SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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RULE 14A-6(E)(2))
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[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Halliburton Company
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N/A
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Notes:
[LOGO]
March 20, 2001
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Halliburton Company. The meeting will be held on Tuesday, May 15, 2001, at 9:00
a.m. in the Parisian Room of the Fairmont Hotel, 1717 North Akard Street,
Dallas, Texas 75201. The Notice of Annual Meeting, proxy statement and proxy
card from the Board of Directors are enclosed. The materials provide further
information concerning the Annual Meeting.
At the meeting, stockholders are being asked to:
. elect a Board of Directors of thirteen Directors to serve for the
coming year;
. ratify the selection of Arthur Andersen LLP as independent accountants
to examine the financial statements and books and records of
Halliburton for 2001; and
. consider three stockholder proposals.
Please refer to the proxy statement for detailed information on each of these
proposals.
It is very important that your shares are represented and voted at the
meeting. Your shares may be voted by returning the enclosed proxy card, by
telephone or via the Internet. If you attend the meeting, you may vote in
person even if you have previously mailed a proxy card or voted by telephone or
via the Internet. We would appreciate your informing us on the proxy card if
you expect to attend the meeting so that we can provide adequate seating.
The continuing interest of our stockholders in the business of Halliburton is
appreciated and we hope many of you will be able to attend the Annual Meeting.
Sincerely,
/s/David J. Lesar
David J. Lesar
Chairman of the Board, President
and Chief Executive Officer
[LOGO]
Notice of Annual Meeting of Stockholders
to be Held May 15, 2001
The Annual Meeting of Stockholders of Halliburton Company, a Delaware
corporation, will be held on Tuesday, May 15, 2001, at 9:00 a.m., in the
Parisian Room of the Fairmont Hotel, 1717 North Akard Street, Dallas, Texas
75201. At the meeting, the stockholders will be asked to consider and act upon
the matters discussed in the attached proxy statement as follows:
1. To elect thirteen (13) Directors to serve for the ensuing year and
until their successors shall be elected and shall qualify.
2. To consider and act upon a proposal to ratify the appointment of
Arthur Andersen LLP as independent accountants to examine the
financial statements and books and records of Halliburton for the year
2001.
3. To consider and act upon three proposals submitted by stockholders.
4. To transact any other business that properly comes before the meeting
or any adjournment or adjournments of the meeting.
These items are fully described in the following pages, which are made a part
of this Notice. The Board of Directors has fixed Monday, March 19, 2001, at the
close of business, as the record date for the determination of stockholders
entitled to notice of and to vote at the meeting and at any adjournment of the
meeting.
The Company requests that you vote your shares as promptly as possible. You
may vote your shares in a number of ways. You may mark your votes, date, sign
and return the proxy card or voting instruction form. If you have shares
registered in your own name, you may choose to vote those shares via the
Internet at http://www.proxyvoting.com/hal, or you may vote telephonically,
within the U.S. and Canada only, by calling 1-800-840-1208 (toll-free). If you
hold Halliburton shares with a broker or bank, you may also be eligible to vote
via the Internet or by telephone if your broker or bank participates in the
proxy voting program provided by ADP Investor Communication Services.
By order of the Board of Directors,
/s/ Susan S. Keith
Susan S. Keith
Vice President and Secretary
March 20, 2001
----------------
Stockholders are urged to vote their shares as promptly as possible by (1)
signing, dating and returning the enclosed proxy card or (2) following the
enclosed voting instructions to vote via the Internet or by telephone.
PROXY STATEMENT
GENERAL INFORMATION
The accompanying proxy is solicited by the Board of Directors of Halliburton
Company. By executing and returning the enclosed proxy or by following the
enclosed voting instructions, you authorize the persons named in the proxy to
represent you and vote your shares on the matters described in the Notice of
Annual Meeting.
If you attend the meeting, you may vote in person. If you are not present,
your shares can be voted only if you have returned a properly executed proxy or
followed the instructions for voting by telephone or via the Internet. If you
have returned a properly executed proxy or followed the instructions for voting
by telephone or via the Internet, your shares will be voted as you specify. If
no specification is made, the shares will be voted in accordance with the
recommendations of the Board of Directors. You may revoke the authorization
given in your proxy at any time before the shares are voted at the meeting.
The record date for determination of the stockholders entitled to vote at the
Annual Meeting is the close of business on March 19, 2001. Halliburton's Common
Stock, par value $2.50, is the only class of capital stock that is outstanding.
As of March 19, 2001, there were 429,030,141 shares of Common Stock
outstanding. Each of the outstanding shares of Common Stock is entitled to one
vote on each matter submitted to the stockholders for a vote at the meeting. A
complete list of stockholders entitled to vote will be kept at our offices at
the address specified below for ten days prior to the Annual Meeting.
Votes cast by proxy or in person at the Annual Meeting will be counted by the
persons appointed by us to act as election inspectors for the meeting. Except
as set forth below, the affirmative vote of the majority of shares present in
person or represented by proxy at the meeting and entitled to vote on the
subject matter will be the act of the stockholders. Shares for which a holder
has elected to abstain on a matter will count for purposes of determining the
presence of a quorum and will be considered a vote against the matter.
In the election of Directors, the candidates for election receiving the
highest number of affirmative votes of the shares entitled to be voted (whether
or not a majority of the shares present), up to the number of Directors to be
elected by those shares, will be elected. Shares present but not voting on the
election of Directors will be disregarded (except for quorum purposes) and will
have no legal effect.
The election inspectors will treat shares held in street name which cannot be
voted by a broker on specific matters in the absence of instructions from the
beneficial owner of the shares, known as broker non-vote shares, as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum. In determining the outcome of any matter for which the broker does not
have discretionary authority to vote, however, those shares will be treated as
not present and not entitled to vote on that matter. Those shares may be
entitled to vote on other matters.
In accordance with our confidential voting policy, no vote of any stockholder
will be disclosed to Halliburton's officers, Directors or employees, except:
. as necessary to meet legal requirements and to assert claims for and
defend claims against Halliburton;
. when disclosure is voluntarily made or requested by the stockholder;
. when stockholders write comments on proxy cards; or
. in the event of a proxy solicitation not approved and recommended by
the Board of Directors.
The proxy solicitor, the election inspectors and the tabulators of all proxies,
ballots and voting tabulations that identify stockholders are independent and
are not employees of Halliburton.
1
This proxy statement, the form of proxy and voting instructions are being
sent to stockholders on or about April 2, 2001. Our Annual Report to
Stockholders, including financial statements, for the fiscal year ended
December 31, 2000 accompanies this proxy statement. The Annual Report is not to
be considered as a part of the proxy solicitation material or as having been
incorporated by reference.
Our principal executive office is located at 3600 Lincoln Plaza, 500 N. Akard
Street, Dallas, Texas 75201-3391.
ELECTION OF DIRECTORS
(Item 1)
Mr. Richard B. Cheney, who served as Chairman of the Board and Chief
Executive Officer, retired from the Board of Directors and the company on
August 16, 2000, in order to run as the Republican Party's Vice Presidential
candidate. Contemporaneously with Mr. Cheney's retirement, Mr. David J. Lesar
was elected to the Board to fill the vacancy. Mr. Lesar is being proposed for
the first time for election to the Board of Directors by the stockholders.
Effective at 9:00 a.m., May 15, 2001, the number of Directors which will
constitute the Board will be increased from 10 to 13. Kenneth T. Derr, Aylwin
B. Lewis and Debra L. Reed are proposed for the first time for election as
Directors to fill the vacancies created by the increase.
Thirteen Directors are to be elected to serve for the ensuing year and until
their successors are elected and qualify. Ten of the nominees listed below are
presently Directors of Halliburton. It is intended that the Common Stock
represented by the proxies, in the absence of instructions to the contrary,
will be voted for the election as Directors of the thirteen nominees. If any of
the nominees are unwilling or unable to serve, favorable and uninstructed
proxies will be voted for a substitute nominee designated by the Board of
Directors. If a suitable substitute is not available, the Board of Directors
will reduce the number of Directors to be elected. Each nominee has indicated
approval of his or her nomination and his or her willingness to serve if
elected.
Information About Nominees for Director
LORD CLITHEROE, 71, Retired Chairman, The Yorkshire Bank, PLC;
Deputy Chief Executive, The RTZ Corporation PLC (an
international group of mining and industrial companies), 1987-
1989; Executive Director, The RTZ Corporation PLC, 1968-1987;
joined Halliburton Company Board in 1987; Chairman of the
Health, Safety and Environment Committee and member of the
Compensation, the Management Oversight and the Nominating and
Corporate Governance Committees.
[PHOTO]
ROBERT L. CRANDALL, 65, Chairman Emeritus, AMR
Corporation/American Airlines, Inc. (engaged primarily in the
air transportation business); Chairman, President and Chief
Executive Officer, AMR Corporation and Chairman and Chief
Executive Officer, American Airlines, Inc. 1985-1998; President,
American Airlines, Inc., 1985-1995; joined Halliburton Company
Board in 1986; Chairman of the Nominating and Corporate
Governance Committee and member of the Audit, the Compensation
and the Management Oversight Committees; Director of Celestica
Inc., American Express Company, Clear Channel Communications,
Inc. and Anixter International Inc.
[PHOTO]
2
KENNETH T. DERR, 64, Retired Chairman of the Board, Chevron
Corporation (an international oil company); Chairman and Chief
Executive Officer, Chevron Corporation, 1989-1999; Director of
AT&T Corp., Citigroup Inc. and Potlatch Corporation.
[PHOTO]
CHARLES J. DIBONA, 69, Retired President and Chief Executive
Officer, American Petroleum Institute (a major petroleum
industry trade association), 1979-1997; joined Halliburton
Company Board in 1997; member of the Health, Safety and
Environment, the Compensation and the Management Oversight
Committees; Chairman of the Board of Trustees, Logistics
Management Institute.
[PHOTO]
LAWRENCE S. EAGLEBURGER, 70, Senior Foreign Policy Advisor,
Baker, Donelson, Bearman & Caldwell (a Washington, D.C. law
firm); United States Secretary of State, Department of State,
1992-1993; Acting Secretary of State, 1992; Deputy Secretary of
State, 1989-1992; joined Halliburton Company Board in 1998;
member of the Audit, the Compensation, the Management Oversight
and the Nominating and Corporate Governance Committees; Director
of Phillips Petroleum Company, Stimsonite, Universal
Corporation, Corning Corp. and COMSAT.
[PHOTO]
W. R. HOWELL, 65, Chairman Emeritus, J.C. Penney Company, Inc.
(a major retailer); Chairman of the Board, J.C. Penney Company,
Inc., 1983-1996; Chief Executive Officer, J.C. Penney Company,
Inc., 1983-1995; joined Halliburton Company Board in 1991;
Chairman of the Management Oversight Committee and member of the
Audit and the Compensation Committees; Director of Exxon Mobil
Corporation, Pfizer Inc., Bankers Trust Company, Bankers Trust
New York Corporation, The Williams Companies, Inc. and American
Electric Power Company, Inc.
[PHOTO]
RAY L. HUNT, 57, For more than five years, Chairman of the
Board and Chief Executive Officer, Hunt Oil Company (oil and gas
exploration and development); Chairman of the Board, Chief
Executive Officer and President, Hunt Consolidated, Inc. and
Chairman of the Board, Chief Executive Officer and President,
RRH Corporation; joined Halliburton Company Board in 1998;
Chairman of the Compensation Committee and member of the Audit
and the Management Oversight Committees; Director of Electronic
Data Systems Corporation, PepsiCo, Inc. and Security Capital
Group Incorporated; Class C Director of the Federal Reserve Bank
of Dallas.
[PHOTO]
DAVID J. LESAR, 47, Chairman of the Board, President and Chief
Executive Officer of the Company; President of the Company,
1997-2000; Executive Vice President and Chief Financial Officer,
1995-1997; joined Halliburton Company Board in 2000; Director of
Lyondell Chemical Company and Mirant Corporation.
[PHOTO]
3
AYLWIN B. LEWIS, 46, Chief Operating Officer, TRICON Global
Restaurants, Inc. (a quick service restaurant company);
Executive Vice President, Operations and New Business
Development, TRICON Global Restaurants, Inc., January-July 2000;
Chief Operating Officer, Pizza Hut, Inc., 1997-1999; Senior Vice
President, Operations, Pizza Hut, Inc., 1996-1997; Senior Vice
President, Marketing and Operations Development, KFC-Pepsico,
Inc., 1995-1996.
