TableAmendment. In addition, pursuant to the Company's Rights Agreement entered into as of Contents

A voteOctober 1, 2007 with Computershare Trust Company, N.A. (the "Rights Agreement"), one preferred share purchase right to purchase a fraction of a share of the Company's Series B Preferred Stock (a "Right") is deemed to be delivered with each share of Common Stock issued in the stock split. The fraction of a share of Series B Preferred Stock purchasable upon the proper exercise of a Right will be taken on a proposaladjusted in the event the proposed stock split is effected, as described below under the heading "Rights Agreement."

        Currently, the Company's Certificate of Incorporation authorizes 150,000,000 shares of Common Stock and the Company's Share Requirement is 124,105,716. Accordingly, the Company does not have an adequate number of authorized shares of Common Stock to ratify this appointment atenable the Meeting. While there is no legal requirement that this proposal be submittedcompletion of the stock split. The Board therefore approved the Amendment, subject to stockholders,stockholder approval, to increase the

number of shares of Common Stock authorized under the Certificate of Incorporation from 150,000,000 to 400,000,000.

        In addition, the Board believes that it is in the selectionCompany's best interest to increase the number of independent registered public accountantsauthorized shares of Common Stock beyond the number necessary to auditeffect the financial statementsstock split in order to have additional authorized but unissued shares available for issuance to meet business needs as they arise without the expense or delay of a special meeting of stockholders to approve additional authorized shares at that time. Such business needs may include equity financings, acquisitions, future stock dividends or splits, adopting new or modifying current employee benefit plans and other proper corporate purposes identified by the Board in the future. Any future issuance of Common Stock of the Company iswould remain subject to separate stockholder approval if required by Delaware law or the rules of sufficient importance to seek stockholder ratification. In the event a majorityany national securities exchange on which shares of the votes cast is not voted in favor of the ratification of the appointment of Ernst & Young LLP, the Audit Committee will reconsider the appointment.

It is expected that representatives of Ernst & Young LLP will be present at the Meeting and will be available to answer questions and discuss matters pertaining to the Report of Independent Registered Public Accounting Firm contained in the financial statements incorporated by reference in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006. These representatives will have the opportunity to make a statement if they desire.

The fees billed by Ernst & Young LLP for services rendered for 2006 and 2005 are set out on page 39 of this Proxy Statement.

The Board recommends that stockholders vote “FOR” the ratification of this appointment.

Governance

Corporate governance is typically defined as the system that allocates duties and authority among a company’s stockholders, board of directors and management. The stockholders elect a board and vote on extraordinary matters; a board is the company’s governing body, responsible for hiring, overseeing, compensating and evaluating management, particularly the chief executive officer; and management runs the company’s day-to-day operations. The business and affairsCommon Stock of the Company are governedthen listed or traded.

        If the proposal is approved by the stockholders, upon the effective date of the Amendment and after the 2-for-1 stock split, the Company would have approximately 181,295,056 shares of Common Stock authorized and available for future issuance. If the proposal is not approved by the stockholders, the number of authorized shares of Common Stock of the Company will remain at 150,000,000, the 2-for-1 stock split will not be effected and the Company would have approximately 40,647,258 shares of Common Stock which remain authorized and available for future issuance, which includes the 6,010,000 shares of Common Stock reserved for issuance upon the conversion of the Company's 1.50% convertible debentures and 2.50% convertible debentures and the 8,743,244 shares reserved under the Company's employee stock plans.

        Other than as permitted or required under the Company's existing employee stock plans, the Company's 1.50% convertible debentures and 2.50% convertible debentures, and outstanding options, the Board has no immediate plans, understandings, agreements or commitments to issue additional shares of Common Stock for any purposes.

        The Board believes that the proposed increase in the number of authorized shares of Common Stock will make a sufficient number of shares available, should the Company decide to use its shares for one or more of such previously mentioned purposes or otherwise. The Company may, nonetheless, request a further increase in authorized shares as and when considered appropriate by the Board.

Rights Agreement

        On October 1, 2007, the Company entered into the Rights Agreement to replace the Company's prior Rights Agreement which expired on October 31, 2007. As a result, the Company issued one Right for each outstanding share of Common Stock. One Right will be issued for each additional share of Common Stock that the Company issues, including shares issued as part of the 2-for-1 stock split. The Rights become exercisable if, without the approval of the Board, a person or group acquires 20% or more of the Company's outstanding Common Stock or commences or announces a tender or exchange offer which would result in such ownership. Each Right that becomes exercisable entitles the registered holder to purchase one one-hundredths of a share of the Company's Series B Preferred Stock at a purchase price of $400.00 per such one one-hundredth of a share, subject to adjustment. If the Amendment is approved and the proposed 2-for-1 stock split is effected, in accordance with the provisionsterms of the Delaware General Corporation LawRights Agreement, the fraction of a share of the Company's Series B Preferred Stock purchasable upon exercise of each Right will be adjusted so that each Right will entitle the registered holder to purchase one two-hundredth of a share of Series B Preferred Stock upon the proper exercise of a Right.

        Both before and after the proposed 2-for-1 stock split, under certain circumstances, and subject to adjustment as set forth in the Rights Agreement, each Right, whether it entitled the holder to one one-hundredth of a share of Series B Preferred Stock or one two-hundredth of such share, would

        If the stockholders approve the proposed Amendment, there will be 151,788,568 shares authorized by the Amendment but unused for the stock split and not reserved for the Company's convertible debt or equity plans, as discussed above. The Board may cause the issuance of these additional shares of Common Stock without further vote of the stockholders of the Company, except as provided under Delaware corporate law or under the rules of any national securities exchange on which shares of Common Stock of the Company are then listed or traded. Under the Company's Certificate of Incorporation, and Bylaws. The Board has adopted written Corporate Governance Principles and a Code of Ethics for Directors,the Company's stockholders do not have preemptive rights to subscribe to additional securities which further guide its actions. These Principles and the Code are available for review on our website at www.c-a-m.com in the “Ethics & Governance” section. Documents and information on our website are not incorporated herein by reference   These documents are also available in print by writing to the Corporate Secretary, 1333 West Loop South, Suite 1700, Houston, TX  77027.

The directors monitor the Company’s business and affairs through Board and Board Committee meetings, background and informational presentation materials provided to them on a regular basis, and meetings with officers and employees of the Company.

The non-management directors meet in executive session at each Board and Board Committee meeting. The executive sessions of the Board are led by David Ross III, who has been selectedmay be issued by the Board as Presiding Director for this purpose, and thoseCompany, which means that current stockholders do not have a prior right to purchase any new issue of the Committees are led by their Chair.

The Board has adopted a formal Standards of Conduct to guide the actions of employees and a Code of Ethics for Senior Financial Officers to promote honest and ethical conduct, proper disclosure of financial information and compliance with laws, rules and regulations. The Standards and Code are available for review and can be accessed in the same manner as the Principles and Code for Directors described above.

Director Independence

The Board believes that it should be composed entirely of independent directors, as defined under standards adopted by the NYSE, with the exception of the Chief Executive Officer, who serves as Chairman of the Board as well. The Board makes an annual determination as to the independence of each of the directors, other than the Chairman and Chief Executive Officer. Under the NYSE rules, no director

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can qualify as independent if, among other things, the director or any immediate family member is a present or former employeecapital stock of the Company or its independent registered public accountant or has been partin order to maintain their proportionate ownership of an interlocking directorate. Additionally, no director can qualify as independent unlessthe Company's Common Stock. In addition, if the Board affirmatively determineselects to issue these additional shares of Common Stock, such issuance could have a dilutive effect on the earnings per share, voting power and holdings of current stockholders.

