SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Schlumberger Limited
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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Notes:
[LOGO]SCHLUMBERGER
Schlumberger Limited
277 Park Avenue
New York, New York 10172-0266
------------
42, rue Saint-Dominique
75007 Paris, France
------------
Parkstraat 83,
2514 JG The Hague,
The Netherlands
NOTICE OF ANNUAL GENERAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 8, 1998
March 6, 1998
The Annual General Meeting of Stockholders of Schlumberger Limited
(Schlumberger N.V.) will be held at the Avila Beach Hotel, Penstraat 130,
Willemstad, Curacao, Netherlands Antilles, on Wednesday, April 8, 1998, at
10:30 in the morning (Curacao time), for the following purposes:
1. To elect 12 directors.
2. To report on the course of business during the year ended December 31,
1997, to approve the Company's Consolidated Balance Sheet as at December
31, 1997, its Consolidated Statement of Income for the year ended December
31, 1997, and the declaration of dividends by the Board of Directors as
reflected in the Company's 1997 Annual Report to Stockholders.
3. To approve the appointment of Price Waterhouse LLP as independent
public accountants to audit the accounts of the Company for 1998.
4. To approve amendments to the Schlumberger Discounted Stock Purchase
Plan.
5. To approve adoption of the Schlumberger 1998 Stock Option Plan.
Action will also be taken upon such other matters as may come properly
before the Meeting.
The close of business on February 23, 1998 has been fixed as the record date
for the Meeting. All holders of Common Stock of record at that time are
entitled to vote at the Meeting.
By order of the Board of
Directors,
DAVID S. BROWNING
Secretary
PROXY STATEMENT
March 6, 1998
This statement is furnished in connection with the solicitation by the Board
of Directors of Schlumberger Limited (Schlumberger N.V.) (the "Company") of
proxies to be voted at the 1998 Annual General Meeting of Stockholders (the
"Meeting"). The approximate mailing date of this Proxy Statement is March 6,
1998. Business at the Meeting is conducted in accordance with the procedures
determined by the presiding officer and is generally limited to matters
properly brought before the Meeting by or at the direction of the Board of
Directors or by a stockholder in accordance with specified requirements
requiring advance notice and disclosure of relevant information.
The Company's 1997 Annual Report to Stockholders (the "Report") has been
mailed under separate cover. The Company's Consolidated Balance Sheet as at
December 31, 1997, its Consolidated Statement of Income for the year ended
December 31, 1997 and the supplemental financial information with respect to
dividends included in the Report are incorporated by reference as part of this
proxy soliciting material.
The Company will bear the cost of furnishing proxy material to all
stockholders and of soliciting proxies by mail and telephone. D. F. King &
Co., Inc. has been retained by the Company to assist in the solicitation of
proxies for a fee estimated at $10,000 plus reasonable expenses. The Company
will reimburse brokerage firms, fiduciaries and custodians for their
reasonable expenses in forwarding the solicitation material to the beneficial
owners.
VOTING PROCEDURE
Each stockholder of record at the close of business on February 23, 1998 is
entitled to one vote for each share registered in such stockholder's name. On
that date there were outstanding shares of Common Stock of the
Company (excluding shares held in treasury).
Fifty percent of the outstanding shares, exclusive of shares held in
treasury, must be present in person or by proxy to constitute a quorum for the
holding of the Meeting. Abstentions and broker non-votes are counted for
determining the presence of a quorum but are not counted as votes cast in the
tabulation of votes on any matter brought before the Meeting.
Shares cannot be voted at the Meeting unless the owner of record is present
in person or is represented by proxy. The Company is incorporated in the
Netherlands Antilles and, as required by the laws thereof and the Company's
Deed of Incorporation, meetings of stockholders must be held in Curacao. The
enclosed proxy card is a means by which a stockholder may authorize the voting
of shares at the Meeting. It may be revoked at any time by written notice to
the Secretary of the Company before it is voted. If it is not revoked, the
shares represented will be voted in accordance with the proxy.
1
1. ELECTION OF DIRECTORS
It is intended to fix the number of directors at 12 and to elect a Board of
12 directors, each to hold office until the next Annual General Meeting of
Stockholders and until a director's successor is elected and qualified or
until a director's death, resignation or removal. Each of the nominees is now
a director and was previously elected by the stockholders, except Victor E.
Grijalva. Unless instructed otherwise, the proxies will be voted for the
election of the 12 nominees named below. If any nominee is unable or unwilling
to serve, proxies may be voted for another person designated by the Board of
Directors. The Board knows of no reason why any nominee will be unable or
unwilling to serve, if elected.
A majority of the votes cast is required to elect each of the nominees for
director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES.
The Board of Directors' nominees for election to the Board, together with
information furnished by them with respect to their business experience, and
other information regarding them, are set forth below:
NOMINEE, AGE AND DIRECTOR
FIVE-YEAR BUSINESS EXPERIENCE SINCE
----------------------------- --------
DON E. ACKERMAN, 64; Private Investor since 1991 (1)................. 1982
D. EUAN BAIRD, 60; Chairman and Chief Executive Officer since October
1986 (2)............................................................ 1986
JOHN DEUTCH, 59; Institute Professor, Massachusetts Institute of
Technology, Cambridge, Massachusetts, since January 1997; Director
of U.S. Central Intelligence May 1995 to December 1996; Deputy
Secretary of Defense April 1994 to May 1995; Under Secretary of
Defense (Acquisition and Technology) March 1993 to 1994; Director of
Schlumberger Limited May 1987 to 1993 (3)........................... 1997
VICTOR E. GRIJALVA, 59; Executive Vice President, Oilfield Services
of the Company from 1994 to present. Previously, from 1992 to 1994,
Executive Vice President for Wireline, Testing & Anadrill........... --
DENYS HENDERSON, 65; Chairman, The Rank Group Plc., a diversified
leisure services concern, since March 1995; Chairman, Zeneca Group
PLC, June 1993 to May 1995; Chairman, Imperial Chemical Industries
PLC ("ICI"), June 1993 through April 1995; Chairman and Chief
Executive Officer, ICI, April 1987 to June 1993, all in the United
Kingdom (4)......................................................... 1995
ANDRE LEVY-LANG, 60; Chairman of the Board of Management of Compagnie
Financiere de Paribas, an international banking group, since June
1990; Chairman of the Board of Management of Banque Paribas, a
subsidiary of Compagnie Financiere de Paribas, since 1991; Chairman
of the Board of Management of Compagnie Bancaire 1989 to 1993;
Chairman of the Supervisory Board of Compagnie Bancaire since 1993,
all in Paris (5).................................................... 1992
2
NOMINEE, AGE AND DIRECTOR
FIVE-YEAR BUSINESS EXPERIENCE SINCE
----------------------------- --------
WILLIAM T. McCORMICK, JR., 53; Chairman and Chief Executive Officer,
CMS Energy Corp., a diversified energy company, Dearborn, Michigan
(6).................................................................. 1990
DIDIER PRIMAT, 53; President, Primwest Holding N.V., an investment
management company, Curacao, N.A. (7)................................ 1988
NICOLAS SEYDOUX, 58; Chairman and Chief Executive Officer, Gaumont, a
French film making enterprise, Paris (7)............................. 1982
LINDA GILLESPIE STUNTZ, 43; Partner, law firm of Stuntz & Davis P.C.,
Washington, D.C. since February 1995; Partner, law firm of Van Ness
Feldman, P.C., Washington, D.C. March 1993 to February 1995; U.S.
Dept. of Energy May 1989 to January 1993 (8)......................... 1993
SVEN ULLRING, 62; President and Chief Executive Officer, Det Norske
Veritas which provides safety, quality and reliability services to
maritime, offshore and other industries, Hovik, Norway............... 1990
YOSHIHIKO WAKUMOTO, 66; Adviser to Toshiba Corporation, a technology
company centered on electronics and energy, since July 1996, and,
since November 1996, Vice President, The Japan Foundation, and
Executive Director of its Center for Global Partnership; Member of
Board of Toshiba Corporation from July 1988 to June 1996; from July
1992 to June 1996, Executive Vice President of Toshiba with
responsibility for corporate planning, group companies and
information systems (1992 to 1995), and international affairs (1996);
from July 1990 to June 1992, Senior Vice President for international
staff (1990 and 1991) and corporate planning (1992), all in Tokyo ... 1997
- --------
(1) Mr. Ackerman is also Chairman of the Board of Genicom Corporation, which
is in the business of computer peripherals, electronic components and
computer related services.
(2) Mr. Baird is also a director of Compagnie Financiere de Paribas, Paris,
France and of The BOC Group plc, a United Kingdom company in the chemical
and health care industries. He is a trustee of Haven Capital Management
Trust.
(3) Mr. Deutch is also a director of Citicorp, a bank holding company which is
the parent of Citibank; CMS Energy Corp., a diversified energy company;
Cummins Engine Company, Inc., a manufacturer of diesel engines and
components, and of ARIAD Pharmaceuticals which is engaged in the discovery
and development of novel pharmaceuticals based on signal transaction
pathways and the genes that regulate them.
(4) Sir Denys is also Chairman of Dalgety PLC, a United Kingdom agricultural
products holding company.
(5) Mr. Levy-Lang is also a director of Elf-Aquitaine, a producer of oil, gas
and chemicals. On January 4, 1996, Mr. Levy-Lang was notified by a French
judge that he was placed under official investigation ("mise en examen")
as part of an ongoing inquiry regarding irregularities uncovered
3
in the 1991 financial statements of Ciments Francais, S.A., which was at
that time a subsidiary of Compagnie Financiere de Paribas.
(6) Mr. McCormick is also a director of First Chicago NBD Inc., a regional
bank holding company, and Rockwell International Inc., a diversified
producer of electronic, industrial automation and avionics products, among
others.
(7) Mr. Primat and Mr. Seydoux are cousins.
(8) Mrs. Stuntz is also a director of American Electric Power Company, Inc.,
an electric and power holding company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Following are the shares of the Company's Common Stock beneficially owned as
of January 31, 1998 by all directors and nominees, by each of the named
executive officers, and by the directors and officers as a group. Except as
footnoted, each named individual has sole voting and investment power over the
shares listed by that individual's name. As of January 31, 1998, no nominee
for director owned more than 1.0% of the outstanding shares of the Company's
Common Stock, except Mr. Primat who owned 1.12%. All 23 directors and
executive officers as a group owned 1.90% of the outstanding shares of the
Company at January 31, 1998.
NAME SHARES
- ---- ---------
Don E. Ackerman................................................... 2,000
D. Euan Baird..................................................... 1,691,955(1)
John Deutch....................................................... 2,600(2)
Victor E. Grijalva................................................ 492,643(3)
Denys Henderson................................................... 5,000
Andre Levy-Lang................................................... 4,000
Arthur Lindenauer................................................. 151,710(4)
Clermont Matton................................................... 409,899(5)
William T. McCormick, Jr.......................................... 8,000
Irwin Pfister..................................................... 105,254(6)
Didier Primat..................................................... 5,560,100(7)
Nicolas Seydoux................................................... 251,524(8)
Linda Gillespie Stuntz............................................ 4,000(9)
Sven Ullring...................................................... 3,172
Yoshihiko Wakumoto................................................ --
All directors and executive officers as a group (23 persons)...... 9,444,964(10)
- --------
(1) Includes 1,140,000 shares which are deemed to be beneficially owned by
Mr. Baird because he has the right to acquire such shares within 60 days
through the exercise of stock options.
(2) Includes 600 shares owned by Mr. Deutch's wife, as to which he disclaims
beneficial ownership.
4
(3) Includes 600 shares owned by Mr. Grijalva's daughter, as to which he
disclaims beneficial ownership, and 414,000 shares which are deemed to be
beneficially owned by him because he has the right to acquire such shares
within 60 days through the exercise of stock options.
(4) Includes 126,000 shares which are deemed to be beneficially owned by Mr.
Lindenauer because he has the right to acquire such shares within 60 days
through the exercise of stock options.
(5) Includes 384,000 shares which are deemed to be beneficially owned by Mr.
Matton because he has the right to acquire such shares within 60 days
through the exercise of stock options.
(6) Includes 105,000 shares which are deemed to be beneficially owned by Mr.
Pfister because he has the right to acquire such shares within 60 days
through the exercise of stock options.
(7) Includes 560,000 shares as to which Mr. Primat shares investment power.
(8) Includes 15,364 shares owned by Mr. Seydoux's wife as to which he shares
voting and investment power.
(9) Includes 2,000 shares as to which Mrs. Stuntz shares voting power.
(10) Includes 2,696,750 shares which are deemed to be beneficially owned by
executive officers as a group because they have the right to acquire such
shares within 60 days through the exercise of stock options.
BOARD AND COMMITTEES
The Company has an Audit, a Compensation, a Finance and a Nominating
Committee.
The Audit Committee assesses and monitors the corporate control environment
and recommends for appointment by the Board of Directors, subject to approval
by the stockholders, a firm of independent certified public accountants whose
duty is to examine the consolidated financial statements of the Company. The
Committee confers with the independent accountants and periodically reports to
and advises the Board concerning the scope of the independent accountants'
examinations and similar matters relating to the Company's accounting
practices and internal accounting controls. The Committee also advises the
Board concerning the fees of the independent accountants. Mr. Ullring is
Chairman of the Audit Committee, and Messrs. Ackerman and Levy-Lang and Mrs.
Stuntz are the other members.
The Compensation Committee reviews and approves the compensation of the
officers of the Company, advises on compensation and benefits matters and
administers the Company's stock option plans. Mr. Ackerman is Chairman of the
Compensation Committee. Sir Denys Henderson and Messrs. McCormick and Seydoux
are the other members.
The Finance Committee advises on various matters including dividend and
financial policies, the borrowing of money, the purchase and sale of
securities and the investment and reinvestment of surplus funds. The Committee
periodically reviews the administration of the employee benefit plans of
5
the Company and its subsidiaries. Messrs. Baird, Deutch, Levy-Lang, Primat and
Wakumoto are the members of this Committee.
The Nominating Committee recommends to the Board the number and names of
persons to be proposed by the Board for election as directors at the annual
general meetings of stockholders. Also, the Committee may recommend to the
Board persons to be appointed by the Board or to be elected by the
stockholders to fill any vacancies on the Board. Mr. McCormick is Chairman of
this Committee, and Messrs. Baird, Seydoux and Ullring are the other members.
The Nominating Committee will consider nominees recommended by stockholders.
Stockholders may submit nominations to Chairman, Nominating Committee, care of
the Secretary, Schlumberger Limited, 277 Park Avenue, New York, New York
10172-0266.
During 1997 the Board of Directors held five meetings. The Audit Committee
met twice; the Compensation Committee met four times; the Finance Committee
met twice, and the Nominating Committee met once. All present directors
attended at least 75% of the aggregate of the meetings of the Board and of the
Committees of the Board on which such directors served.
Directors who are employees of the Company do not receive compensation for
serving on the Board or Committees of the Board. Board members who are not
employees receive annual fees of $40,000 each and additional annual fees of
$10,000 as members of each of the Committees on which they serve, except that
the Chairmen of the Audit, Compensation and Nominating Committees each receive
an annual fee of $20,000, rather than the $10,000 annual fee for Committee
service.
Prior to 1997, the Company and its subsidiaries had banking relationships
with Banque Paribas under which funds were deposited with, and borrowed from,
Banque Paribas on terms the Company felt were competitive, reasonable, and
customary. Such relationships may occur in 1998. Mr. Levy-Lang, nominee for
election as director, is Chairman of the Board of Management of Banque
Paribas.
6
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ending December 31, 1997,
1996 and 1995, the cash compensation paid by the Company and its subsidiaries,
as well as certain other compensation paid or accrued for those years, to the
Chief Executive Officer and the next four most highly compensated executive
officers of the Company:
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
-------------
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
NAME AND -------------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(1) OPTIONS(#)(3) COMPENSATION($)(4)
------------------ ---- ------------ ----------- ------------- ------------------
D.E. Baird.............. 1997 1,500,000 1,500,000 500,000 323,000
Chairman and 1996 1,100,000 1,100,000 150,000 231,000
Chief Executive Officer 1995 1,100,000 1,000,000 50,000 139,417
V.E. Grijalva........... 1997 600,000 450,000 200,000 129,000
Executive Vice
President, 1996 600,000 425,000 100,000 108,350
Oilfield Services 1995 600,000 385,000 25,000 81,350
A. Lindenauer........... 1997 500,000 275,000 60,000 96,200
Executive Vice
President-- 1996 500,000 260,000 40,000 83,600
Finance 1995 500,000 260,000 0 65,625
I. Pfister.............. 1997 420,411 300,000 125,000 55,112
Executive Vice
President,
Test & Transactions
C. Matton............... 1997 498,299(2) 207,612 50,000 77,641
Executive Vice
President, 1996 500,000 115,000 100,000 83,600
Resource Management
Services 1995 500,000 260,000 25,000 56,948
- --------
(1) Salary and bonus amounts include cash compensation earned and received and
any amounts deferred under the Schlumberger Restoration Savings Plan
("Restoration Savings Plan").
