the participant. If not sooner terminated,
the ESPP will automatically terminate when all of the shares of common stock
reserved for issuance have been sold.
Withdrawal. Generally, a participant may withdraw from the ESPP during a
purchase period at any time prior to the fifth business day before a purchase
date.
New Plan Benefits. Because benefits under the ESPP will depend on
employees' elections to participate and the fair market value of Halliburton
common stock at various future dates, it is not possible to determine the
benefits that will be received by executive officers and other employees if the
ESPP is approved by the stockholders. Non-employee Directors are not eligible
to participate.
U.S. Federal Income Tax Treatment
The following summarizes the effect of current U.S. federal income tax upon
the participant and Halliburton with respect to shares purchased under the
ESPP. It does not purport to be complete, and does not discuss the tax
consequences arising in the context of a participant's death or the income tax
laws of any municipality, state or foreign country in which the participant's
income or gain may be taxable.
26
If the Halliburton stockholders approve this proposal, the ESPP, and the
right of participants to make purchases thereunder, should qualify under the
provisions of Sections 421 and 423 of the Internal Revenue Code. Under these
provisions, no income will be taxable to a participant until the shares
purchased under the ESPP are sold or otherwise disposed of. Upon sale or other
disposition of the shares, the participant will generally be subject to tax and
the amount of the tax will depend on the holding period. If the shares are sold
or disposed of more than two years from the first day of the applicable
purchase period and more than one year from the date of transfer of the shares
to the participant, then the participant generally will recognize ordinary
income measured as the lesser of:
. the excess of the fair market value of the shares at the time of sale
over the purchase price, or
. 15% of the fair market value of the shares as of the enrollment date.
Any additional gain should be treated as long-term capital gain. If the shares
are disposed of within the two-year and one-year periods referred to above, the
participant will recognize ordinary income generally measured as the difference
between the fair market value of the shares on the purchase date over the
purchase price. Any additional gain or loss on the sale will be long-term or
short-term capital gain or loss, depending on the holding period. Halliburton
is not entitled to a deduction for amounts taxed as ordinary income or capital
gain to a participant except to the extent ordinary income is recognized by
participants upon a disposition of shares prior to the expiration of the
holding period.
Vote Required
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.
The Board of Directors recommends a vote FOR the approval of the proposed
Employee Stock Purchase Plan.
SHAREHOLDER PROPOSAL ON AUDITOR SERVICES
(Item 3)
The United Association S&P 500 Index Fund ("United Fund"), located at 370
Seventeenth Street, Suite 3100, Denver, Colorado 80202, has notified
Halliburton that it intends to present the resolution set forth below to the
Annual Meeting for action by the stockholders. United Fund's supporting
statement for the resolution, along with the Board of Directors' statement in
opposition is set forth below. As of November 14, 2001, United Fund
beneficially owned 32,583 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
That the shareholders of Halliburton request that the Board of Directors
adopt a policy that in the future the firm that is appointed to be the
Company's independent accountants will only provide audit services to the
Company and not provide any other services.
Supporting Statement
The Securities and Exchange Commission passed new proxy statement rules that
took effect February 5, 2001, which require companies to disclose how much they
pay their accounting firms for audit services and non-audit services.
The results have been startling. According to a Wall Street Journal article
of April 10, 2001: "The nation's biggest companies last year paid far more
money than previously estimated to their independent accounting firms for
services other than auditing, newly disclosed figures show, renewing questions
about whether such fees create conflicts of interest for auditing firms... At
issue: How objective can an accounting firm be in an audit when it is also
making millions of dollars providing the client with other services."
27
That Wall Street Journal article reported that of the 307 S&P 500 companies
it had surveyed, the average fees for non-audit services were nearly three
times as big as the audit fees. The Company's 2001 proxy statement revealed
that it had paid its independent auditor, Arthur Andersen LLP, $7.4 million for
its audit work and $44.1 million directly or indirectly for additional work
[$1.5 million for financial information systems design and implementation fees
and $6.5 million for all other fees directly to Arthur Andersen LLP plus $36.1
million in additional systems design and implementation funds indirectly
through Accenture (then owned by Arthur Andersen LLP and formerly known as
Andersen Consulting)].
When the SEC was seeking comments on its accountant disclosure rules,
substantial institutional investors urged that auditors should not accept
non-audit fees from companies. The California Public Employees' Retirement
System's General Counsel, Kayla J. Gillan, wrote: "The SEC should consider
simplifying its Proposal and drawing a bright-line test: no non-audit services
to an audit client." TIAA-CREF's Chairman/CEO John H. Biggs wrote: "independent
public audit firms should not be the auditors of any company for which they
simultaneously provide other services. It's that simple."
It is respectfully submitted that it would be in the best interests of the
Company's shareholders if the Board of Directors adopts a policy that in the
future any firm appointed to be the Company's independent accountants shall
only provide audit services to the Company and not provide any other services.