        In addition to the corporate purposes discussed above, the proposed Amendment may be considered by some, under certain circumstances, to have an anti-takeover effect, although this is not the intent of the Board. For example, it may be possible for the Board to delay or impede a takeover or transfer of control of the Company by causing such additional authorized shares to be sold and issued to holders who might side with the Board in opposing a takeover bid that the director has no material relationship with the Company that might interfere with the exercise of his or her independence from management and the Company. In evaluating each director’s independence, the Board considers all relevant facts and circumstances in making a determination of independence. In particular, when assessing the materiality of a director’s relationship with the Company, the Board considers the issuedetermines is not merely from the standpoint of the director, but also from the standpoint of persons or organizations with which the director has an affiliation. In its determination of independence, the Board reviewed and considered all relationships and transactions between each director, his family members or any business, charity or other entity in which the director has an interest on the one hand, and the Company, its affiliates, or the Company’s senior management has an interest on the other. As a result of this review, and based on the NYSE standards of independence, the Board affirmatively determined that Nathan M. Avery, C. Baker Cunningham, Peter J. Fluor, Lamar Norsworthy, Michael E. Patrick, David Ross III and Bruce W. Wilkinson are independent from the Company and its management. In addition, the Board affirmatively determined that each of the members of the Audit Committee, Messrs. Patrick, Ross and Wilkinson, are independent under the additional standards for audit committee membership under rules of the Securities and Exchange Commission (“SEC”). The remaining director, Sheldon R. Erikson, is an employee and Chairman and Chief Executive Officer of the Company.

In connection with its determination as to the independence of directors, the Board considered ordinary course transactions between the Company and other companies for which Messrs. Patrick and Ross serve as directors. The Board also considered that Mr. Wilkinson is Chairman and Chief Executive Officer of McDermott International, Inc. (“McDermott”) and that during 2006 McDermott made payments for products purchased from the Company of approximately $8.6 million. This represents less than 1/4 of 1% (0.23%) of the Company’s consolidated gross revenues for 2006, and approximately 1/5 of 1% (0.21%) of McDermott’s. For this reason and the fact that Mr. Wilkinson had no involvement in negotiating the terms of the purchases nor interest in the transactions, these purchases were not submitted to our Nominating and Governance Committee for review under our Policy On Related Person Transactions described below. Additionally, the Board considered that McDermott may order additional product in the future from the Company. The Board has concluded that these transactions and relationships do not adversely affect Mr. Wilkinson’s ability and willingness to act in the best interests of the Company and its shareholdersstockholders. The Amendment therefore could, under these circumstances, be considered to have the effect of discouraging unsolicited takeover attempts. By potentially discouraging initiation of any such unsolicited takeover attempt, the proposed Amendment may limit the opportunity for the Company's stockholders to dispose of their shares at the higher price generally available in takeover attempts or otherwise compromise his independence.that may be available under a merger proposal. The proposed Amendment may be considered by some to have the effect of permitting the Company's current management, including the current Board, to retain its position, and place it in a better position to resist changes that stockholders may wish to make if they are dissatisfied with the conduct of the Company's business. The Board, took note of the fact that these transactions have been on standard terms and conditions and that McDermott hashowever, is not been afforded any special benefits and will not be afforded any special benefits from the Company in the future.

Policy On Related Person Transactions

Our Board has adopted written policies and procedures for the reviewaware of any transaction, arrangement or relationship in which the Company is a participant, the amount involved exceeds $120,000, and one of our executive officers, directors, director nominees or 5% stockholders (or their immediate family members), each of whom we referattempt to as a “related person,” has a direct or indirect material interest.

If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a “related person transaction,” the related person must report the proposed related person transaction to the Company’s General Counsel. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by the Board’s Nominating and Governance Committee. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the Committee will review, and, in its discretion, may ratify the related person transaction. The policy also permits the chairman of the

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Nominating and Governance Committee to review and, if deemed appropriate, approve proposed related person transactions that arise between committee meetings, subject to ratification by the Committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually.

A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the Committee after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the Committee will review and consider:

·       the approximate dollar value of the amount involved in the related person transaction;

·       the related person’s involvement in the negotiation of the terms and conditions, to include price, of the Related Person transaction;

·       the related person’s interest in the related person transaction;

·       the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;

·       whether the transaction was undertaken in the ordinary course of our business;

·       whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party;

·       the purpose of, and the potential benefits to us of, the transaction; and

·       any other information regarding the related person transaction or the related person in the context of the proposed transaction that the Committee determines to be relevant to its decision to either approve or disapprove the transaction.

The Committee may approve or ratify the transaction only if the Committee determines that, under all of the circumstances, the transaction is not inconsistent with the Company’s best interests. The Committee may impose any conditions on the related person transaction that it deems appropriate.

In addition to the transactions that are excluded by the instructions to the SEC’s related person transaction disclosure rule, the Board has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:

·       interests arising solely from the related person’s position as a director of another corporation or organization that is a party to the transaction;

·       interests arising solely from the related person’s position as an executive officer of another entity (whether or not the person is also a director of such entity), that is a participant in the transaction, where (a) the related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, (b) the related person and his or her immediate family members are not involved in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction, (c) the amount involved in the transaction equals less than the greater of $1 million or 2% of the annual consolidated gross revenues of the other entity that is a party to the transaction, and (d) the amount involved in the transaction equals less than 2% of the Company’s annual consolidated gross revenues; and

·       a transaction that is specifically contemplated by provisions of the Company’s charter or bylaws such as a contract of indemnity.

The policy provides that transactions involving compensation of executive officers shall be reviewed and approved by the Compensation Committee in the manner specified in its charter.

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Board Responsibilities and Structure

The primary responsibility of the Board is to provide oversight, counseling and direction to the Company’s management from the perspective of the long-term intereststake control of the Company and its stockholders. The Board’s detailed responsibilities include: (a) selectingthe Board has not presented this proposal with the intent that it be utilized as a type of anti-takeover device.

        There are other provisions currently in the Company's Certificate of Incorporation, Amended and regularly evaluatingRestated Bylaws ("Bylaws"), Rights Agreement and Delaware law which could have an anti-takeover effect. A summary of certain of these provisions is set forth below. These provisions, as well as the performanceauthority of the Chief Executive OfficerBoard to issue additional shares of Common Stock and other senior executives; (b) planning for succession with respect toaccelerate the position of Chief Executive Officer and monitoring management’s succession planning for other senior executives; (c) reviewing and, where appropriate, approving the Company’s major financial objectives and strategic and operating plans and actions; (d) overseeing the conductexercisability of the Company’s business to evaluate whetherrights under the business is being properly managed; and (e) overseeingCompany's Rights Agreement could be used by the processes for maintaining the Company’s integrity with regard to its financial statements and other public disclosures and compliance with laws and ethics. The Board has instructed the Chief Executive Officer, working with the Company’s other executive officers, to manage the Company’s business in a manner consistent withcalculated to prevent the Company’s standardsremoval of management and practices, andmake more difficult or discourage a change in accordance with any specific plans, instructions or directionscontrol of the Board.Company.

        The Chief Executive Officer and managementCompany is authorized to issue 10,000,000 shares of Preferred Stock, of which 3,000,000 shares have been designated as Series B Preferred Stock which are responsible for seekingpurchasable pursuant to preferred share purchase rights issued pursuant to the advice and, in appropriate situations,Company's Rights Agreement summarized above under the approval of the Board with respect to extraordinary actions to be undertaken by the Company.

heading "Rights Agreement". The Board, and its Committees meet throughout the year on a set schedule, and also hold special meetings and act by written consent from time to time as appropriate. Board agendas include regularly scheduled sessions for the independent directors to meet without management present, and the Board’s Presiding Director leads those sessions. The Board has delegated various responsibilities and authority to the Board Committees as described in this section of the Proxy Statement. Committees regularly report on their activities and actions to the full Board. Board members have access to all of the Company’s employees outside of Board meetings. Board members periodically visit different Company sites and events worldwide and meet with local management at those sites and events.

