PRODUCTION OPERATORS CORP
11302 TANNER ROAD
HOUSTON, TEXAS 77041
January 16, 1996
Dear Stockholders:
The Annual Meeting of the Stockholders of Production
Operators Corp will be held at 10:00 a.m., Central
Standard Time, on Wednesday, February 28, 1996, at the
offices of Production Operators Corp, 11302 Tanner Road,
Houston, Texas 77041. The Board of Directors cordially
invites you to attend this meeting.
Enclosed with this letter are the formal notice of
meeting, the proxy statement, a proxy card and a copy of
the Annual Report of the Company for the fiscal year ended
September 30, 1995.
Please feel free to contact us if you have any
questions about the meeting or its agenda. If you do not
plan to attend the meeting in person, your prompt
completion and return of the enclosed proxy would be
appreciated.
Sincerely,
Carl W. Knobloch, Jr.
Chairman of the Board
<PAGE>
TABLE OF CONTENTS
Page
Notice............................................. 3
Proxy Statement.................................... 4
Voting Rights.................................... 4
Management....................................... 5
Election of Directors.......................... 5
The Board of Directors and Its Committees...... 7
Five Percent Stockholders...................... 7
Knobloch Group................................. 8
Compensation Committee Report.................. 9
Executive Compensation......................... 11
Description of the Company's Compensation
Plans for Key Officers........................ 12
Stock Option Grant Table....................... 14
Stock Option Exercises and Stock Option
Value Table................................... 15
Corporate Performance Graph.................... 16
Interest in Certain Transactions............... 17
Independent Auditors .............................. 17
1997 Annual Meeting ............................... 17
Annual Report on Form 10-K ........................ 17
Other Matters ..................................... 17
<PAGE>
PRODUCTION OPERATORS CORP
11302 TANNER ROAD
HOUSTON, TEXAS 77041
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of the Stockholders of Production
Operators Corp, a Delaware corporation (the "Company"),
will be held at the offices of Production Operators Corp,
11302 Tanner Road, Houston, Texas 77041, on Wednesday,
February 28, 1996, at 10:00 a.m., Central Standard Time,
for the following purposes:
(1) To elect eight directors;
(2) To transact such other business as may properly
come before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business
on January 8, 1996, as the record date for the
determination of stockholders entitled to notice of and to
vote at this meeting or any adjournment thereof. The
stock transfer books will not be closed.
By Order of the Board of Directors
Carla Knobloch
Secretary
Dated: January 16, 1996
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE
URGED TO PROMPTLY COMPLETE, SIGN AND DATE THE ENCLOSED
PROXY AND RETURN IT IN THE ENCLOSED POSTAGE PAID ENVELOPE.
<PAGE>
PRODUCTION OPERATORS CORP
11302 TANNER ROAD
HOUSTON, TEXAS 77041
PROXY STATEMENT
The accompanying proxy is solicited by and on behalf of the Board
of Directors of Production Operators Corp (the "Company"), whose
principal executive offices are located at 11302 Tanner Road, Houston,
Texas 77041, for use at the Annual Meeting of Stockholders to be held
February 28, 1996 (the "Annual Meeting"), or any adjournment thereof,
pursuant to the foregoing notice of said meeting. This proxy
statement and the enclosed form of proxy were first sent or given to
stockholders of the Company on or about January 16, 1996.
Any stockholder giving a proxy has the power to revoke it at any
time prior to the exercise thereof by filing with the Secretary of the
Company a written revocation; filing a duly executed proxy bearing a
later date with the Secretary of the Company; or attending the meeting
and voting in person. All shares represented by each properly
executed and unrevoked proxy received by the Company in time for the
meeting will be voted in accordance with the instructions contained
therein. If no instructions are given on an executed and returned
form of proxy, the proxies intend to vote the shares represented
thereby in favor of each of the proposals to be presented to and voted
upon by the stockholders as set forth herein, and in accordance with
their best judgment on any other matter that may properly come before
the meeting.