The Board of Directors recommends a vote AGAINST this proposal because it is
moot.
Our board of directors has already taken action on this proposal by adopting
a corporate policy that restricts the kinds of services that may be performed
by our principal outside auditors. The text of the policy is set out in
Appendix B to this proxy statement.
Recent reports of alleged audit failures at other companies have raised
potential conflict-of-interest and independence issues when a company's
principal outside auditor also performs consulting services. In order to assure
our stockholders and the investing public that the firm that audits our
financial statements is truly independent, the audit committee has recommended,
and our board has approved, a corporate policy restricting the types of
services that can be provided by our principal audit firm.
The following are highlights of the policy:
. The policy goes far beyond proposals that would merely prohibit auditing
firms from providing information technology consulting and internal audit
services--although the policy certainly does that. In general, the policy
permits our outside auditors to provide only non-audit services that (i)
facilitate the performance of the audit, (ii) improve the financial
reporting process and internal controls environment or (iii) relate to tax
consulting or advice. Our board has determined that these types of
services are consistent with maintaining auditor independence. Moreover,
even these non-audit services may not be provided by our principal auditor
unless our chief financial officer has determined that the firm's
expertise assures a beneficial result and that the engagement is
consistent with auditor independence. All other types of services are
prohibited except to the extent specifically authorized by the audit
committee.
. Even the permitted services described above are subject to additional
audit committee oversight and approval.
. An annual plan of non-audit services must be submitted to, and approved
in advance by, the audit committee.
. The aggregate fees for permitted non-audit services may not exceed the
fees paid for core audit services in any calendar year without the
specific approval of the audit committee.
28
. International statutory audits and employee benefit plan audits may not
be performed by the outside auditors unless they are included in the
annual plan of non-audit services.
. Each of the following types of services must be approved on a
case-by-case basis by the chairman of the audit committee:
. Accounting and audit services relating to acquisitions, investments or
dispositions of assets.
. Investigations relating to alleged violations of our Code of Business
Conduct.
. Tax services.
. The outside auditors are prohibited from performing all other services,
including the following, unless specifically authorized by the audit
committee:
. Financial and other information systems design and implementation;
. Employee benefit plan design and implementation;
. Executive financial planning;
. Internal audit services;
. Business process review, design, re-engineering and implementation; and
. Risk management services.
. The outside auditors' engagement partner assigned to our annual financial
statement audit may not serve longer than five years.
Our board believes that the policy more than satisfies the request of the
shareholder proponent. Consequently, since our board has already complied with
the proposal, it is now moot and no longer appropriate for consideration at the
meeting.
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 shareholder 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 solicited hereby 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.
29
Shareholder Proposals for the 2003 Annual Meeting
Stockholders interested in submitting a proposal for inclusion in the proxy
materials for the Annual Meeting of Stockholders in 2003 may do so by following
the procedures prescribed in SEC Rule 14a-8. To be eligible for inclusion,
shareholder proposals must be received by Halliburton's Secretary (3600 Lincoln
Plaza, 500 North Akard Street, Dallas, Texas 75201-3391) no later than November
19, 2002. The 2003 Annual Meeting will be held on May 21, 2003.
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/ SUSAN S. KEITH
Susan S. Keith
Vice President and Secretary
March 19, 2002
30
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 independent directors. Members of the Committee shall
be considered independent if they have no relationship to the Company that
could interfere with the exercise of their independence from management and the
Company. 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. Company management, internal 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 four meetings
each year on a regular basis and will have special meetings if and when
required.
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 and
independent auditors and the Board of Directors, including private sessions
with the internal and independent auditors, as the Committee may deem
appropriate.
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.
3. Receive and review reports from Company management and 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 Board shall be ultimately responsible for the selection,
evaluation, and replacement of the independent auditors. 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;
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. 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.
8. 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.
9. Receive and review reports from both the internal and independent auditors
relating to plans for the audit of the Company's information technology
procedures and controls.
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. 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, three
members shall constitute a quorum.
Approved as revised: Board of Directors of
Halliburton Company
February 17, 2000
Supercedes previous version dated:
September 11, 1997
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Appendix B
CORPORATE POLICY
SERVICES OF PRINCIPAL INDEPENDENT AUDITORS
PURPOSE:
To establish the policy of Halliburton Company, its subsidiaries and
affiliates (the "Company") with respect to the types of services other than
core audit functions ("Non-Audit Services") that may be provided by the
independent accounting firm appointed to audit the financial statements of the
Company (the "Principal Independent Auditors").
GENERAL:
This Policy is intended to assist management, the Audit Committee and the
Board of Directors in carrying out their respective responsibilities to ensure
that auditor independence is not impaired. Nothing herein shall be deemed to
amend or restrict the Audit Committee Charter, to restrict the authority of the
Audit Committee or the Board to select, evaluate and replace the Principal
Independent Auditors or to alter in any way the responsibilities of the Audit
Committee, the Principal Independent Auditors and management as set forth in
the Audit Committee's Charter or as required under applicable laws, rules or
regulations as they relate to the matters covered herein.