(2) Mr. Matton's salary of $500,000 was changed to 2,900,000 French francs on
October 1, 1997.
(3) The Company has granted no stock appreciation rights or restricted stock.
(4) The 1997 amounts disclosed in this column include:
(a) Company contributions to Schlumberger's Profit Sharing Plans.
(b) Company unfunded credits to the Schlumberger Supplementary Benefit Plan.
(c) Company unfunded matching credits to the Restoration Savings Plan.
(a)($) (b)($) (c)($)
------ ------- ------
Mr. Baird.............................................. 19,200 227,850 75,950
Mr. Grijalva........................................... 19,200 82,350 27,450
Mr. Lindenauer......................................... 19,200 57,750 19,250
Mr. Pfister............................................ 17,600 27,919 9,593
Mr. Matton............................................. 33,041 33,450 11,150
The Company's matching credits under the Restoration Savings Plan are vested
33 1/3% at three years of service, 66 2/3% at four years, 100% at five years
or at age 60 or upon death or upon change of control. The amounts credited
under the Restoration Savings Plan will be paid upon termination or
retirement, death, disability, or change in control.
7
STOCK OPTION GRANTS TABLE
The following table sets forth certain information concerning stock options
granted during 1997 by the Company to the Chief Executive Officer and the next
four most highly compensated executive officers of the Company. In addition,
there are shown hypothetical gains that could be realized for the respective
options, based on assumed rates of annual compound stock price appreciation of
5% and 10% from the date the options are granted over the ten-year term of the
options. The actual gain, if any, realized upon exercise of the options will
depend upon the market price of the Company's Common Stock relative to the
exercise price of the option at the time the option is exercised. There is no
assurance that the amounts reflected in this table will be realized.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
------------------------------------------------ ---------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
GRANTED (#)(1) FISCAL YEAR ($/SH)(2) DATE 5%($) 10%($)
NAME -------------- ------------ --------- ---------- ---------- ----------
D. E. Baird............. 500,000 8.14 90.50 10/21/07 28,457,481 72,116,846
V. E. Grijalva.......... 200,000 3.26 90.50 10/21/07 11,382,992 28,846,738
A. Lindenauer........... 60,000 0.98 90.50 10/21/07 3,414,897 8,654,021
I. Pfister.............. 125,000 2.03 90.50 10/21/07 7,114,370 18,029,211
C. Matton............... 50,000 0.81 90.50 10/21/07 2,845,748 7,211,684
- --------
(1) The Company has not granted any stock appreciation rights. These options
become exercisable in installments of 20% each year following the date of
grant. All outstanding stock options become fully exercisable prior to any
reorganization, merger or consolidation of the Company where the Company
is not the surviving corporation or prior to liquidation or dissolution of
the Company, unless such merger, reorganization or consolidation provides
for the assumption of such stock options.
(2) The exercise price of the options is equal to the average of the high and
the low per share prices of the Common Stock on their respective dates of
grant and may be paid in cash or by tendering shares of Common Stock.
Applicable tax obligations may be paid in cash or by the withholding of
shares of Common Stock.
8
STOCK OPTION EXERCISES
AND DECEMBER 31, 1997 STOCK OPTION VALUE TABLE
The following table sets forth certain information concerning stock options
exercised during 1997 by the Chief Executive Officer and the next four most
highly compensated executive officers of the Company and the number and value
of unexercised options at December 31, 1997. The Company has not granted stock
appreciation rights. The values of unexercised in-the-money stock options at
December 31, 1997 shown below are presented pursuant to Securities and
Exchange Commission rules. The actual amount, if any, realized upon exercise
of stock options will depend upon the market price of the Company's Common
Stock relative to the exercise price per share of Common Stock of the stock
option at the time the stock option is exercised. There is no assurance that
the values of unexercised in-the-money stock options reflected in this table
will be realized.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN THE MONEY
OPTIONS AT OPTIONS AT
FY-END (#) FY-END ($)(2)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISES (#) REALIZED ($)(1) UNEXERCISABLE UNEXERCISABLE
- ---- ---------------- --------------- ------------- -------------
D. E. Baird....... 200,000 12,225,000 1,060,000/ 52,606,640/
940,000 21,886,760
V. E. Grijalva.... 50,000 2,981,850 364,000/ 18,511,364/
446,000 11,951,256
A. Lindenauer..... 70,000 4,012,170 110,000/ 5,430,228/
140,000 3,840,992
I. Pfister........ 0 -- 85,000/ 4,167,850/
221,000 4,569,116
C. Matton......... 24,000 1,290,000 334,000/ 16,745,890/
292,000 11,762,024
- --------
(1) Market value of stock on date of exercise less exercise price.
(2) Closing price of stock on December 31, 1997 ($80.50) less exercise price.
9
PENSION PLANS
The Company and certain of its subsidiaries maintain pension plans for
employees, including executive officers, providing for lifetime pensions upon
retirement after a specified number of years of service. Employees may
participate in one or more pension plans in the course of their careers with
the Company or its subsidiaries, in which case they become entitled to a
pension from each of such plans based upon the benefits accrued during the
years of service related to each plan. Such plans are funded on an actuarial
basis through cash contributions made by the Company or its subsidiaries;
certain of these plans also permit or require contributions by employees.
Benefits under the International Staff Pension Plans of the Company and
certain of its subsidiaries (the "International Plans") are based on a
participant's pensionable salary (generally, base salary plus incentive) for
each year in which the participant participates in the International Plans and
the participant's length of service with the Company or any subsidiary. From
January 1, 1993, the benefit earned is 3.2% of pensionable salary for each
year of service. Benefits are payable upon normal retirement age at or after
age 55 or upon early retirement. Estimated annual benefits from the
International Plans payable upon retirement: $33,714 for Mr. Baird; $57,139
for Mr. Grijalva; and $119,184 for Mr. Matton (assuming pensionable salary
continues at the December 31, 1997 level for Mr. Matton).
Benefits under the U.S. tax qualified pension plans of the Company and
certain of its subsidiaries (the "U.S. plans") are based on a participant's
admissible compensation (generally, base salary plus incentive) for each year
in which the participant participates in the U.S. plans and the participant's
length of service with the Company or any subsidiary. From January 1, 1989,
the benefit earned is 1.5% of admissible compensation for service prior to the
participant's completion of 15 years of active service and 2% of admissible
compensation for service after completion of 15 years of active service. The
Company has adopted a supplementary benefit plan for eligible employees,
including executive officers. Amounts under the supplementary plan will be
accrued under an unfunded arrangement to pay each individual the additional
amount which would have been payable under the U.S. plans if the amount had
not been subject to limitations imposed by law on maximum annual benefit
payments and on annual compensation recognized to compute plan benefits.
Assuming admissible compensation continues at the December 31, 1997 levels,
estimated annual benefits payable upon retirement at normal retirement age
(65) from the U.S. plans and the supplementary benefit plan: $671,278 for
Mr. Baird; $290,555 for Mr. Grijalva; $234,390 for Mr. Lindenauer; $132,015
for Mr. Pfister; and $89,414 for Mr. Matton.
10
CORPORATE PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the Company's
cumulative total stockholder return on its Common Stock (assuming reinvestment
of dividends at date of payment into Common Stock of the Company) with the
cumulative total return on the published Standard & Poor's 500 Stock Index and
the cumulative total return on Value Line's Oilfield Services/Equipment
Industry Group over the preceding five-year period. The following graph is
presented pursuant to Securities and Exchange Commission rules. The Company
believes that while total stockholder return is an important corporate
performance indicator, it is subject to the vagaries of the market. In
addition to the creation of stockholder value, the Company's executive
compensation program is based on financial and strategic results, and the
other factors set forth and discussed in the Compensation Committee Report on
Page 12.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG SCHLUMBERGER LIMITED, S&P 500 INDEX AND VALUE LINE'S OILFIELD
SERVICE/EQUIPMENT INDUSTRY GROUP**
[PERFORMANCE GRAPH APPEARS HERE]
Schlumberger S&P 500 Industry Peer Index
12/92 100 100 100
12/93 105 110 119
12/94 92 112 116
12/95 129 153 177
12/96 189 189 272
12/97 252 308 388
Assumes $100 invested on December 31, 1992 in Schlumberger Limited stock,
in the S&P 500 Index and in Value Line's 1997 Oilfield Services Industry
Index. Reflects month-end dividend reinvestment, and annual reweighting of
the Industry Peer Index portfolio.
*Total return assumes reinvestment of dividends.
**Fiscal year ending December 31.
11
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company's Board is comprised entirely of
outside Directors who act on behalf of the Board to review and approve
compensation programs applicable to executive officers. Specific awards for
these officers are approved by the Committee.
Three programs continue to provide the core compensation vehicles for
executive officers:
--Base Salaries
--Annual Cash Incentive Awards
--Stock Option Grants
For many years the Company has emphasized career opportunities by recruiting
from colleges and universities in countries where the Company works (more than
70 countries throughout the world), supporting mobility and maintaining highly
competitive compensation programs which are based on an employee's
contribution and potential rather than country of origin.
Thus, the three programs noted above are applicable not only to executive
officers but to thousands of managerial, professional and technical employees
in the Company. At all levels, employees enjoy competitive base salaries. Cash
incentive participation is added to the compensation package as employees
advance, with the size of incentive opportunity as a percent of base salary
increasing as one progresses in the organization.
Within the first few years of employment, those with strong performance as
well as outstanding future potential may be awarded stock option grants, which
are discretionary in nature.
In this way, an increasing portion of the successful employee's total
compensation becomes leveraged against yearly results and Company long-term
appreciation due to the expanding role of cash incentives and stock options.
Many of the Company's subsidiaries also have profit sharing plans that
provide annual deferred awards which reflect the results of the fiscal year
for the subsidiary sponsoring the plan. These awards also tend to increase the
portion of total compensation which is leveraged against business results.
Base salaries are reviewed annually for competitiveness against a data base
of comparator company information provided by outside compensation
consultants. The companies in the data base reflect those broad industry
segments in which the Company competes--oil-related, high technology and high
volume manufacturing. The companies in the data base may change slightly from
year to year due to mergers and acquisitions as well as the normal movement of
companies into and out of the data base at their own volition. The roster of
companies in the data base used for executive officer base salary ranges is
also used for professional and managerial employees of the Company throughout
the world.
12
While executive officer base salary levels are studied annually, they are
adjusted less frequently. Except for significant changes in responsibility, an
executive officer's base salary may be increased only every three to five
years, and then by a significant amount. This has allowed the Company to focus
primarily on variable compensation during the period of low inflation we have
been experiencing.
Consistent with its adherence to salary change practices for executive
officers, the salary of the Chief Executive Officer was increased in 1997, the
first increase since 1992. Irwin Pfister's salary was increased in 1997 at the
time of his promotion to Executive Vice President, with responsibility for the
Test and Transactions sector.
The comparator companies used for compensation purposes are different from
those in the Corporate Performance Graph (the Value Line Oilfield
Services/Equipment Industry Group). The Value Line companies do not constitute
a source of recruits nor do they reflect all the industry segments in which
the Company operates.
Annual cash incentive awards for each executive officer are payable early in
the calendar (fiscal) year and reflect performance against targets or
objectives established early in the preceding calendar year.
Incentive awards are calculated as a percent of the base salary paid each
executive officer in the completed calendar year. The maximum percent varies
among executive officer positions to reflect the differing levels of potential
impact on Company results. For 1997, the incentive award ranges of the named
executive officers were:
--0 to 100% for Mr. Baird,
--0 to 75% for Messrs. Grijalva, Matton and Pfister,
--0 to 60% for Mr. Lindenauer.
One half the incentive potential for each executive officer is a function of
performance against specific numerical targets for the Company (Messrs. Baird
and Lindenauer) or the business sector for which the executive officer was
responsible (Messrs. Grijalva, Matton and Pfister) during the calendar year
completed. The Company target is earnings per share; the business sector
target is net income for the sector.
The second half of the incentive potential is a reflection of performance
against various objectives of each executive officer. Objectives may be
strategic or personal and may relate solely to the completed fiscal year or be
interim measures against longer-term objectives. Achievement against
objectives is determined subjectively.
The strong performance of the Company in 1997 and of the Oilfield Services
sector in particular generated incentive awards which placed Messrs. Baird,
Grijalva and Lindenauer at an appropriately high level of total cash
compensation in the comparator company data base discussed earlier.
13
Stock option grants were awarded late in 1997 in a Company-wide review of
those deemed eligible to receive an option grant. Such reviews are conducted
every 18 months to two years. In addition, grants typically are awarded
between general reviews to recognize promotions, substantial changes in
responsibility and significant individual or team achievements.
The Company's stock option program is unique in that grants are awarded on
an entirely discretionary basis to individuals demonstrating exceptional
performance in their current positions as well as the likelihood of continuing
high quality performance in the future.
Each of the named executive officers received a stock option grant in 1997.
The grants awarded Messrs. Baird, Grijalva and Lindenauer were intended to be
the final grants of their Schlumberger careers. By the time these grants fully
vest (five years from grant date), each of these executive officers will have
become eligible for his unreduced Company retirement benefit.
The stock option grants awarded by the Company are uniform in their terms
for executive officers as well as all other optionees--10-year term, vesting
in 20% steps at the first through fifth anniversary of grant date, and option
price equal to fair market value on date of grant.
The Company does not utilize below market options, stock appreciation
rights, phantom stock, restricted stock, performance units or reload options.
Section 162(m) of the Internal Revenue Code limits the deductibility of
certain compensation expenses in excess of $1,000,000 per individual. The
Committee does not believe that the cash compensation payable in excess of
this amount for fiscal year 1997 will result in any material loss of tax
deduction for the Company. Therefore, the Committee has elected not to follow
the provisions of Section 162(m) with regard to cash compensation. The
Company's stock option plans are believed to be in compliance with the
provisions of Section 162(m).
BASES FOR THE COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The same data base of companies used for comparison purposes to review base
salaries of other executive officers (and managerial employees throughout the
Schlumberger universe) is studied to consider the base salary of the Chief
Executive Officer. The data base reflects the industry segments in which the
Company operates--oil-related, high technology and high volume manufacturing.
In 1997, the Chief Executive Officer's salary was increased to $1,500,000.
This was the first adjustment in salary since 1992, and the salary of Mr.
Baird is expected to remain unchanged for the balance of his career in
Schlumberger.
The potential cash incentive award for the Chief Executive Officer for 1997
was 100% of base salary. As with other executive officers with corporate
responsibility, one half of this award potential was a measure of performance
against targeted earnings per share for the Company. This target was exceeded
in 1997.
14
The second half of the award potential reflects the Committee's evaluation
of Mr. Baird's performance against strategic objectives established early in
1997 for the calendar year. These included the creation of a 10-year vision
which was formulated with the substantive involvement of groups of employees
at various levels, growth in Asia where expansion continued to be strong, and
profitability of the seismic business, which exceeded expectations. Disclosure
of specific measures applied to evaluate achievement of these objectives as
well as the basic nature of certain other objectives could adversely affect
the Company's competitive position.
The total cash incentive awarded Mr. Baird for 1997 performance was
$1,500,000. In combination with base salary, this placed him (appropriately)
in the upper range of total cash compensation in the comparator company survey
data.
In 1997 Mr. Baird received a stock option grant of 500,000 shares which
fully vests in five years. This grant was decidedly larger than prior grants
in light of the Company's 61.2% stock price appreciation during 1997 and its
51% increase in net income in 1997 over 1996. Also, the Committee does not
contemplate additional option grants before Mr. Baird's retirement.
Like all other options awarded in 1997, the grant to Mr. Baird was of 10-
year duration, vesting in 20% steps on the first through fifth anniversary of
grant date, and priced at fair market value on grant date.
As is the case with all other executive officers of the Company, Mr. Baird
has no employment agreement.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY'S
BOARD OF DIRECTORS
Don E. Ackerman, Chairman William T. McCormick Jr.
Denys Henderson Nicolas Seydoux
15
2. FINANCIAL STATEMENTS
The Company's Consolidated Balance Sheet as at December 31, 1997, its
Consolidated Statement of Income for the year ended December 31, 1997, and the
amount of dividends declared by the Board of Directors during 1997 are
submitted to the stockholders pursuant to the Deed of Incorporation of the
Company.
A majority of the votes cast is required for the approval of the financial
results as set forth in such financial statements and of the declaration of
dividends by the Board of Directors reflected in the Company's 1997 Annual
Report.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 2.
3. APPOINTMENT OF AUDITORS
Price Waterhouse LLP, who have served as auditors for the Company since its
organization, have been selected by the Board of Directors as independent
public accountants to audit the accounts of the Company for the year 1998. The
Company's By-Laws provide that the selection of auditors is subject to
approval by the stockholders, and a majority of the votes cast is required for
such approval. A representative of Price Waterhouse LLP will attend the
Meeting and will have the opportunity to make a statement and respond to
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 3.
