Performance Unit Program - Halliburton Co.
HALLIBURTON COMPANY
PERFORMANCE UNIT PROGRAM
TERMS AND CONDITIONS
<PAGE>
TABLE OF CONTENTS
ARTICLE I..................................................................... 1
PURPOSE....................................................................... 1
ARTICLE II.................................................................... 1
DEFINITIONS................................................................... 1
2.1 Definitions................................................. 1
2.2 Number...................................................... 4
2.3 Headings.................................................... 4
ARTICLE III................................................................... 4
PARTICIPATION................................................................. 4
3.1 Participants................................................ 4
3.2 Partial Performance Cycle Participation..................... 4
3.3 No Right to Participate..................................... 5
3.4 Consent to Dispute Resolution............................... 5
ARTICLE IV.................................................................... 6
ADMINISTRATION................................................................ 6
ARTICLE V..................................................................... 6
AWARD DETERMINATIONS.......................................................... 6
5.1 Performance Measures........................................ 6
5.2 Performance Requirements.................................... 6
5.3 Award Determinations........................................ 7
5.4 Incentive Opportunities .................................... 7
5.5 Discretionary Adjustments................................... 7
ARTICLE VI.................................................................... 7
DISTRIBUTION OF AWARDS........................................................ 7
6.1 Form and Timing of Payment.................................. 7
6.2 Excess Remuneration......................................... 8
6.3 Elective Deferral........................................... 8
6.4 Tax Withholding............................................. 8
ii
<PAGE>
ARTICLE VII................................................................... 8
TERMINATION OF EMPLOYMENT..................................................... 8
7.1 Termination of Service During Performance Cycle............. 8
7.2 Termination of Service after End of Performance
Cycle But Prior to the Payment Date......................... 9
ARTICLE VIII.................................................................. 9
RIGHTS OF PARTICIPANTS AND BENEFICIARIES...................................... 9
8.1 Status as a Participant or Beneficiary...................... 9
8.2 Employment.................................................. 9
8.3 Nontransferability..........................................10
8.4 Nature of Program...........................................10
ARTICLE IX....................................................................11
CORPORATE CHANGE..............................................................11
ARTICLE X.....................................................................11
AMENDMENT AND TERMINATION.....................................................11
ARTICLE XI....................................................................11
MISCELLANEOUS.................................................................11
11.1 Governing Law...............................................11
11.2 Successor...................................................12
11.3 Status of Stock.............................................12
11.4 Stockholder Approval........................................12
iii
<PAGE>
ARTICLE I
PURPOSE
The purpose of this document is to set forth the general terms and
conditions applicable to the Performance Unit Program (the "Program")
established by the Halliburton Company (the "Company") Compensation Committee of
Directors pursuant to, and in implementation of, Article X of the Company's 1993
Stock and Long-Term Incentive Plan, as amended (the "1993 Plan"). The Program is
intended to carry out the purposes of the 1993 Plan and provide a means to
reinforce objectives for sustained long-term performance and value creation by
awarding selected key executives of the Company with payments in cash and/or
Company stock based on the level of achievement of pre-established performance
goals during individual performance cycles. The Program is also intended to
support strategic planning processes, balance short and long-term decision
making and help provide competitive total compensation opportunities.
ARTICLE II
DEFINITIONS
2.1 Definitions. Where the following words and phrases appear in the
Program, they shall have the respective meanings set forth below, unless their
context clearly indicates to the contrary. Other initially capitalized terms
used herein but not defined shall have the meanings ascribed to them in the 1993
Plan.
"Affiliate" shall mean a Subsidiary of the Company or a division or
designated group of the Company or a Subsidiary.
"Average Salary " shall mean the average base pay rate of all
Participants in a particular Participant Category as of January 1 of the
first year of any Performance Cycle, including base pay a Participant could
have received in cash in lieu of (i) contributions made on such
Participant's behalf to a qualified plan maintained by the Company, to any
cafeteria plan under Section 125 of the Code maintained by the Company or
to a qualified transportation fringe benefit program under Section 132 of
the Code and (ii) deferrals of compensation made at the Participant's
1
<PAGE>
election pursuant to a plan or arrangement of the Company or an Affiliate,
but excluding any Awards under this Program and any other bonuses,
incentive pay or special awards.
"Award" shall mean the incentive compensation amount payable either in
cash, Common Stock or a combination thereof to a Participant under the
Program for the Performance Cycle determined in accordance with Article V.