This proxy solicitation will be conducted principally by mail and
the expenses of soliciting proxies will be borne by the Company.
Proxies may also be solicited personally or by telephone by officers
and regular employees of the Company, but such persons will not
receive any special compensation for any such services. Arrangements
will be made with brokerage houses, custodians, nominees and other
fiduciaries to send proxy material to the beneficial owners of stock
held of record by such persons and the Company may reimburse them for
their reasonable out-of-pocket expenses.
VOTING RIGHTS
The authorized capital stock of the Company consists of 15,000,000
shares of Common Stock, $1.00 par value per share (the "Common
Stock"), and 500,000 shares of Preference Stock, no par value. On
January 8, 1996, the record date for determining stockholders entitled
to notice of and to vote at the Annual Meeting and any adjournments or
postponements thereof, there were issued and outstanding (exclusive of
treasury shares) 10,147,472 shares of the Common Stock. Each
outstanding share of the Common Stock will be entitled to one vote at
the meeting. No Preference Stock has been issued. No stockholder is
entitled to cumulative voting rights. Abstentions are counted in the
number of shares present in person or represented by proxy for
purposes of determining whether a proposal has been approved, whereas
broker nonvotes are not counted for those purposes. A majority of the
outstanding shares of the Common Stock of the corporation entitled to
vote, represented in person or by proxy, shall constitute a quorum at
the 1996 Annual Meeting of Stockholders.
<PAGE>
MANAGEMENT
Election of Directors
The By-Laws of the Company provide for a maximum of fifteen
directors. Eight directors will be elected at the Annual Meeting to
serve for the ensuing year and until their successors are elected and
have qualified. The persons named in the enclosed form of proxy, or
their substitutes, intend to vote the shares represented by the
proxies for only such eight nominees. All of the nominees were
elected to the Board of Directors at the last Annual Meeting of
Stockholders. The proxies may be voted with discretionary authority
for the election of other persons as directors in case any of the
listed nominees is unable to serve for any unexpected reason.
Management is unaware of any such reason.
The following table sets forth information, as of December 1,
1995, concerning persons nominated as directors, including their
beneficial ownership, as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), of shares of the
Common Stock and beneficial ownership of the Common Stock by all
executive officers and directors as a group. The officers and
directors have sole voting and investment power with respect to such
shares, except as otherwise noted.
<TABLE>
<CAPTION>
Common Stock
Year Beneficially
First Owned and %
Director Nominees and Elected a Certain Other of Total as of
5-Year Employment History Age Director Directorships<F4> Dec. 1, 1995<F5>
<S> <C> <C> <C> <C>
F. E. ELLIS<F1><F2><F3> 62 1990 2,000*
Retired in 1988; previously
Executive Vice President of
Conoco, Inc., an integrated
petroleum company, Houston,
Texas
JORGE E. ESTRADA M. 48 1995 Pride Petroleum
Vice President of Pride Services, Inc.,
International, a subsidiary of Houston,Texas
Pride Petroleum, an energy
drilling and workover service
company, since July 1993 and
President and CEO of JEMPSA, a
diversified entertainment
company, Buenos Aires, Argentina
C. RAHL GEORGE<F2><F3> 76 1964 5,550*
Retired in 1982; previously
Chairman of the Board and Chief
Executive Officer of Rhodes,
Inc., a retail furniture
company, Atlanta, Georgia
JOHN R. HUFF<F2><F3> 49 1991 Oceaneering
Chairman of Oceaneering International,Inc.,
International, Inc. ("OII"). an Houston, Texas; BJ
underwater services company Services Company,
primarily for the offshore oil Houston, Texas
and gas industry, Houston, Texas
since August 1990; President and
CEO of OII since August 1986
(Continued)
<PAGE>
<CAPTION>
Common Stock
Year Beneficially
First Owned and %
Director Nominees and Elected a Certain Other of Total as of
5-Year Employment History Age Director Directorships<F4> Dec. 1, 1995<F5>
<S> <C> <C> <C> <C>
CARL W. KNOBLOCH, JR.<F1> 65 1960 1,421,078<F6>
Chairman of the Board of the 13.9%
Company since May 1, 1961 and
President of the Company from
October 1, 1986 through July 5,
1994
HENRY E. LONGLEY<F2><F3> 62 1987 328,000<F7>
President of Longley Supply 3.2%
Company, wholesale plumbing
supply business, Wilmington,
North Carolina
D. JOHN OGREN<F1> 52 1994 50,627*
President of the Company since
July 5, 1994; previously Senior
Vice President of E.I. duPont
and Company and Conoco, Inc. and
President and CEO of DuPont
Canada
LESTER VARN, JR.<F1><F2><F3> 71 1964 Laclede Steel Company, 233,020<F8>
President of Varn Investment St. Louis, Missouri 2.3%
Company, holding and management
company for land and securities
investment, Jacksonville, Florida
Shares owned by all directors 2,100,469
and executive officers as a 20.5%
group (11 persons)<F9>
The information in the table is based on statements to the Company by the individuals.