4. AMENDMENTS TO THE SCHLUMBERGER DISCOUNTED STOCK PURCHASE PLAN
The Schlumberger Discounted Stock Purchase Plan (the "DSPP") was originally
approved by the Board of Directors (the "Board") of the Company and the
stockholders in 1988 and was amended and restated in 1992 by the Board with
approval of the stockholders. On January 21, 1998, the Board approved, subject
to stockholder approval, amendments to the DSPP which would (i) increase the
number of shares available for purchase under the DSPP by 12,000,000 shares;
and (ii) provide for automatic adjustments in lieu of the discretionary
adjustments currently provided for by the Plan in the various share
limitations and purchase price of the shares available for purchase under the
DSPP in the event of certain changes in the capital structure of the Company.
As amended and restated in 1992, the DSPP authorized the purchase of 8,000,000
shares of Common Stock. After giving affect to the Company's two-for-one 1997
stock split, 2,624,867 shares remained available for purchase under the DSPP
and it is anticipated that approximately 1,200,000 shares will be purchased on
June 30, 1998. The amendments are designed to insure that a sufficient number
of shares will be available for future purchase periods and to eliminate
discretion in any adjustment in the event of any change in the capital
structure of the Company such as the Company's 1997 stock split. The
amendments also make other changes to conform with applicable laws. Currently,
15,500 employees participate in the DSPP.
16
The following is a summary of the principal features of the DSPP. The
summary, however, is subject in all respects to the express provisions of the
DSPP. The DSPP, as proposed to be amended and restated, is set forth as
Exhibit A to this Proxy Statement and reference is made to such Exhibit for a
complete statement of its terms and provisions.
Employees eligible to participate in the DSPP are full-time and part-time
employees of the Company and its subsidiaries, including officers, who have
been so employed for a period of six months or more. The DSPP is administered
by the DSPP Committee (the "Committee") appointed by the Board.
Each participant in the DSPP may make contributions through payroll
deductions from one to ten percent of his or her eligible compensation. Such
contributions, together with interest and dividends on shares held in the
DSPP, where applicable, are used to purchase shares of Common Stock at the end
of each twelve-month purchase period provided for under the DSPP (which
generally extends from the first trading day of July to the last trading day
of the following June).
The price used for allocating shares to a participant is 85% of the lesser
of (i) the fair market value (as defined in the DSPP) of the Company's Common
Stock on the first trading day of the twelve-month purchase period or (ii) the
fair market value of the Company's Common Stock on the last trading day of
such twelve-month purchase period.
It is intended that the DSPP constitute an "employee stock purchase plan"
under the provisions of Section 423 of the United States Internal Revenue Code
(the "Code"). The provisions of Section 423 of the Code and the DSPP limit the
number of shares which may be purchased by any participant for each purchase
period. Under existing interpretation of accounting rules, the Company treats
the DSPP as noncompensatory and recognizes no charge to earnings. The
Financial Accounting Standards Board is considering a review of the accounting
rules for discounted stock purchase plans.
The tax consequences to participants will vary according to the laws and
regulations of the country where the participant is subject to tax. For
participants subject to U.S. tax, no U.S. income is recognized upon the grant
or purchase of shares under the DSPP. However, such participants will
recognize taxable income upon disposition of the shares acquired under the
DSPP.
The Company is entitled to a deduction under Section 162 of the Code only to
the extent that ordinary income is realized by the participant as a result of
a disqualifying disposition.
Stockholder approval is required for an amendment that otherwise would cause
the terms of the DSPP to fail to meet the requirements of Section 423 of the
Code. Section 423 of the Code currently requires stockholder approval of a
plan amendment that would (a) change the number of shares subject to the plan
or (b) change the class of employees eligible to participate in the plan.
17
The following table sets forth the number of shares purchased under the DSPP
during 1997 by the Chief Executive Officer, the named executive officers,
executive officers as a group and all employees as a group, including all
current officers who are not executive officers.
PURCHASE
PRICE NUMBER OF
NAME AND POSITION (1) SHARES
----------------- -------- ---------
D. E. Baird, Chairman and Chief Executive Officer....... 0
V. E. Grijalva, Executive Vice President................ 594
A. Lindenauer, Executive Vice President................. 594
I. Pfister, Executive Vice President.................... 0
C. Matton, Executive Vice President..................... 594
All executive officers as a group....................... 3,868
All employees, including non-executive officers, as a
group.................................................. 1,395,755
--------
(1)The purchase price on June 30, 1997 was $35.76.
A majority of the votes cast is required for approval of the proposed DSPP
amendments.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 4.
5. ADOPTION OF SCHLUMBERGER 1998 STOCK OPTION PLAN
On January 21, 1998, the Board adopted, subject to stockholder approval, the
Schlumberger 1998 Stock Option Plan (the "1998 Plan"). The Board's approval of
the 1998 Plan followed a review and evaluation of the Company's existing plans
by the Compensation Committee of the Board (the "Committee").
Under the Schlumberger 1979 Stock Incentive Plan and the Schlumberger 1979
Incentive Stock Option Plan (under both of which no further options could be
granted after May 7, 1989), 205,344 shares of Common Stock are reserved for
issuance in respect of outstanding options. Under the Schlumberger 1989 Stock
Incentive Plan (the "1989 Plan"), 12,055,604 shares of Common Stock are
reserved for issuance in respect of outstanding options and 191,659 shares are
reserved for future grants. Under the Schlumberger 1994 Stock Option Plan (the
"1994 Plan") 14,123,234 shares are reserved for issuance in respect of
outstanding options and 5,433,950 shares are reserved for future grants.
In structuring the 1998 Plan, the Committee sought to provide incentives
which link the interests of key employees with the long term growth of the
Company and the interests of the Company's stockholders through the ownership
and performance of the Company's Common Stock and to respond to applicable tax
laws, accounting rules and securities regulations. The 1998 Plan is set forth
in Exhibit B to this Proxy Statement and reference is made to such Exhibit for
a complete statement of its terms and provisions.
18
The 1998 Plan is administered by the Committee, which may from time to time
grant stock options (either "incentive" or "non-qualified" stock options)
(hereinafter collectively referred to as "Stock Options") to employees of the
Company or its subsidiaries who are executive, administrative, professional or
technical personnel with responsibilities affecting the management, direction,
development and financial success of the Company or its subsidiaries
(approximately 4,200 of whom are optionees as of January 31, 1998).
Subject to certain limitations specified in the 1998 Plan, the Committee has
discretion to determine the terms and conditions upon which such Stock Options
may be exercisable. No member of the Committee, no director of the Company who
is not also an employee nor any person who owns directly or indirectly stock
possessing more than 5% of the total combined voting power or value of all
classes of stock of the Company or any subsidiary is eligible to receive Stock
Options under the 1998 Plan. Members of the Committee shall be subject to the
requirements for Non-Employee Directors as defined in Rule 16b-3 under the
United States Securities Exchange Act of 1934 (the "Exchange Act"), as it may
be amended from time to time. No Stock Options may be granted under the 1998
Plan after January 21, 2008. All outstanding Stock Options become fully
exercisable prior to any reorganization, merger or consolidation of the
Company where the Company is not the surviving corporation or prior to
liquidation or dissolution of the Company, unless such merger, reorganization
or consolidation provides for the assumption of such Stock Options.
The 1998 Plan provides that an aggregate of 12,000,000 shares of Common
Stock, par value $0.01 per share, of the Company shall be subject to the 1998
Plan. The shares subject to the 1998 Plan consist of authorized and unissued
shares or previously issued shares reacquired and held by the Company or any
subsidiary. Should any Stock Option under the 1998 Plan expire or be
terminated prior to its exercise in full and prior to the termination of the
1998 Plan, the shares subject to such Stock Option shall be available for
further grants under the 1998 Plan. To date, no stock options have been
granted under the 1998 Plan.
Stock Options under the 1998 Plan give the optionee the right to purchase a
number of shares of the Company's Common Stock at future dates within 10 years
of the date of grant. In order to satisfy the requirements of Section 162(m)
of the Code, no optionee may be granted options to purchase more than
1,000,000 shares during the life of the 1998 Plan. The exercise price may be
the fair market value of the stock (as defined in the 1998 Plan) on the date
of grant, or such other price as the Committee may determine, but not less
than 100% of such fair market value. After it is granted, no Stock Option may
be amended to decrease the purchase price and no Stock Option may be granted
in substitution for an outstanding Stock Option with a purchase price lower
than the purchase price of the outstanding Stock Option. The purchase price to
be paid upon exercise of the option may be paid, subject to such rules,
procedures and restrictions as the Committee may prescribe from time to time
(i) in cash or by certified check; (ii) by the delivery of shares of the
Company's Common Stock with a fair market value at the time of exercise equal
to the total option price; or (iii) by a combination of the preceding methods.
At the election of the optionee and subject to such rules, procedures and
19
restrictions as the Committee may prescribe, withholding obligations may be
satisfied through the surrender of shares of Common Stock to which the
optionee is otherwise entitled. The fair market value of a share of Common
Stock on a particular date is defined as the mean between the highest and
lowest sales price per share of the Common Stock in the New York Stock
Exchange Composite Transactions Quotations as reported for that date or, if
there have been no such reported prices for that date, the mean of the
reported prices on the last preceding date on which a composite sale or sales
were effected on one or more of the exchanges on which the Common Stock
traded. On January 30, 1998, the closing sale price of the Company's Common
Stock on the New York Stock Exchange Composite Tape was $73.6875.
The 1998 Plan permits an optionee to exercise an outstanding option after
termination of employment during the three months after such termination,
unless the optionee's employment is terminated for cause (as determined by the
Committee) or is terminated without the consent of the Company. An optionee's
legal representatives have 5 years after an optionee's death while in the
employ of the Company to exercise an outstanding option. In either instance,
such option may be exercised only to the extent that the option was
exercisable on the date of termination, but in no event beyond the original
term of the option. If the optionee terminates employment due to retirement
(within the meaning of any prevailing pension plan in which the optionee
participates), the exercise period of an outstanding option shall continue for
60 months, but in no event beyond the original term of such option and only to
the extent such option was exercisable on the date of retirement. The
Committee may in its discretion cause an option to be forfeited if, at any
time more than three months after termination of employment due to retirement,
the holder of such option engages in "detrimental activity" as defined in
Section 5(v)(C) of the 1998 Plan.
The Board is authorized to amend or terminate the 1998 Plan. Stockholder
approval will be required for a plan amendment only if and to the extent (i)
such approval is required to meet the requirements of Code Section 422 or (ii)
the amendment would permit the decrease of the exercise price of a Stock
Option after the grant of the Stock Option or grant to the holder of an
outstanding Stock Option, a new Stock Option with a lower exercise price in
exchange for such Stock Option. Section 422 of the Code currently requires
stockholder approval of a plan amendment with respect to incentive stock
options that would (a) change the number of shares subject to the plan; or (b)
change the class of employees eligible to participate in the plan.
The following discussion of tax considerations relates only to U.S. federal
income tax matters. The discussion assumes that optionees are fully subject to
U.S. federal income tax on the basis of U.S. citizenship or residency.
Moreover, the discussion is general in nature and does not take into account a
number of considerations which may apply in light of the particular
circumstances of an optionee.
Some of the options issued under the 1998 Plan are intended to constitute
"incentive stock options" within the meaning of Section 422 of the Code, while
other options granted under the 1998 Plan are non-qualified stock options. The
Code provides for tax treatment of stock options
20
qualifying as incentive stock options that may be more favorable to employees
than the tax treatment accorded non-qualified stock options. Generally, upon
the exercise of an incentive stock option, the optionee will recognize no
income for U.S. federal income tax purposes. The difference between the
exercise price of the incentive stock option and the fair market value of the
stock at the time of purchase is an item of tax preference which may require
payment of an alternative minimum tax. On the sale of shares acquired by
exercise of an incentive stock option (assuming that the sale does not occur
within two years of the date of grant of the option or within one year from
the date of exercise), any gain will be taxed to the optionee as long-term
capital gain. In contrast, upon the exercise of a non-qualified option, the
optionee recognizes taxable income (subject to withholding) in an amount equal
to the difference between the fair market value of the shares on the date of
exercise and the exercise price. Upon any sale of such shares by the optionee,
any difference between the sale price and the fair market value of the shares
on the date of exercise of the non-qualified option will be treated generally
as capital gain or loss. Under rules applicable to U.S. corporations, no
deduction is available to the employer corporation upon the grant or exercise
of an incentive stock option (although a deduction may be available if the
employee sells the shares so purchased before the applicable holding period
expires), whereas, upon exercise of a non-qualified stock option, the employer
corporation is entitled to a deduction in an amount equal to the income
recognized by the employee. A non-U.S. corporation, such as the Company, is
entitled to deductions only to the extent allocable to "effectively connected
income" which is subject to U.S. federal income tax. Based on the provisions
of the 1998 Plan, the Company expects that the 1998 Plan will comply with the
requirements of Section 162(m) of the Code, provided that the Committee is
comprised solely of "Outside Directors" as defined in Section 162(m) of the
Code.
Except with respect to death, an optionee has three months after termination
of employment in which to exercise an incentive stock option and retain
favorable tax treatment at exercise. An option exercised more than three
months after an optionee's termination of employment due to retirement cannot
qualify for the tax treatment accorded incentive stock options. Such option
would be treated as a non-qualified stock option instead. An optionee who
retires from employment and exercises an incentive stock option during the
three months following his or her termination should qualify to receive
incentive stock option tax treatment for that option.
A majority of the votes cast is required for the approval of the 1998 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 5.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL GENERAL MEETING
In order for a stockholder proposal to be considered for inclusion in the
Proxy Statement for the 1999 Annual General Meeting of Stockholders, written
proposals must be received by the Secretary of the Company, 277 Park Avenue,
New York, New York 10172-0266, no later than November 7, 1998.
21
OTHER MATTERS
Stockholders may obtain a copy of Form 10-K filed with the United States
Securities and Exchange Commission without charge by writing to the Secretary
of the Company, 277 Park Avenue, New York, New York 10172-0266.
The Board of Directors knows of no other matter to be presented at the
Meeting. If any additional matter should be presented properly, it is intended
that the enclosed proxy will be voted in accordance with the discretion of the
persons named in the proxy.
Please sign, date and return the accompanying proxy in the enclosed envelope
at your earliest convenience.
By order of the Board of Directors,
David S. Browning
Secretary
New York, N.Y.
March 6, 1998
22
SCHLUMBERGER IN BRIEFSLBSLBSCHLUMBERGER - PRELIMINARY FINANCIAL STATEMENTS
--------------------------------------------------------------------------
FOR INFORMATION OF SEC ONLY
---------------------------
CONSOLIDATED STATEMENT OF INCOME
(Stated in thousands except per share amounts)
Year Ended December 31, 1997 1996 1995
----------- ----------- -----------
Revenue
Operating $10,647,590 $8,956,150 $7,621,694
Interest and other income 106,823 69,515 91,536
----------- ---------- ----------
10,754,413 9,025,665 7,713,230
----------- ---------- ----------
Expenses
Cost of goods sold
and services 7,836,952 6,835,444 5,804,157
Research & engineering 486,205 452,608 427,848
Marketing 307,036 301,304 283,790
General 369,030 355,392 345,441
Interest 86,843 72,020 81,620
Unusual items - 333,091 -
Taxes on income 372,650 (175,677) 121,217
----------- ---------- ----------
9,458,716 8,174,182 7,064,073
----------- ---------- ----------
Net Income $ 1,295,697 $ 851,483 $ 649,157
=========== ========== ==========
Basic earnings per share (1) $2.62 $1.74 $1.33
=========== ========== ==========
Diluted earnings per share (1) (2) $2.52 $1.70 $1.32
=========== ========== ==========
Average shares outstanding (1) 495,215 490,041 484,748
Average shares outstanding
assuming dilution (1) (2) 514,345 500,498 487,864
(1) Restated for the 2-for-1 stock split on June 2, 1997.
(2) The calculation of diluted earnings per share assumes that all stock options
and warrants are exercised at the beginning of the period and the proceeds
used to purchase shares at the average market price for the period.
See Notes to Consolidated Financial Statements
Schlumberger Limited (Schlumberger N.V., Incorporated in the Netherlands
Antilles) and Subsidiary Companies.