"Award Schedule" shall mean the schedule that aligns the level of
achievement of applicable Performance Goals with Incentive Opportunities
for a particular Performance Cycle, such that the level of achievement of
the pre-established Performance Goals at the end of such Performance Cycle
will determine the actual Award.
"Beneficiary" shall mean the person, persons, trust or trusts entitled
by Will or the laws of descent and distribution to receive the benefits
specified under the Program in the event of the Participant's death prior
to full payment of a Award.
"Board of Directors" shall mean the Board of Directors of the Company.
"Cause" shall mean (i) the conviction of the Participant of a felony
under Federal law or the law of the state in which such action occurred,
(ii) dishonesty in course of fulfilling the Participant's employment duties
or (iii) the disclosure by the Participant to any unauthorized person or
competitor of any confidential information or confidential knowledge as to
the business or affairs of the Company and its Affiliates.
"CEO" shall mean the Chief Executive Officer of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Compensation Committee of Directors,
appointed by the Board of Directors from among its members to administer
the 1993 Plan in accordance with Article IV thereof.
"Common Stock" shall mean the common stock, par value $2.50 per share,
of the Company.
"Company" shall mean Halliburton Company and its successors.
"Corporate Change" shall have the meaning set forth in Article II,
Section (h) of the 1993 Plan.
"Dispute Resolution Program" shall mean the Halliburton Dispute
Resolution Plan.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
2
<PAGE>
"Fair Market Value" shall have the meaning set forth in Article II,
Section (j) of the 1993 Plan.
"Incentive Opportunity" shall mean, with respect to a particular
Participant Category, incentive award payment amounts, expressed as a
percentage of Average Salary, which corresponds to various levels of
pre-established Performance Goals, determined pursuant to the Award
Schedule.
"Key Executive" shall mean a full-time, active employee who is an
executive, including an officer, of the Company or an Affiliate (whether or
not he or she is also a director thereof), who is compensated for such
employment by a regular salary and who, in the opinion of the Committee, is
a key member of management of the Company and its Affiliates in a position
to contribute materially to the Company's continued growth and development
and to its future financial success.
"1993 Plan" shall mean the Halliburton Company 1993 Stock and
Long-Term Incentive Plan, as amended.
"Participant" shall mean a Key Executive who participates in the
Program pursuant to the provisions of Article III hereof. A Key Executive
shall not be eligible to participate in the Program while on a leave of
absence.
"Participant Category" shall mean a grouping of Participants
determined in accordance with the applicable provisions of Article III
hereof.
"Payment Date" shall mean, with respect to a particular Performance
Cycle, the last business day of February of the year next following the end
of such Performance Cycle.
"Performance Cycle" shall mean each period of three consecutive
calendar years. Performance Cycles shall begin on January 1 of each of
2001, 2002 and 2003, unless the Program is earlier terminated or suspended.
Performance Cycles shall overlap.
"Performance Goals" shall mean, for a particular Performance Cycle,
levels of achievement of applicable Performance Measures, as established by
the Committee at the start of each Performance Cycle, used to gauge Company
performance. Performance Goals may be based on Company, Subsidiary,
business unit or business group performance, on comparative performance
with other companies or on a combination thereof.
"Performance Measures" shall mean the objective criteria selected by
the Committee which are used in determining Performance Goals. Performance
Measures may include financial measures such as average return on capital
employed, average annual return on investment, earnings per share, cash
3
<PAGE>
value added or such other performance criteria as may by permitted under
the 1993 Plan. The Committee may select one Performance Measure or multiple
Performance Measures for a particular Performance Cycle.
"Program" shall mean the Performance Unit Program under the 1993 Plan.
The duration of the Program shall be coterminous with the 1993 Plan in
accordance with the provisions of Article III of the 1993 Plan.
"Subsidiary" shall have the meaning set forth in Article II, Section
(aa) of the 1993 Plan.
2.2 Number. 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.
2.3 Headings. The headings of Articles and Sections herein are included
solely for convenience, and if there is any conflict between headings and the
text of the Program, the text shall control.
ARTICLE III
PARTICIPATION
3.1 Participants. Participants for any Performance Cycle shall be those
active Key Executives who are nominated by the CEO and approved by the Committee
within the first ninety (90) days of such Performance Cycle.