[PHOTO]
J. LANDIS MARTIN, 55, For more than five years, President and
Chief Executive Officer, NL Industries, Inc. (a manufacturer and
marketer of titanium dioxide pigments) and Chairman and Chief
Executive Officer, Titanium Metals Corporation (an integrated
producer of titanium metals); President, Titanium Metals
Corporation, since 2000; Chief Executive Officer, Titanium
Metals Corporation, since 1995; Chairman of the Board and Chief
Executive Officer, Baroid Corporation (and its predecessor),
acquired by Dresser Industries, Inc. in 1994, 1990-1994; joined
Halliburton Company Board in 1998; member of the Health, Safety
and Environment, the Nominating and Corporate Governance and the
Management Oversight Committees; Director of NL Industries,
Inc., Titanium Metals Corporation, Tremont Corporation,
Apartment Investment and Management Corporation, Crown Castle
[PHOTO] International Corporation and Special Metals Corporation.
JAY A. PRECOURT, 63, Chairman of the Board and Chief Executive
Officer, Hermes Consolidated, Inc. (a gatherer, transporter and
refiner of crude oil and crude oil products); Vice Chairman and
Chief Executive Officer, Tejas Gas Corporation, 1986-1999;
President, Tejas Gas Corporation, 1996-1998; joined Halliburton
Company Board in 1998; member of the Compensation, the Health,
Safety and Environment and the Management Oversight Committees;
Chairman of the Board and Director of Founders Funds, Inc. and
Director of the Timken Company.
[PHOTO]
DEBRA L. REED, 44, President, San Diego Gas & Electric Company
(a regulated utility company); President-Energy Distribution
Services, Southern California Gas Company, 1998-2000; Senior
Vice President, Southern California Gas Company, 1995-1998.
[PHOTO]
C. J. SILAS, 68, Retired Chairman of the Board and Chief
Executive Officer, Phillips Petroleum Company (engaged in
exploration and production of crude oil, natural gas and natural
gas liquids on a worldwide basis, the manufacture of plastics
and petrochemicals and other activities); Chairman of the Board
and Chief Executive Officer Phillips Petroleum Company, 1985-
1994; joined Halliburton Company Board in 1993; Chairman of the
Audit Committee and member of the Compensation and the
Management Oversight Committees; Director of Reader's Digest
Association, Inc.
[PHOTO]
4
Stock Ownership of Certain Beneficial Owners and Management
The following table sets forth information about persons or groups who, based
on information contained in Schedules 13G filed with the Securities and
Exchange Commission reflecting beneficial ownership at December 31, 2000, own
or have the right to acquire more than five percent of our Common Stock.
Amount and
Nature of Percent
Name and Address Beneficial of
of Beneficial Owner Ownership Class
------------------- ---------- -------
FMR Corp. ................................................ 41,076,328(1) 9.619%
82 Devonshire Street
Boston, MA 02109
- --------
(1) The number of shares reported includes 39,081,761 shares beneficially owned
by Fidelity Management & Research Company, 1,255,467 shares owned by
Fidelity Management Trust Company and 739,100 shares held by Fidelity
International Limited. FMR Corp., through control of Fidelity Management &
Research Company and Fidelity Management Trust Company, has sole
dispositive power over the shares with the exception of those held
beneficially by Fidelity International Limited. FMR Corp. has sole power to
vote or to direct the vote of 861,667 shares of Common Stock.
The following table sets forth, as of March 19, 2001, the amount of our
Common Stock owned beneficially by each Director and nominee for Director, each
of the executive officers named in the Summary Compensation Table on page 16
and all Directors, nominees for Director and executive officers as a group.
Amount and Nature of
Beneficial Ownership
----------------------------------
Sole Shared
Voting and Voting or
Name of Beneficial Owner or Investment Investment Percent
Number of Persons in Group Power(1) Power(2) of Class
- --------------------------- ---------- ---------- --------
Richard B. Cheney........................... 200,000(3) *
Lord Clitheroe.............................. 4,800 *
Lester L. Coleman........................... 210,980 *
Robert L. Crandall.......................... 5,200 *
Kenneth T. Derr............................. 2,000 *
Charles J. DiBona........................... 2,200 *
Lawrence S. Eagleburger..................... 12,557 *
W. R. Howell................................ 4,100 *
Ray L. Hunt................................. 78,247 69,712(4) *
David J. Lesar.............................. 629,200 *
Aylwin B. Lewis............................. 0 *
J. Landis Martin............................ 51,601 *
Gary V. Morris.............................. 215,017 *
Jay A. Precourt............................. 19,240 *
David A. Reamer............................. 127,242 *
Debra L. Reed............................... 0 250(4) *
C. J. Silas................................. 4,200 *
Donald C. Vaughn............................ 221,409 *
Shares owned by all current Directors,
nominees for Director and executive
officers as a group (24 persons)........... 2,039,801 69,962 *
- --------
* Less than 1% of shares outstanding.
(1) Included in the table are shares of Common Stock that may be purchased
pursuant to outstanding stock options (and, in the case of Mr. Vaughn,
related restricted incentive stock awards under specific Dresser
Industries, Inc. stock compensation plans) within 60 days of the date of
this proxy statement for the following: Mr. Cheney--200,000; Lord
Clitheroe--1,000; Mr. Coleman--159,667; Mr. Crandall--1,000; Mr. DiBona--
1,000; Mr. Eagleburger--2,500; Mr. Howell--1,000; Mr. Hunt--7,500; Mr.
Lesar--362,036; Mr. Martin--7,500; Mr. Morris--128,667; Mr. Precourt--
7,500; Mr. Reamer--84,500; Mr. Silas--1,000; Mr. Vaughn--
5
114,163 and six unnamed executive officers--148,541. Until the options are
exercised, these individuals will neither have voting nor investment power
over the underlying shares of Common Stock but only have the right to
acquire beneficial ownership of the shares through exercise of their
respective options.
(2) The Halliburton Stock Fund is an investment fund established under the
Halliburton Company Employee Benefit Master Trust to hold Halliburton
Common Stock for some of Halliburton's profit sharing, retirement and
savings plans. The Fund held 4,111,186 shares of Common Stock at March
5, 2001. Mr. Reamer and two executive officers not named in the above
table have beneficial interests in the Fund. Shares held in the Fund are
not allocated to any individual's account. A total of 2,243 shares which
might be deemed to be beneficially owned as of March 5, 2001 by Mr.
Reamer and the unnamed executive officers is not included in the table
above. The Trustee, State Street Bank and Trust Company, votes shares
held in the Halliburton Stock Fund in accordance with voting
instructions from the participants. Under the terms of the plans, a
participant has the right to determine whether up to 15% of his account
balance in a plan is invested in the Halliburton Stock Fund. The
Trustee, however, determines when sales or purchases are to be made.
(3) Mr. Cheney has entered into an irrevocable agreement to donate to
charity the after-tax proceeds from the exercise of all his outstanding
vested and unvested stock options, including the options relating to
200,000 shares referenced in the table. The agreement gives an
administrative agent total discretion to decide when to exercise the
options, without consultation with Mr. Cheney. Mr. Cheney does not own
any shares of Common Stock.
(4) Mr. Hunt holds 69,712 shares as the trustee of trusts established for
the benefit of his children. Ms. Reed has shared voting and investment
power over 250 shares held in her husband's Individual Retirement
Account.
6
CORPORATE GOVERNANCE
The Company's Guidelines on Governance (Revised as of February 17, 2000) were
included in the proxy statement for the 2000 Annual Meeting of Stockholders and
have not been revised since that date. If you would like a copy of the
Guidelines, please contact the Vice President and Secretary at the address set
forth on page 2 of this proxy statement.
THE BOARD OF DIRECTORS
AND
STANDING COMMITTEES OF DIRECTORS
The Board of Directors has standing Audit; Compensation; Nominating and
Corporate Governance; Health, Safety and Environment; and Management Oversight
Committees. Each of the standing Committees is comprised entirely of outside
Directors, none of whom is an employee or former employee of Halliburton.
During the last fiscal year, the Board of Directors met on 9 occasions, the
Audit Committee met on 6 occasions, the Compensation Committee met on 5
occasions, the Nominating and Corporate Governance Committee met on 3
occasions, the Health, Safety and Environment Committee met on 2 occasions, and
the Management Oversight Committee met on 5 occasions. Except for Messrs.
Eagleburger and Hunt, no other incumbent member of the Board attended fewer
than 75 percent of the total number of meetings of the Board and the Committees
on which he served during the last fiscal year.
Audit Committee
The Audit Committee's role is one of oversight, while Halliburton's
management is responsible for preparing financial statements. The independent
auditors are responsible for auditing those financial statements. The Audit
Committee is not providing any expert or special assurance as to Halliburton's
financial statements or any professional certification as to the independent
auditor's work. The following functions are the key responsibilities of the
Audit Committee in carrying out its oversight:
. recommending the appointment of independent auditors to the Board of
Directors;
. reviewing the scope of the independent auditors' examination and the
scope of activities of the internal audit department;
. reviewing Halliburton's financial policies and accounting systems and
controls;
. reviewing audited financial statements and interim financial
statements;
. preparing a report for inclusion in Halliburton's proxy statement
regarding the Audit Committee's review of audited financial statements
for the last fiscal year which includes a statement on whether it
recommended that the Board include those financial statements in the
Annual Report on Form 10-K;
. approving and ratifying the duties and compensation of the independent
auditors, both for audit and non-audit services; and
. reviewing and assessing the adequacy of the Audit Committee's Charter
annually and recommending revisions to the Board.
The Committee also reviews Halliburton's compliance with its Code of Business
Conduct. The Committee meets separately with the independent auditors and with
members of the internal audit staff, outside the presence of company management
or other employees, to discuss matters of concern, to receive recommendations
or suggestions for change and to exchange relevant views and information. The
Audit Committee and the Board of Directors are ultimately responsible for the
selection, evaluation and replacement of the independent auditors.
Halliburton's Audit Committee Charter is attached as Appendix A.
7
Compensation Committee
Duties of the Compensation Committee include:
. developing and approving an overall executive compensation philosophy,
strategy and framework consistent with corporate objectives and
stockholder interests;
. reviewing and approving all actions relating to compensation, promotion
and employment-related arrangements for specified officers of
Halliburton, its subsidiaries and affiliates;
. establishing annual performance criteria and reward schedules under
Halliburton's annual incentive pay plans and certifying the performance
level achieved and reward payments at the end of each plan year;
. approving any other incentive or bonus plans applicable to specified
officers of Halliburton, its subsidiaries and affiliates;
. administering awards under Halliburton's 1993 Stock and Long-Term
Incentive Plan and Senior Executives' Deferred Compensation Plan;
. selecting an appropriate comparator group against which Halliburton's
total executive compensation program is measured;
. reviewing and approving or recommending to the Board, as appropriate,
major changes to, and taking administrative actions associated with,
any other forms of non-salary compensation under its purview;
. reviewing and approving the stock allocation budget among all employee
groups within Halliburton; and
. monitoring and reviewing periodically overall compensation program
design and practice to ensure continued competitiveness,
appropriateness and alignment with established philosophies, strategies
and guidelines.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee has responsibility for:
. reviewing and periodically updating the criteria for Board membership
and evaluating the qualifications of each Director candidate against
the criteria;
. assessing the appropriate mix of skills and characteristics required of
Board members;
. identifying and screening candidates for Board membership;
. establishing procedures for stockholders to recommend individuals for
consideration by the Committee as possible candidates for election to
the Board;
. reviewing annually each Director's continuation on the Board and
recommending to the Board a slate of Director nominees for election at
the Annual Meeting of Stockholders;
. recommending candidates to fill vacancies on the Board;
. reviewing periodically the status of each Director to assure compliance
with the Board's policy that at least a majority of Directors meet the
Board's definition of independent Director;
. recommending members to serve on the standing Committees of the Board
and the Chairmen of the Committees;
. reviewing periodically the corporate governance guidelines adopted by
the Board of Directors and recommending revisions to the guidelines as
appropriate; and
. reviewing periodically Halliburton's Director compensation practices
and recommending changes, if any, to the Board.
8
The Nominating and Corporate Governance Committee will consider qualified
nominees recommended by stockholders who may submit recommendations to the
Committee in care of the Vice President and Secretary at the address set forth
on page 2 of this proxy statement. Stockholder nominations must be submitted
prior to year-end and must be accompanied by a description of the
qualifications of the proposed candidate and a written statement from the
proposed candidate that he or she is willing to be nominated and desirous of
serving, if elected.
Nominations by stockholders may also be made at an Annual Meeting of
Stockholders in the manner provided in our By-laws. The By-laws provide that a
stockholder entitled to vote for the election of Directors may make nominations
of persons for election to the Board at a meeting of stockholders by complying
with required notice procedures. Nominations shall be made pursuant to written
notice to the Secretary, which must be received at our principal executive
offices not less than ninety (90) days prior to the anniversary date of the
immediately preceding Annual Meeting of Stockholders. The notice shall set
forth:
. as to each person the stockholder proposes to nominate for election or
re-election as a Director:
. the name, age, business address and residence address of the
person,
. the principal occupation or employment of the person,
. the class and number of shares of Halliburton capital stock that
are beneficially owned by the person, and
. all other information relating to the person that is required to be
disclosed in solicitations for proxies for election of directors
pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended; and
. as to the stockholder giving the notice:
. the name and record address of the stockholder, and
. the class and number of shares of Halliburton capital stock that
are beneficially owned by the stockholder.