POLICY:
1. The core audit services performed by the Principal Independent Auditors are
services for financial statement audit and review that are customary for the
purpose of rendering an opinion or review report on the financial
statements. Core audit services include:
. Annual domestic audits;
. Quarterly reviews;
. SEC-related filings, including consent letters;
. Comfort letters;
. Audit of the tax accrual; and
. Such other services as the SEC, the New York Stock Exchange or other
regulatory bodies may, from time to time, deem to constitute audit
services.
2. The Principal Independent Auditors may be retained to provide Non-Audit
Services only where the following two conditions are met:
a. A determination by the Company's Chief Financial Officer that the firm's
particular expertise and knowledge, including knowledge of the Company's
businesses and financial systems, provides a substantial assurance of
high-quality, timely and useful results; and
b. A determination by the Company's Chief Financial Officer that the
engagement is consistent with the maintenance of auditor independence
pursuant to the determination by the Board as set forth below.
The Audit Committee has recommended to the Board and the Board has
determined that, in general, Non-Audit Services that facilitate the
performance of the audit, improve the financial reporting process, improve
the controls environment or provide tax consulting and advice are consistent
with the maintenance of auditor independence.
3. Provided that the Company's Chief Financial Officer has made the
determinations required by Policy Paragraph 2, the Chief Financial Officer
may retain the Principal Independent Auditors for the types of Non-Audit
Services described above, subject to the following additional requirements:
a. An annual plan of Non-Audit Services will be submitted to and approved
in advance by the Audit Committee.
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b. Absent a specific approval by the Audit Committee, the total amount of
fees for Non-Audit Services will not exceed the amount of fees for core
audit services in any calendar year.
c. Subject to being included in the plan of Non-Audit Services submitted to
and annually approved by the Audit Committee, the Principal Independent
Auditors shall be permitted to perform the following types of Non-Audit
Services:
. International statutory audits; and
. Employee benefit audits.
d. Subject to being specifically approved on a case-by-case basis by the
Chairman of the Audit Committee, the Principal Independent Auditors
shall be permitted to perform the following types of Non-Audit Services:
. Accounting and audit services relating to the sale or other
disposition of Company assets;
. Accounting and audit services relating to acquisitions and
investments;
. Investigations pursuant to the Company's Code of Business Conduct; and
. Tax services, including tax compliance and tax examination assistance.
4. Except as specifically authorized by the Audit Committee, the Principal
Independent Auditors shall not be retained by the Company or its business
units to provide consulting services related to any information system
design and implementation projects, business process reviews, or any other
consulting services not directly related to the tax, audit, control
environment and accounting services enumerated in Policy Paragraph 3.
Services that are specifically not permitted to be performed by the
Principal Independent Auditors without the express approval of the Audit
Committee include, without limitation:
. Financial and other information systems design and implementation;
. Employee benefit plan design and implementation;
. Executive financial planning;
. Internal audit services;
. Business process review, design, re-engineering and implementation; and
. Risk management services.
5. To further enhance the objective of assuring the Principal Independent
Auditors' independence in providing core audit services, the firm's
engagement partner assigned to the Company's audit shall not serve a term
longer than five (5) years.
Other References:
1. Halliburton Company Audit Committee Charter.
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Appendix C
HALLIBURTON COMPANY
2002 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The HALLIBURTON COMPANY 2002 EMPLOYEE STOCK PURCHASE PLAN (the
"Plan") is intended to provide an incentive for eligible employees of
HALLIBURTON COMPANY (the "Company") and certain of its subsidiaries to acquire
or increase a proprietary interest in the Company through the purchase of
shares of the Company's common stock. The Plan is intended to qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"). The provisions of the Plan shall be construed
in a manner consistent with the requirements of that section of the Code.
2. Definitions. Where the following words and phrases are used in the
Plan, they shall have the respective meanings set forth below, unless the
context clearly indicates to the contrary:
"Board" means the Board of Directors of the Company.
"Committee" means the Board or a committee of members of the Board
appointed by the Board to administer this Plan.
"Company" means Halliburton Company and, where required by the context,
shall include any Participating Company.
"Corporate Change" means one of the following events: (i) the merger,
consolidation, or other reorganization of the Company in which the
outstanding Stock is converted into or exchanged for a different class of
securities of the Company, a class of securities of any other issuer (except
a direct or indirect wholly owned subsidiary of the Company), cash or other
property; (ii) the sale, lease or exchange of all or substantially all of
the assets of the Company to any other corporation or entity (except a
direct or indirect wholly owned subsidiary of the Company); or (iii) the
adoption by the stockholders of the Company of a plan of liquidation or
dissolution.