Board Committees and Charters

The Board currently has, and appoints the members of, three permanent Committees of the Board: the Audit Committee, the Compensation Committee and the Nominating and Governance Committee. Each of these Committees operates pursuant to a written charter which can be found in the “Ethics and Governance” section of our website: www.c-a-m.com. As stated earlier, documents and information on our website are not incorporated herein by reference. These documents are also available in print by writing to the Corporate Secretary, 1333 W. Loop S., Suite 1700, Houston, TX  77027. Each of these Committees is composed entirely of independent directors. Membership of the Committees is as follows:

The Nominating and Governance Committee is responsible for developing, reviewing and monitoring compliance with the Company’s policies and practices relating to corporate governance, including the Company’s Corporate Governance Principles, and for monitoring compliance with corporate governance rules and regulations, including the Company’s Policy On Related Person Transactions, and serves as the Company’s nominating committee. The Nominating and Governance Committee, along with the Compensation Committee, is responsible for succession planning for the Chief Executive Officer and the Chairman of the Board. The Nominating and Governance Committee is responsible for reviewing and

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recommending to the Board nominees for directors, recommending committee assignments and conducting an annual review of Board effectiveness and the performance of the Chief Executive Officer.

The Audit Committee reviews and approves the Company’s financial statements and earnings releases, oversees the internal audit function, reviews the Company’s internal accounting controls and oversees the Company’s compliance policies and programs. The Audit Committee has the sole authority to appoint, review and discharge our independent registered public accountants. The Board of Directors has determined that Mr. Michael E. Patrick, Chairman of the Audit Committee, and Messrs. David Ross III and Bruce W. Wilkinson, all of the members of the Audit Committee, are “audit committee financial experts” and “independent” as defined under applicable SEC and NYSE rules. The Report of the Audit Committee appears on pages 37-38 of this Proxy Statement.

The Compensation Committee is responsible for developing our non-employee director compensation program and presenting it to our Board for approval. It is responsible for the compensation plans and decisions for all executive officers other than the Chief Executive Officer with respect to whom the Committee confers with the Board before making its compensation decisions. It oversees the compensation program for non-executive employees and supervises and administers the compensation and benefits policies and plans of the Company. The Compensation Committee also oversees executive development and succession planning, except, as noted above, it shares the responsibility for succession planning for the Chief Executive Officer and the Chairman of the Board with the Nominating and Governance Committee. A description of the Committee’s role in determining executive compensation is contained in “Executive Compensation — Compensation Discussion and Analysis” which appears on pages 14-36 of this Proxy Statement. A description of the Committee’s role in determining non-employee director compensation is contained in “Corporate Governance and Board of Directors Matters — Director Compensation” which appears below.

Meeting Attendance

During 2006, the Board held seven meetings, the Audit Committee held nine meetings, the Compensation Committee held five meetings and the Nominating and Governance Committee held three meetings. Attendance for all such meetings was 100 percent except for Mr. Norsworthy. Mr. Norsworthy became seriously ill in October 2006 and as a result was unable to attend two Board meetings and one meeting of the Audit Committee, on which he served until his illness. Mr. Norsworthy’s attendance for the year was 75 percent, but prior to his illness was 92 percent.

Each director is expected to make a reasonable effort to attend all meetings of the Board, all meetings of the Committees of which such director is a member and the Company’s annual meeting of stockholders. All of the directors attended the Company’s 2006 annual meeting of stockholders. Each director is also expected to have reviewed materials supplied in advance of such meetings.

Director Compensation

The compensation program for our non-employee directors was developed by the Compensation Committee based on the recommendations of, and the competitive market analysis prepared by, its outside compensation consultant, Frederic W. Cook & Co., Inc. It was recommended by the Committee and approved by the full Board.

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The following sets out the components of the compensation program for our non-employee directors. Employee directors receive no additional compensation for serving on our Board of Directors.

One quarter of the annual amount of the deferred stock units are earned and vest at the end of each quarter of service as a director. Vested deferred stock units are payable in Company Common Stock at the end of a three-year deferral period or the end of additional deferral periods if so elected by the director, or at the end of Board tenure, whichever is first to occur. Directors may elect to defer their Board and Committee Chair retainers under our Deferred Compensation Plan for Non-Employee Directors. Deferral can be made for such periods of timefurther stockholder approval (except as may be selectedrequired by applicable law or the director and can be made into deferred stock units, payable in Company Common Stock or cash, at the director’s election, or into accounts with the same investment options available to employees under the Company’s 401(k) plan.

The directors are eligible to use Company aircraft for personal travel, provided they reimburse the Company for the incremental cost to the Companyrules of any such use. Additionally,stock exchange on which the spousesCompany's securities may be listed or traded) has the authority to issue shares of directors are invited to the Company’s annual off-site Board meeting and to other events requiring business-related travel. The directors are reimbursed by the Company for the cost and tax liability associated with the cost of their spouse or companions’ business-related travel.

Director Compensation Table

The following table provides compensation information for 2006 for each non-employee member of our Board of Directors.

(1)In 2005, the Company eliminated stock options for non-employee directors and replaced that element of our directors’ compensation package with grants of deferred stock units payablePreferred Stock in Company Common Stock. The

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aggregate number of shares under stock awards, including awards of deferred stock units, outstanding at the end of 2006 were 6,000 for each of the non-employee directors.

(2)No grants of stock options have been made to directors since they were eliminated as an element of our directors’ compensation. The aggregate number of shares underlying prior-year option awards outstanding at the end of 2006 were:  zero for Nathan M. Avery; 24,000 for C. Baker Cunningham; 12,000 for Peter J. Fluor; 44,580 for Lamar Norsworthy; 24,000 for Michael E. Patrick; 12,000 for David Ross III; and, 48,000 for Bruce W. Wilkinson.

(3)While our directors are entitled to elect to defer their retainers, they may defer them only into deferred stock units payable in Company Common Stock, or the cash value thereof, or into cash accounts with the same investment options available to employees under the Company’s 401(k) Plan. No above-market or preferential earnings on their cash deferrals are earned or paid.

(4)This figure includes the personal use of the Company’s aircraft. It also includes the cost of spouse business-related travel and the tax gross-up of the related liability.

(5)This figure is the cost of spouse business-related travel and the tax gross-up of the related tax liability.

Stockholder Communications with the Board

Any interested party desiring to communicate with our Board, or one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of our non-management directors, may send a letter addressed to the Company’s Board of Directors as a whole or to individual directors, c/o Corporate Secretary, 1333 West Loop South, Suite 1700, Houston, Texas 77027. The Corporate Secretary has been instructed by the Board to screen the communications to insure they truly are communications with the Board or a director and promptly forward all such communications to the full Board or to the individual director specifically addressed in the communications.

Director Selection Process

The Nominating and Governance Committee is the Board committee responsible for developing the Company’s slate of director nominees for election by stockholders, which the Committee recommends to the Board for its consideration. The Committee engages the services of a third-party search firm to assist in the identification and evaluation of Board member candidates when it conducts a search for director nominee candidates.

The Nominating and Governance Committee determines the required selection criteria and qualifications of Company director nominees based upon the needs of the Company at the time nominees are considered. A candidate, at a minimum, must possess the ability to apply good business judgment and must be in a position to properly exercise his or her duties of loyalty and care. Candidates should also exhibit proven leadership capabilities, high integrity and experience with a high level of responsibilities within their chosen fields, and have the ability to quickly grasp complex principles of business, finance, international transactions and the oilfield services industry. In general, candidates who hold an established executive level position in business, finance or education will be preferred. The Nominating and Governance Committee will consider these criteria for nominees identified by itself, by stockholders or through some other source. When current Board members are considered for nomination for re-election, the Nominating and Governance Committee also takes into consideration their prior Board contribution, performance and meeting attendance records.