The proposed nominee may be required to furnish other information as
Halliburton may reasonably require to determine the eligibility of the proposed
nominee to serve as a Director. At any meeting of stockholders, the presiding
officer may disregard the purported nomination of any person not made in
compliance with these procedures.
Health, Safety and Environment Committee
The Health, Safety and Environment Committee has responsibility for:
. reviewing and assessing Halliburton's health, safety and environmental
policies and practices and proposing modifications or additions as
needed;
. overseeing the communication and implementation of these policies
throughout Halliburton;
. reviewing annually the health, safety and environmental performance of
Halliburton's operating units and their compliance with applicable
policies and legal requirements; and
. identifying, analyzing and advising the Board on health, safety and
environmental trends and related emerging issues.
9
Management Oversight Committee
The Management Oversight Committee has responsibility for:
. evaluating the performance of the Chief Executive Officer;
. reviewing succession plans for senior management of Halliburton and its
major operating units;
. evaluating management development programs and activities; and
. reviewing other internal matters of broad corporate significance.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following persons served as members of the Compensation Committee during
2000: Charles J. DiBona, W. R. Howell, Ray L. Hunt, Jay A. Precourt, and C. J.
Silas served throughout 2000. Lord Clitheroe, Robert L. Crandall, and Lawrence
S. Eagleburger served on the Committee from February 17, 2000 through December
31, 2000. Anne L. Armstrong and Richard J. Stegemeier served on the Committee
from February 17, 2000 through their retirement date of May 16, 2000. None of
these Directors is an officer or former officer of Halliburton or its
subsidiaries or had a relationship with Halliburton or its subsidiaries
requiring director interlock or insider participation disclosure.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Halliburton's primary mission is to enhance long-term shareholder value by
providing a broad spectrum of high quality services and related products within
the energy services and engineering and construction business segments in which
Halliburton operates. We believe that Halliburton's total compensation package
for executives should, therefore, emphasize compensation plans which are linked
to increased shareholder value and to measures which drive shareholder value.
Under our charter, we are generally responsible for overseeing Halliburton's
overall compensation philosophy and objectives and have specific responsibility
for reviewing, approving and monitoring the compensation program for senior
executives of Halliburton and its business units. Our principal function is to
ensure that Halliburton's compensation program is effective in attracting,
retaining and motivating key employees, that it reinforces business strategies
and objectives for enhanced shareholder value and that it is administered in a
fair and equitable manner consistent with established policies and guidelines.
During 2000, we conducted a thorough analysis and study of our charter and
executive compensation philosophy, strategy, framework and processes. With the
help of our outside compensation consultant and Halliburton management, each
component of Halliburton's executive compensation program was extensively
reviewed and adjustments were made where we deemed appropriate.
Overall Executive Compensation Philosophy
The overriding objective of Halliburton's total compensation package for
senior executives is to emphasize the enhancement of shareholder value. Beyond
this, our priorities are to establish and maintain competitive executive
compensation programs that enable Halliburton to attract, retain, and motivate
the high caliber executives required for the success of the business.
Halliburton's compensation program is designed and regularly reviewed to ensure
that the program's components:
. support Halliburton's strategies,
. focus executive efforts,
. help achieve business success, and
10
. generate wealth for our shareholders.
In determining what we deem to be appropriate types and amounts of compensation
for executive officers, we consult with outside compensation consultants and
review compensation data obtained from independent sources.
In the design and administration of executive compensation programs, we
reference, but do not necessarily target, current market levels of compensation
at the 50th percentile for good performance and the 75th percentile for
outstanding performance. In doing so, we consider the competitive market data
for a comparator group which reflects the markets in which Halliburton competes
for business and people. The comparator group is composed of:
. specific peer companies within the energy services and engineering and
construction industries; and
. selected companies from general industry having similar revenue size,
number of employees and market capitalization and which, in our
opinion, provide comparable references.
Regression analysis is used in assessing all market compensation data to
provide appropriate comparisons based on company size, complexity and
performance, and individual role and job content. A consistent present value
methodology is used in assessing stock-based and other long-term incentive
awards.
The focus and mix of executive compensation elements and opportunities are
tailored by individual position to reflect an appropriate balance among fixed
and variable pay, short and long-term focus and individual,
business/organization unit or corporate accountability.
We believe that Halliburton's objectives can be optimized by providing
executives with a compensation package that consists of:
. a cash base salary,
. a rewards-oriented compensation program aligned with shareholder value
creation,
. stock-based awards, and
. supplemental retirement benefits.
Chief Executive Officer Transition
Richard B. Cheney served as Halliburton's Chief Executive Officer from
October 1995 until his resignation and retirement in August 2000 to run as the
Republican Party's Vice Presidential candidate. Effective with Mr. Cheney's
resignation, the Board elected Mr. Lesar as Chairman of the Board, President
and Chief Executive Officer. In September 2000, we reviewed and adjusted Mr.
Lesar's compensation package in view of his promotion to Chief Executive
Officer.
Messrs. Cheney's and Lesar's employment agreements with Halliburton are
summarized beginning on page 20 of this proxy statement.
Base Salary
We generally review base salaries for Halliburton's executive officers,
including the Chief Executive Officer, each December. Executive salaries are
referenced to competitive market data for comparable positions within the
comparator group. In addition to considering market comparisons in making
salary decisions, we exercise discretion and judgment based on the following
factors:
. the executive's level of responsibility;
. experience in his/her role and equity issues relating to pay for other
Halliburton executives;
11
. performance; and
. external factors involving competitive positioning, projected corporate
performance, and general economic conditions.
No specific formula is applied to determine the weight of each factor.
Based on the above factors, at our meeting in December 1999, we:
. did not adjust Mr. Cheney's base salary for 2000, and
. increased Mr. Lesar's base salary, who was at that time Halliburton's
President and Chief Operating Officer, to $900,000.
In addition, in light of Mr. Lesar's promotion to Chief Executive Officer in
August, we increased his annual salary rate to $1,100,000 at our September
meeting. The Summary Compensation Table reflects the total base salary paid to
Mr. Lesar in 2000 as a result of the two adjustments.
Executive Performance Plan
Effective January 1, 2000, we established an intermediate term, reward-
oriented program for corporate and business unit executives (the "Executive
Performance Plan") to provide a means to link total compensation to
Halliburton's performance, as measured by cash value added, or CVA. CVA
measures the difference between after tax cash income and a capital charge,
based upon Halliburton's weighted average cost of capital, to determine the
amount of value, in terms of cash flow, added to Halliburton's business. We
believe that, because CVA has been demonstrated to provide a close correlation
to total shareholder return, incentive awards are closely linked to the
improvement of shareholder value. In addition, the Executive Performance Plan
provides that incentive compensation earned will be paid in the form of
restricted stock, in order to:
. further relate compensation earned under the plan to shareholder value
creation,
. build executive stock ownership, and
. provide incentives for executives to focus on a time frame longer than
one year.
At the beginning of each plan year, we establish a reward schedule that
aligns given levels of CVA performance beyond a threshold level with reward
opportunities. The level of achievement of annual CVA performance determines
the dollar amount of incentive compensation payable to a participant. In order
to compensate for the fact that the pay out period is longer relative to that
under the predecessor annual plan, the Executive Performance Plan provides that
a 25% premium is added to the dollar amount of incentive earned to determine
the number of restricted shares issuable to a participant.
Officers of Halliburton and its business units were eligible to participate
in the Executive Performance Plan during 2000. In 2000, consolidated CVA
performance exceeded the maximum level that we established. Accordingly, Mr.
Lesar and the other executives named in the Summary Compensation Table (other
than Mr. Cheney) earned restricted stock based on their maximum incentive
opportunity. In accordance with the provisions of the Executive Performance
Plan, Mr. Cheney received a lump sum cash payment equal to the dollar amount of
the incentive earned, prorated through his retirement date. Mr. Cheney did not
receive the 25% premium. The incentive amounts earned by Messrs. Cheney, Lesar
and the other named executives are shown in the Summary Compensation Table.
Stock-Based Compensation
The 1993 Plan provides for a variety of cash and stock-based awards,
including stock options, stock appreciation rights, and restricted stock, among
others. Under the 1993 Plan, we may, in our discretion, select from these types
of awards to establish individual long-term incentive awards.
12
Stock options were the principal long-term incentive granted to executive
officers in 2000. Stock options granted in 2000 are exercisable at the fair
market value of Halliburton common stock on the date of grant and become
exercisable during employment over a three-year period (one-third per year). We
believe that options, which have value only if the stock price appreciates
following the date of grant, provide an excellent means for linking executives'
interests directly to those of stockholders.
Our determination of the number of option shares granted to executive
officers, including the grant made to Mr. Lesar in September 2000 in connection
with his promotion, is based on market references to long-term incentive
compensation for comparable positions within the comparator group and on our
subjective assessment of organizational roles and internal job relationships.
An option for 300,000 shares was granted to Mr. Lesar in September 2000. Mr.
Cheney was not granted a stock option in 2000.
To further our efforts to tie shareholder value enhancement to compensation
opportunities, we have broadened the base of employee stock ownership
throughout the company. During 2000, 812 stock option grants for a total of
1,733,907 shares were made. Our intention is to continue this process with
additional grants in the future to expand stock option grants farther into the
organization. In order to implement this goal, in 2000 Halliburton's
stockholders approved an amendment of the 1993 Plan increasing the number of
shares authorized for issuance under the 1993 Plan by an additional 22,000,000
shares and broadening the base of employees eligible to participate.
During 2000, we continued to make selective use of restricted stock grants
for retention and promotion recognition purposes.
Senior Executives' Deferred Compensation Plan
Under the terms of the Senior Executives' Deferred Compensation Plan, which
is used for the purpose of providing supplemental retirement benefits to senior
executives:
. mandatory additions to a participant's account are made to offset
contributions to which each would have been entitled under
Halliburton's qualified defined contribution plans if not for the
limitation on contributions imposed under the Internal Revenue Code
(commonly known as ERISA Offset Benefits);
. additions up to the amount of any remuneration which would otherwise
exceed the deduction limit under Section 162(m) of the Internal Revenue
Code may be allocated to a participant's account in lieu of the payment
of the remuneration; and
. discretionary additions, in amounts as we may determine, are made to
provide additional supplemental retirement benefits.
Interest on active and retired participants' supplemental retirement benefit
accounts is accrued at the rate of five and ten percent per annum,
respectively, while interest on the other two account balances accrues at the
rate of ten percent per annum. No amounts may be received by a participant
under the plan prior to termination of the participant's employment.
In making supplemental retirement benefit contributions under the plan,
amounts are determined considering guidelines that include references to:
. retirement benefits provided from other company programs,
. compensation,
. length of service, and
. years of service to normal retirement.
13
There is no specific weighting of these factors. We authorized a supplemental
retirement benefit addition for Mr. Lesar of $379,000 in 2000. Mr. Cheney did
not receive a supplemental retirement benefit accrual in 2000.
Policy Regarding Section 162(m) of the Internal Revenue Code
Section 162(m) of the Internal Revenue Code and applicable regulations
generally disallow a federal income tax deduction by a public company for
compensation paid to the chief executive officer or any of the four other most
highly compensated officers to the extent the compensation exceeds $1 million
in any year. Specific performance-based compensation and compensation which is
deferred is excluded from this calculation.
Halliburton's policy is to utilize available tax deductions whenever
appropriate. When determining executive compensation programs, we consider all
relevant factors, including the tax deductions that may result from the
compensation. Accordingly, Halliburton has attempted to preserve the federal
tax deductibility of compensation in excess of $1 million a year to the extent
doing so is consistent with the intended objectives of our executive
compensation philosophy.
The 1993 Plan was amended by the stockholders in 1996 and 2000 to qualify
stock options, stock appreciation rights and performance share awards under the
plan as performance-based compensation under IRS rules.
We believe that the best interests of Halliburton and its stockholders are
served by the executive compensation programs currently in place. These
programs encourage and promote Halliburton's principal compensation objective,
enhancement of shareholder value, and permit the exercise of our discretion in
the design and implementation of compensation packages. Accordingly,
Halliburton may from time to time pay compensation to its executive officers
that may not be fully deductible. Because of deferred vesting of restricted
stock earned under the Executive Performance Plan and the elective deferral by
some executive officers of portions of their salary, the loss of deductibility
for 2000 is not expected to be significant. We will continue to review
Halliburton's executive compensation plans periodically to determine what
changes, if any, should be made as the result of the limitation on
deductibility.
Respectfully submitted,
THE COMPENSATION COMMITTEE OF
DIRECTORS
Lord Clitheroe*
Robert L. Crandall*
Charles J. DiBona
Lawrence S. Eagleburger*
W. R. Howell
Ray L. Hunt
Jay A. Precourt
C. J. Silas
- --------
* Messrs. Clitheroe, Crandall and Eagleburger served on the Compensation
Committee from February 17, 2000 through December 31, 2000.