"Eligible Compensation" means an employee's regular straight-time
earnings or base salary, determined before giving effect to any elective
salary reduction or deferral agreements and including vacation and sick
time, but excluding overtime, incentive compensation, bonuses, special
payments, commissions, severance pay, short-term disability pay, long-term
disability pay, geographical coefficients, shift differential and any other
items of compensation.
"Eligible Employee" means, as of each Enrollment Date, each employee of
the Company or a Participating Company who, as of such Enrollment Date, has
completed a six-month period of service with the Company and/or its
Subsidiaries (service with an acquired entity or operation shall be credited
for this purpose), but excluding (i) employees who are employed in a foreign
country whose laws or regulations effectively prohibit participation in the
Plan and (ii) employees who are customarily employed by the Company less
than twenty (20) hours per week or less than five (5) months in any calendar
year. Additionally, the Committee may also determine that a designated group
of highly compensated employees are ineligible to participate in the Plan so
long as the group fits within the definition of "highly compensated
employee" in Code Section 414(q).
"Enrollment Date" means the first day of each Purchase Period.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall mean the closing price for a share of Stock on
the New York Stock Exchange (or if the Stock is not then listed on such
exchange, such other national securities exchange on which the Stock is then
listed) for the last Trading Day on the date of such determination, as
reported on the New York Stock Exchange (or such other national securities
exchange) Composite Tape or such other source as the Committee deems
reliable, or if no prices are reported on that date, on the last preceding
date on which such prices are so reported.
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"Participating Company" means any present or future parent corporation or
Subsidiary of the Company that participates in the Plan pursuant to
paragraph 4.
"Purchase Date" means the last Trading Day of each Purchase Period.
"Purchase Period" means a period of approximately six months beginning on
(i) the first Trading Day on or after each July 1 and ending on the last
Trading Day in the period ending the following December 31, or (ii) the
first Trading Day on or after each January 1 and ending on the last Trading
Day in the period ending the following June 30. The first Purchase Period
shall begin on the first Trading Day on or after July 1, 2002. The Committee
shall have the power to change the duration of Purchase Periods (including
the commencement dates thereof) with respect to future offerings without
stockholder approval if such change is announced at least five days prior to
the scheduled beginning of the first Purchase Period to be affected
thereafter.
"Purchase Price" means an amount equal to 85% of the Fair Market Value of
a share of Stock on the Enrollment Date or on the Purchase Date, whichever
is lower, subject to adjustment pursuant to paragraph 13.
"Stock" means the Company's common stock, par value $2.50 per share.
"Subsidiary" means a corporation, domestic or foreign, which is a
"subsidiary" of the Company, as defined in section 424(f) of the Code,
whether or not such corporation exists or is hereafter organized or acquired
by the Company or a subsidiary.
"Trading Day" means a day on which the principal national stock exchange
on which the Stock is traded is open for trading.
3. Administration of the Plan. The Plan shall be administered by the
Committee. Subject to the provisions of the Plan, the Committee shall interpret
the Plan, make such rules as it deems necessary for the proper administration
of the Plan, and make all other determinations necessary or advisable for the
administration of the Plan and the purchase of Stock under the Plan, including
without limitation establishing the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars. In addition, the Committee
shall correct any defect or supply any omission or reconcile any inconsistency
in the Plan, or in any stock purchase right granted under the Plan, correct any
mistakes in the administration of the Plan in the manner and to the extent that
the Committee deems necessary or desirable to effectuate the intent of the
Plan. The Committee shall, in its sole discretion, make such decisions or
determinations and take such actions, and all such decisions, determinations
and actions taken or made by the Committee pursuant to this and the other
paragraphs of the Plan shall be conclusive on all parties. The Committee shall
not be liable for any decision, determination or action taken in good faith in
connection with the administration of the Plan. The Committee shall have the
authority to delegate routine day-to-day administration of the Plan to such
officers and employees of the Company as the Committee deems appropriate.
4. Participating Companies...The Committee may designate any present or
future parent corporation of the Company or Subsidiary that is eligible by law
to participate in the Plan as a Participating Company by written instrument
delivered to the designated Participating Company. Such written instrument
shall specify the effective date of such designation and shall become, as to
such designated Participating Company and employees in its employment, a part
of the Plan. The terms of the Plan may be modified as applied to the
Participating Company only to the extent permitted under Section 423 of the
Code. Transfer of employment among the Company and Participating Companies
shall not be considered a termination of employment hereunder. Any
Participating Company may, by appropriate action of its Board of Directors,
terminate its participation in the Plan. Moreover, the Committee may, in its
discretion, terminate a Participating Company's Plan participation in the Plan
at any time. The Participating Companies at any time shall be listed on
Attachment A hereto as it may be amended from time to time by the Committee.
5. Eligibility. Subject to the further provisions hereof, all Eligible
Employees as of an Enrollment Date shall be eligible to participate in the Plan
with respect to the Purchase Period beginning as of such date.