The Nominating and Governance Committee will consider qualified candidates for possible nomination who are submitted by our stockholders. Stockholders wishing to make such a submission may do so by sending the following information to the Nominating and Governance Committee, c/o Corporate Secretary, at the address listed on the Notice of Annual Meeting of Stockholders: (1) name of the candidate and a brief biographical sketch and resume; (2) contact information for the candidate and a document evidencing the candidate’s willingness to serve as a director, if elected; and (3) a signed

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statement as to the submitting stockholders’ current status as a stockholderredemption, redemption prices, liquidation preferences, and the number of shares currently held.

The Nominating and Governance Committee assesses each proposed nominee based uponconstituting any series or the resume and biographical information,designation of such series. Although the individual’s willingness to serve and other background information. This information is evaluated againstBoard has no intention at the criteria set forth above and the specific needspresent time of the Company. Based upon this preliminary assessment, candidates may be invited to participate indoing so, it could issue a series of interviews. Following this process,Preferred Stock that could, depending on the Nominating and Governance Committee determines which nominee(s) to recommend toterms of such series, impede the Board for election bycompletion of a merger, tender offer or other takeover attempt. In addition, under the Board and nomination for election by our stockholders at the next annual meeting. The Nominating and Governance Committee uses the same process for evaluating all nominees, regardlessCompany's Certificate of Incorporation, certain business combinations require a supermajority vote of the original sourcestockholders of the nomination.

No candidates for director nominations were submitted toCompany, the NominatingCompany's stockholders cannot act by written consent or call a meeting of stockholders, and Governance Committee by any stockholder in connection with the 2007 Annual Meeting. Any stockholder desiring to presentCompany has a nomination for consideration by the Committee prior to our 2008 annual meeting must do so prior to September 1, 2007, in order to provide adequate time to duly consider the nominee and comply with our bylaws.

The Nominees and Continuing Directors

The names of the nominees for director and of the continuing directors, their principal occupations during the past five years, other directorships held, and certain other information are set out below, in order of their classification.

NOMINEES STANDING FOR ELECTION

CLASS III — TERM ENDING 2010

MICHAEL E. PATRICK

Director since 1996. Age 63. Vice President and Chief Investment Officer of Meadows Foundation, Inc., a philanthropic association, since 1995. He is a director of BJ Services Company and Apptricity Corporation.

BRUCE W. WILKINSON

Director since 2002. Age 62. Chairman of the Board and Chief Executive Officer since August 2000, and President and Chief Operating Officer from May 2000 to July 2000, of McDermott International, Inc., an energy services company.

DIRECTORS CONTINUING IN OFFICE

CLASS I — TERM ENDING 2008

PETER J. FLUOR

Director since February 2005. Age 59. Chairman of the Board and Chief Executive Officer since 2001 of Texas Crude Energy, Inc., a private, independent oil and gas exploration company, where he has been employed since 1972 in positions with increasing responsibilities, including President from 1980 to 1990 and Chief Executive Officer from 1990 to 2001. He also serves on the boards of directors of Devon Energy Corporation and Fluor Corporation, for which he was interim Chairman from January 1998 through July 1998, and is currently its Lead Independent Director, and serves as a director of The Welch Foundation. He is a member of the All American Wildcatters, the American Petroleum Institute and The Council of Overseers of the Jesse H. Jones Graduate School of Management at Rice University.

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DAVID ROSS III

Director since 1995. Age 66. Member of The Council of Overseers of the Jesse H. Jones Graduate School of Management at Rice University. From 1987 until 1993, he was Chairman and Chief Executive Officer of the Sterling Consulting Group, a firm providing analytical research, planning and evaluation services to companies in the oil and gas industry. He is a director of Process Technology Holdings, Inc.

CLASS II — TERM ENDING 2009

NATHAN M. AVERY

Director since 1995. Age 72. Partner, GHXX Ltd. Chairman of the Board and Chief Executive Officer of Galveston-Houston Company, a company specializing in the manufacturing of products to serve the energy and mining industries, from 1972 to December 2000, when it was sold to Komatsu, Ltd. He has been an active participant in the oil and gas industry since the 1960s and was Chairman of thestaggered Board of Directors, each of Bettis Corporation, an actuator company, until 1996, when Bettis Corporation merged with Daniel Industries, Inc., and waswhich could have a director and memberdeterrent effect against a takeover of the Executive CommitteeCompany.

        The Company is subject to the provisions of Daniel Industries until June 1999, when Daniel Industries merged with Emerson Electric Co.

C. BAKER CUNNINGHAM

Director since 1996. Age 65. President and Chief Executive Officer, and director, of Belden CDT Inc., a manufacturer of high-speed electronic cables focusing on products for the specialty electronic and data networking markets, including connectivity, from July 2004 to October 2005. He served as ChairmanSection 203 of the Board, President and Chief Executive OfficerDelaware General Corporation Law. Section 203 prohibits publicly held Delaware corporations from engaging in a "business combination" with an "interested stockholder" for a period of Belden Inc., a wire, cable and fiber optic products manufacturing company, from 1993 to July 2004.

SHELDON R. ERIKSON

Chairmanthree years after the date of the Board oftransaction in which the Company since 1996, Chief Executive Officerperson became an interested stockholder, unless the business combination is approved in a prescribed manner. A "business combination" includes mergers, asset sales and director since 1995. Age 65. He was also President ofother transactions resulting in a financial benefit to the Company from 1995 to 2006. He was Chairman of the Board from 1988 to 1995, and President and Chief Executive Officer from 1987 to 1995, of The Western Company of North America,interested stockholder. Generally, an international petroleum service company engaged in pressure pumping, well stimulating and cementing and offshore drilling. Previously, he was President of the Joy Petroleum Equipment Group of Joy Manufacturing Company. He"interested stockholder" is a director of Rockwood Holdings, Inc. He also serves onperson who, together with affiliates and associates, owns or was, within the boards of directors of the National Petroleum Council, the American Petroleum Institute, and the Petroleum Equipment Suppliers Association, of which he is a past Chairman of the Board.

Stock Ownership Guidelines

The Company has had stock ownership guidelines for its directors, and stock ownership requirements for its officers and other key executives, since 1996. The Board adopted these guidelines and requirements in order to align the economic interests of the directors and officers of the Company with those of all stockholders and to further focus their attention on enhancing stockholder value. Under these guidelines, outside directors are expected to own at least $250,000 worth of Common Stock within three years of the adoption of revised guidelines in 2005, or for new directors, within three years of their election to the Board. Officers are required to own Common Stock having a market value between two and five times their base salary, as is more fully described in “Executive Compensation — Compensation Discussion and Analysis — Stock Ownership Requirements” on page 23 of this Proxy Statement. In each case, valuation for this purpose is based on the higher of cost or current market value. Deferred Stock Units owned by Directors are included in the stock ownership calculation.

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Compensation Discussion and Analysis

Compensation Philosophy and Objectives.

The purpose of our executive compensation program is to advance the interests of our stockholders. It is designed to do this by:

·       attracting, retaining and motivating qualified executives to lead, manage and guide the business and affairs of the Company,

·       providing performance-based incentives to encourage and reward the attainment of the Company’s annual, long-term and strategic goals and objectives, and

·       aligning the executives’ interests with those of our stockholders.

To achieve this purpose, our executive compensation program is designed to recognize and reward our executives for their performance and contributions to the Company. When measuring an executive’s performance and contributions, a number of factors are taken into consideration, such as:

·       the executive’s level of responsibility,

·       the skill and experience needed to fulfill his or her responsibilities,

·       the executive’s effectiveness in discharging his or her responsibilities,

·       the executive’s level of achievement of business objectives and established goals, and

·       the Company’s performance against its short-term objectives and long-term goals.