14
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The following graph compares the cumulative total stockholder return on our
Common Stock for the five-year period ended December 31, 2000, with the
Standard & Poor's 500 Stock Index and the Standard & Poor's Energy Composite
Index over the same period. This comparison assumes the investment of $100 on
December 31, 1995 and the reinvestment of all dividends. On January 23, 1996,
Halliburton distributed to stockholders all of the outstanding common stock of
Highlands Insurance Group, Inc. as a special dividend. The graph accounts for
this distribution as though it were paid in cash and reinvested in our Common
Stock. The stockholder return set forth on the chart below is not necessarily
indicative of future performance.
[GRAPH]
Total Stockholders' Return -- Five Years
Assumes Investment of $100 on December 31,1995 and Reinvestment of Dividends
Halliburton Company S&P 500 S&P Energy Composite
------------------- ------- --------------------
12-31-95 $100.00 $100.00 $100.00
12-31-96 $126.49 $122.96 $125.78
12-31-97 $220.46 $163.98 $157.53
12-31-98 $127.67 $210.85 $158.38
12-31-99 $175.79 $255.21 $188.47
12-31-00 $160.17 $231.95 $239.42
15
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
---------------------------------- ------------------------------
Awards Payouts
--------------------- --------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Principal Bonus Compensation Awards Options Payouts Compensation
Position Year Salary ($) ($)(1) ($)(2) ($)(3) (#) ($)(4) ($)(5)
- ------------------ ---- ---------- ---------- ------------ ---------- ---------- -------- ------------
Richard B. Cheney....... 2000 $ 806,332 $1,451,398 -- $ 0 0 N/A $100,775
Chairman of the Board 1999 1,283,000 0 -- 0 300,000 N/A 640,914
and Chief Executive 1998 1,183,257 1,154,704 -- 1,525,000 100,000 N/A 564,771
Officer of the Company
(6)
David J. Lesar.......... 2000 958,333 2,012,709 -- 1,216,250 300,000 N/A 478,515
President and Chief 1999 823,000 0 -- 0 260,100 N/A 349,265
Operating Officer of 1998 693,255 534,955 -- 1,525,000 65,000 N/A 308,524
the Company; Chairman
of the Board,
President and Chief
Executive Officer of
the Company (6)
Lester L. Coleman....... 2000 475,008 498,800 -- 417,000 39,000 N/A 137,837
Executive Vice 1999 450,000 0 -- 0 45,000 N/A 130,489
President and General 1998 412,506 225,000 -- 471,250 25,000 N/A 173,581
Counsel of the Company
Gary V. Morris.......... 2000 475,008 498,800 -- 834,000 39,000 N/A 171,005
Executive Vice 1999 450,000 0 -- 0 45,000 N/A 160,334
President and Chief 1998 337,500 225,000 -- 471,250 25,000 N/A 137,919
Financial Officer of
the Company
David A. Reamer......... 2000 350,004 367,539 -- 0 24,000 N/A 85,910
Senior Vice President 1999 N/A N/A N/A N/A N/A N/A N/A
of the Company (6) 1998 N/A N/A N/A N/A N/A N/A N/A
Donald C. Vaughn........ 2000 741,000 1,167,178 -- 205,158 0 $187,125 184,500
Vice Chairman of the 1999 741,000 800,500 -- 81,588 0 N/A 135,397
Company 1998 614,417 1,085,000 -- 1,668,155 18,037 N/A 173,569
- --------
(1) In 1998, the Compensation Committee approved a special one-time bonus for
selected officers and key employees, including Messrs. Cheney, Lesar,
Coleman, and Morris. Mr. Vaughn received the bonus earned under the
Dresser incentive compensation plan which was approved prior to the
Dresser merger. No bonuses were earned under the Annual Performance Pay
Plan in 1999. However, pursuant to Mr. Vaughn's employment agreement, he
received a 1999 payment equal to the average of the bonus he earned under
Dresser's incentive compensation plan for Dresser's 1998 fiscal year.
Bonus compensation earned by Messrs. Lesar, Coleman, Morris, Reamer and
Vaughn under the Executive Performance Plan for 2000 was paid in
restricted stock vesting over a 3-year period. The amounts shown in the
bonus column for such persons are equal to the fair market value of the
restricted stock as of December 31, 2000. Pursuant to the terms of the
Executive Performance Plan, Mr. Cheney received a lump sum cash payment
prorated through his retirement date.
(2) The dollar value of perquisites and other personal benefits for each of
the named executive officers was less than established reporting
thresholds.
(3) In 1998, Messrs. Cheney and Vaughn were each awarded 50,000 shares with
restrictions lapsing over 5 years; Mr. Lesar was granted 50,000 shares
with restrictions lapsing over 10 years; Mr. Coleman was granted 15,000
shares with restrictions lapsing over 10 years and Mr. Morris was granted
15,000 shares with restrictions lapsing over 10 years. In addition,
during 1998, Mr. Vaughn was issued 3,513 restricted shares, under
restrictive incentive awards granted under Dresser's stock compensation
plan. Restrictions on those shares lapsed on the effective date of the
Dresser merger. During 1999, Mr. Vaughn was issued 1,993 restricted
shares, under restrictive incentive awards granted under Dresser's stock
compensation plan. Restrictions on those shares lapse three years from
issue or upon retirement. In 2000, Mr. Lesar was granted 35,000 shares
with restrictions lapsing over 10 years; Mr. Coleman was granted 12,000
shares with restrictions lapsing over 10 years; and Mr. Morris was
granted 24,000 shares with restrictions lapsing over 10 years. In 2000,
Mr. Vaughn was issued
16
4,241 restricted shares under restrictive incentive awards granted under
Dresser's stock compensation plan. Restrictions on those shares lapse
three years from issue or upon retirement. Dividends are paid on the
restricted shares. The total number and value of restricted shares held by
each of the above individuals as of December 31, 2000 were as follows:
Total Aggregate
Restricted Market
Name Shares Value
---- ---------- ----------
Mr. Cheney*......................................... 0 $ --
Mr. Lesar........................................... 181,000 6,561,250
Mr. Coleman......................................... 27,000 978,750
Mr. Morris.......................................... 58,900 2,135,125
Mr. Reamer.......................................... 22,080 800,400
Mr. Vaughn.......................................... 36,234 1,313,483
--------
* Restrictions lapsed on 140,000 shares with a market value of
$7,560,000 due to retirement on August 16, 2000.
(4) Halliburton does not have a long-term incentive program apart from stock
option and restricted stock grants. Mr. Vaughn received a long-term
incentive payment in January 2000 under Dresser's incentive stock unit
program.
(5) "All Other Compensation" includes the following accruals for or
contributions to various plans for the fiscal year ending December 31,
2000: (i) company contributions to qualified defined contribution plans
for Mr. Cheney--$2,040, Mr. Lesar--$2,040, Mr. Coleman--$2,040, Mr.
Morris--$2,040, Mr. Reamer--$2,040 and Mr. Vaughn--$2,040; (ii) 401(k)
plan matching contributions for Mr. Cheney --$6,800, Mr. Lesar--$6,800,
Mr. Coleman--$6,800, Mr. Morris--$6,800, Mr. Reamer--$6,800 and Mr.
Vaughn--$6,800; (iii) ERISA restoration accruals for Mr. Cheney--
$53,692, Mr. Lesar--$47,759, Mr. Coleman--$19,919, Mr. Morris--$18,897;
Mr. Reamer--$11,811 and Mr. Vaughn--$71,318; (iv) supplemental
retirement plan contributions for Mr. Lesar--$379,000, Mr. Coleman--
$78,000, Mr. Morris--$124,000 and Mr. Reamer--$47,000; (v) above-market
earnings on ERISA restoration account for Mr. Cheney--$6,866, Mr.
Lesar--$4,695, Mr. Coleman--$4,694, Mr. Morris--$2,060, Mr. Reamer--
$1,060 and Mr. Vaughn--$20,266; (vi) above-market earnings on amounts
deferred under elective deferral plans for Mr. Cheney--$31,377, Mr.
Lesar--$38,221, Mr. Coleman--$26,384, Mr. Morris --$17,208, Mr. Reamer--
$17,199 and Mr. Vaughn--$9,659; and (vii) company contributions to
executive life insurance premiums for Mr. Vaughn--$18,326. Mr. Vaughn
was credited with earnings of $56,091 on his accrued balance under an
unfunded plan provided by a subsidiary in lieu of normal pension
benefits.
(6) Mr. Cheney retired from Halliburton on August 16, 2000 and Mr. Lesar
became Chairman of the Board, President and Chief Executive Officer
effective on that date. Mr. Reamer became an executive officer on May
16, 2000.
17
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value
Number of % of Total at Assumed Annual Rates of
Securities Options Stock Price Appreciation
Individual Grants(1) Underlying Granted to Exercise for Option Term(2)
-------------------- Options Employees in Price Expiration -------------------------------
Name Granted (#) Fiscal Year ($/Share) Date 5% 10%
---- ----------- ------------ --------- ---------- --------------- ---------------
Richard B. Cheney....... -0- -- -- -- -- --
David J. Lesar.......... 300,000 17.30 $ 51.50 9/14/2010 $ 9,716,422 $ 24,623,321
Lester L. Coleman....... 39,000 2.25 34.75 12/6/2010 852,309 2,159,919
Gary V. Morris.......... 39,000 2.25 34.75 12/6/2010 852,309 2,159,919
David A. Reamer......... 24,000 1.38 34.75 12/6/2010 524,498 1,329,181
Donald C. Vaughn........ -0- -- -- -- -- --
All Optionees........... 1,733,907 100.00 41.6097(3) (3) 45,373,080 114,984,295
All Stockholders........ N/A N/A N/A N/A 11,174,560,822 28,318,531,112(4)
- --------
(1) All options granted under the 1993 Plan are granted at the fair market
value of the Common Stock on the grant date and generally expire ten
years from the grant date. During employment options vest over a three
year period, with one-third of the shares becoming exercisable on each of
the first, second and third anniversaries of the grant date. The options
granted to designated executives are transferable by gift to individuals
and entities related to the optionee, subject to compliance with
guidelines adopted by the Compensation Committee.
(2) The assumed values result from the indicated rates of stock price
appreciation. Values were calculated based on a 10-year exercise period
for all grants. The actual value of the option grants is dependent on
future performance of the Common Stock. There is no assurance that the
values reflected in this table will be achieved. Halliburton did not use
an alternative formula for a grant date valuation, as it is not aware of
any formula that will determine with reasonable accuracy a present value
based on future unknown or volatile factors.
(3) The exercise price shown is a weighted average of all options granted in
2000. Options expire on one or more of the following dates: January 4,
2010, January 31, 2010, February 7, 2010, February 16, 2010, February 18,
2010, February 22, 2010, February 28, 2010, March 8, 2010, March 10,
2010, April 3, 2010, April 4, 2010, April 7, 2010, April 14, 2010, April
24, 2010, May 3, 2010, May 10, 2010, May 15, 2010, May 16, 2010, May 17,
2010, May 18, 2010, May 23, 2010, July 12, 2010, July 14, 2010, August
16, 2010, August 24, 2010, August 28, 2010, September 7, 2010, September
8, 2010, September 14, 2010, September 18, 2010, September 21, 2010,
October 3, 2010, October 4, 2010, October 9, 2010, October 24, 2010,
October 30, 2010, November 8, 2010, or December 6, 2010.
(4) "All Stockholders" values are calculated using the weighted average
exercise price for all options awarded in 2000, $41.6097, based on the
outstanding shares of Common Stock on December 31, 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at Fiscal Year-End In-the-Money Options at
Acquired Value (Shares) Fiscal Year-End ($)
on Exercise Realized ------------------------------ -------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ------------- -------------- ----------- -------------
Richard B. Cheney....... 826,667 $21,964,254 200,000 233,333 $ 0 $270,831
David J. Lesar.......... 0 0 362,036 495,066 2,092,753 176,036
Lester L. Coleman....... 28,000 836,500 159,667 77,333 1,352.794 126,206
Gary V. Morris.......... 0 0 128,667 77,333 1,107,482 126,206
David A. Reamer......... 0 0 84,500 50,500 606,375 96,938
Donald C. Vaughn........ 171,705 3,090,559 95,137 0 0 0
18
RETIREMENT PLANS
Executives of Halliburton are participating or have participated in several
defined benefit pension plans of the company. Mr. Cheney was covered by the
Halliburton Retirement Plan (the "Floor Plan") prior to his retirement in
August of 2000. Messrs. Coleman, Lesar, Morris and Reamer were covered by the
Floor Plan but their participation was discontinued and all benefits
distributed in 1997 and 1998 as discussed below. Mr. Vaughn is covered by the
Dresser Industries, Inc. Supplemental Executive Retirement Plan which is a non-
qualified plan and by a frozen defined benefit plan that was sponsored by a
former Dresser subsidiary.