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6. Stock Subject to the Plan. Subject to the provisions of paragraph 13,
the aggregate number of shares of Stock which may be sold under the Plan shall
not exceed 12,000,000 shares, which shares may be authorized but unissued
shares or treasury shares, including shares bought on the open market or
otherwise for purposes of the Plan.
7. Stock Purchase Rights.
(a) Grant of Stock Purchase Rights. On each Enrollment Date the Company
shall grant a stock purchase right to each Eligible Employee who elects to
participate in the Plan for the Purchase Period beginning on such date.
Subject to subparagraphs 7(f) and (g), the number of shares of Stock subject
to a stock purchase right for a participant shall be equal to the quotient
of (i) the aggregate payroll deductions withheld on behalf of such
participant during the Purchase Period, plus any amounts carried over from
the prior Purchase Period, divided by (ii) the Purchase Price of the Stock
applicable to the Purchase Period; provided, however, that the maximum
number of shares of Stock that may be subject to any stock purchase right
for a participant during any Purchase Period may not exceed 10,000 shares
(subject to adjustment as provided in paragraph 13). No fractional shares
shall be purchased; any payroll deductions accumulated in a participant's
account and not applied to the purchase of whole shares shall be retained in
the participant's account and applied in the next Purchase Period, subject
to withdrawal by the participant pursuant to paragraph 9.
(b) Election to Participate; Payroll Deduction Authorization. An
Eligible Employee may participate in the Plan only by means of payroll
deduction. Except as provided in subparagraph 7(f), each Eligible Employee
who elects to participate in the Plan shall deliver to the Company, within
the time period prescribed by the Committee, a payroll deduction
authorization in the form prescribed by the Company, whereby he gives notice
of his election to participate in the Plan as of the next following
Enrollment Date, and whereby he designates an integral percentage (except as
provided below) to be deducted from his Eligible Compensation for each pay
period ending in the Purchase Period and paid into the Plan for his account.
The designated percentage may not be less than 1% nor exceed 10%; provided,
however, the minimum contribution per pay period shall be $10.
(c) Changes in Payroll Authorization. All payroll deductions made for a
participant shall be credited to his account under the Plan. A participant
may discontinue his participation in the Plan as provided in paragraph 9
hereof, or may increase or decrease the rate of his payroll deductions
during the Purchase Period by completing or filing with the Company a new
payroll deduction authorization form authorizing a change in his payroll
rate. The Committee may, in its discretion, limit the number of payroll rate
changes during any Purchase Period. The change in rate shall be effective
with the first full payroll period following five business days after the
Company's receipt of the new payroll deduction authorization form unless the
Company elects to process a given change in payroll rate earlier. A
participant's payroll deduction authorization form shall remain in effect
for successive Purchase Periods unless terminated as provided in paragraph 9
hereof.
(d) Automatic Payroll Reduction. Notwithstanding the foregoing, to the
extent necessary to comply with subparagraphs 7(f) and (g) hereof, a
participant's payroll deductions may be decreased to 0% at any time during a
Purchase Period. Payroll deductions shall recommence at the rate provided in
such participant's payroll deduction authorization form at the beginning of
the first Purchase Period that is scheduled to end in the following calendar
year, unless terminated by the participant as provided in paragraph 9 hereof.
(e) Tax Withholding. At the time the stock purchase right is exercised,
in whole or in part, or at the time some or all of the Stock issued under
the Plan is disposed of, the participant must make adequate provision for
the Company's federal, state or other tax withholding obligations, if any,
that arise upon the exercise of the stock purchase right or the disposition
of the Stock. At any time, the Company may, but shall not be obligated to,
withhold from the participant's compensation the amount necessary for the
Company to meet applicable withholding obligations, including without
limitation any withholding required to make
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available to the Company any tax deductions or benefits attributable to the
sale or early disposition of Stock purchased by the participant.
(f) $25,000 Limitation. Notwithstanding anything in the Plan to the
contrary, no employee shall be granted a stock purchase right under the Plan
which permits his rights to purchase Stock under the Plan and under all
other employee stock purchase plans of the Company and its parent
corporation and Subsidiaries to accrue at a rate which exceeds $25,000 of
Fair Market Value of Stock (determined at the time such stock purchase right
is granted) for each calendar year in which such stock purchase right is
outstanding at any time (within the meaning of Section 423(b)(8) of the
Code). Any payroll deductions in excess of the amount specified in the
foregoing sentence shall be returned to the participant as soon as
administratively feasible after the next following Enrollment Date.
(g) Special Restriction on Participation. Any provisions of the Plan to
the contrary notwithstanding, no Eligible Employee shall be granted a stock
purchase right under the Plan to the extent that, immediately after the
grant, such Eligible Employee (or any other person whose stock would be
attributed to such Eligible Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing 5% or more of the total combined voting power
or value of all classes of the capital stock of the Company, its parent
corporation or any Subsidiary.