CONSOLIDATED BALANCE SHEET
(Stated in thousands)
December 31, 1997 1996
------------ ------------
ASSETS
Current Assets
Cash and short-term investments $ 1,761,077 $ 1,358,948
Receivables less allowance for doubtful accounts
(1997 $60,535; 1996 $58,981) 2,819,898 2,260,091
Inventories 1,094,070 938,974
Deferred taxes on income 175,927 222,456
Other current assets 220,248 262,148
----------- -----------
6,071,220 5,042,617
Long-Term Investments, held to maturity 742,751 323,717
Fixed Assets less accumulated depreciation 3,768,639 3,358,581
Excess of Investment Over Net Assets
of Companies Purchased less amortization 1,167,624 1,225,335
Deferred Taxes on Income 202,774 203,983
Other Assets 143,723 170,818
----------- -----------
$ 12,096,731 10,325,051
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities 2,297,370 $ 2,200,161
Estimated liability for taxes on income 384,167 367,562
Bank loans 750,303 743,018
Dividend payable 93,821 92,842
Long-term debt due within one year 104,237 70,827
----------- -----------
3,629,898 3,474,410
Long-Term Debt 1,069,056 637,203
Postretirement Benefits 396,559 383,129
Other Liabilities 306,294 203,929
----------- -----------
5,401,807 4,698,671
----------- -----------
Stockholders' Equity
Common stock 931,096 818,803
Income retained for use in the business 8,061,731 7,137,744
Treasury stock at cost (2,249,765) (2,315,946)
Translation adjustment (48,138) (14,221)
----------- -----------
6,694,924 5,626,380
----------- -----------
$ 12,096,731 10,325,051
=========== ===========
See Notes to Consolidated Financial Statements
Schlumberger Limited (Schlumberger N.V., Incorporated in the Netherlands
Antilles) and Subsidiary Companies.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Stated in thousands)
Year Ended December 31, 1997 1996 1995
Cash flows from operating activities: ----------- ----------- ----------
Net income $ 1,295,697 $ 851,483 $ 649,157
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 972,539 885,198 820,196
Earnings of companies carried at equity,
less dividends received
(1997 $2,474; 1996 $1,911; 1995 $1,000) (2,021) 5,212 (3,791)
Provision for losses on accounts receivable 24,007 27,036 20,306
Other adjustments (2,778) (4,613) (3,562)
Change in operating assets and liabilities:
Increase in receivables (642,772) (319,448) (136,312)
Increase in inventories (184,388) (144,774) (99,334)
Decrease (increase) in deferred taxes 46,529 (26,226) -
Increase (decrease) in accounts payable
and accrued liabilities 132,452 161,463 (9,243)
Increase (decrease) in estimated liability
for taxes on income 37,150 39,851 (3,684)
Other - net 31,578 (73,044) (39,389)
----------- ----------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,707,993 1,402,138 1,194,344
----------- ----------- ----------
Cash flows from investing activities:
Purchases of fixed assets (1,495,980) (1,157,957) (938,847)
Sales/retirements of fixed assets & other 97,004 98,584 26,936
Payment for purchase of businesses (13,730) (115,262) (200,805)
Net proceeds on sale of drilling rigs 174,000 - -
(Increase) decrease in investments (846,194) (218,914) 129,165
Decrease in other assets 24,852 1,050 42,496
----------- ----------- ----------
NET CASH USED IN INVESTING ACTIVITIES (2,060,048) (1,392,499) (941,055)
----------- ----------- ----------
Cash flows from financing activities:
Dividends paid (370,771) (366,791) (327,189)
Proceeds from employee stock purchase plan 50,055 38,807 36,159
Proceeds from exercise of stock options 95,495 141,299 37,518
Purchase of shares for Treasury - - (40,552)
Proceeds from issuance of long-term debt 815,579 195,009 486,518
Payments of principal on long-term debt (309,685) (165,742) (287,455)
Net increase (decrease) in short-term debt 50,831 212,523 (143,444)
----------- ----------- ----------
NET CASH PROVIDED BY(USED IN) FINANCING ACTIVITIES 331,504 55,105 (238,445)
----------- ----------- ----------
Net (decrease) increase in cash (20,551) 64,744 14,844
Cash, beginning of year 137,259 72,515 57,671
----------- ----------- ----------
CASH, END OF YEAR $ 116,708 $ 137,259 $ 72,515
=========== =========== ==========
See Notes to Consolidated Financial Statements
Schlumberger Limited (Schlumberger N.V., Incorporated in the Netherlands
Antilles) and Subsidiary Companies.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Dollar amounts in thousands)
Common Stock
--------------------------------------------------------------
Income
Issued In Treasury Retained for
--------------------------------- ------------------------- Translation Use in the
Shares(1) Amount Shares(1) Amount Adjustment Business
-------------- --------------- -------------- --------- ----------- ------------
Balance,
Jan.1, 1995 614,802,904 $695,946 130,338,980 $ 2,406,321 $(57,104) $6,350,433
Translation
adjustment 44,298
Sales to optionees less
shares exchanged 5,223 (1,742,660) (32,296)
Purchases for
Treasury 1,380,000 40,552
Employee stock
purchase plan 1,449,588 36,159
Net income 649,157
Dividends declared
($0.7125 per share (1)) (345,518)
------------ ------------ ------------ ------------ ------------ ------------
Balance,
Dec. 31, 1995 616,252,492 737,328 129,976,320 2,414,577 (12,806) 6,654,072
Translation
adjustment (1,415)
Sales to optionees less
shares exchanged 42,668 (5,314,696) (98,631)
Employee stock
purchase plan 1,483,494 38,807
Net income 851,483
Dividends declared
($0.75 per share (1)) (367,811)
------------ ------------ ------------ ------------ ------------ ------------
Balance,
Dec. 31, 1996 617,735,986 818,803 124,661,624 2,315,946 (14,221) 7,137,744
Translation
adjustment (33,917)
Sales to optionees less
shares exchanged 29,314 (3,323,223) (61,743)
Employee stock
purchase plan 1,399,623 50,055
Net income 1,295,697
IVS acquisition 16,324 (238,812) (4,438)
Tax benefit on
stock options 16,600
Dividends declared
($0.75 per share (1)) (371,710)
------------ ------------ ------------ ------------ ------------ ------------
Balance,
Dec. 31, 1997 619,135,609 $931,096 121,099,589 $ 2,249,765 $(48,138) $8,061,731
=========== ======== =========== =========== ========== ============
(1) Restated for the 2-for-1 stock split on June 2, 1997
See Notes to Consolidated Financial Statements
Schlumberger Limited (Schlumberger N.V., Incorporated in the Netherlands
Antilles) and Subsidiary Companies.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF ACCOUNTING POLICIES
______________________________
The Consolidated Financial Statements of Schlumberger Limited and its
subsidiaries have been prepared in accordance with accounting principles
generally accepted in the United States.
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of majority-owned
subsidiaries. Significant 20% - 50% owned companies are carried on the equity
method and classified in Other Assets. The Company's pro rata share of after-tax
earnings is included in Interest and other income. Equity in undistributed
earnings of all 50% owned companies at December 31, 1997, was not material.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. While actual
results could differ from these estimates, management believes that the
estimates are reasonable.
REVENUE RECOGNITION
Generally, revenue is recognized after services are rendered and products are
shipped.
TRANSLATION OF NON-US CURRENCIES
All assets and liabilities recorded in functional currencies other than US
dollars are translated at current exchange rates. The resulting adjustments are
charged or credited directly to the Stockholders' Equity section of the
Consolidated Balance Sheet. Revenue and expenses are translated at the weighted
average exchange rates for the period. All realized and unrealized transaction
gains and losses are included in income in the period in which they occur. The
Company policy is to hedge against unrealized gains and losses on a monthly
basis. Included in the 1997 results were transaction losses of $2 million,
compared with a gain of $10 million in 1996 and a loss of $2 million in 1995.
Currency exchange contracts are entered into as a hedge against the effect of
future settlement of assets and liabilities denominated in other than the
functional currency of the individual businesses. Gains or losses on the
contracts are recognized when the currency exchange rates fluctuate, and the
resulting charge or credit offsets the unrealized currency gains or losses on
those assets and liabilities. At December 31, 1997, contracts and options were
outstanding to purchase the US dollar equivalent of $402 million in various
foreign currencies. These contracts mature on various dates in 1998, 1999 and
2000.
INVESTMENTS
Both short-term and long-term investments held to maturity are stated at cost
plus accrued interest, which approximates market, and comprise primarily
Eurodollar time deposits, certificates of deposit and commercial paper,
Euronotes and Eurobonds, substantially all denominated in US dollars.
Substantially all the investments designated as held to maturity that were
purchased and sold during the year had original maturities of less than three
months. Short-term investments that are designated as trading are stated at
market. The unrealized gain on such securities at December 31, 1997, was not
significant.
For purposes of the Consolidated Statement of Cash Flows, the Company does not
consider short-term investments to be cash equivalents as they generally have
original maturities in excess of three months. Short-term investments at
December 31, 1997 and 1996, were $1.6 billion and $1.2 billion, respectively.
INVENTORIES
Inventories are stated principally at average or standard cost, which
approximates average cost, or at market, if lower. Inventory consists primarily
of materials and supplies.
EXCESS OF INVESTMENT OVER NET ASSETS OF COMPANIES PURCHASED
Cost in excess of net assets of purchased companies is amortized on a straight-
line basis over periods ranging from 5 to 40 years. Accumulated amortization was
$343 million and $287 million at December 31, 1997 and 1996, respectively.
FIXED ASSETS AND DEPRECIATION
Fixed assets are stated at cost less accumulated depreciation, which is provided
for by charges to income over the estimated useful lives of the assets by the
straight-line method. Fixed assets include the manufacturing cost (average cost)
of oilfield technical equipment manufactured by subsidiaries of the Company.
Expenditures for renewals, replacements and betterments are capitalized.
Maintenance and repairs are charged to operating expenses as incurred. Upon sale
or other disposition, the applicable amounts of asset cost and accumulated
depreciation are removed from the accounts and the net amount, less proceeds
from disposal, is charged or credited to income.
TAXES ON INCOME
The Company and its subsidiaries compute taxes on income in accordance with the
tax rules and regulations of the many taxing authorities where the income is
earned. The income tax rates imposed by these taxing authorities vary
substantially. Taxable income may differ from pretax income for financial
accounting purposes. To the extent that differences are due to revenue or
expense items reported in one period for tax purposes and in another period for
financial accounting purposes, an appropriate provision for deferred income
taxes is made.
Approximately $3.4 billion of consolidated income retained for use in the
business at December 31, 1997, represented undistributed earnings of
consolidated subsidiaries and the Company's pro rata share of 20% - 50% owned
companies. No provision is made for deferred income taxes on those earnings
considered to be indefinitely reinvested or earnings that would not be taxed
when remitted.
Tax credits and other allowances are credited to current income tax expense on
the flow-through method of accounting.
EARNINGS PER SHARE
As required by SFAS 128, the Company must report both basic and diluted earnings
per share. Basic earnings per share is computed by dividing net income by the
average number of common shares outstanding during the year. Diluted earnings
per share is computed by dividing net income by the average number of common
shares outstanding assuming dilution, the calculation of which assumes that all
stock options and warrants are exercised at the beginning of the period and the
proceeds used, by the Company, to purchase shares at the average market price
for the period. The following is a reconciliation from basic earnings per share
to diluted earnings per share for each of the last three years:
(Stated in thousands except per share amounts)
Average
Net Shares Earnings
Income Outstanding per share
----------- ----------- ---------
1997
Basic $1,295,697 495,215 $2.62
Effect of dilution:
Options 10,992
Warrants 8,138
---------- ----------- ---------
Diluted $1,295,697 514,345 $2.52
========== =========== =========
1996
Basic $ 851,483 490,041 $1.74
Effect of dilution:
Options 6,142
Warrants 4,315
---------- ----------- ---------
Diluted $ 851,483 500,498 $1.70
========== =========== =========
1995
Basic $ 649,157 484,748 $1.33
Effect of dilution:
Options 2,315
Warrants 801
---------- ----------- ---------
Diluted $ 649,157 487,864 $1.32
========== =========== =========
RESEARCH & ENGINEERING
All research and engineering expenditures are expensed as incurred, including
costs relating to patents or rights that may result from such expenditures.
UNUSUAL ITEMS
- -------------
In 1996, the Company announced a charge of $300 million after tax in the third
quarter related primarily to the Electricity & Gas and Geco-Prakla Land and
Transition Zone businesses. The after-tax charge of $300 million included pre-
tax charges of $112 million for severance and termination costs, other
facilities' closure costs of $39 million, goodwill write-offs of $122 million,
and other asset impairments/charges of $60 million.
The severance and termination costs relate to less than 5% of the worldwide
workforce primarily in Europe and pertain to both manufacturing and operating
personnel in about 30 locations. Most of the other facilities' closure costs
relate to the write-down of buildings, equipment and other assets to net
realizable value.
In addition, the Company recorded a charge of $58 million after tax, including a
loss on the divestiture of the remaining defense-related activity, certain asset
impairments and other charges. The amount is classified in cost of goods sold
and services ($47 million) and taxes on income ($11 million).
As of December 31, 1997, $65 million of the severance and termination had been
spent. The remainder should be spent within the next 18 months.
ACQUISITIONS
- ------------
During 1997, subsidiaries of the Company acquired Interactive Video Systems,
Inc., a metrology solutions provider for the front-end semiconductor fabrication
equipment market, and S.A. Holditch and Associates, Inc., a petroleum and
geoscience consulting services company. These acquisitions were accounted for as
purchases. Costs in excess of net assets acquired were $38 million which are
being amortized on a straight line basis over periods of 5 and 15 years,
respectively.
During 1996, subsidiaries of the Company acquired Solaic, SA (on December 31,
1996), a magnetic and smart card manufacturer; an 80% interest in Printer, a
magnetic stripe card manufacturer; Oilphase Sampling Services Ltd., a reservoir
fluid sampling company; The Production Analyst* and OilField Manager* software
products from OGCI Software, Inc.; Germann, a turnkey gasoline station
provider; Gueant, a gas dispenser service company; and a 33% equity interest
in DAP Technologies Limited, a developer and manufacturer of rugged handheld
computer products. The purchase prices were $75 million, $9 million, $7 million,
$8 million, $8 million, $7 million and $4 million, respectively. These
acquisitions were accounted for as purchases. Costs in excess of net assets
acquired were $91 million which are being amortized on a straight-line basis
over periods between 7 and 25 years.
INVESTMENTS
- -----------
The Consolidated Balance Sheet reflects the Company's investment portfolio
separated between current and long-term, based on maturity. Except for $117
million of investments which are considered trading at December 31, 1997 (1996 -
$111 million), it is the Company's intent to hold the investments until
maturity.
Long-term investments mature in 1999-$97 million, in 2000-$205 million and $441
million thereafter.
At December 31, 1997, there were interest rate swap arrangements outstanding
having a total principal amount of $80 million. These arrangements mature at
various dates in 1998, and interest rates are adjusted quarterly. Interest
rate swap arrangements had no material effect on consolidated interest income.
FIXED ASSETS
- ------------
A summary of fixed assets follows:
(Stated in millions)
December 31, 1997 1996
------- ------
Land $ 75 $ 71
Buildings &
improvements 1,009 1,040
Machinery and
equipment 9,126 8,467
------- ------
Total cost 10,210 9,578
Less accumulated
depreciation 6,441 6,219
------- ------
$ 3,769 $3,359
======= ======
Estimated useful lives of Buildings & improvements range from 5 to 50 years and
of Machinery and equipment from 2 to 25 years.
LONG-TERM DEBT
- --------------
A summary of long-term debt by currency follows:
(Stated in millions)
December 31, 1997 1996
---- ----
US dollar $ 323 $ 195
French franc 186 -
UK pound 122 137
German mark 118 185
Japanese yen 111 101
Italian lire 93 7
Canadian dollar 68 -
Other 48 12
------ -----
$1,069 $ 637
====== =====
Long-term debt is at variable rates; substantially all of the debt is at rates
up to 8%. Such rates are reset every six months or sooner. Accordingly, the
carrying value of long-term debt at December 31, 1997, approximates the
aggregate fair value.
Long-term debt at December 31, 1997, is due as follows: $372 million in 1999,
$266 million in 2000, $197 million in 2001, $146 million in 2002 and $88 million
thereafter.
At December 31, 1997, there were no interest rate swap arrangements outstanding
related to debt. At times, interest rate swap arrangements are entered into to
adjust non-US dollar denominated debt and interest rates into US dollars.
Interest rate swap arrangements had no impact in 1997 and 1996. The exposure, in
the event of nonperformance by the other parties to the arrangements, would not
be significant.
LINES OF CREDIT
- ---------------
At December 31, 1997, the Company's principal US subsidiary had an available
unused Revolving Credit Agreement with a group of banks. The Agreement provided
that the subsidiary may borrow up to $500 million until December 1998 at money
market-based
rates. In addition, at December 31, 1997, the Company and its subsidiaries had
available unused lines of credit of approximately $830 million.