The purpose of the Floor Plan was to provide a floor for retirement benefits
provided under the Halliburton Retirement and Savings Plan. Effective as of
December 31, 1996, benefit accruals under the Floor Plan ceased for all
employees except those that were age 55 or over ("Grandfathered Employees").
The portion of the Floor Plan attributable to employees other than
Grandfathered Employees terminated effective February 28, 1997 and all accrued
benefits payable to participants were distributed in 1998. Mr. Cheney was a
Grandfathered Employee while Messrs. Coleman, Lesar, Morris and Reamer were
not.
The Halliburton Retirement and Savings Plan is intended to be the primary
plan to provide retirement benefits to participating employees. Halliburton
makes annual contributions to the Halliburton Retirement and Savings Plan. The
plan provides a dollar of company matching contributions for every dollar of
employee contributions up to a maximum of 4% of "Compensation". "Compensation"
for this purpose was limited to $170,000 in 2000 by Internal Revenue Code
Section 401(a)(17). In addition, each year Halliburton may make discretionary
profit sharing contributions. These contributions may not exceed the maximum
amount deductible under Section 404 of the Internal Revenue Code. It is not
possible to estimate the amount of benefits payable at retirement under the
Halliburton Retirement and Savings Plan because of some or all of the
following:
. profit sharing amounts contributed in the future are discretionary and
will be contingent on future profits;
. earnings on trust fund assets will vary;
. trust fund assets may appreciate or depreciate in value;
. the compensation of the individual may vary;
. age at date of retirement may vary; and
. the plan may be changed or discontinued.
The Floor Plan is a qualified defined benefit pension plan established as of
January 1, 1991 as a floor plan integrated with the Halliburton Retirement and
Savings Plan to provide an adequate level of retirement benefits for employees.
Prior to January 1, 1997, the terms of the Floor Plan provided for a monthly
pension payment equal to the following amount: (i) 1 1/3% of an employee's
average monthly base compensation, computed over the highest three calendar
year period, multiplied by the employee's years of accrual service after
January 1, 1990; minus (ii) a pension which is the actuarial equivalent of the
participant's eligible profit sharing accounts, excluding any employer and
employee contributions under the employee matched savings portion of the
program, accumulated since January 1, 1990 under the Halliburton Retirement and
Savings Plan. The offset for the Halliburton Retirement and Savings Plan was
based upon the 1984 Unisex Pension Mortality Table and an 8 1/2% interest
assumption. As a result of the termination of the Floor Plan for employees
other than Grandfathered Employees, the employees received a distribution of
the Floor Plan benefit, if any, in 1998. The Floor Plan will continue for
Grandfathered Employees under the same formula as in effect prior to 1997
except that a Grandfathered Employee's Floor Plan benefit will never be less
than the value of the benefit determined as of January 1, 1997 increased with
interest. The value of the grandfathered Floor Plan benefits calculated for
Mr. Cheney at his retirement was $0.
19
For Mr. Vaughn, the estimated total annual retirement benefits payable under
defined benefit pension plans are set forth below:
Pension Plan Table
Years of Service
----------------------------------------------------------------------
Remuneration 5 10 15 20 25 30 35
- ------------ -------- -------- -------- ---------- ---------- ---------- ----------
$1,000,000 $100,000 $200,000 $300,000 $ 400,000 $ 500,000 $ 600,000 $ 600,000
1,150,000 115,000 230,000 345,000 460,000 575,000 690,000 690,000
1,300,000 130,000 260,000 390,000 520,000 650,000 780,000 780,000
1,450,000 145,000 290,000 435,000 580,000 725,000 870,000 870,000
1,600,000 160,000 320,000 480,000 640,000 800,000 960,000 960,000
1,800,000 180,000 360,000 540,000 720,000 900,000 1,080,000 1,080,000
2,000,000 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,200,000
2,200,000 220,000 440,000 660,000 880,000 1,100,000 1,320,000 1,320,000
2,400,000 240,000 480,000 720,000 960,000 1,200,000 1,440,000 1,440,000
2,600,000 260,000 520,000 780,000 1,040,000 1,300,000 1,560,000 1,560,000
2,800,000 280,000 560,000 840,000 1,120,000 1,400,000 1,680,000 1,680,000
3,000,000 300,000 600,000 900,000 1,200,000 1,500,000 1,800,000 1,800,000
3,200,000 320,000 640,000 960,000 1,280,000 1,600,000 1,920,000 1,920,000
The gross amounts represented above include sums accrued under Halliburton's
qualified and non-qualified defined benefit plans. Amounts credited to
qualified and non-qualified defined contribution plans, however, will be paid
from those plans and thus represent deductions to the above gross amounts.
Likewise, "pension benefit equivalents" credited under the deferred
compensation plan also represent deductions.
The compensation used to determine pension benefits for Mr. Vaughn is within
10% of the amounts shown in the salary and bonus columns of the Summary
Compensation Table. The years of credited service as of December 31, 2000 in
determining benefits for Mr. Vaughn is 5.12 years. Benefits are computed as
straight-life annuity amounts that may be paid in various forms.
In addition to the benefits described above for Mr. Vaughn, he is due an
additional $84,792 per year at age 65 from the defined benefit pension plan of
a Halliburton subsidiary. This plan benefit is substantially frozen and does
not reflect future pay or service. The benefit is stated as a straight-life
annuity, but various other optional forms are available.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
Employment Contracts
Mr. Cheney. As previously noted, Mr. Cheney resigned from Halliburton and
took early retirement in August 2000 to run as the Republican Party's Vice
Presidential nominee. Other than the continuing obligations discussed below,
the terms of Mr. Cheney's employment agreement with Halliburton terminated at
that time. No severance benefits were paid to Mr. Cheney under his employment
agreement since he elected to resign. Compensation Mr. Cheney received as a
result of his retirement is described in the next section, Arrangements
Relating to Executive Officer Retirement.
Mr. Cheney has continuing obligations to Halliburton under his employment
agreement, including non-competition and confidentiality obligations.
20
Mr. Lesar. Mr. Lesar entered into an employment agreement with Halliburton as
of August 1, 1995 which provided for his employment as Executive Vice President
and Chief Financial Officer of Halliburton. The agreement also provides that,
while Mr. Lesar is employed by Halliburton, management will recommend to the
Compensation Committee:
. annual supplemental retirement benefit allocations under the Senior
Executives' Deferred Compensation Plan; and
. annual grants of stock options under the 1993 Plan.
These recommendations are to be consistent with the criteria utilized by the
Compensation Committee for similarly situated executives.
Under the terms of his employment agreement, in the event Mr. Lesar is
involuntarily terminated by Halliburton for any reason other than termination
for cause (as defined in the agreement), Halliburton is obligated to pay Mr.
Lesar a severance payment equal to:
. the value of any restricted shares that are forfeited because of
termination; and
. five times his annual base salary.
Mr. Vaughn. In connection with Halliburton's merger with Dresser Industries,
Inc., on September 29, 1998, Halliburton entered into an employment contract
with Mr. Vaughn which provided for his employment as Vice Chairman of
Halliburton until March 31, 2001.
The employment agreement further provides for:
. an annual base salary of not less than $600,000;
. payment of the bonus earned by him under the Dresser 1998 Executive
Incentive Compensation Plan for the fiscal year ending October 31,
1998, as well as a bonus calculated in the same manner as provided in
the plan for the two months ended December 31, 1998;
. participation in the Halliburton Annual Performance Pay Plan commencing
on January 1, 1999, subject to a minimum payment equal to the average
annual amount earned during fiscal years 1997 and 1998 under Dresser's
incentive compensation plan;
. participation in the 1993 Plan;
. continued participation in Dresser's Supplemental Executive Retirement
Plan (which was adopted by Halliburton); and
. participation in other employee benefit plans made generally available
to Halliburton's executive employees.
In addition, Halliburton affirmed its obligations under the Dresser merger
agreement with respect to the Dresser employee benefit plans. As a consequence,
Halliburton assumed the stock options held by Mr. Vaughn and it honored his
participation in the Dresser Deferred Compensation Plan, the Dresser
Performance Stock Unit Program, the Dresser Executive Life Insurance Program,
the Dresser Supplemental Executive Retirement Plan, the M. W. Kellogg
retirement plan and the Dresser Retiree Medical Benefit Plan.
Under the employment agreement, if Mr. Vaughn's employment is terminated
before the end of the term for any reason other than death, "voluntary
termination" or "cause" (as those terms are defined in the agreement), he will
nevertheless continue to receive all compensation and benefits through the end
of the term. If, Mr. Vaughn's employment is terminated through death,
"voluntary termination" or "cause", however, he will be entitled to receive
only:
. his base salary pro rated through the date of termination;
21
. individual bonuses and individual incentive compensation payable for
prior years (but not for the year of the termination); and
. benefits payable pursuant to the terms of Dresser's and Halliburton's
employee benefit plans (including any stock, stock option, incentive
compensation and deferred compensation plans).
Mr. Vaughn is obligated under the employment agreement to refrain from
competing with Halliburton for one year after termination of employment.
Messrs. Coleman and Morris. Messrs. Coleman and Morris entered into
employment agreements with Halliburton effective September 29, 1998, providing
for their employment as Executive Vice President and General Counsel, and
Executive Vice President and Chief Financial Officer, respectively. Each
executive's employment agreement further provides that he will receive an
annual base salary of not less than $450,000 and will participate in
Halliburton's Annual Performance Pay Plan. Also, each executive was granted an
award under the 1993 Plan of 15,000 shares of Common Stock subject to
restrictions.
Under the terms of the employment agreements, in the event of either
executive's termination for any reason other than voluntary termination (as
defined in the agreement), death, permanent disability, retirement (either at
or after age 65 or voluntarily prior to such age), or termination by
Halliburton for cause (as defined in the agreement), Halliburton is obligated
to make severance payments equal to:
. the value of any restricted shares that were forfeited because of the
termination;
. two years' base salary;
. any unpaid bonus earned in prior years; and
. any bonus payable for the year in which his employment is terminated
determined as if he had remained employed for the full year.
Mr. Reamer. Mr. Reamer entered into an employment agreement with Halliburton
and Halliburton's subsidiary, Halliburton Energy Services, Inc. ("HESI"), on
September 29, 1998, which provided for his employment as Senior Vice President
of the Shared Services division of HESI. Mr. Reamer's employment agreement also
provides for an annual salary of not less than $325,000 and participation in
Halliburton's Annual Performance Pay Plan. In addition, Mr. Reamer was granted
7,500 restricted shares under the 1993 Plan.
Under the terms of the employment agreement, in the event of Mr. Reamer's
termination for any reason other than voluntary termination (as defined in the
agreement), death, permanent disability, retirement (either at age 65 or
voluntarily prior to such age), or termination by Halliburton for cause (as
defined in the agreement), HESI is obligated to make severance payments equal
to:
. the value of any restricted shares that were forfeited because of the
termination;
. two years' base salary;
. any unpaid bonus earned in prior years; and
. any bonus payable for the year in which his employment is terminated
determined as if he had remained employed for the full year.
Arrangements Relating to Executive Officer Retirement
Mr. Cheney retired as Chairman of the Board and Chief Executive Officer of
Halliburton on August 16, 2000. In connection with Mr. Cheney's retirement, the
Board approved retention of his outstanding stock options on a total of
1,160,000 shares of Halliburton common stock as permitted under his option
agreements. At that time, 400,000 of the 1,160,000 option shares were unvested.
Under the terms of his stock option
22
agreements, the unvested options did not automatically vest on retirement, but
instead continue to vest over the normal three-year vesting period applicable
to each grant. Currently, Mr. Cheney has outstanding options for 433,333
shares, 233,333 of which are unvested. Mr. Cheney has entered into an
irrevocable agreement to donate to charity the after-tax proceeds from the
exercise of all of his outstanding options. Under the agreement, Mr. Cheney
gave an administrative agent total discretion to decide when to exercise the
options, without consultation with Mr. Cheney. Also, as a result of Mr.
Cheney's retirement, restrictions lapsed on 140,000 shares of common stock. The
fair market value of the shares on August 16, 2000 was $7,560,000. In addition,
pursuant to the terms of the Executive Performance Plan, Mr. Cheney received a
prorated 2000 bonus in the amount shown in the Summary Compensation Table.
Change-In-Control Arrangements
Pursuant to the 1993 Plan, in the event of a change-in-control:
A. The Compensation Committee, acting in its sole discretion, will act to
effect one or more of the following alternatives for outstanding stock options:
. accelerate the time at which options may be exercised;
. cancel the options and pay the optionees the excess of the per share
value offered to stockholders in the change-in-control transaction over
the exercise price(s) of the shares subject to options;
. make adjustments to the options as deemed appropriate to reflect the
change-in-control; or
. convert the options to rights to purchase a proportionate amount of
shares of stock or other securities or property paid to stockholders in
the change-in-control transaction.
B. The Compensation Committee may provide for full vesting of all shares of
outstanding restricted stock and termination of all restrictions applicable to
the restricted stock.