The principal components of our executive compensation package include a combination of total annual cash and long-term equity incentive compensation. Total annual cash is comprised of a base salary and an annual incentive bonus. Long-term incentives include awards of performance shares, in the form of restricted stock units, and stock options. We use the annual cash bonus incentives to encourage alignment with, and to reward performance against, short-term performance goals, and we use long-term equity-based incentives to make executive compensation dependent on long-term value creation for our stockholders. Both the annual incentive bonus cash compensation and the awards of restricted stock units are performance-dependent and are therefore at risk each year. The awards of stock options provide value only to the extent there is an increase in value of our common stock over the exercise period.

Our executive compensation program is highly leveraged to the principle of pay for performance. We believe that to encourage and reward performance, a significant portion of executive compensation should be tied to, and reflect, performance — performance of the individual, performance of his or her group or division and performance of the Company as a whole. The following table sets out the percentage, and the average percentage by component, of the 2006 Total Direct Compensation of the Chief Executive Officer and four other executive officers named in the Summary Compensation Table on page 26 of this Proxy Statement (the “Named Executive Officers”). “Total Direct Compensation” is comprised of base salary, annual incentive bonus and long-term incentives as reflected in the Summary Compensation Table. The table shows the at-risk components of Total Direct Compensation that are performance-dependent.

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Our executive compensation program targets the level of the base salaries and annual incentives of our executive officers at median competitive market levels and our longer-term equity incentives at the 75th percentile when compared to similar positions with our peer group companies and with our primary labor- and/or capital-market competitors of broadly similar size and market value. Our program is designed to have significant swings in total compensation and any or all of its performance-dependent components, both above and below these levels, in order to reflect actual performance.

Implementation of the Executive Compensation Program.

Our executive compensation program is administered by the Compensation Committee of our Board of Directors, which makes all compensation decisions regarding all executive officers of the Company, including our Named Executive Officers, except in the case of the Chief Executive Officer, with respect to whom the Committee confers with the full Board before making its compensation decisions. The principal functions of the Committee with respect to executive compensation include:

·       Establishing, reviewing and approving the Company’s compensation policy and strategy;

·       Reviewing and approving corporate goals and objectives relevant to the Chief Executive Officer’s compensation and, in conjunction with the full Board, evaluating the Chief Executive Officer’s performance in light of those goals and objectives and setting the Chief Executive Officer’s compensation level based on this evaluation;

·       Reviewing and approving the compensation of the other executive officers of the Company;

·       Making recommendations to the Board with respect to incentive compensation plans and equity-based plans for executive officers and other key employees;

·       Exercising oversight responsibility for severance policies and individual employment and severance arrangements;

·       Reviewing and enforcing compliance with stock ownership guidelines for directors and requirements for executives;

·       Reviewing and approving executive benefits and perquisites;

·       Overseeing the administration of the Company’s annual incentive award plan and (i) establishing eligible classes of participants, (ii) setting performance targets, (iii) approving minimum, target and maximum awards, and (iv) certifying attainment of goals and approving any payouts;

·       Overseeing the administration of the Company’s long-term incentive plans and (i) establishing the award guidelines to be used in determining the amount and mix of individual awards, (ii) making grants to officers and key employees, and (iii) authorizing the number of shares available for grant to other employees;

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·       Overseeing the administration of the Company’s retirement plans; and

·       Providing guidance and direction to, and monitoring of, the Company’s benefit plans and programs.

The Compensation Committee is assisted in this effort by our management and by Frederic W. Cook & Co. (“FWC”), an outside executive compensation consulting firm, whom the Compensation Committee has retained as its independent consultant. With respect to executive compensation matters, FWC reports to and acts at the direction of the Compensation Committee. Management does not direct or oversee the activities of FWC with respect to the Company’s executive compensation program. With the permission of the Compensation Committee, management does work with FWC to develop management’s recommendations for the Committee’s consideration on various executive compensation matters such as recommended grade levels.

FWC conducts an annual review of the Company’s executive compensation program for the Compensation Committee. The review focuses on:

·       the program’s effectiveness in supporting the Company’s business strategy,

·       peer group competitive performance comparisons,

·       the program’s reasonableness as compared to:

·        peer group compensation practices and

·        the competitive practices of our peer group companies, in particular, and our primary labor-and/or capital-market competitors of broadly similar size and market value in general,

·       a market comparison of each element of total compensation with peer-company data, gathered from peer-company proxy statements and other disclosure documents, as well as compensation surveys of the manufacturing industry conducted by Towers Perrin, Hewitt Associates and Watson Wyatt,

·       the dilution and burn rate potential of equity incentives,

·       the cost to our stockholders of equity incentives as measured by the Shareholder Value Transfer methodology,

·       other elements of compensation such as, payments on severance or change in control, perquisites, and

·       the equity ownership of each of the executive officers.

The peer group used to make competitive compensation comparisons is composed of publicly-traded oil services and equipment manufacturing companies with whom we compete generally and with whom we compete to attract and retain qualified executives. In 2006, this group was composed of:

These companies were selected by FWC and approved by the Committee.

Management provides the Compensation Committee at its February meeting each year an itemized summary of each Named Executive Officer’s total compensation for the past two years and the estimated

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low, medium and high total compensation that could be earned by the executive in the current year depending on whether, and to what extent, performance-based compensation is earned. The Chief Executive Officer periodically reviews with the Compensation Committee the performance of executives other than himself, including the other Named Executive Officers.

When making compensation decisions with respect to the amount of each element of total compensation, the Committee considers:

·       the performance of the individual executive,

·       performance of the Company in relation to its peers,

·       the compensation practices of companies with which it competes for talent,

·       the competitive market for executives and compensation levels provided by comparable companies,

·       FWC’s recommendations regarding the appropriate mix of compensation and recommendations regarding each element of each executive’s total compensation, and

·       total compensation of each executive position as compared with the 25th, 50th and 75th percentile compensation for a like position with the individual peer group companies and with the results of the industry surveys.

Components of Executive Compensation.

The overall components of compensation for our executives, including the Named Executive Officers, are:

·       base salary,

·       performance-dependent annual cash incentive bonus,

·       equity based long-term incentives, and

·       benefits and perquisites.

Base Salary.Each of our executives receives a base salary to compensate him or her for services rendered during the year. Base salary ranges are determined for each executive position based on job responsibilities, required experience, value to the Company, and peer group and general market competitiveness. Our base salaries are generally set at, or below, the median of the base salaries paid to similarly situated executives at our peer group companies. Base salaries provided between 9% and 21% of the 2006 Total Direct Compensation of our Named Executive Officers. Base salaries, along with all other elements of compensation, are reviewed annually by the Committee at its November meeting, and base salaries are set for the coming year giving consideration to:

·       changes in levels of responsibility or value to the Company,

·       the performance of the executive,

·       the annual review of executive compensation prepared by FWC, discussed above,  to include:

·        a review of the executive’s compensation in relation to the respective peer group and survey data, and

·        a review of the executive’s compensation relative to individual performance and to base salaries of other executive officers.

At its November 2006 meeting, the Committee raised the base salaries for 2007 of Mr. Erikson to $1,025,000, Mr. Myers to $450,000, Mr. Moore to $450,000, Mr. Carne to $350,000, and Mr. Lemmer to

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$360,000.  The increases in base salary for Mr. Moore resulted from his promotion to President and Chief Operating Officer of the Company and for Mr. Carne from a reassignment to a position of greater responsibility. The increases for Messrs. Erikson, Myers and Lemmer resulted from competitive comparisons.