CAPITAL STOCK
The Company is authorized to issue 1,000,000,000 shares of Common Stock, par
value $0.01 per share, of which 498,036,020 and 493,074,362 (restated for the 2-
for-1 stock split on June 2, 1997) shares were outstanding on December 31, 1997
and 1996, respectively. The Company is also authorized to issue 200,000,000
shares of cumulative Preferred Stock, par value $0.01 per share, which may be
issued in series with terms and conditions determined by the Board of Directors.
No shares of Preferred Stock have been issued. Holders of Common Stock and
Preferred Stock are entitled to one vote for each share of stock held.
In January 1993, Schlumberger acquired the remaining 50% interest in the Dowell
Schlumberger group of companies. The purchase price included a warrant, expiring
in 7.5 years and valued at $100 million, to purchase (restated for the 2-for-1
stock split on June 2, 1997) 15 million shares of Schlumberger Limited Common
Stock at an exercise price of $29.975 per share. The warrant is fully vested
and nontransferable.
STOCK COMPENSATION PLANS
- ------------------------
As of December 31, 1997, the Company has two types of stock-based compensation
plans, which are described below. The Company applies APB Opinion 25 and
related Interpretations in accounting for its plans. Accordingly, no
compensation cost has been recognized for its stock option plans and its stock
purchase plan. Had compensation cost for the Company's stock-based plans been
determined based on the fair value at the grant dates for awards under those
plans, consistent with the method of SFAS 123, the Company's net income and
earnings per share would have been the pro forma amounts indicated below:
(Stated in millions except per share amounts)
1997 1996 1995
---- ---- ----
Net Income
As reported $1,296 $ 851 $ 649
Pro forma $1,233 $ 809 $ 641
Basic earnings per share(1)
As reported $ 2.62 $1.74 $1.33
Pro forma $ 2.49 $1.65 $1.32
Diluted earnings per share(1)
As reported $ 2.52 $1.70 $1.32
Pro forma $ 2.40 $1.62 $1.31
(1) Restated for the 2-for-1 stock split on June 2, 1997
As required by SFAS 123, the above pro forma data reflects the effect of stock
option grants and the employee stock purchase plan during 1997, 1996 and 1995.
STOCK OPTION PLANS
During 1997, 1996, 1995 and in prior years, officers and key employees were
granted stock options under the Company's stock option plans. The exercise
price of each option equals the market price of the Company's stock on the date
of grant; an option's maximum term is ten years, and options generally vest in
20% increments over five years.
As required by SFAS 123, the fair value of each grant is estimated on the date
of grant using the multiple option Black-Scholes option-pricing model with the
following weighted-average assumptions used for 1997, 1996 and 1995: dividend of
$0.75; expected volatility of 21% for 1997 grants and 20% for 1996 and 1995
grants; risk-free interest rates for the 1997 grant to officers of 6.19%
and 5.80% -6.77% for the 1997 grants to all other employees; risk-free interest
rates for 1996 grants of 5.38% - 6.36% for officers and 5.09% -6.01% for all
others employees; risk-free interest rates for 1995 grants of 5.85% - 7.88% for
officers and 5.70% - 7.66% for all other employees; and expected option lives of
7.27 years for officers and 5.09 years for other employees for 1997 grants and
8.4 years for officers and 5.39 years for other employees for 1996 and 1995
grants.
A summary of the status of the Company's stock option plans as of December 31,
1997, 1996 and 1995, and changes during the years ending on those dates is
presented below:
1997(1) 1996(1) 1995(1)
---------------------------------- ----------------------- -----------------------
Weighted Weighted Weighted
-Average -Average -Average
Exercise Exercise Exercise
Fixed Options Shares Price Shares Price Shares Price
- ------------- ------ ---------- ------ --------- ------ ---------
Outstanding at beginning of year 24,396,796 $32.50 22,140,960 $29.00 23,121,698 $28.00
Granted 6,157,271 $84.50 8,262,000 $39.50 1,507,400 $31.00
Exercised (3,405,622) $28.75 (5,516,484) $27.00 (1,795,838) $22.00
Forfeited (529,140) $36.52 (489,680) $32.00 (692,300) $30.50
---------- --------- ---------- ------- ---------- -------
Outstanding at end of year 26,619,305 $45.21 24,396,796 $32.50 22,140,960 $29.00
========== ========= ========== ======= ========== =======
Options exercisable at year-end 10,786,864 9,927,816 12,518,540
Weighted-average fair value of
options granted during the year $26.11 $10.53 $8.70
(1) Restated for the 2-for-1 stock split on June 2, 1997
The following table summarizes information concerning currently outstanding and
exercisable options by three ranges of exercise prices at December 31, 1997:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------------- ----------------------------------------
Weighted
Average
Number Outstanding Remaining Weighted Average Number Exercisable Weighted Average
Range of Exercise Prices As of 12/31/97 Contractual Life Exercise Price As of 12/31/97 Exercise Price
- -------------------------------------------------------------------------------------------------------------------------------
$4.2100 -- $31.4690 8,858,775 5.71 $28.5219 6,238,135 $28.9303
$31.5320 -- $42.2820 11,120,229 6.87 $36.6741 4,428,729 $34.2084
$46.8130 -- $90.5000 6,640,301 9.63 $81.5801 120,000 $46.8130
---------- ----------
$4.2100 -- $90.5000 26,619,305 7.17 $45.2138 10,786,864 $31.2719
========== ==========
EMPLOYEE STOCK PURCHASE PLAN
Under the Schlumberger Discounted Stock Purchase Plan, the Company is authorized
to issue up to 10,012,245 shares of Common Stock to its employees. On January
21, 1998 the Board, subject to stockholder approval, amended the Plan to
increase the aggregate number of shares available for purchase to 22,012,245.
Under the terms of the Plan, employees can choose each year to have up to 10% of
their annual earnings withheld to purchase the Company's Common Stock. The
purchase price of the stock is 85% of the lower of its beginning or end of the
plan year market price. Under the Plan, the Company sold 1,399,623, 1,483,494
and 1,449,588 shares to employees in 1997, 1996 and 1995, respectively.
Compensation cost has been computed for the fair value of the employees'purchase
rights, which was estimated using the Black-Scholes model with the following
assumptions for 1997, 1996 and 1995: dividend of $0.75; expected life of one
year; expected volatility of 28% for 1997 and 20% for 1996 and 1995; and risk-
free interest rates of 5.64% for 1997, 5.71% for 1996 and 5.61% for 1995. The
weighted-average fair value of those purchase rights granted in 1997, 1996 and
1995 is $17.845, $9.73 and $7.21, respectively.
INCOME TAX EXPENSE
- ------------------
In the third quarter of 1996, with increasing profitability and strong outlook
in the US, the Company recognized 50% of the US income tax benefit related to
its US subsidiary's tax loss carryforward and all temporary differences. This
resulted in a credit of $360 million.
In the second quarter of 1997, the Company released the remaining valuation
allowance related to its US subsidiary's tax loss carryforward and all temporary
differences. The resulting reduction in income tax expense was not significant.
The Company has net deductible temporary differences of $940 million at December
31, 1997. Significant temporary differences pertain to postretirement medical
benefits, fixed assets, employee benefits and inventory.
The Company and its subsidiaries operate in over 100 taxing jurisdictions where
statutory tax rates generally vary from 0% to 50%.
The effective tax rates in 1997, 1996 (before the unusual items) and 1995 were
22%, 20% and 16%, respectively. The variations from the US statutory federal tax
rate (35%) and the Company's effective tax rates were due to several factors,
including the effect of the US operating loss carryforward and a substantial
proportion of operations in countries where taxation on income is lower that in
the US.
The Company's 1997 income tax expense includes a deferred tax benefit of $17
million. In 1996 and 1995, due to the Company's US consolidated group net
operating loss carryforward, the deferred tax provision excluding the effect of
the 1996 unusual items, was less than $5 million. The remaining component of
income tax expense was the current provision in each year.
LEASES AND LEASE COMMITMENTS
- -----------------------------
Total rental expense was $285 million in 1997, $232 million in 1996 and $206
million in 1995. Future minimum rental commitments under noncancelable leases
for years ending December 31 are: 1998 $157 million; 1999 $142 million; 2000
$119 million; 2001 $97 million; and 2002 $82 million. For the ensuing three
five-year periods, these commitments decrease from $149 million to $4 million.
The minimum rentals over the remaining terms of the leases aggregate $26
million.
Included in the rental expenses and future minimum rental commitments above are
the semisubmersibles Drillstar and Sedco Explorer. In September 1997, these rigs
were sold to a newly formed venture in which the Company has a 25% interest. The
rigs will be operated by Sedco Forex under bareboat charters.
CONTINGENCIES
- --------------
The Company and its subsidiaries comply with government laws and regulations and
responsible management practices for the protection of the environment. The
Consolidated Balance Sheet includes accruals for the estimated future costs
associated with certain environmental remediation activities related to the past
use or disposal of hazardous materials. Substantially all such costs relate to
divested operations and to facilities or locations that are no longer in
operation. Due to a number of uncertainties, including uncertainty of timing,
the scope of remediation, future technology, regulatory changes and other
factors, it is possible that the ultimate remediation costs may exceed the
amounts estimated. However, in the opinion of management, such additional costs
are not expected to be material relative to consolidated liquidity, financial
position or future results of operations.
In addition, the Company and its subsidiaries are party to various other legal
proceedings. Although the ultimate disposition of these proceedings is not
presently determinable, in the opinion of the Company any liability that might
ensue would not be material in relation to the Consolidated Financial
Statements.
SEGMENT INFORMATION
The Company's business comprises three segments: Oilfield Services, Measurement
& Systems and Omnes. Services and products are described in more detail on pages
46-47 in this report.
Oilfield Services and Measurement & Systems are reportable segments.
Financial information for the years ended December 31, 1997, 1996 and 1995, by
industry segment and by geographic area, is as follows:
(Stated in millions)
Oilfield Measurement Adjust. Consol-
Services & Systems & Elim. idated
---------- ------------- -------- -------
INDUSTRY SEGMENT 1997
Operating revenue
Customers $7,663 $ 2,985 $ - $10,648
Inter-segment transfers - 1 (1) -
----- ----- --------- -------
$7,663 $2,986 $ (1) $10,648
====== ====== ========= =======
Operating income $1,557 $ 149 $(58) $ 1,648
------- ------- ----------
Interest expense (87)
Interest and other income 107
-------
Income before taxes $ 1,668
=======
Depreciation expense $ 788 $ 114 $ 3 $ 905
---- ------- --------- -------
Fixed asset additions $1,353 $ 140 $ 3 $ 1,496
---- ------- --------- -------
At December 31
Identifiable assets $7,101 $ 2,481 $(99) $ 9,483
Corporate assets 2,614
-------
Total assets $12,097
=======
INDUSTRY SEGMENT 1996
Operating revenue
Customers $6,129 $ 2,827 $ - $ 8,956
Inter-segment transfers - 7 (7) -
---- ------- --------- -------
$6,129 $2,834 $ (7) $ 8,956
====== ======== ========= =======
Operating income $ 986 $ 124 $(52) $ 1,058
------ --------- ---------
Interest expense (72)
Interest and other income 70
Unusual items (380)
-------
Income before taxes $ 676
-------
Depreciation expense $ 700 $ 111 $ 8 $ 819
------ ------- -------- --------
Fixed asset additions $1,018 $ 131 $ 9 $ 1,158
------ ------- -------- --------
At December 31
Identifiable assets $5,961 $ 2,518 $(41) $ 8,438
Corporate assets 1,887
-------
Total assets $10,325
=======
(Stated in millions)
Oilfield Measurement Adjust. Consol-
Services & Systems & Elim. idated
-------- ----------- -------- --------
INDUSTRY SEGMENT 1995
Operating revenue
Customers $4,867 $2,755 $ - $7,622
Inter-segment transfers 1 4 (5) -
------ ------ ---- -------
$4,868 $2,759 $ (5) $7,622
====== ====== ==== =======
Operating income $ 627 $ 151 $(17) $ 761
------ ------ ----
Interest expense (82)
Interest and other income
less other charges -$1 91
-------
Income before taxes $ 770
=======
Depreciation expense $ 650 $ 104 $ 6 $ 760
------ ------ ---- -------
Fixed asset additions $ 800 $ 122 $ 17 $ 939
------ ------ ---- -------
At December 31
Identifiable assets $5,192 $2,213 $(29) $7,376
Corporate assets 1,534
-------
Total assets $8,910
=======
Transfers between segments and geographic areas are for the most part made at
regular prices available to unaffiliated customers.
Certain Oilfield Services segment fixed assets are manufactured within that
segment.
During the years ended December 31, 1997, 1996 and 1995, neither sales to any
government nor sales to any single customer exceeded 10% of consolidated
operating revenue.
Corporate assets largely comprise short-term and long-term investments.
. (Stated in millions)
Western Hemisphere Eastern Hemisphere
----------------- Adjust. Consol-
US Other Europe Other & Elim. idated
-------- -------- -------- -------- --------- ----------
GEOGRAPHIC AREA 1997
Operating revenue
Customers $2,696 $1,508 $3,093 $3,351 $ - $10,648
Inter-area transfers 580 14 338 46 (978) -
------ ------ ------ ------ -------- ---------
$3,276 $1,522 $3,431 $3,397 $(978) $10,648
====== ====== ====== ====== ======== =========
Operating income $ 374 $ 266 $ 349 $ 816 $(157) $ 1,648
Interest expense (87)
Interest and other income 107
---------
Income before taxes $ 1,668
=========
At December 31
Identifiable assets $2,713 $1,329 $2,705 $2,746 $ (10) $ 9,483
Corporate assets 2,614
---------
Total assets $12,097
=========
GEOGRAPHIC AREA 1996
Operating revenue
Customers $2,103 $1,150 $3,065 $2,638 $ - $ 8,956
Inter-area transfers 443 7 169 35 (654) -
------ ------ ------ ------ -------- ---------
$2,546 $1,157 $3,234 $2,673 $(654) $ 8,956
====== ====== ====== ====== ======== =========
Operating income $ 195 $ 166 $ 243 $ 546 $ (92) $ 1,058
Interest expense (72)
Interest and other income 70
Unusual items (380)
---------
Income before taxes $ 676
========
At December 31
Identifiable assets $2,249 $ 885 $3,300 $2,069 $ (65) $ 8,438
Corporate assets 1,887
---------
Total assets $10,325
=========
(Stated in millions)
Western Hemisphere Eastern Hemisphere
----------------- Adjust. Consol-
US Other Europe Other & Elim. idated
--------- ------- --------- ------- -------- -------
GEOGRAPHIC AREA
Operating revenue
Customers $1,826 $905 $2,779 $2,112 $ - $7,622
Inter-area transfers 358 17 149 30 (554) -
------ ------- --------- ------- ------- ------
$2,184 $922 $2,928 $2,142 $(554) $7,622
====== ======= ========= ======= ======= ======
Operating income $ 130 $135 $ 170 $ 367 $ (41) $ 761
Interest expense (82)
Interest and other income
less other charges - $1 91
------
Income before taxes $ 770
======
At December 31
Identifiable assets $1,748 $720 $2,894 $2,025 $ (11) $7,376
Corporate assets 1,534
------
Total assets $8,910
======
PENSION AND OTHER BENEFIT PLANS
- -------------------------------
US PENSION PLANS
The Company and its US subsidiary sponsor several defined benefit pension plans
that cover substantially all employees. The benefits are based on years of
service and compensation on a career-average pay basis. These plans are
substantially fully funded with a trustee in respect to past and current
service. Charges to expense are based upon costs computed by independent
actuaries. The funding policy is to contribute annually amounts that are
allowable for federal income tax purposes. These contributions are intended to
provide for benefits earned to date and those expected to be earned in the
future.
The assumed discount rate, compensation increases and return on plan assets used
to determine pension expense in 1997 were 8%, 4.5% and 8.5%, respectively. The
assumed discount rate in 1996 and 1995 was 7.5%.
Net pension cost in the US for 1997, 1996 and 1995, included the following
components:
(Stated in millions)
1997 1996 1995
------ ------ ------
Service cost - benefits
earned during the period $ 29 $ 27 $ 26
Interest cost on projected
benefit obligation 55 50 46
Expected return on
plan assets (actual
return: 1997 $165;
1996 $94; 1995 $137) (57) (52) (47)
Amortization of
transition asset (2) (2) (2)
Amortization of prior
service cost/other 3 4 4
----- ----- -----
Net pension cost $ 28 $ 27 $ 27
===== ===== =====
Effective January 1, 1996, the Company and its subsidiaries amended their
pension plans to improve retirement benefits for current employees. The funded
status at December 31, 1995, reflects the amendment.
Effective January 1, 1998, the Company and its subsidiaries amended their
pension plans to improve retirement benefits for retired employees. The funded
status at December 31, 1997, reflects the amendment.