8. Exercise of Stock Purchase Rights.
(a) General Statement. Subject to the limitations set forth in
paragraph 7, unless a participant withdraws from the Plan as provided in
paragraph 9, each participant in the Plan automatically and without any act
on his part shall be deemed to have exercised his stock purchase right on
each Purchase Date to the extent of his unused payroll deductions under the
Plan and to the extent the issuance of Stock to such participant upon such
exercise is lawful.
(b) Delivery of Shares to Custodian. As soon as practicable after each
Purchase Date, the Company shall deliver to a custodian selected by the
Committee one or more certificates representing (or shall otherwise cause to
be credited to the account of such custodian) the aggregate number of whole
shares of Stock with respect to which stock purchase rights were exercised
on such Purchase Date of all of the participating employees hereunder. Such
custodian shall keep accurate records of the beneficial interests of each
participant in such shares by means of participant accounts under the Plan,
and shall provide each participant with periodic statements with respect
thereto as may be directed by the Committee. The Committee may require that
shares be retained with such custodian, or other designated broker or agent
for a designated period of time and/or may establish other procedures to
permit tracking of disqualifying dispositions of such shares. If the Company
is required to obtain from any U.S. commission or agency authority to issue
any such shares, the Company shall seek to obtain such authority. Inability
of the Company to obtain from any commission or agency (whether U.S. or
foreign) authority which counsel for the Company deems necessary for the
lawful issuance of any such shares shall relieve the Company from liability
to any participant in the Plan except to return to him the amount of his
payroll deductions under the Plan which would have otherwise been used upon
exercise of the relevant stock purchase right.
(c) Withdrawal of Shares. A participant may, at any time, in such form
and manner as established by the custodian, direct the custodian to deliver
to the participant all or part of the shares held by the custodian in his
account or to sell such shares and deliver to the participant the proceeds
therefrom, less applicable expenses.
(d) Dividends. With respect to an individual's Stock held by the
custodian pursuant to subparagraph 8(b), the custodian shall automatically
reinvest in additional shares of Stock for such individual's account any
cash dividends received by the custodian and attributable to such Stock and
shall, in accordance with procedures adopted by the custodian, facilitate
the individual's voting rights attributable to shares held in a
participant's account.
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9. Withdrawal from the Plan.
(a) General Statement. Any participant may withdraw in whole from the
Plan at any time that is five or more days prior to the Purchase Date
relating to a particular Purchase Period. Partial withdrawals shall not be
permitted. A participant who wishes to withdraw from the Plan must timely
deliver to the Company a notice of withdrawal in a form prepared by the
Company. The Company, promptly as practical following the receipt of the
notice of withdrawal, shall refund to the participant the amount of his
payroll deductions under the Plan which have not yet been used to purchase
shares upon the exercise of his stock purchase rights; and thereupon,
automatically and without any further act on his part, his payroll deduction
authorization and his interest in unexercised stock purchase rights under
the Plan shall terminate in full.
(b) Leave of Absence. A participant who goes on a leave of absence
shall be deemed to have elected to withdraw from the Plan.
(c) Eligibility Following Withdrawal. A participant who withdraws from
the Plan shall be eligible to participate again in the Plan upon expiration
of the Purchase Period during which he withdrew (provided that he is
otherwise an Eligible Employee at such later time).
10. Termination of Eligible Employment. If the employment of a participant
with the Company terminates for any reason whatsoever or the participant ceases
to be an Eligible Employee, then his participation in the Plan automatically
and without any act on his part shall terminate as of the date of such
termination of employment or change in status. The Company shall promptly
refund to him (or his estate or personal representative, as the case may be)
the amount of his payroll deductions under the Plan which have not yet been
used to purchase Stock, and thereupon his interest in unexercised stock
purchase rights under the Plan shall terminate in full.
11. Restriction Upon Assignment of Stock Purchase Rights. A stock purchase
right granted under the Plan shall not be transferable otherwise than by will
or the laws of descent and distribution. Each stock purchase right shall be
exercisable, during a participant's lifetime, only by the participant to whom
granted. The Company shall not recognize and shall be under no duty to
recognize any assignment or purported assignment by an employee of any of his
stock purchase rights under the Plan.
12. No Shareholder Rights or Privileges Until Exercise of Stock Purchase
Rights. With respect to shares of Stock subject to a stock purchase right, a
participant shall not be deemed to be a shareholder, and he shall not have any
of the rights or privileges of a shareholder, until such stock purchase right
has been exercised and shares delivered pursuant to subparagraph 8(b).
13. Changes in Stock; Adjustments. Whenever any change is made in the
Stock, by reason of a stock dividend or by reason of subdivision, stock split,
reverse stock split, recapitalization, reorganization, combination,
reclassification of shares or other similar change, appropriate action will be
taken by the Committee to adjust any or all of (i) the number and type of
shares subject to the Plan, (ii) the number and type of shares subject to
outstanding stock purchase rights and (iii) the Purchase Price with respect to
any of the foregoing.