Performance-Dependent Annual Cash Incentive Bonus.Our Management Incentive Compensation Plan (“MICP”), approved by our stockholders in 2005, provides each of our executives and other key management employees, including the Named Executive Officers, an opportunity to earn a performance-linked annual cash bonus dependent on the level of achievement against performance objectives set by the Committee. The purpose of having our annual bonus plan be performance-dependent is to place a significant portion of targeted Total Direct Compensation at risk tied to the performance-dependent MICP objectives. The MICP is designed to motivate and reward key management employees whose efforts impact the annual performance of the Company and its groups, divisions and subsidiaries through the achievement of financial performance objectives, and in some instances, individual performance objectives. The performance-dependent annual cash bonus incentive provided between 18% and 25% of the 2006 Total Direct Compensation of our Named Executive Officers.

Under the terms of the MICP, after reviewing such factors as the Company’s business portfolio, competition and market conditions, the Compensation Committee establishes a target award for each executive, sets the Company’s performance objectives for the year and measures performance against the objectives at the conclusion of the year.

The MICP sets out the various performance measures from which the Committee may choose in setting yearly performance objectives. They include basic measures of financial performance, such as: earnings, or derivatives thereof including earnings before interest, income taxes, depreciation and amortization (EBITDA), earnings before taxes (EBT), and earnings per share (EPS); return on equity (ROE); cash flow; bookings; revenues; return on net capital employed (RONCE); and, economic value added (EVA).

Setting Individual Target Awards.   The Compensation Committee, taking into consideration the advice and recommendations of its executive compensation consultant advisor, FWC; the recommendations of the Chief Executive Officer for positions other than his own; and all other factors the Committee deems relevant, including peer group and industry competitive practices, establishes a target award for each executive expressed as a percentage of his or her salary. Our target awards are set at or near the market-median target for similar positions with our peer group companies. The target awards for our Named Executive Officers for 2006 and 2007 are as follows:

*                    Expressed as a percentage of base salary.

Mr. Moore’s MICP Target Award was increased in recognition of his new responsibilities as President and Chief Operating Officer. Mr. Lemmer’s Target Award was increased based on market comparisons.

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Setting the Performance Objectives.   Performance objectives for each year are set by the Committee based upon proposals submitted to the Committee by the Chief Executive Officer which, in turn, are based on and designed to support achievement of the Company’s performance goals set out in the annual operating plan and budget approved by the Board. The Committee also considers market expectations for the Company’s performance for the year. The Committee attempts to set goals so that the relative difficulty of achieving target performance levels is consistent from year to year.

For 2006, MICP performance objectives were established for EPS and cash flow for corporate officers, including the Chief Executive Officer. For group and division officers the performance objectives were group/division-specific targets for EBT and cash flow.

In addition, for 2006, there were several performance hurdles to be met to achieve payment of a bonus that would otherwise have been earned by performance against the performance objectives mentioned above. The Company must have achieved a threshold level of ROE set by the Committee for the year or the bonus payments otherwise earned for all participants would have been reduced by 50%. Additionally, any bonus otherwise earned by a corporate participant would have been reduced by 50% if a minimum level of EPS set by the Committee had not been met, and any bonus otherwise earned by a group/division participant would have been reduced by an additional 20% if the group/division failed to increase its revenue and order growth from 2005 by a rate set by the Committee but it would have been increased by 10% as a result of having exceeded that growth rate.

Calibrating Target Awards to Performance.   The actual awards for 2006 could have varied, and for 2007 will vary, from 0-200% of the target award for corporate executives, including the Chief Executive Officer, and from 0-220% for group and division executives, depending upon actual achievement against performance objectives, in the following manner. The EPS/EBT and cash flow performance goals are weighted 75% and 25%, respectively.

The maximum amount that can be earned under the MICP is 200%/220%, and even when the performance exceeds 120%, as it did for some of the groups in 2006, no additional sum can be earned or “banked” for subsequent years.

Measuring Performance.   Following the closing of the books for the year, the Committee verifies and certifies, at its February meeting, the Company’s and each group’s/division’s actual performance against the performance objectives established at orperiod immediately prior to the beginning of the year.

Under the terms of the MICP, the Compensation Committee has the authority to exercise negative discretion to adjust an executive officer’s award down by as much as 25% from the established target award, baseddate on individual performance. The Committee made no discretionary adjustments, modifications or revisions and made no discretionary awards for 2006.

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For 2006, the Compensation Committee certified the achievement of actual performance against performance objectives for corporate executives and the executives of the groups/divisions, as follows:

Over the past five years, the Company has achieved target bonus payments for performance against goals ranging from 0 to 200%, and has averaged 130.5%.

Equity Based Long-Term Incentives.Our long-term incentive program, the 2005 Equity Incentive Plan (the “EQIP”) approved by the stockholders in 2005,which it is intended to align compensation of executives, including the Named Executive Officers and certain other designated key employees, with the interests of our stockholders by providing these executives and key employees with incentives that are tied to the long-term performance of the Company and by rewarding creation and preservation of long-term stockholder value. Our long-term incentive program provided between 54% and 73% of the 2006 Total Direct Compensation of our Named Executive Officers.

The Compensation Committee, in consultation with FWC, determines an appropriate target award for long-term incentives using the Shareholder-Value Transfer methodology. This methodology develops competitive annual long-term incentive amounts by targeting aggregate annual awards based on grant value (and cost) as a percentage of market capitalization, and then estimating competitive individual allocations. Long-term incentive value is awarded to executives in the form of performance-dependent restricted stock units (“RSUs”) and stock options. When allocating long-term incentives, the Committee targeted approximately one-fourth of the long-term incentive target amount for long-term incentives to performance-based RSUs and approximately three-fourths to stock options for the 2006 and the 2007 awards. Adjustments were then made to reflect individual performance. While time-based RSUs are awarded to other executives and key employees, performance-based RSUs and stock options are awarded to executive officers.

Only those RSUs earned by 2006 performance are listed in column (e) of the Summary Compensation Table set out on page 26 of this Proxy Statement. Those granted for 2007 are subject to 2007 performance and will, to the extent earned, if any, be listed as 2007 compensation.

Performance-Based RSUs.   Grants of RSUs are intended to serve two purposes: (1) encourage and reward performance, and (2) to assist in retention of key employees. For 2006 and 2007, each executive received an award of RSUs at the beginning of the year. These RSUs have both performance and continued employment requirements that must be met in order for the executive to earn a payout. A target number of RSUs was established for each executive by dividing an amount equal to his or her target MICP bonus by the year-end closing price of the Company stock. The actual number of RSUs that may be earned, and therefore the ultimate value of the awards, ranges from 0 to 200% of the target number, and will be dependent on the performance of the Company during the year against the same EPS performance goal for corporate officers set by the Committee.

The actual vesting of RSUs earned and payment of the shares they represent are subject to continued employment. Except as noted below, no RSUs will vest if the executive terminates prior to vesting. The awards earned by 2006 performance will vest and be paid out in increments of 12.5%, 12.5% and 75% per

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year beginning in 2007. The awards which can be earned by 2007 performance have a three-year cliff vesting and will vest and be paid out, to the extent earned, if any, in 2010. In the event of termination due to retirement at age 55 with at least 10 years service with the Company for the 2006 earned awards, and at age 60 for the 2007 awards, or due to a reduction in force, the awards will continue to vest according to their vesting schedule. In the event of death or disability, or if terminated in connection with a change-of-control and the successor company entity does not assume the award or grant a substitute award, they will vest immediately upon termination. “Change in control” has the same meaning as in the change in control agreements discussed below, except that a change in control resulting from a merger or consolidation, as defined in part (iii) of the definition, does not occur unless the Company’s stockholders own less than 50% of the outstanding securities of the surviving or resulting corporation or entity.

Stock Options.   Awards of stock options are intended to enhance the link between stock price appreciation and long-term executive officer compensation, provide an opportunity for increased equity ownership by executives and maintain competitive levels of total compensation. In 2006, each key executive, including the Named Executive Officers, received an award of stock options. The number of options was determined using the Black-Scholes option-pricing model by converting that portion of the long-term incentive target amount established for each executive by the Committee remaining after the award of RSUs into a number of stock options. This number was adjusted, for some executive officers other than the Chief Executive Officer, based on the Chief Executive Officer’s input with respect to performance.