The funded status of the plans at December 31, 1997 and 1996, was as follows:
(Stated in millions)
1997 1996
---------- ---------
Actuarial present value
of obligations:
Vested benefit obligation $ 750 $ 639
===== =====
Accumulated benefit
obligation $ 754 $ 641
===== =====
Projected benefit obligation $ 824 $ 700
Plan assets at market value 913 771
----- -----
Excess of assets over projected
benefit obligation 89 71
Unrecognized net gain (204) (155)
Unrecognized prior service cost 55 34
Unrecognized net asset
at transition date (5) (7)
----- -----
Pension liability $ (65) $ (57)
===== =====
Assumed discount rate and rate of compensation increases used to determine the
projected benefit obligations were 7.5% and 4.5%, respectively in 1997 and 8%
and 4.5%, respectively, in 1996; the expected long-term rate of return on plan
assets was 8.5% for both years. Plan assets at December 31, 1997, consist of
common stocks ($524 million), cash or cash equivalents ($58 million), fixed
income investments ($253 million) and other investments ($78 million). Less than
1% of the plan assets at December 31, 1997, represented Schlumberger Limited
Common Stock.
NON-US PENSION PLANS
Outside of the US, subsidiaries of the Company sponsor several defined benefit
and defined contribution plans that cover substantially all employees who are
not covered by statutory plans. For defined benefit plans, charges to expense
are based upon costs computed by independent actuaries. These plans are
substantially fully funded with trustees in respect to past and current service.
For all defined benefit plans, pension expense was $15 million, $16 million and
$13 million in 1997, 1996 and 1995, respectively. The only significant defined
benefit plan is in the UK.
The assumed discount rate, compensation increases and return on plan assets used
to determine pension expense in 1997 were 8%, 5%, and 8.5%, respectively. The
assumed discount rate in 1996 and 1995 was 7.5%.
Net pension cost in the UK plan for 1997, 1996 and 1995 (translated into US
dollars at the average exchange rate for the periods), included the following
components:
(Stated in millions)
1997 1996 1995
---------- --------- ------
Service cost - benefits
earned during the period $ 14 $ 12 $ 10
Interest cost on projected
benefit obligation 14 9 9
Expected return on
plan assets (actual
return: 1997 $26;
1996 $36; 1995 $43 (24) (18) (16)
Amortization of transition
asset and other (4) (3) (2)
----- ----- -----
Net pension cost $ - $ - $ 1
===== ===== =====
The funded status of the plan (translated into US dollars at year-end exchange rates) was as
follows:
(Stated in millions)
1997 1996
----- -----
Actuarial present value
of obligations:
Vested benefit obligation $ 200 $ 132
===== =====
Accumulated benefit
obligation $ 200 $ 132
===== =====
Projected benefit obligation $ 227 $ 150
Plan assets at market value 339 276
----- -----
Excess of assets over
projected benefit obligation 112 126
Unrecognized net gain (92) (111)
Unrecognized prior service cost 3 4
Unrecognized net asset
at transition date (4) (4)
----- -----
Pension asset $ 19 $ 15
===== =====
The assumed discount rate and rate of compensation increases used to determine
the projected benefit obligation were 7.5% and 5%, respectively in 1997 and 8%
and 5%, respectively, in 1996; the expected long-term rate of return on plan
assets was 8.5% in 1997 and 1996. Plan assets consist of common stocks ($268
million), cash or cash equivalents ($10 million) and fixed income investments
($61 million). None of the plan assets represents Schlumberger Limited Common
Stock.
For defined contribution plans, funding and cost are generally based upon a
predetermined percentage of employee compensation. Charges to expense in 1997,
1996 and 1995, were $23 million, $15 million and $14 million, respectively.
OTHER DEFERRED BENEFITS
In addition to providing pension benefits, the Company and its subsidiaries have
other deferred benefit programs. Expense for these programs was $123 million,
$93 million and $80 million in 1997, 1996 and 1995, respectively.
HEALTH CARE BENEFITS
The Company and its US subsidiary provide health care benefits for certain
active employees. The cost of providing these benefits is recognized as expense
when incurred and aggregated $33 million, $38 million and $37 million in 1997,
1996 and 1995, respectively. Outside of the United States, such benefits are
mostly provided through government-sponsored programs.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company and its US subsidiary provide certain health care benefits to former
employees who have retired under the US pension plans.
The principal actuarial assumptions used to measure costs were a discount rate
of 8% in 1997 and 7.5% in 1996 and 1995. The overall medical cost trend rate
assumption beginning December 31, 1996, was 9% graded to 5% over the next six
years and 5% thereafter. Previously the overall assumption had been 10% graded
to 6% over the next 6 years and 6% thereafter.
Net periodic postretirement benefit cost in the US for 1997, 1996 and 1995,
included the following components:
(Stated in millions)
1997 1996 1995
------- ----- -----
Service cost - benefits
earned during the period $ 9 $ 13 $ 12
Interest cost on accumulated
postretirement benefit
obligation 21 26 25
Amortization of unrecognized
net gain and other (5) - -
----- ----- -----
$ 25 $ 39 $ 37
===== ===== =====
The funded status at December 31, 1997 and 1996, was as follows:
(Stated in millions)
1997 1996
----- -----
Accumulated postretirement
benefit obligation:
Retirees $ 149 $ 143
Fully eligible 50 8
Actives 106 135
----- -----
$ 305 $ 286
Unrecognized net gain 87 92
Unrecognized prior service 5 5
----- -----
Postretirement benefit
liability at December 31 $ 397 $ 383
===== =====
The assumed discount rate used to determine the accumulated postretirement
benefit obligation was 7.5% for 1997 and 8% in 1996.
If the assumed medical cost trend rate was increased by one percentage point,
health care cost in 1997 would have been $30 million, and the accumulated
postretirement benefit obligation would have been $355 million at December 31,
1997.
SUPPLEMENTARY INFORMATION
- -------------------------
Operating revenue and related cost of goods sold and services comprised the
following:
(Stated in millions)
Year ended
December 31, 1997 1996 1995
------- ------ ------
Operating revenue
Sales $ 2,664 $2,428 $2,372
Services 7,984 6,528 5,250
------- ------ ------
$10,648 $8,956 $7,622
======= ====== ======
Direct operating costs
Goods sold $ 1,822 $1,704 $1,645
Services 6,015 5,131 4,159
------- ------ ------
$ 7,837 $6,835 $5,804
======= ====== ======
Cash paid for interest and income taxes was as follows:
(Stated in millions)
Year ended
December 31, 1997 1996 1995
------- ------ ------
Interest $ 87 $ 73 $ 81
Income taxes $ 271 $ 179 $ 132
Accounts payable and accrued liabilities are summarized as follows:
(Stated in millions)
December 31, 1997 1996
------ ------
Payroll, vacation and
employee benefits $ 541 $ 488
Trade 870 712
Taxes, other than income 175 182
Other 711 818
------ ------
$2,297 $2,200
====== ======
The caption "Interest and other income" includes interest income, principally
from short-term and long-term investments, of $99 million, $73 million and $89
million for 1997, 1996 and 1995, respectively.
EXHIBIT A
SCHLUMBERGER DISCOUNTED STOCK PURCHASE PLAN
(As Amended and Restated January 21, 1998)
1. PURPOSE
The Schlumberger Discounted Stock Purchase Plan (the "Plan") is designed to
encourage and assist all employees of Schlumberger Limited, a Netherlands
Antilles corporation, and Subsidiaries (hereinafter collectively referred to
as the "Company"), where permitted by applicable laws and regulations, to
acquire an equity interest in Schlumberger Limited through the purchase of
shares of Common Stock, par value $0.01 per share, of Schlumberger Limited
("Common Stock"). It is intended that this Plan shall constitute an "employee
stock purchase plan" within the meaning of Section 423 of the Internal Revenue
Code of 1986, as amended (the "Code").
2. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Stock Purchase Plan Committee (the
"Committee") appointed by the Board of Directors of Schlumberger Limited (the
"Board"), which Committee shall consist of at least three (3) persons. The
Committee shall supervise the administration and enforcement of the Plan
according to its terms and provisions and shall have all powers necessary to
accomplish these purposes and discharge its duties hereunder including, but
not by way of limitation, the power to (i) employ and compensate agents of the
Committee for the purpose of administering the accounts of participating
employees; (ii) construe or interpret the Plan; (iii) determine all questions
of eligibility; and (iv) compute the amount and determine the manner and time
of payment of all benefits according to the Plan hereunder.
The Committee may act by unanimous decision of its members at a regular or
special meeting of the Committee or by decision reduced to writing and signed
by all members of the Committee without holding a formal meeting. Vacancies in
the membership of the Committee arising from death, resignation or other
inability to serve shall be filled by appointment of the Board.
3. NATURE AND NUMBER OF SHARES
The Common Stock subject to issuance under the terms of the Plan shall be
shares of Schlumberger Limited's authorized but unissued shares or previously
issued shares reacquired and held by Schlumberger Limited. Except as provided
in Section 20 hereof, the aggregate number of shares which may be issued under
the Plan and authorized by this amendment shall not exceed the sum of (i) the
8,000,000 shares of Common Stock authorized by the 1992 Amendment and
restatement of the Plan as adjusted for the 1997 stock split and (ii)
12,000,000 shares of Common
A-1
Stock. All shares purchased under the Plan, regardless of source, shall be
counted against this share limitation.
4. ELIGIBILITY REQUIREMENTS
Each "Employee" (as hereinafter defined), except as described in the next
following paragraph, shall become eligible to participate in the Plan in
accordance with Section 5 on the first "Enrollment Date" (as hereinafter
defined) following employment by the Company. Participation in the Plan is
voluntary.
The following Employees are not eligible to participate in the Plan:
(i) Employees who would, immediately upon enrollment in the Plan, own
directly or indirectly, or hold options or rights to acquire, an aggregate
of 5% or more of the total combined voting power or value of all
outstanding shares of all classes of the Company or any subsidiary;
(ii) Employees who are customarily employed by the Company less than
twenty (20) hours per week or less than five (5) months in any calendar
year;
(iii) Employees who are prohibited by the laws and regulations of the
nation of their residence or employment from participating in the Plan as
determined by the Committee; and
(iv) Employees who have not completed at least six (6) months of service
with the Company as of an Enrollment Date.
"Employee" shall mean any individual employed by Schlumberger Limited or any
Subsidiary (as hereinafter defined). "Subsidiary" shall mean any corporation
in existence as of the "Effective Date" (as hereinafter defined) of this Plan
in an unbroken chain of corporations beginning with Schlumberger Limited if,
as of the Effective Date, each of the corporations other than the last
corporation in the chain owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations
in the chain. Any corporation which may become a Subsidiary (as defined
herein) after the Effective Date shall automatically be deemed to be a
participating Subsidiary under this Plan effective as of the following
Enrollment Date unless the Committee takes action to exclude such corporation
and its employees from participation herein.
5. ENROLLMENT
Each eligible Employee of Schlumberger Limited or any Subsidiary as of July
1, 1988 (the "Effective Date" herein) may enroll in the Plan as of the
Effective Date. Each other eligible Employee of Schlumberger Limited or a
participating Subsidiary who thereafter becomes eligible to participate may
enroll in the Plan on the first July 1 following the date he or she first
meets the eligibility requirements of Section 4. Any eligible Employee not
enrolling in the Plan when first eligible may enroll in the Plan on the first
day of July of any subsequent calendar year. Any eligible Employee may enroll
A-2
or re-enroll in the Plan on the dates hereinabove prescribed or such other
specific dates established by the Committee from time to time ("Enrollment
Dates"). In order to enroll, an eligible Employee must complete, sign and
submit the appropriate form to the Personnel Department of the Company.
6. METHOD OF PAYMENT
Payment for shares is to be made as of the applicable "Purchase Date" (as
defined in Section 9) through payroll deductions (with no right of prepayment)
over the Plan's designated purchase period (the "Purchase Period") with the
first such deduction commencing with the payroll period ending after the
Enrollment Date. Each Purchase Period under the Plan shall be a period of
twelve (12) calendar months beginning on July 1 and ending on the following
June 30 or such other period as the Committee may prescribe. Each
participating Employee (hereinafter referred to as a "Participant") will
authorize such deductions from his or her pay for each month during the
Purchase Period and such amounts will be deducted in conformity with his or
her employer's payroll deduction schedule.
Each Participant may elect to make contributions each pay period in amounts
not less than one percent (1%) and not more than ten percent (10%), or such
other percentages as the Committee may establish from time to time before an
Enrollment Date for all purchases to occur during the relevant Purchase
Period, of his or her base earnings or salary, geographical coefficient,
overtime pay, shift premiums and commissions from the Company (excluding long-
term disability or workers compensation payments and similar amounts, but
including elective qualified contributions by the Participant to employee
benefit plans maintained by the Company) during such pay period. The rate of
contribution shall be designated by the Participant in the enrollment form.
Effective July 1, 1992, bonuses will be included in determining the amount of
the Participant's contribution unless the Participant gives written notice to
the Personnel Department at the time and in the manner directed by the
Committee.
A Participant may elect to increase or decrease the rate of contribution
effective as of the first day of any calendar quarter by giving thirty (30)
days' written notice to the Personnel Department of the Company on the
appropriate form. A Participant may suspend payroll deductions at any time
during the Purchase Period, by giving thirty (30) days' written notice to the
Personnel Department on the appropriate form. In such case, the Participant's
account will continue to accrue interest and will be used to purchase stock at
the end of the Purchase Period. A Participant may also elect to withdraw
contributions at any time by giving thirty (30) days' prior written notice to
the Personnel Department of the Company on the appropriate form. Any
Participant who withdraws his or her contributions will receive his or her
entire account balance, including interest and dividends, if any, plus a stock
certificate for the number of shares held by the Participant under the Plan as
soon as practicable. Any Participant who suspends payroll deductions or
withdraws contributions during any Purchase Period cannot resume payroll
deductions during such Purchase Period and must re-enroll in the Plan in order
to participate in the next Purchase Period.
A-3
No more than the maximum contribution permitted any Participant under
Section 9 can be accumulated over the Purchase Period, including interest and
dividends, if applicable. Except in case of cancellation of election to
purchase, death, resignation or other terminating event, the amount in a
Participant's account at the end of the Purchase Period will be applied to the
purchase of the shares.
7. CREDITING OF CONTRIBUTIONS, INTEREST AND DIVIDENDS
Contributions shall be credited to a Participant's account as soon as
administratively feasible after payroll withholding. Unless otherwise
prohibited by laws and regulations, Participant contributions will receive
interest at a rate realized for the investment vehicle or vehicles designated
by the Committee for purposes of the Plan. Interest will be credited to a
Participant's account from the first date on which Participant contributions
are deposited with the investment vehicle until the earlier of (i) the end of
the Purchase Period or (ii) in the event of cancellation, death, resignation
or other terminating event, the last day of the month next preceding the date
on which such contributions are returned to the Participant. Dividends on
shares held in a Participant's account in the Plan will also be credited to
such Participant's account. Any such contributions, interest and dividends
shall be deposited in or held by a bank or financial institution designated by
the Committee for this purpose ("Custodian").
8. GRANT OF RIGHT TO PURCHASE SHARES ON ENROLLMENT
Enrollment in the Plan by an Employee on an Enrollment Date will constitute
the grant by the Company to the Participant of the right to purchase shares of
Common Stock under the Plan. Re-enrollment by a Participant in the Plan (but
not merely an increase or decrease in the rate of contributions) will
constitute a grant by the Company to the Participant of a new opportunity to
purchase shares on the Enrollment Date on which such re-enrollment occurs. A
Participant who has not terminated employment and has not withdrawn his or her
contributions from the Plan will have shares of Common Stock purchased for him
or her on the applicable Purchase Date, and he or she will automatically be
re-enrolled in the Plan on the Enrollment Date immediately following the
Purchase Date on which such purchase has occurred, unless such participant
notifies the Personnel Department on the appropriate form that he or she
elects not to re-enroll. A Participant who has suspended payroll deductions or
withdrawn contributions during any Purchase Period must re-enroll on the
appropriate form to participate in the Plan in the next Purchase Period.
Each right to purchase shares of Common Stock under the Plan during a
Purchase Period shall have the following terms:
(i) the right to purchase shares of Common Stock during a particular
Purchase Period shall expire on the earlier of: (A) the completion of the
purchase of shares on the Purchase Date occurring on the last trading day
of the Purchase Period; or (B) the date on which participation of such
Participant in the Plan terminates for any reason;
A-4
(ii) in no event shall the right to purchase shares of Common Stock
during a Purchase Period extend beyond twenty-seven (27) months from the
Enrollment Date;
(iii) payment for shares purchased will be made only through payroll
withholding and the crediting of interest and dividends, if applicable, in
accordance with Sections 6 and 7;
(iv) purchase of shares will be accomplished only in accordance with
Section 9;
(v) the price per share will be determined as provided in Section 9;
(vi) the right to purchase shares (taken together with all other such
rights then outstanding under this Plan and under all other similar stock
purchase plans of Schlumberger Limited or any Subsidiary) will in no event
give the Participant the right to purchase a number of shares during a
Purchase Period in excess of the number of shares of Common Stock derived
by dividing $25,000 by the fair market value of the Common Stock (the
"Maximum Share Limitation") on the applicable Grant Date determined in
accordance with Section 9; and
(vii) the right to purchase shares will in all respects be subject to the
terms and conditions of the Plan, as interpreted by the Committee from time
to time.