Pursuant to the Career Executive Incentive Stock Plan, the Compensation
Committee may, in the event of a tender offer for all or a part of
Halliburton's Common Stock, accelerate the lapse of restrictions on any or all
shares on which restrictions have not previously lapsed.
Under the Executive Performance Plan:
. in the event of a change-in-control during a plan year, a participant
will be entitled to an immediate cash payment equal to the maximum
dollar amount a participant would have been entitled to for the year
multiplied by 125% and prorated through the date of the change-in-
control, and
. in the event of a change-in-control after the end of a plan year but
before the payment date, a participant will be entitled to an immediate
cash payment equal to 125% of the incentive earned for the plan year.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dresser has outstanding approximately $6.1 million in letters of credit under
a bank facility that was established in connection with some insurance
relationships of NL Industries, Inc., of which Mr. Martin is a director and
executive officer. NL is obligated to indemnify Dresser for any losses or
expenses in respect of these letters of credit.
23
DIRECTORS' COMPENSATION, RESTRICTED STOCK PLAN AND RETIREMENT PLAN
Directors' Fees and Deferred Compensation Plan
All non-employee Directors receive an annual fee of $30,000 and an attendance
fee of $2,000 for each meeting of the Board of Directors. The Directors also
receive an attendance fee of $2,000 per meeting for Committee service. The
Chairmen of the Audit; Compensation; Nominating and Corporate Governance;
Health, Safety and Environment; and Management Oversight Committees each
receive an additional $10,000 annually. Under the Directors' Deferred
Compensation Plan, Directors are permitted to defer their fees, or a portion of
their fees, until after they cease to be a Director. A participant may elect,
on a prospective basis, to have his or her deferred compensation account either
credited quarterly with interest at the prime rate of Citibank, N.A. or
translated on a quarterly basis into common stock equivalents. Distribution
will be made either in a lump sum or in annual installments over a 5- or 10-
year period, as determined by the committee appointed to administer the plan in
its discretion. Distributions of common stock equivalents are made in shares of
common stock, while distributions of deferred compensation credited with
interest are made in cash. Messrs. Crandall, DiBona, Eagleburger, Hunt and
Precourt have elected to participate in the plan.
Directors' Restricted Stock Plan
Pursuant to the terms of the Restricted Stock Plan for Non-Employee
Directors, which was approved by the stockholders at the 1993 Annual Meeting,
each non-employee Director receives an annual award of 400 restricted shares of
common stock as a part of his or her compensation. The awards are in addition
to the Directors' annual retainer and attendance fees. Shares awarded under the
Directors' Restricted Stock Plan may not be sold, assigned, pledged or
otherwise transferred or encumbered until the restrictions are removed.
Restrictions will be removed following termination of Board service under
specified circumstances, which include, among others, death or disability,
retirement under the Director mandatory retirement policy, or early retirement
after at least four years of service. During the restriction period, Directors
have the right to vote, and to receive dividends on, the restricted shares. Any
shares that under the plan's provisions remain restricted following termination
of service will be forfeited.
Directors' Stock Options
At the 2000 Annual Meeting, the stockholders approved an amendment to the
1993 Plan that, among other things, broadened the eligibility provisions to
permit non-employee Directors to be granted awards under the plan. Under the
new stock option program for non-employee Directors:
. Each Director elected after the 2000 Annual Meeting will receive an
option for 5,000 shares of Halliburton common stock at the time of
initial election to the Board and an option for 2,000 shares each year
thereafter at the time of the Director's reelection. The option grants
are in lieu of benefits under the Directors' Retirement Plan (discussed
below) which is closed to Directors elected after the 2000 Annual
Meeting.
. Each Director who continues to participate in the Directors' Retirement
Plan will receive an annual option for 1,000 shares at the time of
reelection to the Board.
. Each "grandfathered" Director who opted out of the Directors'
Retirement Plan (Messrs. Hunt, Martin and Precourt) received a one-time
option grant for 5,000 shares and will receive an annual option for
2,000 shares at the time of reelection.
Options granted under the stock option program:
. have an exercise price equal to the closing price of Halliburton's
common stock on the grant date,
. become exercisable six months after the grant date, and
24
. are exercisable for 10 years from the date of grant or three years
after termination of service, whichever is the shorter period.
Directors' Retirement Plan
As noted above, the Directors' Retirement Plan has been closed to new
Directors elected after May 16, 2000 (the date of last year's Annual Meeting).
Each individual who was serving as a non-employee Director on May 16, 2000
continued to be eligible to participate in the plan but had a one-time right to
opt out of the plan and receive the same level of option grants as a new
Director. Messrs. Hunt, Martin and Precourt elected to cease participation in
the plan in exchange for the right to receive additional grants of options.
Under the Directors' Retirement Plan, each non-employee Director who
continues as a participant will receive an annual benefit upon the benefit
commencement date. The benefit commencement date is the later of a
participant's termination date or attainment of age 65. The benefit will be
equal to the last annual retainer for the participant for a period of years
equal to the participant's years of service on his or her termination date. The
minimum benefit payment period for each participant is 5 years. Upon the death
of a participant, benefit payments will be made to the surviving spouse, if
any, over the remainder of the retirement benefit payment period. Years of
service for each Director participant under the plan are: Lord Clitheroe--14,
Mr. Crandall--16, Mr. DiBona--4, Mr. Eagleburger--3, Mr. Howell--10, and Mr.
Silas--8. Assets are transferred to State Street Bank and Trust Company, as
Trustee, to be held pursuant to the terms of an irrevocable grantor trust to
aid Halliburton in meeting its obligations under the Directors' Retirement
Plan. The corpus and income of the trust are treated as assets and income of
Halliburton for federal income tax purposes and are subject to the claims of
general creditors of Halliburton to the extent provided in the plan.
SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The rules promulgated under Section 16(a) of the Securities Exchange Act of
1934, as amended, require Halliburton's officers and Directors, and persons who
own more than 10 percent of a registered class of Halliburton's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and the New York Stock Exchange and to
furnish Halliburton with copies. Due to the Dresser merger, the third party
administrator of the Dresser Deferred Compensation Plan inadvertently failed to
report to Halliburton the reinvestment of dividends paid on contingent stock
units held by Mr. Vaughn. As a result of this failure, Mr. Vaughn inadvertently
failed to report the reinvestment of dividends on a timely basis.
AUDIT COMMITTEE REPORT
Halliburton's Audit Committee of the Board of Directors consists of directors
who, in the business judgment of the Board of Directors, are independent under
the New York Stock Exchange listing standards. In addition, in the business
judgment of the Board of Directors, at least one of us has accounting or
related financial management experience required under the listing standards.
We operate under a written charter, a copy of which is included as Appendix A
to this proxy statement. As required by the charter, we review and reassess the
charter annually and recommend any changes to the Board of Directors for
approval.
Under the charter, Halliburton's management is responsible for preparing
Halliburton's financial statements and the independent auditors are responsible
for auditing those financial statements. The Audit Committee's role under the
charter is to provide oversight of management's responsibility. The Audit
Committee is not providing any expert or special assurance as to Halliburton's
financial statements or any professional certification as to the independent
auditor's work.
In fulfilling our oversight role for the year ended December 31, 2000, we:
. reviewed and discussed Halliburton's audited financial statements with
management;
25
. discussed with Arthur Andersen LLP, Halliburton's independent auditors,
the matters required by Statement on Auditing Standards No. 61 relating
to the conduct of the audit;
. received from Arthur Andersen the written disclosures and letter
required by Independence Standards Board Standard No. 1; and
. discussed with Arthur Andersen its independence.
Based on our:
. review of the audited financial statements,
. discussions with management,
. discussions with Arthur Andersen, and
. review of Arthur Andersen's written disclosures and letter,
we recommended to the Board of Directors that the audited financial statements
be included in Halliburton's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000 for filing with the Securities and Exchange Commission.
Respectfully submitted,
THE AUDIT COMMITTEE OF DIRECTORS
Robert L. Crandall
Lawrence S. Eagleburger
W. R. Howell
Ray L. Hunt
C. J. Silas
Audit Fees
The aggregate fees billed for professional services rendered by Arthur
Andersen LLP for the audit of Halliburton's annual financial statements for
fiscal year 2000 and the reviews of Halliburton's financial statements included
in Halliburton's Forms 10-Q for fiscal year 2000 totaled $7.4 million.
Financial Information Systems Design and Implementation Fees
The aggregate fees billed for the professional services as financial
information systems design and implementation rendered by Arthur Andersen LLP
for fiscal year 2000 totaled $1.5 million which consisted primarily of:
. $730,000 for an intercompany project, and
. $700,000 for a tax database project.
In addition, Accenture's (formerly known as Andersen Consulting) aggregate fees
billed for systems design and implementation for the period from January 1,
2000 through August 7, 2000 were $36.1 million dollars.
All Other Fees
The aggregate fees billed for services rendered in year 2000 by Arthur
Andersen LLP, other than the services covered in the paragraphs above headed
Audit Fees and Financial Information Systems Design and Implementation Fees
totaled $6.5 million which primarily consisted of:
. $3.8 million of tax services, and
26
. $2.7 million of special projects which consisted primarily of:
. $950,000 for work related to the sale of the Dresser Equipment
Group business, primarily for audited financial statements of the
Group,
. $700,000 for work related to worldwide benefit plans,
. $400,000 for due diligence related work, and
. $600,000 for small projects, none of which were greater than
$40,000.
Audit Committee Consideration
Halliburton's Audit Committee considered whether Arthur Andersen LLP's
provision of Financial Information Systems Design and Implementation Fees and
All Other Fees as reported above is compatible with maintaining Arthur Andersen
LLP's independence as Halliburton's principal independent accounting firm.
Work Performed by Principal Accountant's Full Time, Permanent Employees
Arthur Andersen's work on Halliburton's audit was performed by full time,
permanent employees and partners of Arthur Andersen.
PROPOSAL FOR RATIFICATION OF THE SELECTION OF AUDITORS
(Item 2)
Arthur Andersen LLP has examined Halliburton's financial statements since
1946. A resolution will be presented at the Annual Meeting to ratify the
appointment by the Board of Directors of that firm as independent accountants
to examine the financial statements and the books and records of Halliburton
for the year ending December 31, 2001. The appointment was made upon the
recommendation of the Audit Committee. Arthur Andersen LLP has advised that
neither the firm nor any member of the firm has any direct financial interest
or any material indirect interest in Halliburton. Also, during at least the
past three years, neither the firm nor any member of the firm has had any
connection with Halliburton in the capacity of promoter, underwriter, voting
trustee, Director, officer or employee.
Representatives of Arthur Andersen are expected to be present at the Annual
Meeting, will have an opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions from
stockholders.
The affirmative vote of the holders of a majority of the shares of
Halliburton's Common Stock represented at the Annual Meeting and entitled to
vote on the matter is needed to approve the proposal.
If the stockholders do not ratify the selection of Arthur Andersen LLP, the
Board of Directors will reconsider the selection of independent accountants.
The Board of Directors recommends a vote FOR ratification of the appointment
of Arthur Andersen LLP as independent accountants to examine the financial
statements and books and records of Halliburton for the year 2001.
STOCKHOLDER PROPOSAL ON MYANMAR (BURMA)
(Item 3)
The Amalgamated Bank of New York LongView Collective Investment Fund (the
"LongView Fund"), located at 11-15 Union Square, New York, NY 10003, has
notified Halliburton that it intends to present the
27
resolution set forth below to the Annual Meeting for action by the
stockholders. LongView Fund's supporting statement for the resolution, along
with the Board of Directors' statement in opposition is set forth below. As of
December 6, 2000, LongView Fund beneficially owned 144,091 shares of
Halliburton's common stock. Proxies solicited on behalf of the Board of
Directors will be voted AGAINST this proposal unless stockholders specify a
contrary choice in their proxies.
Proposal
RESOLVED: The shareholders of Halliburton Company ("Halliburton" or the
"Company") urge the Board of Directors to create a committee of independent
directors to prepare a report at reasonable expense that describes projects
undertaken by the Company or any subsidiary in Burma, with an emphasis on what
steps have been and are being taken to assure that neither Halliburton nor any
of its subsidiaries is involved in or appears to benefit from the use of forced
labor or other human rights abuses in Burma.
Supporting Statement
Burma has been ruled for over a decade by a military dictatorship widely
condemned for human rights abuses. The U.S. government has banned new
investment in Burma, and many U.S. companies, including Texaco and Atlantic
Richfield, have voluntarily withdrawn from the country. Halliburton, however,
remains one of the last U.S. companies with an office in Burma.
The United Nations, the U.S. Department of Labor, the International Labor
Organization and various human rights groups have published reports on forced
labor and other human-rights violations in Burma, with particular reference to
the Yadana gas pipeline project.