3.2 Partial Performance Cycle Participation. If, after the beginning of a
Performance Cycle, (i) a person is newly hired, promoted or transferred into a
position in which he or she is a Key Executive, or (ii) an employee who was not
previously a Participant for such Performance Cycle returns to active employment
as a Key Executive following a leave of absence, the Committee, or its delegate,
may designate in writing such person as a Participant for the pro rata portion
of such Performance Cycle beginning on the first day of the month following such
designation.
If a Key Executive who has previously been designated as a Participant for
a particular Performance Cycle takes a leave of absence during such Performance
Cycle, all of such Participant's rights to an Award for such Performance Cycle
shall be prorated based upon that portion of the Performance Cycle during which
4
<PAGE>
he or she was an active Participant, in which case the prorated portion of the
Award shall be paid in accordance with the provisions of Section 6.1, unless the
Committee shall determine that such Participant's Award for such Performance
Cycle shall be forfeited.
Each Participant shall be assigned to a Participant Category at the time he
or she becomes a Participant for a particular Performance Cycle. If a
Participant thereafter incurs an adverse change in status during such
Performance Cycle due to demotion, reassignment or transfer, the Committee may
approve such adjustment in the Participant's Incentive Opportunity as it deems
appropriate under the circumstances (including, without limitation, reassigning
such Participant to another Participant Category or terminating his or her
participation in the Program for the remainder of the Performance Cycle), any
such adjustment to be made on a pro rata basis for the balance of the
Performance Cycle.
3.3 No Right to Participate. No Participant or other employee of the
Company or an Affiliate shall, at any time, have a right to participate in the
Program for any Performance Cycle, notwithstanding having previously
participated in the Program.
3.4 Consent to Dispute Resolution. Participation in the Program
constitutes consent by the Participant to be bound by the terms and conditions
of the Dispute Resolution Program which in substance requires that all disputes
arising out of or in any way related to employment with the Company or its
Affiliates, including any disputes concerning the Program, be resolved
exclusively through such program, which includes binding arbitration as the last
step.
5
<PAGE>
ARTICLE IV
ADMINISTRATION
Within the first ninety (90) days of each Performance Cycle, the Committee
shall establish the basis for payments under the Program in relation to given
Performance Goals, as more fully described in Article V hereof, and, following
the end of each Performance Cycle, determine the actual Award payable to each
Participant. The Committee shall have the power and authority granted it under
Article IV of the 1993 Plan, including, without limitation, the authority to
construe and interpret the Program, to prescribe, amend and rescind rules,
regulations and procedures relating to its administration and to make all other
determinations necessary or advisable for administration of the Program. To the
extent permitted by Section (d) of Article IV of the 1993 Plan, the Committee
may delegate some of its authority to the CEO. Decisions of the Committee, or
its delegates, in accordance with the authority granted hereby or delegated
pursuant hereto shall be conclusive and binding. Subject only to compliance with
the express provisions hereof, the Committee or its delegates may act in their
sole and absolute discretion with respect to matters within their authority
under the Program.
ARTICLE V
AWARD DETERMINATIONS
5.1 Performance Measures. Within the first ninety (90) days of each
Performance Cycle, the Committee shall select the Performance Measure or
Measures to be used in determining the Performance Goals for such Performance
Cycle. Different Performance Measures may be selected for particular Participant
Categories or for particular Participants within the Participant Categories. The
Performance Measures may, but need not, differ from one Performance Cycle to
another.
5.2 Performance Requirements. Within the first ninety (90) days of each
Performance Cycle, the Committee shall approve the Performance Goal respecting
each selected Performance Measure, and shall establish an Award Schedule which
aligns the level of achievement of applicable Performance Goals with Incentive
6
<PAGE>
Opportunities, such that the level of achievement of the pre-established
Performance Goals at the end of the Performance Cycle will determine the actual
Award. Performance Goals may be measured in absolute and/or relative terms and
may be weighted differently.
5.3 Award Determinations. After the end of each Performance Cycle, the
Committee shall determine the extent to which the Performance Goals have been
achieved and the amount of the Award shall be computed for each Participant in
accordance with the Award Schedule.
5.4 Incentive Opportunities. The established Incentive Opportunities
will vary in relation to the Participant Categories. A Participant's assigned
Participant Category for a particular Performance Cycle will not be changed
during such Performance Cycle except as set forth in the last paragraph of
Section 3.2.