__________
*Less than one percent
<FN>
<F1> Member of the Executive Committee.
<F2> Member of the Stock Option and Executive Compensation Committee.
<F3> Member of the Audit Committee.
<F4> The directorships shown are with companies registered under Section 12 of the 1934 Act or
subject to the reporting requirements of Section 15(d) of the 1934 Act or registered under the
Investment Company Act of 1940.
<F5> The number of shares includes shares beneficially owned as defined in Rule 13d-3 promulgated
under the 1934 Act.
<F6> Reference is made to "Five Percent Stockholders" regarding Mr. Knobloch's stock ownership.
<F7> Mr. Longley has sole voting and dispositive power as to 230,000 shares and shares voting and
dispositive power with respect to 80,000 shares as one of three trustees of the Profit Sharing
Pension Plan of Longley Supply Company. Mr. Longley disclaims beneficial ownership of 18,000
shares held in the name of his wife, Anne Penton Longley, which are included in the table.
<F8> Included in the table are 75,944 shares held by Mr. Varn and his brother, George Varn, as
co-trustees of a trust for the benefit of Lester Varn, Jr. Mr. Varn disclaims any beneficial
ownership of the following shares included in the table: 75,974 shares held by a trust of which
Mr. Varn and his brother are co-trustees for the benefit of his brother; 3,036 shares held by
trusts of which Mr. Varn and his brother are co-trustees for the benefit of Mr. Varn's two children
and one of his brother's children; and 4,355 shares held by trusts of which Mr. Varn, his brother
and his mother are co-trustees, one trust for the benefit of his mother and the other for the
benefit of his and his brother's children. Mr. Varn is co-owner with his brother and their
children of three companies and a profit-sharing plan that hold 71,687 shares which are included in
the table.
<PAGE>
<F9> For directors, nominees and officers as a group, the number of shares includes 113,862 shares
which are subject to options issued under the Company's 1980 and 1992 Long-Term Incentive Plans
that are exercisable or become exercisable within 60 days of December 1, 1995.
</FN>
</TABLE>
The Board of Directors and Its Committees
The Board of Directors has Executive, Audit, and Stock Option and
Executive Compensation Committees. The membership on these committees
by the directors standing for election is shown in the table. The
Board of Directors does not have a nominating committee or other
committee performing a similar function. During the last fiscal year,
the Board of Directors met three times, the Audit Committee met three
times, the Stock Option and Executive Compensation Committee met three
times and the Executive Committee did not meet. All directors
attended more than 90% of the meetings of the Board of Directors and
the respective committees on which they served.
The Executive Committee is composed of two members who are
employees and two members who are not employees. Notwithstanding the
broad powers conferred upon the Executive Committee, as a matter of
policy, material matters are normally passed upon by the Board of
Directors as a whole and all developments of major significance are
reported promptly to the Board.