The exercise price for all stock option awards made in 2006 is equal to the closing share price on the date of grant. Prior to 2006, the exercise price for stock options was equal to the per share weighted-average daily trading price of the Company’s stock on the date of grant pursuant to the terms of the EQIP then in effect. The Board amended the terms of the EQIP in 2006 to use the closing price on the date of grant in response to the new Securities and Exchange Commission regulations governing executive compensation disclosure, which require options granted at a price different than the closing price on the date of grantsought to be separately noted as such.

The Company has never backdated option awards nor granted options with an exercise price less than either the per share weighted-average daily trading price or the closing price on the date of grant, whichever was then applicable.

The options vest at a rate of 33 1/3% per year over the first three years of a seven-year option term. Vesting rights cease upon termination of employment for any reason other than termination on or after age 65 with at least 10 years service with the Company, death or disability. Exercise rights cease 90 days after termination unless termination is for cause, in which case they cease immediately, or unless termination occurs on or after age 55, for grants prior to 2006, or 60, for grants in 2006, with at least 10 years service with the Company or termination is a result of a reduction in workforce, in which case they cease three years from termination. In the event of a termination due to death or disability, or in the event of a change-of-control and the successor company or entity does not assume the option award or grant a substitute award, as defined in the EQIP, the options immediately vest and become exercisable.

The annual award of stock options has, since 1999, been made in conjunction with the regularly scheduled meetings of the Compensation Committee and Board of Directors in November of each year. The only exception to this was an award to two of the Named Executive Officers in March 2005 that would normally have been made in November 2004. The exercise price of these stock option grants was the per share weighted average daily trading price on the date of grant. To the extent newly hired or promoted executives receive an initial award of stock options,determined whether such options are priced at the closing price on a date no earlier than their actual date of hire or promotion.

Stock options awarded under the predecessor long-term incentive plan to the EQIP allowed for options to be “reloaded.” Stock options awarded under the EQIP have no reload provisions and no options granted since mid-2005 have reload provisions. Under a reload right, when an option holder pays the

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exercise price of a stock option using shares of stock already owned, the holder is granted a new option for a number of shares equal to the number of shares tendered in payment at an exercise price equal to that used to determine the value of the shares tendered, the closing price on the preceding trading day.

Benefits and Perquisites.We provide our executive officers with benefits and perquisites that we and the Committee believe are reasonable, competitive and necessary to attract and retain qualified executives to lead, manage and guide our business and affairs.

Retirement Benefits.   We provide retirement benefits for all our non-union employees in the United States through a combination of our qualified 401(k) defined contribution plan and, for those hired before May 1, 2003, our qualified defined benefit (pension) plan. In addition, executives, including the Named Executive Officers, and other key employees are eligible to participate in our unfunded non-qualified ERISA-excess defined contribution plan, and those hired before May 1, 2003, in our unfunded excess defined benefit (pension) plan. The ERISA-excess plans allow executives and other key employees to participate in the plans as if there were no IRS limitations on the qualified plans, but otherwise operate in substantially the same manner as the accompanying qualified plans, except that the excess defined contribution plan does not have investment options but rather credits investment performance based on the fixed income investment option of the 401(k) defined contribution plan. Under the 401(k) defined contribution plan and the supplemental excess defined contribution plan, participants receive a Company match of 100% on the first 3% of eligible earnings contributed and 50% of the next 3% of qualified earnings contributed.

Participation in our U.S. defined benefit (pension) plan and its accompanying excess plan was closed to new participants as of May 2003. Executives, like other U.S. employees who joined the Company after May 1, 2003, are not eligible to participate in either the defined benefit (pension) plan or its ERISA-excess plan, but are eligible for a Company contribution of between 0 and 6%, depending on Company performance against its MICP EPS performance goal, of each such employee’s qualified earnings into their profit sharing account under our 401(k) defined contribution plan if certain financial objectives are achieved. Further information regarding the Company’s retirement programs are set forth in the Summary Compensation Table on page 26 and in the sections “Pension Benefits Table” on page 31 and in the “Nonqualified Deferred Compensation” section on page 32.

We do not offer a supplemental executive retirement plan or SERP.

Perquisites.   In addition to the standard health, dental, life and disability insurance benefits offered to substantially all of our U.S. non-union employees, our executive officers, including the Named Executive Officers, are eligible to receive financial planning services and reimbursements for country, luncheon and fitness club dues. Senior Vice Presidents, the Chief Operating Officer and the Chief Executive Officer are eligible to use Company aircraft for personal travel provided they reimburse the Company for the incremental cost to the Company of any such use. Additionally, when the spouse of an executive accompanies the executive on travel for business purposes, the executive receives a tax gross-up for any resulting imputed income. Certain executive officers are also reimbursed for automobile fuel and cleaning expenses in lieu of reimbursement for toll charges and actual miles driven in their personal automobiles for Company business.

The Company provides these benefits and perquisites for competitive reasons and because, in the case of spousal travel, the Company’s business is global and its offices and facilities are located throughout the world, requiring a number of our executives to travel extensively and to attend a number of industry and client activities that are social in nature where the presence of the spouse is both expected and beneficial.

The cost to the Company of all benefits and perquisites provided to executive officers is included in FWC’s competitive analysis and in the annual presentation to the Committee on total compensation paid to executives.

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Stock Ownership Requirements.

In addition to stock ownership guidelines for directors set out in “Corporate Governance and Board of Directors Matters — Stock Ownership Guidelines” on page 13 of the Proxy Statement, the Company has stock ownership requirements for its executives and other key employees. Within three years of being appointed an executive or other key employee of the Company, or being promoted to a position requiring increased ownership, the executive or employee is required to directly own Common Stock having a market value or cost basis, whichever is higher, equal to at least the following multiple of his or her base salary:

All executive officers who are no longer in their three-year grace period are in compliance with their ownership requirement. The ownership interest of the Named Executive Officers, individually, and executives as a whole, is set out in “Security Ownership of Management” on page 39 of this Proxy Statement.

Employment, Severance and Change in Control Arrangements.

The Company has no employment contract or change in control agreement with Mr. Erikson, our Chairman and Chief Executive Officer. Mr. Erikson is eligible for benefits under our Executive Severance Policy.

Employment Contracts.   When the Company was created by a split-off in 1995, in order to attract qualified executives with the required experience and leadership skills to what was essentially a start-up venture with the risks normally associated with such a venture, the Company offered employment contracts to three persons as inducements to employment. One of these persons has since retired from the Company and the contract of one of the others, Mr. Erikson, our Chairman and Chief Executive Officer, has expired by its own terms and has not been replaced. The third person to have an employment contract, and only one currently with an employment contract, is Mr. Myers, our Chief Financial Officer. The agreement provides terms of employment, including base salary, bonus, benefits, severance benefits, and certain other benefits should a “change in control” occur. The terms of Mr. Myers’ contract are discussed in the section “Potential Payments Upon Termination or Change In Control” on page 33 of this Proxy Statement.

Executive Severance Policy.   The Company has an Executive Severance Policy for all executives, other than those with an employment contract. As a result, this Policy covers all executives other than Mr. Myers, including Messrs. Erikson, Moore, Carne and Lemmer and provides for salary and welfare benefit continuation of 12 months for a covered executive if his or her employment with the Company is terminated by the Company for any reason other than cause. Participation in the MICP will be prorated through the last day of employment and determined on the basis of unit achievement of the goals and objectives established for the applicable year. No bonus entitlements are earned during the severance period.