Halliburton participated in constructing the Yadana pipeline. According to an
October 2000 Wall Street Journal article, European Marine Contractors, a
Halliburton subsidiary, contracted in 1997 to lay 365 kilometers of the
pipeline undersea. A report by the United Nations Special Rapporteur on Burma
found that Burmese villagers were forced to work on offshore portions of the
Yadana project. EarthRights International, a human rights organization,
reported that "from 1992 until the present, thousands of villagers in Burma
were forced to work in support of these pipelines and related infrastructure,
were raped, tortured and killed by soldiers hired by the companies as security
guards for the pipeline." The Journal reported that Halliburton refused to
comment on whether it was aware of human rights concerns in Burma.
At least one U.S. company doing business in Burma was sued by victims of
forced labor. In a case filed against Unocal involving the Yadana project, a
federal judge found that "the evidence does suggest that Unocal knew that
forced labor was being utilized and that the Joint Venturers [including Unocal]
benefited from the practice." The lawsuit was dismissed for failure to meet the
requirements of the Alien Tort Claims Act. Even so, a judicial finding that a
company knew forced labor was being used can damage a company's reputation.
Fifty years after World War II, companies still face litigation by victims of
forced labor under the Nazi regime. The German government recently established
a $4.6 billion compensation fund with funding to come from companies that
benefited from forced labor, including U.S.-based companies Ford and General
Motors. Any involvement in human rights abuses can thus come back to haunt
companies years later.
We believe that Halliburton shareholders are entitled to an independent
assessment of the Company's activities in Burma insofar as they relate to human
rights issues there.
We urge you to vote FOR this resolution.
The Board of Directors recommends a vote AGAINST this proposal for the
following reasons:
. Halliburton's activities in Myanmar (Burma) represent a tiny fraction of
Halliburton's overall business operations.
28
. Halliburton's limited operations in Myanmar have been performed primarily
by personnel sourced from outside Myanmar.
Halliburton's operations in Myanmar are immaterial. For the fiscal year ended
December 31, 1999, Myanmar represented approximately $21 thousand of
Halliburton's total assets of $10.7 billion or 0.0002%; approximately $120
thousand of Halliburton's net earnings of $438 million or 0.03%; and
approximately $1.1 million of Halliburton's gross sales of $14.9 billion or
0.007%.
Halliburton employs only one Myanmar national in its limited operations in
Myanmar. All other personnel on Halliburton projects come from outside the
country. Therefore, there is absolutely no basis for attributing human rights
abuses to Halliburton's activities.
While the Board shares the Proponent's concern about human rights abuses in
countries such as Myanmar, Halliburton has not engaged in, or condoned, such
conduct. Thus, the requested report will serve only to increase administrative
burdens and costs.
Halliburton's Code of Business Conduct requires all employees and agents to
practice honesty and integrity in every aspect of their dealings with other
Halliburton employees, customers, suppliers and the public and to treat those
persons with dignity and respect.
As a company that operates in over 100 countries around the world, our
customers, partners, suppliers and employees represent virtually every race or
national origin and an associated multitude of religions, cultures, customs,
political philosophies and languages. We must, and do, respect this diversity
and realize that neither the United States nor we can impose its values on the
world.
It is not our purpose to remake the world in the image of any particular
political, moral or religious philosophy with which we are comfortable. Rather,
we hope to help improve the quality of life wherever we do business by serving
as a developer of natural resources and infrastructures.
Regarding allegations of violations of human rights by the government of
Myanmar, we believe that decisions as to the nature of such governments and
their actions are better made by governmental authorities and international
entities such as the United Nations as opposed to individual persons or
companies. Where the United States government has mandated that United States
companies refrain from commerce, we comply, often to the advantage of our
international competitors. History has shown that single country, let alone
corporate boycotts and sanctions, are ineffective, often injuring the economic
interests of the boycotting entity.
We do not always agree with the policies or actions of governments in every
place that we do business. Due to the long-term nature of our business and the
inevitability of political and social change, however, it is neither prudent
nor appropriate for Halliburton to establish its own country-by-country foreign
policy.
Because Halliburton already places a high priority on the treatment of all
persons with dignity and respect, the Board believes that the added reporting
will not create added value to the stockholders.
The Board of Directors recommends a vote AGAINST the proposal. Proxies
solicited by the Board will be voted against the proposal unless instructed
otherwise.
STOCKHOLDER PROPOSAL ON INDEXING EXECUTIVE STOCK OPTIONS
(Item 4)
The Central Laborers' Pension Fund (the "Central Laborers' Fund"), with a
mailing address of P.O. Box 1267, Jacksonville, IL 62651, has notified
Halliburton that it intends to present the resolution set forth below to the
Annual Meeting for action by the stockholders. Central Laborers' Fund's
supporting statement for the
29
resolution, along with the Board of Directors' statement in opposition is set
forth below. As of November 22, 2000, Central Laborers' Fund beneficially owned
4,200 shares of Halliburton's common stock. Proxies solicited on behalf of the
Board of Directors will be voted AGAINST this proposal unless stockholders
specify a contrary choice in their proxies.
Proposal
RESOLVED, that the shareholders of Halliburton Company (the "Company")
request that the Board of Directors adopt an executive compensation policy that
all future stock option grants to senior executives shall be performance-based.
For the purposes of this resolution, a stock-option is performance-based if its
exercise price is linked to an industry performance index associated with the
peer group companies used for stock price comparisons in the Company's proxy
statement.
Supporting Statement
As long-term shareholders of the Company, we support executive compensation
policies and practices that provide challenging performance objectives and
serve to motivate executives to achieve long-term corporate value maximization
goals. While salaries and bonuses compensate management for short-term results,
the grant of stock and stock options has become the primary vehicle for
focusing management on achieving long-term results. Unfortunately, these option
grants can and do often provide levels of compensation well beyond those
merited. It has become abundantly clear that stock option grants without
specific performance-based targets often reward executives for stock price
increases due solely to a general stock market rise, rather than improved or
superior company performance.
One type of indexed stock options is options whose exercise price moves with
an appropriate market index composed of a company's primary competitors. The
resolution requests that the Company's Board ensure that future Company stock
option plans link the option exercise price to an industry performance index
associated with the peer group of companies used for stock price comparisons in
the Company's proxy statement.
Implementing an indexed stock option plan would mean that our Company's
participating executives would receive payouts only if the Company's stock
price performance was better than that of the peer group average. By tying the
exercise price to a market index, indexed options reward participating
executives for outperforming the competition. Indexed options would have value
when our Company's stock price rises in excess of its peer group average or
declines less than its peer group average stock price decline. By downwardly
adjusting the exercise price of the option during a downturn in the industry,
indexed options remove pressure to reprice stock options. In short, superior
performance would be rewarded.
At present, the Company's stock option plan is not indexed to peer group
performance standards. Our Company's stock performance over the past five year
period has lagged the Standard & Poor 500 Index and modestly outperformed its
peer group industry average, according to the Company's most recent proxy
statement.
As long-term owners, we feel strongly that our Company would benefit from the
implementation of a stock option program that rewarded superior long-term
corporate performance. In response to strong negative public and shareholder
reactions to the excessive financial rewards provided executives by non-
performance based option plans, a growing number of shareholder organizations,
executive compensation experts, and companies are supporting the implementation
of indexed stock option plans. We urge your support for this important
governance reform.
The Board of Directors recommends a vote AGAINST this proposal for the
following reasons:
. The Board believes that the 1993 Plan provides appropriate incentives to
Halliburton's executives that are competitive with those of our comparator
group.
30
Because stock options only have value if the stock price appreciates
following the date of grant, executives' interests are linked directly to those
of stockholders. In addition, in determining the number of options granted to
an executive, the Compensation Committee considers competitive market data on
long-term incentive compensation for comparable positions within a comparator
group. This comparator group is composed of companies which reflect the markets
in which Halliburton competes for business and people.
The Board has implemented various measures to make sure that option grants
provide executives with the appropriate incentive, while protecting
stockholders. In 2000, the stockholders approved an amendment to the 1993 Plan
to prohibit repricing of stock options. This amendment was implemented even
though Halliburton has never repriced stock options. Additionally, option
grants are limited to a term of 10 years and vest over a three-year period.
The Board believes that indexing options as proposed would place Halliburton
at a competitive disadvantage in recruiting and retaining executives.
. Implementation of the proposal would disqualify Halliburton's stock options
as performance-based compensation under Internal Revenue Code regulations,
thereby limiting the deductibility of compensation attributable to options
to the ultimate disadvantage of the stockholders.
Internal Revenue Code (S)162(m) limits the deductibility of compensation
expense over $1 million paid to specified executives. Specific performance-
based compensation meeting IRS criteria is excluded from the calculation to
determine whether the $1 million cap has been exceeded. Amendments to the 1993
Plan were adopted in 1996 and 2000 to qualify stock options, stock appreciation
rights and performance share awards as performance-based compensation under IRS
rules. To the extent that the exercise price of a stock option is less than the
fair market value of the stock on the date of grant of the stock option,
compensation arising from the exercise would not qualify as performance-based
compensation and, thus, would be includable as compensation subject to the
limits on deductibility. Implementation of the proposal could result in denial
of tax deductibility of compensation expense arising from stock option
exercises by senior executives.
. Indexing the exercise price of options would have serious accounting
consequences on Halliburton's financial reporting.
Accounting Principles Board Opinion No. 25 and FASB Interpretation No. 44
provide the accounting and financial reporting guidance relative to stock
options. The measurement date for determining compensation costs for stock
options is the first date on which are known both (1) the number of shares that
an individual employee is entitled to receive and (2) the stock option price.
If executives' stock options were indexed in accordance with the proposal,
Halliburton would have to re-measure the compensation cost related to these
stock options at each quarterly financial reporting period and recognize that
expense over the period the employee performs the related services. To the
extent that the exercise price of a stock option is less than the fair market
value of the stock option on the date of grant of the stock option,
compensation arising from the exercise would not be based on future performance
and the expense would have to be recognized on the date of grant. Current
financial reporting requirements for stock options do not require the
associated compensation expense to be included in net earnings if the exercise
price equals or exceeds the underlying stock's fair market value on the date of
grant. If the proposal were adopted, additional compensation expense might have
to be recognized in the income statement arising from indexing stock options,
which would negatively impact Halliburton's reported financial performance as
compared to other companies.
In summary, the Board of Directors believes the right balance is being
achieved in the granting of stock options to executives. Implementation of the
proposal could have serious competitive, tax and financial consequences to
Halliburton.
The Board of Directors recommends a vote AGAINST the proposal. Proxies
solicited by the Board will be voted against the proposal unless instructed
otherwise.
31
STOCKHOLDER PROPOSAL ON EXECUTIVE COMPENSATION SYSTEM
(Item 5)
The International Brotherhood of Electrical Workers' Pension Benefit Fund
(the "IBEW Fund"), located at 1125 Fifteenth St., N.W., Washington, D.C. 20005,
has notified Halliburton that it intends to present the resolution set forth
below to the Annual Meeting for action by the stockholders. IBEW Fund's
supporting statement for the resolution, along with the Board of Directors'
statement in opposition is set forth below. As of November 22, 2000, IBEW
Funds' Fund beneficially owned 55,288 shares of Halliburton's common stock.
Proxies solicited on behalf of the Board of Directors will be voted AGAINST
this proposal unless stockholders specify a contrary choice in their proxies.
Proposal
RESOLVED, that the shareholders of Halliburton Company ("Company") hereby
request that the Company's Board of Directors take the necessary steps to
establish a performance-based senior executive compensation system that focuses
the five most highly-paid members of management on advancing the long-term
success of the Company. To demonstrate that such steps have been taken, we
request that the Compensation Committee Report identify specific performance
criteria and explain why they have been selected; the specific target level
that must be achieved to satisfy that performance criteria; and rank each
performance factor in order of importance, as well as identify the weight
attached to each factor.
Supporting Statement
The long-term success of the Company depends on the ability of the board of
directors and senior management to establish and implement a strategic plan
that ensures the Company's long-term success. This strategic plan must meet the
needs of the Company's customers, recognize the important contributions of its
employees, accept the Company's responsibility to associate itself with
responsible vendors and suppliers, and satisfy all legal and ethical
responsibilities to the Company's immediate and broader community.
Senior management must be keenly focused on fulfilling these strategic plans.
The best way to ensure proper focus is through a performance-based executive
compensation system that generously rewards superior performance. Specific
financial and non-financial performance criteria should be selected to focus
the five most highly-paid members of management on advancing the long-term
success of the Company.
This system must be transparent, justifiable and challenging to focus senior
management and the rest of the Company. Accountability must be the cornerstone
of the system. Such a system would serve to motivate senior management and all
other employees throughout the ranks.
It is our opinion that too many companies, including our Company, reward
average or below average performance and do not motivate senior management to
excel. We believe that rather than challenging them to achieve superior
performance, enormous compensation packages, including massive stock option
grants, effectuate significant and unjustifiable transfers of wealth from
shareholders to managers. We do not believe such a system is in shareholders'
interest.