9. PURCHASE OF SHARES
The right to purchase shares of Common Stock granted by the Company under
the Plan is for the term of a Purchase Period. The fair market value of the
Common Stock to be purchased during such Purchase Period will be determined by
averaging the highest and lowest composite sale prices per share of the Common
Stock in the New York Stock Exchange Composite Transactions Quotations ("Fair
Market Value") on the first trading day of the calendar month of July or such
other trading date designated by the Committee (the "Grant Date"). The Fair
Market Value of the common Stock will again be determined in the same manner
on the last trading day of the calendar month of June or such other trading
date designated by the Committee (the "Purchase Date"). These dates constitute
the date of grant and the date of exercise for valuation purposes of Section
423 of the Code. The price used for allocating each share to a Participant
shall be 85% of the lesser of the prices so established.
As of the Purchase Date, the Committee shall apply the funds then credited
to each Participant's account to the purchase of whole shares of Common Stock.
The cost to the Participant for the shares purchased during a Purchase Period
shall be 85% of the lower of:
(i) the Fair Market Value of Common Stock on the Grant Date; or
(ii) the Fair Market Value of Common Stock on the Purchase Date.
Certificates evidencing shares purchased shall be delivered to the Custodian
or to any other bank or financial institution designated by the Committee for
this purpose or shall be delivered to the Participant (if the Participant has
elected to receive the certificate) as soon as administratively feasible after
the Purchase Date, but Participants shall be treated as the record owners of
their shares effective
A-5
as of the Purchase Date. Shares that are held by the Custodian or any other
designated bank or financial institution shall be held in book entry form. Any
cash equal to less than the price of a whole share of Common Stock shall be
credited to a Participant's account on the Purchase Date and carried forward
in his or her account for application during the next Purchase Period. Any
Participant who purchases stock at the end of a Purchase Period and is not re-
enrolled in the Plan for the next Purchase Period will receive a certificate
for the number of shares held in his or her account as of the most recent
Purchase Date and any cash, dividends or interest remaining in his or her
account. Any Participant who terminates employment or withdraws his or her
contributions from the Plan prior to the next Purchase Date, will receive a
certificate for the number of shares held in his or her account and a cash
refund attributable to amounts equal to less than the price of a whole share,
and any accumulated contributions, dividends and interest. If for any reason a
Participant's allocations to the Plan exceed $21,250 during a Purchase Period
or if the purchase of shares with such allocations would exceed the Maximum
Share Limitation, such excess amounts shall be refunded to the Participant as
soon as practicable after such excess has been determined to exist.
If as of any Purchase Date the shares authorized for purchase under the Plan
are exceeded, enrollments shall be reduced proportionately to eliminate the
excess. Any funds that cannot be applied to the purchase of shares due to
excess enrollment shall be refunded as soon as administratively feasible,
including interest determined in accordance with Section 7. The Committee in
its discretion may also provide that excess enrollments may be carried over to
the next Purchase Period under this Plan or any successor plan according to
the regulations as set forth under Section 423 of the Code.
10. WITHDRAWAL OF SHARES
A Participant may elect to withdraw shares held in his or her account at any
time (without withdrawing from the Plan) by giving notice to the Personnel
Department on the appropriate form. Upon receipt of such notice from the
Personnel Department, the Custodian, bank or other financial institution
designated by the Committee for this purpose will arrange for the issuance and
delivery of all shares held in the Participant's account as soon as
administratively feasible.
11. TERMINATION OF PARTICIPATION
The right to participate in the Plan terminates immediately when a
Participant ceases to be employed by the Company for any reason whatsoever
(including death, unpaid disability or when the Participant's employer ceases
to be a Subsidiary) or the Participant otherwise becomes ineligible.
Participation also terminates immediately when the Participant voluntarily
withdraws his or her contributions from the Plan. Participation terminates
immediately after the Purchase Date if the Participant is not re-enrolled in
the Plan for the next Purchase Period or if the Participant has suspended
payroll deductions during any Purchase Period and has not re-enrolled in the
Plan for the next Purchase Period. As soon as administratively feasible after
termination of participation, the Committee shall pay to the Participant or
his or her beneficiary or legal representative all amounts
A-6
credited to his or her account, including interest and dividends, if
applicable, determined in accordance with Section 7, and shall cause a
certificate for the number of shares held in his or her account to be
delivered to the Participant or to his or her beneficiary or legal
representative.
12. UNPAID LEAVE OF ABSENCE
Unless the Participant has voluntarily withdrawn his or her contributions
from the Plan, shares will be purchased for his or her account on the Purchase
Date next following commencement of an unpaid leave of absence by such
Participant provided such leave does not constitute a termination of
employment. The number of shares to be purchased will be determined by
applying to the purchase the amount of the Participant's contributions made up
to the commencement of such unpaid leave of absence plus interest on such
contributions and dividends, if applicable, both determined in accordance with
Section 7. Participation in the Plan will terminate immediately after the
purchase of shares on such Purchase Date, unless the Participant has resumed
eligible employment prior to the Purchase Date, in which case the Participant
may resume payroll deductions immediately.
13. DESIGNATION OF BENEFICIARY
Each Participant may designate one or more beneficiaries in the event of
death and may, in his or her sole discretion, change such designation at any
time. Any such designation shall be effective upon receipt by the local
Personnel Department and shall control over any disposition by will or
otherwise.
As soon as administratively feasible after the death of a Participant,
amounts credited to his or her account, including interest and dividends, if
applicable, determined in accordance with Section 7, shall be paid in cash and
a certificate for any shares shall be delivered to the Participant's
designated beneficiaries or, in the absence of such designation, to the
executor, administrator or other legal representative of the Participant's
estate. Such payment shall relieve the Company of further liability to the
deceased Participant with respect to the Plan. If more than one beneficiary is
designated, each beneficiary shall receive an equal portion of the account
unless the Participant has given express contrary instructions.
14. ASSIGNMENT
The rights of a Participant under the Plan will not be assignable or
otherwise transferable by the Participant except by will or the laws of
descent and distribution. No purported assignment or transfer of such rights
of a Participant under the Plan, whether voluntary or involuntary, by
operation of law or otherwise, shall vest in the purported assignee or
transferee any interest or right therein whatsoever but immediately upon such
assignment or transfer, or any attempt to make the same, such rights shall
terminate and become of no further effect. If this provision is violated, the
Participant's election to purchase Common Stock shall terminate and the only
obligation of the Company remaining under the Plan will be to pay to the
person entitled thereto the amount then credited to the Participant's account.
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No Participant may create a lien on any funds, securities, rights or other
property held for the account of the Participant under the Plan, except to the
extent that there has been a designation of beneficiaries in accordance with
the Plan, and except to the extent permitted by will or the laws of descent
and distribution if beneficiaries have not been designated. A Participant's
right to purchase shares under the Plan shall be exercisable only during the
Participant's lifetime and only by him or her.
15. TREATMENT OF NON-U.S. PARTICIPANTS
Participants who are employed by non-U.S. Companies, who are paid in foreign
currency and who contribute foreign currency to the Plan through payroll
deductions, will have such contributions converted to U.S. dollars. The
exchange rate for such conversion will be the rate quoted by a major financial
institution selected by the Committee for the last trading day of the Purchase
Period. If the exchange rate for certain countries cannot be quoted in this
manner, the conversion rate shall be determined as prescribed by the
Committee. In no event will any procedure implemented for dealing with
exchange rate fluctuations that may occur during the Purchase Period result in
a purchase price below the price determined pursuant to Section 9.
16. COSTS
All costs and expenses incurred in administering this Plan shall be paid by
the Company. Any brokerage fees for the sale of shares purchased under the
Plan shall be paid by the Participant.
17. REPORTS
Annually, the Company shall provide or cause to be provided to each
Participant a report of his or her contributions and the shares of Common
Stock purchased with such contributions by that Participant on each Purchase
Date.
18. EQUAL RIGHTS AND PRIVILEGES
All eligible Employees shall have equal rights and privileges with respect
to the Plan so that the Plan qualifies as an "employee stock purchase plan"
within the meaning of Section 423 or any successor provision of the Code and
related regulations. Any provision of the Plan which is inconsistent with
Section 423 or any successor provision of the Code shall without further act
or amendment by the Company be reformed to comply with the requirements of
Section 423. This Section 18 shall take precedence over all other provisions
in the Plan.
19. RIGHTS AS STOCKHOLDER
A Participant will have no rights as a stockholder under the election to
purchase until he or she becomes a stockholder as herein provided. A
Participant will become a stockholder with respect to
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shares for which payment has been completed as provided in Section 9 at the
close of business on the last business day of the Purchase Period.
20. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, LIQUIDATION,
MERGER OR ASSET SALE.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the right to purchase shares of Common Stock
covered by a current Purchase Period and the number of shares which have
been authorized for issuance under the Plan for any future Purchase
Period, the maximum number of shares each Participant may purchase each
Purchase Period (pursuant to Section 9), as well as the price per share
and the number of shares of Common Stock covered by each right under the
Plan which have not yet been purchased shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase
or decrease in the number of shares of Common Stock effected without
receipt of consideration by the Company. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect,
and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Purchase Period then in progress shall be
shortened by setting a new Purchase Date (the "New Purchase Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The
New Purchase Date shall be before the date of the Company's proposed
dissolution or liquidation. Each Participant will be notified in writing,
at least thirty (30) business days prior to the New Purchase Date, that
the Purchase Date for the Participant's right to purchase shares has been
changed to the New Purchase Date and that the applicable number of shares
will automatically be purchased on the New Purchase Date, unless prior to
such date the Participant has withdrawn from the Plan as provided in
Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each outstanding right to
purchase shares shall be assumed or an equivalent right to purchase
shares substituted by the successor corporation or a Parent or Subsidiary
of the successor corporation. In the event that the successor corporation
refuses to assume or substitute the right to purchase shares, any
Purchase Period then in progress shall be shortened by setting a new
Purchase Date (the "New Purchase Date") and any Purchase Period then in
progress shall end on the New Purchase Date. The New Purchase Date shall
be before the date of the Company's proposed sale or merger. Each
participant will be notified in writing, at least thirty (30) business
days prior to the New Purchase Date, that the Purchase Date has been
changed to the New Purchase Date and that the applicable number of shares
will be purchased automatically on the New Purchase Date,
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unless prior to such date the Participant has withdrawn from the Plan as
provided in Section 10 hereof.
21. MODIFICATION AND TERMINATION
Except as provided in Section 20 hereof, the Board may amend or terminate
the Plan at any time. No amendment shall be effective unless within one year
after it is adopted by the Board it is approved by the holders of a majority
of the votes cast at a meeting if such amendment would otherwise cause the
rights granted under the Plan to purchase shares of Common Stock to fail to
meet the requirements of Section 423 of the Code (or any successor provision).
In the event the Plan is terminated, the Committee may elect to terminate
all outstanding rights to purchase shares under the Plan either immediately or
upon completion of the purchase of shares on the next Purchase Date, unless
the Committee has designated that the right to make all such purchases shall
expire on some other designated date occurring prior to the next Purchase
Date. If the rights to purchase shares under the Plan are terminated prior to
expiration, all funds contributed to the Plan that have not been used to
purchase shares shall be returned to the Participants as soon as
administratively feasible, including interest and dividends, if applicable,
determined in accordance with Section 7.
22. BOARD AND STOCKHOLDER APPROVAL; EFFECTIVE DATE
This Plan was originally approved by the Board on January 28, 1988, amended
and restated by the Board on January 21, 1992 and approved by the holders of a
majority of the shares of outstanding Common Stock of Schlumberger Limited on
April 15, 1992. This amendment and restatement approved by the Board on
January 21, 1998 shall become effective as of July 1, 1998; provided, however,
that the changes contained herein shall not be effective unless approved by
the holders of a majority of the votes cast at a meeting within the period
ending January 21, 1999 (12 months after the date such amendments are approved
by the Board).
23. GOVERNMENTAL APPROVALS OR CONSENTS
This Plan and any offering or sale made to Employees under it are subject to
any governmental approvals or consents that may be or become applicable in
connection therewith. Subject to the provisions of Section 21, the Board may
make such changes in the Plan and include such terms in any offering under the
Plan as may be desirable to comply with the rules or regulations of any
governmental authority.
24. OTHER PROVISIONS
The agreements to purchase shares of Common Stock under the Plan shall
contain such other provisions as the Committee and the Board shall deem
advisable, provided that no such provision shall in any way be in conflict
with the terms of the Plan.
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EXHIBIT B
SCHLUMBERGER 1998 STOCK OPTION PLAN
(As Established Effective January 21, 1998)
1. PURPOSE OF THE PLAN
This Stock Option Plan (the "Plan") is intended as an incentive to key
employees of Schlumberger Limited (the "Company") and its subsidiaries. Its
purposes are to retain employees with a high degree of training, experience
and ability, to attract new employees whose services are considered unusually
valuable, to encourage the sense of proprietorship of such persons and to
stimulate the active interest of such persons in the development and financial
success of the Company.
2. ADMINISTRATION OF THE PLAN
(a) The Board of Directors shall appoint and maintain a Compensation
Committee (the "Committee") which shall consist of at least three (3) members
of the Board of Directors, none of whom is an officer or employee of the
Company, who shall serve at the pleasure of the Board. The Committee may from
time to time grant incentive stock options and non-qualified stock options
("Stock Options") under the Plan to the persons described in Section 3 hereof.
No member of such Committee shall be eligible to receive Stock Options under
this Plan during his or her tenure on the Committee. Members of the Committee
shall be subject to any additional restrictions necessary to satisfy the
definition of "Non-Employee Director" as set forth in Rule 16b-3 under the
United States Securities Exchange Act of 1934 (the "Act") as it may be amended
from time to time.
(b) The Committee shall have full power and authority to interpret the
provisions of the Plan and supervise its administration. All decisions and
selections made by the Committee pursuant to the provisions of the Plan shall
be made by a majority of its members. Any decision reduced to writing and
signed by a majority of the members shall be fully effective as if adopted by
a majority at a meeting duly held. Subject to the provisions of the Plan, the
Committee shall have full and final authority to determine the persons to whom
Stock Options hereunder shall be granted, the number of shares to be covered
by each Stock Option except that no optionee may be granted options for more
than 1,000,000 shares during the life of the Plan, and whether such Stock
Option shall be designated an "incentive stock option" or a "non-qualified
stock option."
(c) No member of the Committee shall be liable for anything done or omitted
to be done by him or by her or any other member of the Committee in connection
with the Plan, except for his or her own willful misconduct or as expressly
provided by statute.
(d) If the exercise period of an outstanding Stock Option is continued
following a holder's termination of employment due to retirement as provided
in Section 5(c)(v), the Committee shall
B-1
have the authority in its discretion to cause such option to be forfeited in
the event that such holder engages in "detrimental activity" as described in
Section 5(c)(v).
3. GRANTS OF STOCK OPTIONS
(a) The persons eligible for participation in the Plan as recipients of
Stock Options shall include only employees of the Company or its subsidiary
corporations as defined in Section 424(f) of the Internal Revenue Code of
1986, as amended from time to time (the "Code") and hereinafter referred to as
"subsidiaries" who are executive, administrative, professional or technical
personnel who have responsibilities affecting the management, direction,
development and financial success of the Company or its subsidiaries. No
Director of the Company who is not also an employee is eligible to participate
in the Plan, nor is any employee who owns directly or indirectly stock
possessing more than five percent (5%) of the total combined voting power or
value of all classes of stock of the Company or any subsidiary. An employee
may receive more than one grant of Stock Options at the Committee's discretion
including simultaneous grants of different forms of Stock Options.
(b) The Committee in granting Stock Options hereunder shall have discretion
to determine the terms and conditions upon which such Stock Options may be
exercisable. Each grant of a Stock Option shall be confirmed by an Agreement
consistent with this Plan which shall be executed by the Company and by the
person to whom such Stock Option is granted. All such Agreements shall contain
a provision providing that the Stock Option shall not be exercisable unless
the recipient remains in the employment of the Company or a subsidiary for a
period of at least one (1) year from the date of any such Agreement, subject
to the right of the Company or subsidiary to terminate such employment.
(c) For purposes of this Plan, employment with the Company shall include
employment with any subsidiary of the Company, and Stock Options granted under
this Plan shall not be affected by an employee's transfer of employment from
the Company to a subsidiary, from a subsidiary to the Company or between
subsidiaries.