5.5 Discretionary Adjustments. Except as provided below, established
Performance Goals will not be changed during the Performance Cycle. However, if
the Committee, in its sole and absolute discretion, determines that there has
been (i) a material change in the Company's business, operations, corporate or
capital structure, (ii) a material change in the manner in which business is
conducted or (iii) any other material change or event (including merger,
consolidation or other reorganization of any of the comparator companies used to
determine achievement of relative Performance Goals) which will impact one or
more Performance Goals in a manner the Committee did not intend, then the
Committee may, reasonably contemporaneously with such change or event, make such
adjustments to the relevant Performance Goal or Goals as it shall deem
appropriate and equitable.
ARTICLE VI
DISTRIBUTION OF AWARDS
6.1 Form and Timing of Payment. Except as otherwise provided below, the
amount of each Award shall be paid in cash, Common Stock (based upon Fair Market
Value), or a combination thereof, on the Payment Date, or as soon thereafter as
practicable. In the event of termination of a Participant's employment prior to
7
<PAGE>
the Payment Date for any reason other than death (in which case payment shall be
made in accordance with the applicable provisions of Article VII), the amount of
any Award (or prorated portion thereof) payable pursuant to the provisions of
Sections 7.1 or 7.2 shall be paid in cash on the Payment Date, or as soon
thereafter as practicable.
6.2 Excess Remuneration. Notwithstanding the provisions of Section 6.1, to
the extent that incentive compensation hereunder does not qualify as
performance-based compensation pursuant to Section 162(m) of the Code, the
Committee may, in its discretion, with respect to a Participant who is a
"covered employee" for purposes of such Section 162(m), determine that payment
of that portion of an Award which would otherwise cause such Participant's
compensation to exceed the limitation on the amount of compensation deductible
by the Company in any taxable year pursuant to such Section 162(m), be deferred
until such Participant is no longer a "covered employee." In such case, interest
shall be credited on the portion of the Award deferred for the period of the
deferral as provided pursuant to Article IV of the Halliburton Company Benefit
Restoration Plan, as amended, or other applicable plan.
6.3 Elective Deferral. Nothing herein shall be deemed to preclude a
Participant's election to defer receipt of a percentage of his or her Award
beyond the time such amount would have been payable hereunder pursuant to the
Halliburton Elective Deferral Plan or other similar plan.
6.4 Tax Withholding. The Company or employing entity through which payment
of an Award is to be made shall have the right to withhold from any cash or
Common Stock remuneration hereunder payable to any Participant any tax required
to be withheld by reason of such resulting compensation income.
ARTICLE VII
TERMINATION OF EMPLOYMENT
7.1 Termination of Service During Performance Cycle. In the event a
Participant's employment is terminated prior to the last business day of a
Performance Cycle for any reason other than death, normal retirement at or after
age 65, approved early retirement or disability (as determined by the CEO or his
8
<PAGE>
delegate), all of such Participant's rights to an Award for such Performance
Cycle shall be forfeited. In the case of a Participant's death during a
Performance Cycle, the prorated amount of such Participant's Award, if any,
applicable to such Performance Cycle shall be paid in cash to the Participant's
estate, or if there is no administration of the estate, to the heirs at law, on
the Payment Date, or as soon thereafter as practicable. In the case of a
Participant's disability, normal retirement at or after age 65 or approved early
retirement, the prorated amount of such Participant's Award, if any, applicable
to such Performance Cycle shall be paid in accordance with the provisions of
Section 6.1.
7.2 Termination of Service after End of Performance Cycle But Prior to the
Payment Date. If a Participant's employment is terminated after the end of the
applicable Performance Cycle, but prior to the Payment Date, for any reason
other than termination for Cause, the amount of any Award applicable to such
Performance Cycle shall be paid to the Participant in accordance with the
provisions of Section 6.1, except in the case of death, in which case the amount
of the Award shall be paid in cash to such Participant's estate, or if there is
no administration of the estate, to the heirs at law, as soon as practicable.
If a Participant's employment is terminated for Cause, all of such
Participant's rights to an Award applicable to such Performance Cycle shall be
forfeited.
ARTICLE VIII
RIGHTS OF PARTICIPANTS AND BENEFICIARIES
8.1 Status as a Participant or Beneficiary. Neither status as a
Participant or Beneficiary shall be construed as a commitment that any Award
will be paid or payable under the Program.
8.2 Employment. Nothing contained in the Program or in any document
related to the Program or to any Award shall confer upon any Participant any
right to continue as an employee or in the employ of the Company or an Affiliate
or constitute any contract or agreement of employment for a specific term or
interfere in any way with the right of the Company or an Affiliate to reduce
9
<PAGE>
such person's compensation, to change the position held by such person or to
terminate the employment of such person, with or without cause.