In the event of a Corporate Change, unless a successor corporation assumes
or substitutes new stock purchase rights (within the meaning of Section 424(a)
of the Code) for all stock purchase rights then outstanding, (i) the Purchase
Date for all stock purchase rights then outstanding shall be accelerated to a
date fixed by the Committee prior to the effective date of the Corporate Change
and (ii) upon such effective date any unexercised stock purchase rights shall
expire and the Company promptly shall refund to each participant the amount of
such participant's payroll deductions under the Plan which have not yet been
used to purchase Stock.
14. Use of Funds; No Interest Paid. All funds received or held by the
Company under the Plan shall be included in the general funds of the Company
free of any trust or other restriction, and may be used for any corporate
purpose. No interest shall be paid to any participant on amounts credited to
his account.
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15. Term of the Plan. The Plan shall be effective July 1, 2002, provided
the Plan is approved by the shareholders of the Company prior to such date. If
not sooner terminated under the provisions of paragraph 16, the Plan shall
automatically terminate upon and no further payroll deductions shall be made
and no further stock purchase rights shall be granted after the date all of the
shares of Stock reserved for issuance under the Plan, as increased and/or
adjusted from time to time, have been sold under the Plan. If on the final
Purchase Date there is an insufficient number of shares of Stock available for
all purchases under stock purchase rights exercised on such date, the number of
available shares shall be prorated among the then purchasing participants in an
equitable manner as determined by the Committee based on their deductions for
such Purchase Period and all remaining amounts shall be returned to the
participants.
16. Amendment or Termination of the Plan. The Board in its discretion may
terminate the Plan at any time with respect to any Stock for which stock
purchase rights have not theretofore been granted. The Board shall have the
right to alter or amend the Plan or any part thereof from time to time;
provided, however, that, except as provided below, no change in any stock
purchase right theretofore granted may be made that would materially impair the
stock purchase rights of the participant without the consent of such
participant. In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial accounting consequences, the Board
may, in its discretion and, to the extent necessary or desirable, modify or
amend the Plan to reduce or eliminate such accounting consequence including,
but not limited to (i) altering the Purchase Price for any Purchase Period
including a Purchase Period underway at the time of the change in Purchase
Price; and (ii) shortening any Purchase Period so that Purchase Period ends on
a new Purchase Date, including a Purchase Period underway at the time of the
Board action.
17. Securities Laws. The Company shall not be obligated to issue any Stock
pursuant to any stock purchase right granted under the Plan at any time when
the offer, issuance or sale of shares covered by such stock purchase right has
not been registered under the Securities Act of 1933, as amended, or does not
comply with such other state, federal or foreign laws, rules or regulations, or
the requirements of any stock exchange upon which the Stock may then be listed,
as the Company or the Committee deems applicable and, in the opinion of legal
counsel for the Company, there is no exemption from the requirements of such
laws, rules, regulations or requirements available for the offer, issuance and
sale of such shares. Further, all Stock acquired pursuant to the Plan shall be
subject to the Company's policies concerning compliance with securities laws
and regulations, as such policies may be amended from time to time. The terms
and conditions of stock purchase rights granted hereunder to, and the purchase
of shares by, persons subject to Section 16 of the Exchange Act shall comply
with any applicable provisions of Rule 16b-3. As to such persons, the Plan
shall be deemed to contain, and such stock purchase rights shall contain, and
the shares issued upon exercise thereof shall be subject to, such additional
conditions and restrictions as may be required from time to time by Rule 16b-3
to qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
18. 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 that 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 stock purchase right granted under the Plan. No employee,
beneficiary or other person shall have any claim against the Company or any
Subsidiary as a result of any such action.
19. Miscellaneous Provisions.
(a) Number and Gender. Wherever appropriate herein, words used in the
singular shall be considered to include the plural and words used in the
plural shall be considered to include the singular. The masculine gender,
where appearing in the Plan, shall be deemed to include the feminine gender.
(b) Headings. The headings and subheadings in the Plan are included
solely for convenience, and if there is any conflict between such headings
or subheadings and the text of the Plan, the text shall control.
(c) Not a Contract of Employment. The adoption and maintenance of the
Plan shall not be deemed to be a contract between the Company or any
Participating Company and any person or to be consideration
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for the employment of any person. Participation in the Plan at any given
time shall not be deemed to create the right to participate in the Plan, or
any other arrangement permitting an employee of the Company or any
Participating Company to purchase Stock at a discount, in the future. The
stock purchase rights and obligations under any participant's terms of
employment with the Company or any Participating Company shall not be
affected by participation in the Plan. Nothing herein contained shall be
deemed to give any person the right to be retained in the employ of the
Company or any Participating Company or to restrict the right of the Company
or any Participating Company to discharge any person at any time, nor shall
the Plan be deemed to give the Company or any Participating Company the
right to require any person to remain in the employ of the Company or such
Participating Company or to restrict any person's right to terminate his
employment at any time. The Plan shall not afford any participant any
additional right to compensation as a result of the termination of such
participant's employment for any reason whatsoever.