(d) The purchase price of the shares as to which a Stock Option is exercised
shall be paid in full at the time of the exercise subject to such rules,
procedures and restrictions as the Committee may prescribe from time to time:
(i) in cash or by certified check; (ii) by the delivery of shares of
Schlumberger Common Stock with a fair market value (as determined according to
Section 5(b) of the Plan) at the time of exercise equal to the total option
price; or (iii) by a combination of the methods described in (i) and (ii).
4. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 8 hereof, there shall be
subject to the Plan 12,000,000 shares of Common Stock, par value $0.01 per
share, of the Company (the "Shares"). The Shares subject to the Plan shall
consist of authorized and unissued shares or previously issued shares
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reacquired and held by the Company or any subsidiary. Should any Stock Option
expire or be terminated prior to its exercise in full and prior to the
termination of the Plan, the Shares theretofore subject to such Stock Option
shall be available for further grants under the Plan. Until termination of the
Plan, the Company and/or one or more subsidiaries shall at all times make
available a sufficient number of Shares to meet the requirements of the Plan.
After termination of the Plan, the number of Shares reserved for purposes of
the Plan from time to time shall be only such number of Shares as are issuable
under then outstanding Stock Options.
5. TERMS OF STOCK OPTIONS
(a) Stock Options granted under this Plan which are designated as "incentive
stock options" may be granted with respect to any number of Shares, subject to
the limitation that the aggregate fair market value of such Shares (determined
in accordance with Section 5(b) of the Plan at the time the option is granted)
with respect to which such options are exercisable for the first time by an
employee during any one calendar year (under all such plans of the Company and
any subsidiary of the Company) shall not exceed $100,000. To the extent that
the aggregate fair market value of Shares with respect to which incentive
stock options (determined without regard to this subsection) are exercisable
for the first time by any employee during any calendar year (under all plans
of the employer corporation and its parent and subsidiary corporations)
exceeds $100,000, such options shall be treated as options which are not
incentive stock options. No Stock Options shall be granted pursuant to the
Plan after January 21, 2008.
(b) The purchase price of each Share subject to a Stock Option shall be
determined by the Committee prior to granting a Stock Option. The Committee
shall set the purchase price for each Share at either the fair market value
(the "Fair Market Value") of each Share on the date the Stock Option is
granted, or at such other price as the Committee in its sole discretion shall
determine, but not less than one hundred percent (100%) of such Fair Market
Value. After it is granted, no Stock Option may be amended to decrease the
purchase price and no Stock Option may be granted in substitution for an
outstanding Stock Option with a purchase price lower than the purchase price
of an outstanding Stock Option. The Fair Market Value of a Share on a
particular date shall be deemed to be the mean between the highest and lowest
composite sales price per share of the Common Stock in the New York Stock
Exchange Composite Transactions Quotations, as reported for that date, or, if
there shall have been no such reported prices for that date, the reported mean
price on the last preceding date on which a composite sale or sales were
effected on one or more of the exchanges on which the Shares were traded shall
be the Fair Market value.
(c)(i) Each Stock Option granted hereunder shall be exercisable in one or
more installments (annual or other) on such date or dates as the Committee may
in its sole discretion determine, and the terms of such exercise shall be set
forth in the Stock Option Agreement covering the grant of the option, provided
that no Stock Option may be exercised after the expiration of ten (10) years
from the date such option is granted.
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(ii) Except as provided in paragraph (e) below, the right to purchase Shares
shall be cumulative so that when the right to purchase any Shares has accrued
such Shares or any part thereof may be purchased at any time thereafter until
the expiration or termination of the Stock Option.
(iii) At any time after the granting of any such Stock Option, the Committee
may accelerate the installment exercise dates (subject, however, to any
applicable limitations concerning options designated "incentive stock
options").
(iv)(A) If the optionee's employment with the Company is terminated with the
consent of the Company and provided such employment is not terminated for
cause (of which the Committee shall be the sole judge), the Committee may
permit such Stock Option to be exercised by such optionee at any time during
the period of three (3) months after such termination, provided that such
option may be exercised before expiration and within such three-month period
only to the extent it was exercisable on the date of such termination.
(B) In the event an optionee dies while in the employ of the Company or dies
after termination of employment but prior to the exercise in full of any Stock
Option which was exercisable on the date of such termination, such option may
be exercised before expiration of its term by the person or persons entitled
thereto under the optionee's will or the laws of descent and distribution
during the "Post-Death Exercise Period" (as hereinafter defined) to the extent
exercisable by the optionee at the date of death. The Post-Death Exercise
Period shall be a period commencing on the date of death and ending sixty (60)
months after the date of death (or, if earlier, the date of termination of
employment).
(C) If the optionee's employment with the Company is terminated without the
consent of the Company for any reason other than the death of the optionee, or
if the optionee's employment with the Company is terminated for cause, his or
her rights under any then outstanding Stock Option shall terminate
immediately. The Committee shall be the sole judge of whether the optionee's
employment is terminated without the consent of the Company or for cause.
(v)(A) If the optionee's employment with the Company is terminated due to
retirement (within the meaning of any prevailing pension plan in which such
optionee is a participant), such Stock Option shall be exercisable by such
optionee at any time during the period of sixty (60) months after such
termination or the remainder of the option period, whichever is less, provided
that such option may be exercised after such termination and before expiration
only to the extent that it is exercisable on the date of such termination.
(B) In the event an optionee dies during such extended exercise period, such
Stock Option may be exercised by the person or persons entitled thereto under
the optionee's will or the laws of descent and distribution during the Post-
Death Exercise Period to the extent exercisable by the optionee at the date of
death and to the extent the term of the Stock Option has not expired within
such Post-Death Exercise Period.
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(c) Notwithstanding the foregoing, if at any time after termination due
to retirement the optionee engages in "detrimental activity" (as
hereinafter defined), the Committee in its discretion may cause the
optionee's right to exercise such option to be forfeited. Such forfeiture
may occur at any time subsequent to the date that is three (3) months after
the optionee's termination of employment and prior to the actual delivery
of shares pursuant to the exercise of such option. If an allegation of
detrimental activity by an optionee is made to the Committee, the
exercisability of the optionee's options will be suspended for up to two
months to permit the investigation of such allegation. For purposes of this
Section 5(c)(v), "detrimental activity" means activity that is determined
by the Committee in its sole and absolute discretion to be detrimental to
the interests of the Company or any of its subsidiaries, including but not
limited to situations where such optionee: (1) divulges trade secrets of
the company, proprietary data or other confidential information relating to
the Company or to the business of the Company and any subsidiaries,
(2) enters into employment with a competitor under circumstances suggesting
that such optionee will be using unique or special knowledge gained as a
Company employee to compete with the Company, (3) is convicted by a court
of competent jurisdiction of any felony or of a crime involving moral
turpitude, (4) uses information obtained during the course of his or her
prior employment for his or her own purposes, such as for the solicitation
of business, (5) is determined to have engaged (whether or not prior to
termination due to retirement) in either gross misconduct or criminal
activity harmful to the Company, or (6) takes any action that harms the
business interests, reputation, or goodwill of the Company and/or its
subsidiaries.
(vi) Notwithstanding the other provisions of this paragraph (c), in
no event may a Stock Option be exercised after the expiration of ten
(10) years from the date such Stock Option is granted.
(d) At the time of the grant of a Stock Option, the Committee may
determine that the Shares covered by such option shall be restricted as to
transferability. If so restricted, such Shares shall not be sold,
transferred or disposed of in any manner, and such Shares shall not be
pledged or otherwise hypothecated until the restriction expires by its
terms. The circumstances under which any such restriction shall expire
shall be determined by the Committee and shall be set forth in the Stock
Option Agreement covering the grant of the option to purchase such Shares.
(e) The Committee shall designate whether a Stock Option is to be an
"incentive stock option" for purposes of Section 422 of the Code.
6. ASSIGNABILITY OF STOCK OPTIONS
Stock Options granted under the Plan shall not be assignable or otherwise
transferable by the recipient except by will or the laws of descent and
distribution. Otherwise, Stock Options granted under this Plan shall be
exercisable during the lifetime of the recipient (except as otherwise provided
in the Plan or the applicable Agreement for Stock Options other than
"incentive stock options") only by the
B-5
recipient for his or her individual account, and no purported assignment or
transfer of such Stock Options thereunder, whether voluntary or involuntary,
by operation of law or otherwise, shall vest in the purported assignee or
transferee any interest or right therein whatsoever but immediately upon any
such purported assignment or transfer, or any attempt to make the same, such
Stock Options thereunder shall terminate and become of no further effect.
7. TAXES
The Committee may make such provisions and rules as it may deem appropriate
for the withholding of taxes in connection with any Stock Options granted
under the Plan. An optionee, subject to such rules as the Committee may
prescribe from time to time, may elect to satisfy all or any portion of the
tax required to be withheld by the Company in connection with the exercise of
such option by electing to have the Company withhold a number of shares having
a Fair Market Value on the date of exercise equal to or less than the amount
required to be withheld. An optionee's election pursuant to the preceding
sentence must be made on or before the date of exercise and must be
irrevocable.
8. REORGANIZATIONS AND RECAPITALIZATIONS OF THE COMPANY
(a) The existence of this Plan and Stock Options granted hereunder shall
not affect in any way the right or power of the Company or its stockholders
to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of
bonds, debentures, preferred or prior preference stocks ahead of or
affecting the Shares or the rights thereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of
its assets or business, or any other corporate act or proceeding, whether
of a similar character or otherwise.
(b) Except as hereinafter provided, the issue by the Company of shares of
stock of any class, or securities convertible into shares of stock of any
class, for cash or property, or for labor or services, either upon direct
sale or upon exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such
shares or other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of Shares subject to
Stock Options granted hereunder.
(c) The Shares with respect to which Stock Options may be granted
hereunder are shares of the Common Stock of the Company as presently
constituted, but if, and whenever, prior to the delivery by the Company or
a subsidiary of all of the Shares which are subject to the Stock Options or
rights granted hereunder, the Company shall effect a subdivision or
consolidation of shares or other capital readjustments, the payment of a
stock dividend or other increase or reduction of the number of shares of
the Common Stock outstanding without receiving compensation therefor in
money, services or property, the number of Shares subject to the Plan
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shall be proportionately adjusted and the number of Shares with respect to
which Stock Options granted hereunder may thereafter be exercised shall:
(i) in the event of an increase in the number of outstanding shares,
be proportionately increased, and the cash consideration (if any)
payable per Share shall be proportionately reduced; and
(ii) in the event of a reduction in the number of outstanding shares,
be proportionately reduced, and the cash consideration (if any) payable
per Share shall be proportionately increased.
(d) If the Company merges with one or more corporations, or consolidates
with one or more corporations and the Company shall be the surviving
corporation, thereafter, upon any exercise of Stock Options granted
hereunder, the recipient shall, at no additional cost (other than the
option price, if any) be entitled to receive (subject to any required
action by stockholders) in lieu of the number of Shares as to which such
Stock Options shall then be exercisable the number and class of shares of
stock or other securities to which the recipient would have been entitled
pursuant to the terms of the agreement of merger or consolidation, if
immediately prior to such merger or consolidation the recipient had been
the holder of record of the number of shares of Common Stock of the Company
equal to the number of Shares as to which such Stock Options shall be
exercisable. Upon any reorganization, merger or consolidation where the
Company is not the surviving corporation or upon liquidation or dissolution
of the Company, all outstanding Stock Options shall, unless provisions are
made in connection with such reorganization, merger or consolidation for
the assumption of such Stock Options, be canceled by the Company as of the
effective date of any such reorganization, merger or consolidation, or of
any dissolution or liquidation of the Company, by giving notice to each
holder thereof or his or her personal representative of its intention to do
so and by permitting the exercise during the thirty-day period next
preceding such effective date of all Stock Options which are outstanding as
of such date, whether or not otherwise exercisable.
9. REGISTRATION UNDER SECURITIES ACT OF 1933 AND EXCHANGE LISTING
It is intended that the Stock Options and Shares covered by the Plan will be
registered under the Securities Act of 1933, as amended. At the time any
Shares are issued or transferred to satisfy the exercise of a Stock Option
granted under the Plan, such Shares will have been listed (or listed subject
to notice of issuance) on the New York Stock Exchange.
10. REPORTS AND RETURNS
The appropriate officers of the Company shall cause to be filed any reports,
returns or other information regarding the Stock Options granted hereunder or
any Shares issued pursuant to the
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exercise thereof or a payment made hereunder, as may be required by Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended, or any other
applicable statute, rule or regulation.
11. PLAN TERM
The Plan shall be effective January 21, 1998, subject to approval within
twelve (12) months from the effective date by the holders of a majority of the
votes cast at a meeting. In the event the Plan is not so approved, the Plan
shall automatically terminate and be of no further force or effect. No Stock
Options shall be granted pursuant to this Plan after January 21, 2008.
12. AMENDMENT OR TERMINATION
The Board of Directors may amend, alter or discontinue the Plan at any time
insofar as permitted by law, but no amendment or alteration shall be made
without the approval of the stockholders:
(a) if, except as contemplated by Section 8 of the Plan, the amendment
would permit the decrease of the purchase price of a Stock Option after the
grant of the Stock Option or grant to the holder of an outstanding Stock
Option, a new Stock Option with a lower purchase price in exchange for the
outstanding Stock Option; or
(b) if and to the extent such amendment requires stockholder approval
under Section 422 of the Code (or any successor provision).
No amendment of the Plan shall alter or impair any of the rights or
obligations of any person, without his or her consent, under any option or
right theretofore granted under the Plan.
13. GOVERNMENT REGULATIONS
Nothwithstanding any of the provisions hereof or of any Stock Option granted
hereunder, the obligation of the Company or any subsidiary to sell and deliver
Shares under such Stock Option or to make cash payments in respect thereto
shall be subject to all applicable laws, rules and regulations and to such
approvals by any governmental agencies or national securities exchanges as may
be required, and the recipient shall agree that he will not exercise or
convert any option granted hereunder, and that the Company or any subsidiary
will not be obligated to issue any Shares or make any payments under any such
option if the exercise thereof or if the issuance of such Shares or if the
payment made shall constitute a violation by the recipient or the Company or
any subsidiary of any provision of any applicable law or regulation of any
governmental authority.
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[LOGO] SCHLUMBERGER
NOTICE OF
ANNUAL GENERAL MEETING
OF STOCKHOLDERS
AND
PROXY STATEMENT
APRIL 8, 1998
- ----------------------------------
Please sign your proxy card and
return it in the enclosed
envelope so that you may be
represented at the Meeting.
- ----------------------------------
SCHLUMBERGER LIMITED (SCHLUMBERGER N.V.)
PROXY SOLICITATION ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL GENERAL MEETING OF STOCKHOLDERS
The undersigned, having received the Notice and Proxy Statement for the
Annual General Meeting of Stockholders and the 1997 Annual Report to
P Stockholders, hereby appoints A.L.A. Bosnie, Jan A. Koning, and M.P.
Weber-Dommisse and each of them, proxies, with power of substitution, to
R vote in the manner indicated on the reverse side hereof, and with
discretionary authority as to any other matters that may properly come
O before the meeting, all my (our) shares of record of Schlumberger Limited
(Schlumberger N.V.) at the Annual General Meeting of Stockholders to be
X held at the Avila Beach Hotel, Penstraat 130, Willemstad, Curacao,
Netherlands Antilles on April 8, 1998, and at any adjournment or
Y adjournments thereof.
IF NO OTHER INDICATION IS MADE, THE PROXIES WILL VOTE FOR THE ELECTION OF
THE DIRECTOR NOMINEES AND FOR PROPOSALS 2,3,4, AND 5.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE [SEE REVERSE
SIDE]
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
UNLESS YOU INDICATE OTHERWISE, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
BOARD OF DIRECTORS' RECOMMENDATIONS.
DIRECTORS RECOMMEND A VOTE FOR ITEMS 1, 2, 3, 4, AND 5.
1. Election of 12 directors
NOMINEES: D.E. Ackerman, D.E. Baird, J. Deutch, V.E. Grijalva, D. Henderson,
A. Levy-Lang, W.T. McCormick, Jr., D. Primat, N. Seydoux,
L.G. Stuntz, S. Ullring, Y. Wakumoto
FOR WITHHELD
ALL [ ] ALL [ ]
NOMINEES NOMINEES
For, except vote withheld from the following nominee(s):
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FOR AGAINST ABSTAIN
2. Approval of Financials and [ ] [ ] [ ]
Dividends.
3. Approval of Auditors. [ ] [ ] [ ]
4. Approval of Amendments to the [ ] [ ] [ ]
Schlumberger Discounted Stock
Purchase Plan.
5. Approval of Adoption of the [ ] [ ] [ ]
Schlumberger 1998 Stock
Option Plan.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign names exactly as printed hereon. In signing as attorney,
administrator, executor, guardian or trustee, please give full title as such.
Please sign, date and return in the enclosed envelope.
Signature: Date: Signature: Date:
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