Consider the executive compensation system at our Company. Our Company's
stock performance over the past five year period has lagged the Standard & Poor
500 Index and modestly outperformed its peer group industry average. At the
same time, our Company's former Chairman and CEO Richard Cheney has received an
extremely generous compensation and retirement package, including a base salary
of $1,283,000 and, according to a September 2, 2000, Washington Post article a
"generous retirement package that included about $13.6 million in stock and
stock options."
32
Adoption of this proposal would advance a senior management compensation
system that promotes accountability, ensures management is rewarded for
excellent performance, not average results, and focuses management and all
employees on achieving long-term success. We urge you to vote for this
proposal.
The Board of Directors recommends a vote AGAINST the proposal for the following
reasons:
The Board of Directors believes that the executive compensation program
currently in place at Halliburton is effective and properly motivates
executives to advance the long-term success of Halliburton. The Compensation
Committee is charged with the responsibility of designing and regularly
reviewing the total compensation program to ensure that it is effective in
attracting, retaining and motivating key employees and that it reinforces
business strategies which promote the Compensation Committee's primary
objective of enhancing shareholder value. In carrying out its responsibilities,
the Compensation Committee consults with outside compensation consultants and
considers competitive market data for a comparator group which reflects the
markets in which Halliburton competes for business and people.
As noted in the Compensation Committee's report beginning on page 10, the
principal long-term incentive for executives is the grant of stock options. The
exercise price of the stock options is equal to Halliburton's closing stock
price on the grant date. In addition, the Executive Performance Plan, which is
based on the achievement of given levels of CVA (cash value added) performance,
has elements of a long-term incentive plan because any incentive awards earned
are paid out in restricted stock vesting over a three-year period. The plan
design has the effect of reinforcing the relationship of incentive compensation
to shareholder value creation and focusing executives on a time frame longer
than one year.
The Board believes that the stock option program and the CVA-based incentive
plan already in place are responsive to the Proponent's request for an
executive compensation system that focuses executives on Halliburton's long-
term success. In addition, Halliburton is already complying with the
Proponent's request to identify the performance criteria and explain the
reasons for selection. As explained in the Compensation Committee's report, the
sole performance measure for the Executive Performance Plan is CVA; the reason
for its selection is to link incentive compensation to the enhancement of
shareholder value. In the case of stock options, the performance measure is
implicitly Halliburton's stock price. Stock options, which only have value if
the stock price rises, link the executives' interests with the stockholders and
encourage behavior that will have a positive impact on Halliburton's share
price. Stock options are the primary long-term incentives used by all the
companies in Halliburton's comparator group. In order to be competitive,
Halliburton must continue to grant options to its executives which are
comparable to those granted to executives of our peer companies.
Thus, while the Board is of the opinion that Halliburton has met the first
two of the Proponent's requests, it is totally opposed to the proposal calling
for specification of performance targets. Disclosure of criteria that are
quantitative and the weight associated with each quantitative factor would
place Halliburton at a serious competitive disadvantage. This would require
disclosure of financial and operational details that are more specific than
what is contained in the public disclosures of Halliburton and its competitors.
Furthermore, the Securities and Exchange Commission's instructions relating to
the content of the Compensation Committee's report expressly provide that
disclosure of target levels of performance-related factors is not required if
the disclosure would have an adverse effect on the company.
As described in the Compensation Committee's report, during 2000, the
committee conducted a thorough analysis and study of its charter and executive
compensation philosophy, strategy, framework and processes. With the help of
the Compensation Committee's outside compensation consultant and management,
each component of Halliburton's executive compensation program was extensively
reviewed and adjustments were made where appropriate. The Board of Directors is
satisfied that the existing executive compensation components and the
incentives they create are in our stockholders' long-term interests.
The Board of Directors recommends a vote AGAINST the proposal. Proxies
solicited by the Board will be voted against the proposal unless instructed
otherwise.
33
COST OF SOLICITATION
Officers and other employees of Halliburton may solicit proxies personally,
by telephone or other telecommunications from some stockholders if proxies are
not received promptly. Halliburton will reimburse banks, brokers or other
persons holding Halliburton Common Stock in their names or in the names of
their nominees for their charges and expenses in forwarding proxies and proxy
material to beneficial owners of Halliburton's Common Stock. All expenses of
solicitation of proxies will be borne by Halliburton. In addition, Georgeson
Shareholder Communications Inc. has been retained to assist in the solicitation
of proxies for the 2001 Annual Meeting of Stockholders at a fee of $12,500 plus
reasonable expenses.
STOCKHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
Stockholders are entitled to submit proposals on matters appropriate for
stockholder action consistent with regulations of the Securities and Exchange
Commission. Should a stockholder intend to present a proposal at the 2002
Annual Meeting, it must be received by the Secretary of Halliburton (3600
Lincoln Plaza, 500 N. Akard Street, Dallas, Texas 75201-3391) not later than
November 22, 2001. The proposal must comply with all of the requirements of
Rule 14a-8 under the Securities Exchange Act of 1934, as amended, in order to
be included in Halliburton's proxy statement and form of proxy relating to that
meeting. The 2002 Annual Meeting of Stockholders will be held May 21, 2002.
34
OTHER BUSINESS
Halliburton's By-laws provide that in addition to any other applicable
requirements, for business to be properly brought before the Annual Meeting by
a stockholder, the stockholder must give timely notice in writing to the
Secretary. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of Halliburton, not less than
ninety (90) days prior to the anniversary date of the immediately preceding
stockholders meeting. A stockholder's notice to the Secretary shall set forth
as to each matter the stockholder proposes to bring before the Annual Meeting:
. a brief description of the business desired to be brought before the
Annual Meeting and the reasons for conducting this business at the
Annual Meeting;
. the name and record address of the stockholder proposing the business;
. the class and number of shares of Halliburton which are beneficially
owned by the stockholder;
. a representation that the stockholder or a qualified representative of
the stockholder intends to appear in person to bring the proposed
business before the Annual Meeting; and
. any material interest of the stockholder in the business.
This requirement does not preclude discussion by any stockholder of any
business properly brought before the Annual Meeting in accordance with these
procedures.
The management of Halliburton is not aware of any business to come before the
meeting other than those matters described in this proxy statement. If any
other matters should properly come before the meeting, however, it is intended
that proxies in the accompanying form will be voted on those matters in
accordance with the judgment of the person or persons voting the proxies.
By Authority of the Board of
Directors,
/s/ Susan S. Keith
Susan S. Keith
Vice President and Secretary
March 20, 2001
35
Appendix A
HALLIBURTON COMPANY AUDIT COMMITTEE CHARTER
General
The Audit Committee of the Board of Directors of Halliburton Company shall
consist of at least three independent directors. Members of the Committee shall
be considered independent if they have no relationship to the Company that
could interfere with the exercise of their independence from management and the
Company. As determined by the Board of Directors, the Members of the Committee
will be financially literate with at least one having accounting or related
financial management expertise. Company management, internal and independent
auditors and the Company's General Counsel may attend each meeting or portions
thereof as required by the Committee. The Committee will have four meetings
each year on a regular basis and will have special meetings if and when
required.
Responsibilities
The Audit Committee's role is one of oversight whereas the Company's
management is responsible for preparing the Company's financial statements and
the independent auditors are responsible for auditing those financial
statements. The Audit Committee is not providing any expert or special
assurance as to the Company's financial statements or any professional
certification as to the independent auditor's work. The following functions
shall be the key responsibilities of the Audit Committee in carrying out its
oversight function.
1. Provide an open avenue of communications between the internal and
independent auditors and the Board of Directors, including private
sessions with the internal and independent auditors, as the Committee may
deem appropriate.
2. Receive and review reports from Company management relating to the
Company's financial reporting process, published financial statements
and/or major disclosures and the adequacy of the company's system of
internal controls.
3. Receive and review reports from Company management and General Counsel
relating to legal and regulatory matters that may have a material impact
on the Company's financial statements and Company compliance policies.
4. Receive and review reports from internal auditors relating to major
findings and recommendations from internal audits conducted Company-wide.
Consult with and review reports from internal auditors relating to on-
going monitoring programs including the Company's Code of Business
Conduct and compliance with policies of the Company.
5. Inquire of company management and independent auditors regarding the
appropriateness of accounting principles followed by the Company, changes
in accounting principles and their impact on the financial statements.
6. Review the internal audit program in terms of scope of audits conducted
or scheduled to be conducted.
7. The Committee and Board shall be ultimately responsible for the
selection, evaluation, and replacement of the independent auditors. The
Committee will:
. recommend annually the appointment of the independent auditors to the
Board for its approval and subsequent submission to the stockholders
for ratification, based upon an annual performance evaluation and a
determination of the auditors' independence;
A-1
. determine the independence of the independent auditors by obtaining a
formal written statement delineating all relationships between the
independent auditors and the Company, including all non-audit services
and fees;
. discuss with the independent auditors if any disclosed relationship or
service could impact the auditors' objectivity and independence; and
. recommend that the Board take appropriate action in response to the
auditors' statement to ensure the independence of the independent
auditors.
8. Meet with independent auditors and review their report to the Committee
including comments relating to the system of internal controls, published
financial statements and related disclosures, the adequacy of the
financial reporting process and the scope of the independent audit. The
independent auditors are ultimately accountable to the Board and the
Committee on all such matters.
9. Receive and review reports from both the internal and independent
auditors relating to plans for the audit of the Company's information
technology procedures and controls.
10. Review with the internal and independent auditors the coordination of
their respective audit activities.
11. Prepare a Report, for inclusion in the Company's proxy statement,
disclosing that the Committee reviewed and discussed the audited
financial statements with management and discussed certain other matters
with the independent auditors. Based upon these discussions, state in the
Report whether the Committee recommended to the Board that the audited
financial statements be included in the Annual Report.
12. Review and reassess the adequacy of the Audit Committee's charter
annually. If any revisions therein are deemed necessary or appropriate,
submit the same to the Board for its consideration and approval.
Quorum
For the transaction of business at any meeting of the Audit Committee, three
members shall constitute a quorum.
Approved as revised: Board of Directors of
Halliburton Company
February 17, 2000
Supercedes previous version dated:
September 11, 1997
A-2
PROXY
HALLIBURTON COMPANY
Proxy for 2001 Annual Meeting of Stockholders
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints D.J. Lesar, L.L. Coleman and S.S. Keith,
and any of them, proxies or proxy with full power of substitution and revocation
as to each of them, to represent the undersigned and to act and vote, with all
powers which the undersigned would possess if personally present, at the Annual
Meeting of Stockholders of Halliburton Company to be held in the Parisian Room
of the Fairmont Hotel, 1717 North Akard Street, Dallas, Texas, on Tuesday, May
15, 2001, on the following matters and in their discretion on any other matters
which may come before the meeting or any adjournments thereof. Receipt of
Notice-Proxy Statement dated March 20, 2001, is acknowledged.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned.
In the absence of such direction the proxy will be voted FOR the nominees listed
in Item 1, FOR the Proposal set forth in Item 2 and AGAINST the Proposals set
forth in Items 3, 4 and 5.
(Continued and to be signed on reverse side)
[ FOLD AND DETACH HERE ]
To vote in accordance with the Board of Directors' recommendations just sign below; Please mark
no boxes need to be checked. The Board of Directors Recommends a Vote FOR your votes as [ X ]
Items 1 and 2 and AGAINST Items 3, 4 and 5. indicated in
this example
Item 1-Election of Directors (Instruction: To withhold authority to vote for an individual
nominee write that nominee's name on the space provided
FOR all nominees WITHHOLD below)
listed to the right AUTHORITY
(except as marked to the to vote for all nominees Nominees: 01 Lord Clitheroe, 02 R.L. Crandall, 03 K.T. Derr,
contrary) listed to the right 04 C.J. DiBona, 05 L.S. Eagleburger, 06 W.R. Howell, 07 R.L. Hunt,
08 D.J. Lesar, 09 A.B. Lewis, 10 J.L. Martin, 11 J.A. Precourt,
[ ] [ ] 12 D.L. Reed, 13 C.J. Silas.
_________________________________________________________________
Item 2-Proposal for ratification of selection of Item 3-Shareholder proposal on Myanmar (Burma).
independent public accountants for the Company for 2001
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ] [ ]
Item 4-Shareholder proposal on indexing stock options. Item 5-Shareholder proposal on executive compensation system.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ] [ ]
Yes
Item 6-In their discretion, upon such other business I plan to attend the meeting [ ]
as may properly come before the meeting.
IN THE FUTURE, WOULD YOU CONSENT TO Yes
ACCESSING YOUR ANNUAL REPORT AND PROXY [ ]
STATEMENT ELECTRONICALLY VIA THE INTERNET?
Signature____________________________________________ Signature____________________________________________ Date___________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such.
FOLD AND DETACH HERE
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Your telephone or Internet vote authorizes the named proxies to vote your shares in the same manner
as if you marked, signed and returned your proxy card.
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+--------------------------------+ +-----------------------------------+ +-----------------------------+
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