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Change in Control Agreements.   The Company has change in control agreements with eight executive officers excluding Messrs. Erikson and Myers, but including Messrs. Moore, Carne and Lemmer. The change in control agreements entitle the executive, upon termination in connection with a “change in control”, to a payment equal to three times: base salary; the higher of the highest bonus received during the past three years or eligible to receive during the year of termination; the highest equity award received in the last five years; and value of benefits and perquisites. This agreement also provides that if any payments made under the agreement would cause the executive to be subject to an excise tax because the payment is a “parachute payment” (as defined in the Internal Revenue Code), then the Company will pay the executive an excise tax premium in a sufficient amount to make the executive whole with respect to any additional tax that would not have been payable but for the excise tax provision.

“Good Reason” for termination includes any of the following events which occur without his consent: a change in status, title(s) or position(s) as an officer of the Company that is not a promotion; a reduction in base salary; termination of participation in an ongoing compensation plan; relocation; failure of a successor of the Company to assume the agreement; termination by the Company other than for cause; prohibition from engaging in outside activities permitted by the agreement; or any continuing material default by the Company in the performance of its obligations under the agreement.

A “change in control” of the Company will occur for purposes of this agreement if (i) any person is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Actan interested stockholder, an owner of 1934), directly or indirectly, of securities of the Company representing 20%15% or more of a corporation's voting stock. These provisions could have the combined voting powereffect of the Company’s outstanding voting securities, other than through the purchase of voting securities directly from the Company through a private placement; (ii) the current members of the Board,delaying, deferring or subsequent members approved  by two-thirds of the current members, no longer comprise a majority of the Board; (iii) the Company is merged or consolidated with another corporation or entity and the Company’s stockholders own less than 70% of the outstanding voting securities of the surviving or resulting corporation or entity; (iv) the Company is merged or consolidated with another corporation or entity and the consideration paid is part or all cash equivalent in value equal to 30% or more of the outstanding voting securities of the Company; (v) a tender offer or exchange offer is made and consummated by a person other than the Company for the ownership of 20% or more of the Company’s voting securities; or (vi) there has been a disposition of all or substantially all of the Company’s assets.

Businesses in our industry face a number of risks, including the risk of being acquired, and our executives face the risk of being terminated as a result thereof, and, with the exception of Mr. Myers, they are employees at will who can be terminated for the convenience of the Company. We believe that entering into change in control agreements with some of our executives and providing severance arrangements for all our executives has helped us attract and retain the level of executive talent needed to achieve the Company’s goals. The elements of severance compensation and the amounts of each were approved by the Committee at the time the agreements were entered into based on the Committee’s assessment of what was appropriate and competitive at that time.

Change in control agreements typically provide for multiples of salary and bonus. Most of our agreements provide for a multiple of the value of equity awards as well because our executive officers took stock options in lieu of all or a portion of their base salary, thus putting all their Total Direct Compensation at risk dependent upon performance against goals and stock price appreciation, from 1995 to 2002. We believed that, in the event of a termination as a result of a change in control, our executive officers should not be disadvantaged for having participated in our options in lieu of salary program. Since the program has been discontinued, the Committee has removed this feature from our change in control agreements entered into in 2006 and later.

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Tax Implications of Executive Compensation.

Section 162(m) of the Internal Revenue Code of 1986, as amended, places a limit of $1 million on the amount of annual compensation that may be deducted by the Company in any year with respect to the executives. Since certain performance-based compensation approved by stockholders is not subject to this deduction limitation and is, therefore, deductible, stock options and RSUs granted under the company’s 2005 Equity Incentive Plan and the annual performance-based awards paid pursuant to the Management Incentive Compensation Plan generally will qualify as performance-based compensation and should be deductible. However, to compensate executives in a manner commensurate with performance and the competitive market for executive talent, the Committee and/or the Board of Directors may from time to time, in circumstances it deems appropriate, award compensation in addition to these stock options and RSUs and annual performance-based awards that may not be deductible.

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Summary Compensation Table

The following table sets forth the compensation earned by the Chief Executive Officer, Chief Financial Officer and the other Named Executive Officers for services rendered to the Company for the fiscal year ended December 31, 2006. Compensation earned under the Company’s MICP is paid in the year following the year in which it is earned, and amounts earned in 2006, while paid in 2007, are included herein.

(1)The amounts included in the “Stock Awards” and “Option Awards” columns represent the compensation cost we recognized in 2006 determined in accordance with Statement of Financial Accounting Standards No. 123(R). For a  discussion of valuation assumptions, see Note 8 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2006. The restricted stock unit awards were granted on January 1, 2006, and were earned in 2006. The awards entitled the executive to receive a number of shares of Common Stock equal to the number of units earned upon vesting. The target value was established for each executive’s award which was converted into a number of restricted stock units based on the volume weighted average price on the New York Stock Exchange of the Common Stock on December 30, 2005. The number of units actually earned was 200% of the target number based on performance against goals for earnings per share, cash flow and return on equity in 2006. The units vest in three annual installments of 12.5%, 12.5% and 75%, beginning on February 28, 2007. Stock options were granted on November 9, 2006, at a price equal to the closing price of the Company’s Common Stock on the date of grant and vest in three equal  annual increments beginning on November 9, 2007.

(2)The amount shown for each Named Executive Officer in the “Non-Equity Incentive Plan Compensation” column is attributable to an MICP award earned in fiscal year 2006, but paid in 2007.

(3)These figures include amounts due to pension value earned under the Retirement Plan and pension values earned under the Excess Defined Benefit Plan as follows:  Mr. Erikson, $22,413 and $235,640; Mr. Myers, $16,871 and $57,141; Mr. Moore, $15,800 and $35,014; Mr. Carne, $13,293 and $25,902; and Mr. Lemmer, $17,022 and $36,111.

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(4)In addition to a one-time payment of $200 awarded to all employees in recognition of the Company’s Common Stock having achieved a certain price level, the amounts shown in the “All Other Compensation” column are attributable to the following:

·Mr. Erikson:  $5,425 for Executive LTD premium payment; $58,919 for personal plane usage and spouse travel expense; $10,026 for a tax gross-up on spouse travel; $16,167 for amounts paid by the Company for basic and excess life and long-term disability insurance premiums;  $9,900 for Company contributions to the Retirement Savings Plan; $154,375 for Company contributions and interest for the Supplemental Excess Defined Contribution Plan; and $39,750 for perquisites and other personal benefits, which includes $12,742 for welfare benefits, $25,399 for club dues and $1,609 for miscellaneous automobile expenses..

·Mr. Myers:  $8,552 for personal plane usage; $2,105 for amounts paid by the Company for basic and excess life insurance premiums; $9,900 for Company contributions to the Retirement Savings Plan; $44,214 for Company contributions and interest to the Supplemental Excess Defined Contribution Plan; and $13,937 for perquisites and other personal benefits, which includes $7,721 for welfare benefits and $6,216 for club dues.

·Mr. Moore:  $1,731 for amounts paid by the Company for basic and excess life insurance premiums;  $9,900 for Company contributions to the Retirement Savings Plan; $17,217 for Company contributions and interest to the Supplemental Excess Defined Contribution Plan; and $18,504 for perquisites and other personal benefits, which includes $7,714 for welfare benefits and $10,790 for club dues.

·Mr. Carne:  $2,064 for amounts paid by the Company for basic and excess life insurance premiums;  $9,900 for Company contributions to the Retirement Savings Plan; $26,222 for Company contributions and interest to the Supplemental Excess Defined Contribution Plan; and $8,831 for perquisites and other personal benefits.

·Mr. Lemmer:  $3,016 for amounts paid by the Company for basic and excess life insurance premiums;  $9,900 for Company contributions to the Retirement Savings Plan; $33,359 for Company contributions and interest to the Supplemental Excess Defined Contribution Plan; and $14,697 for perquisites and other personal benefits, which includes $1,185 for welfare benefits, $11,617 for club dues and $1,895 for automobile expenses.

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