8.3 Nontransferability. No benefit payable under, or interest in, this
Program shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge and any such attempted
action shall be void and no such benefit or interest shall be, in any manner,
liable for, or subject to, debts, contracts, liabilities or torts of any
Participant or Beneficiary; provided, however, that, nothing in this Section 8.3
shall prevent transfer (i) by Will, (ii) by applicable laws of descent and
distribution or (iii) pursuant to an order that satisfies the requirements for a
"qualified domestic relations order" as such term is defined in section
206(d)(3)(B) of ERISA and section 414(p)(1)(A) of the Code. Any attempt at
transfer, assignment or other alienation prohibited by the preceding sentence
shall be disregarded and all amounts payable hereunder shall be paid only in
accordance with the provisions of the Program.
8.4 Nature of Program. No Participant, Beneficiary or other person shall
have any right, title or interest in any fund or in any specific asset of the
Company or any Affiliate by reason of any Award hereunder. There shall be no
funding of any benefits which may become payable hereunder. Nothing contained in
the Program (or in any document related thereto), nor the creation or adoption
of the Program, nor any action taken pursuant to the provisions of the Program
shall create, or be construed to create, a trust of any kind or a fiduciary
relationship between the Company or an Affiliate and any Participant,
Beneficiary or other person. To the extent that a Participant, Beneficiary or
other person acquires a right to receive payment with respect to an Award
hereunder, such right shall be no greater than the right of any unsecured
general creditor of the Company or other employing entity, as applicable. All
amounts payable under the Program shall be paid from the general assets of the
Company or employing entity, as applicable, and no special or separate fund or
deposit shall be established and no segregation of assets shall be made to
assure payment of such amounts. Nothing in the Program shall be deemed to give
10
<PAGE>
any employee any right to participate in the Program except in accordance
herewith.
ARTICLE IX
CORPORATE CHANGE
In the event of a Corporate Change, (i) with respect to a Participant's
Award for the Performance Cycle in which the Corporate Change occurred, such
Participant shall be entitled to an immediate cash payment equal to the maximum
amount of Award he or she would have been entitled to receive for the
Performance Cycle, prorated to the date of the Corporate Change (provided, that
any such immediate cash payment applied to a Participant who is a "covered
employee" for purposes of Section 162(m) of the Code shall be discounted to
reflect the time value of money); and (ii) with respect to a Corporate Change
that occurs after the end of the Performance Cycle but prior to the Payment
Date, a Participant shall be entitled to an immediate cash payment equal to the
Award earned for such Performance Cycle.
ARTICLE X
AMENDMENT AND TERMINATION
Notwithstanding anything herein to the contrary, the Committee may, at any
time, terminate, modify or suspend the Program; provided, however, that, without
the prior consent of the Participants affected, no such action may adversely
affect any rights or obligations with respect to any Awards theretofore earned
but unpaid for a completed Performance Cycle, whether or not the amounts of such
Awards have been computed and whether or not such Awards are then payable.
ARTICLE XI
MISCELLANEOUS
11.1 Governing Law. The Program shall be construed in accordance with the
laws of the State of Texas, without giving effect to the principles of conflicts
of law thereof, except to the extent that it implicates matters which are the
11
<PAGE>
subject of the General Corporation Law of the State of Delaware, which matters
shall be governed by the latter law.
11.2 Successor. All obligations and rights of the Company under the
Program shall be binding upon and inure to the benefit of any successor to the
Company.
11.3 Status of Stock. The Company shall not be obligated to issue any
Common Stock pursuant to any Award hereunder at any time when the offering of
the shares covered by such Award has not been registered under the Securities
Act of 1933, as amended, and such other state and federal laws, rules or
regulations as the Company or the Committee deems applicable and, in the opinion
of legal counsel to the Company, there is no exemption from the registration
requirements of such laws, rules or regulations available for issuance and sale
of such shares.
11.4 Stockholder Approval. The "material terms" of the Program (within the
meaning of Section 162(m) of the Code) shall be submitted for approval by the
holders of a majority of the shares of Common Stock present, or represented, and
entitled to vote at the first meeting of the Company's stockholders that occurs
every fifth year following the year in which stockholders previously approved
such "material terms" (inclusive of approval of the 1993 Plan).
12