The Audit Committee is composed of five members, all of whom are
nonemployee directors. The Audit Committee, among its functions,
reviews the scope of the independent auditors' examination and the
Company's financial policies and accounting systems and controls. The
Audit Committee also reviews with the firm of independent auditors,
its audit procedures, management letters and other significant facets
of the annual audit made by the auditors and advises the Board of
Directors of the adequacy of the audit by said independent auditors.
The Audit Committee reviews retrospectively all fees paid to
independent auditors.
The Stock Option and Executive Compensation Committee is composed
of five members, all of whom are nonemployee directors. The Stock
Option and Executive Compensation Committee administers the 1992
Long-Term Incentive Plan and makes recommendations to the Board of
Directors as to grants under the Plan. It is also responsible for
approving compensation arrangements for executives of the Company or
subsidiaries whose aggregate annual cash compensation exceeds $75,000.
Nonemployee directors who serve on the Executive Committee are paid
annual fees of $12,000 each, other nonemployee directors are paid
annual fees of $10,000 each and Committee Chairmen receive an annual
payment of $1,000. Nonemployee directors also receive $1,000 for each
day in attendance at a meeting for or in consultation with the
Company. Members of the Board of Directors who are employees of the
Company do not receive extra compensation for serving as directors.
Five Percent Stockholders
The persons or entities known to the Company to own beneficially
more than 5% of the Common Stock is a group of stockholders including
Carl W. Knobloch, Jr. and members of his family (the "Knobloch Group")
and based on the most recent 13G filings, two other entities.
According to information contained in the most recent annual
filings with the SEC pursuant to Section 13G of the Securities
Exchange Act of 1934, Putnam Investments, Inc. and Fidelity Management
and Research Company were the beneficial owners of over 5% of the
Company's stock. Certain Putnam investment managers are considered
beneficial owners in the aggregate of 992,681 shares or 9.8% of shares
outstanding. Fidelity Management and Research Company's 13G reported
beneficial ownership of 581,600 shares or 5.8% of shares outstanding.
According to these 13G filings, such shares were acquired in the
ordinary course of business and were not acquired for the purpose of
and do not have the effect of changing or influencing the control of
the Company.
Knobloch Group
The Knobloch Group, on April 9, 1987, filed with the Securities and
Exchange Commission (the "SEC") a Schedule 13D, the latest amendment
to which was filed on February 15, 1989 (Amendment No. 4). The
Knobloch Group holds shares of the Common Stock at December 1, 1995 as
follows:
<TABLE>
<CAPTION>
Name Number of Shares Percent of Class
<S> <C> <C>
Carl W. Knobloch, Jr. 1,421,078<F1> 13.9%
Emily C. Knobloch 1,112,800<F2> 10.9%
William R. Knobloch 892,140<F3> 8.7%
Total 2,089,718<F4> 20.5%<F4>
<FN>
<F1> Mr. Knobloch has sole voting and dispositive power as to 15,000 shares; shares voting and
dispositive power as a co-trustee with his wife, Emily C. Knobloch, as to 1,106,314 shares; shares
voting and dispositive power as a co-trustee with his brother, William R. Knobloch, as to 223,500
shares; shares voting and dispositive power as a co-trustee with his sister-in-law, Audrey
Knobloch, as to 5,000 shares; has 4,764 shares vested in his account in the Company's Employee
Stock Ownership Plan; and has the right to acquire 66,500 shares through the exercise of stock
options that are exercisable or become exercisable within 60 days of December 1, 1995. Mr.
Knobloch disclaims beneficial ownership of the following shares included in the table: 223,500
shares held by trusts of which Mr. Knobloch is a co-trustee with William R. Knobloch for the
benefit of three nephews, two nieces and the three children of Carl W. Knobloch, Jr.; 206,400
shares held by a trust of which Mr. Knobloch is co-trustee with Emily C. Knobloch for the benefit
of Mrs. Knobloch; 5,000 shares held by a trust of which Mr. Knobloch is co-trustee with Audrey
Knobloch for the benefit of his brother, William R. Knobloch; and 15,000 shares held by Mr.