(d) Compliance with Applicable Laws. The Company's obligation to offer,
issue, sell or deliver Stock under the Plan is at all times subject to all
approvals of and compliance with any governmental authorities (whether
domestic or foreign) required in connection with the authorization, offer,
issuance, sale or delivery of Stock as well as all federal, state, local and
foreign laws. Without limiting the scope of the preceding sentence, and
notwithstanding any other provision in the Plan, the Company shall not be
obligated to grant stock purchase rights or to offer, issue, sell or deliver
Stock under the Plan to any employee who is a citizen or resident of a
jurisdiction the laws of which, for reasons of its public policy or
otherwise, prohibit the Company from taking any such action with respect to
such employee.
(e) Severability. If any provision of the Plan shall be held illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining provisions hereof; instead, each provision shall be fully
severable and the Plan shall be construed and enforced as if said illegal or
invalid provision had never been included herein.
(f) Governing Law. All provisions of the Plan shall be construed in
accordance with the laws of Delaware except to the extent preempted by
federal law.
C-7
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PROXY
HALLIBURTON COMPANY
Proxy for 2002 Annual Meeting of Stockholders
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints D.J. Lesar, L.L. Coleman and S.S. Keith,
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 the Parisian Room
of the Fairmont Hotel, 1717 North Akard Street, Dallas, Texas, on Wednesday, May
15, 2002, 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 19, 2002, 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 Proposal set forth in Item 2 and AGAINST the Proposal set
forth in Item 3.
(Continued and to be signed on reverse side)
.................................................................................
/\ FOLD AND DETACH HERE /\
You can now access your Halliburton account online.
Access your Halliburton stockholder account online via Investor
ServiceDirect/SM/ (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:
. View account status . View payment history for dividends
. View certificate history . Make address changes
. View book-entry information . Obtain a duplicate 1099 tax form
. Establish/change your PIN
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 Step 2: Log in for Account Access Step 3: Account Status Screen
You must first establish a Personal You are now ready to log in. To You are now ready to access your
Identification Number (PIN) online by access your account please enter account information. Click on the
following the directions provided in the your: appropriate button to view or initiate
upper right portion of the web screen as transactions.
follows. You will also need your Social . SSN
Security Number (SSN) available to . PIN . Certificate History
establish a PIN. . Then click on the Submit button . Book-Entry Information
. Issue Certificate
Investor ServiceDirect/SM/ is currently If you have more than one account, . Payment History
only available for domestic individual and you will now be asked to select . Address Change
joint accounts. the appropriate account. . Duplicate 1099
.. SSN
.. PIN
.. Then click on the Establish PIN button
Please be sure to remember your PIN, or
maintain it in a secure place for future
reference.
For Technical Assistance Call 1-877-978-7778 between
9am-7pm Monday-Friday Eastern Time
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To vote in accordance with the Board of Directors' recommendations just sign Please mark [X]
below; no boxes need to be checked. The Board of Directors Recommends a Vote your vote as
FOR Items 1 and 2 and AGAINST Item 3. indicated in
this example
Item 1--Election of Directors (Instruction: To withhold authority to
vote for an individual nominee write that
FOR all nominees WITHHOLD nominee's name on the space provided below)
listed to the right AUTHORITY
(except as marked to the to vote for all nominees Nominees: 01 R.L. Crandall, 02 K.T. Derr,
contrary) listed to the right 03 C.J. DiBona, 04 L.S. Eagleburger,
[_] [_] 05 W.R. Howell, 06 R.L. Hunt, 07 D.J. Lesar,
08 A.B. Lewis, 09 J.L. Martin, 10 J.A. Precourt,
11 D.L. Reed, 12 C.J. Silas.
-----------------------------------------------
Item 2--Proposal to approve the 2002
Employee Stock Purchase Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
Item 3--Shareholder proposal on auditor Item 4--In their discretion, upon such I plan to attend the meeting Yes
services. other business as may properly [_]
come before the meeting.
FOR AGAINST ABSTAIN
[_] [_] [_]
IN THE FUTURE, WOULD YOU CON- Yes
SENT TO ACCESSING YOUR ANNUAL [_]
REPORT AND PROXY STATEMENT
ELECTRONICALLY VIA THE INTERNET?
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.
.................................................................................
/\ 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 4PM Eastern Time
the business day prior to annual meeting day.
Your telephone or Internet 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 vote your Use any touch-tone telephone to Mark, sign and date
proxy. Have your proxy card in vote your proxy. Have your proxy your proxy card
hand when you access the web card in hand when you call. You will and
site. You will be prompted to OR be prompted to enter your control OR return it in the
enter your control number, number, located in the box below, enclosed postage-paid
located in the box below, to and then follow the directions given. envelope.
create and submit an electronic
ballot.
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
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