Knobloch as trustee of three trusts for the benefit of two nephews and one niece. Mr. Knobloch's
business address is: Production Operators Corp, 11302 Tanner Road, Houston, Texas 77041.
<F2> Emily C. Knobloch shares voting and dispositive power as a co-trustee with Carl W. Knobloch,
Jr. as to 1,106,314 shares and as a co-trustee with William R. Knobloch as to 6,486 shares. Mrs.
Knobloch disclaims beneficial ownership of the following shares included in the table: 899,914
shares held by a trust of which Mrs. Knobloch is co-trustee with Carl W. Knobloch, Jr. for the
benefit of Carl W. Knobloch, Jr.; and 6,486 shares held by a trust of which Mrs. Knobloch is co-
trustee with William R. Knobloch for the benefit of a sister of Carl W. Knobloch, Jr. and William
R. Knobloch. Mrs. Knobloch's residence address is: 2575 Arden Road, N.W., Atlanta, Georgia 30327.
<F3> William R. Knobloch has sole voting and dispositive power as to 658,054 shares; shares voting
and dispositive power as co-trustee with Carl W. Knobloch, Jr. as to 223,500 shares; shares voting
and dispositive power as co-trustee with Emily C. Knobloch as to 6,486 shares; and shares voting
and dispositive power as co-general partner with Audrey Knobloch as to 4,100 shares. William R.
Knobloch disclaims beneficial ownership of the following shares included in the table: 617,480
shares held by trusts of which he is trustee for the benefit of four nieces and one nephew; 223,500
shares held by trusts of which he is co-trustee with Carl W. Knobloch, Jr. for the benefit of four
nieces, one nephew and the three children of William R. Knobloch; 6,486 shares held by a trust of
which he is co-trustee with Emily C. Knobloch for the benefit of his sister; and 4,100 shares held
by a partnership of which he and his wife, Audrey Knobloch are general partners for the benefit of
their grandchildren. William R. Knobloch's residence address is: 452 Country Club Road, New
Canaan, Connecticut 06840.
<F4> Adjusted to reflect overlap of shares owned by trusts as to which more than one of Carl W.
Knobloch, Jr., Emily C. Knobloch and William R. Knobloch serves as trustee. Includes 66,500 shares
which Carl W. Knobloch, Jr. has the right to acquire through the exercise of stock options that are
exercisable or become exercisable within 60 days of December 1, 1995.
</FN>
</TABLE>
<PAGE>
Compensation Committee Report
The Stock Option and Executive Compensation Committee (the
"Committee") is composed of five members, all of whom are independent,
outside directors who are not eligible to participate in any of the
management compensation programs. The Committee interprets and
administers, with recommendations from management, the 1992 Long-Term
Incentive Plan and makes all final determinations as to grants under
the Plan. The Committee also reviews and approves the total
compensation for executives of the Company and its subsidiaries whose
aggregate annual cash compensation exceeds $75,000.
The basic philosophy underlying the development and administration
of the Company's annual and long-term compensation program is to align
the efforts of senior management with the interests of the Company's
stockholders. Key elements of this philosophy are:
Establishing compensation programs that will (i) attract and
retain individuals of outstanding ability and (ii) recognize
excellent individual performance and (iii) provide focus on the
performance of the Company as measured against annual and long-
term objectives.
Providing significant equity-based incentives for executives to
ensure that they are motivated over the long term to respond to
the Company's business challenges and opportunities from the
prospective of an owner with an equity stake in the business.
Rewarding executives consistent with gains in stockholder
value.
There are three major components of the Company's compensation
program: Base salary, annual variable compensation and long-term
incentive awards. The criteria for determining base salaries are an
individual employee's performance over the prior year, internal
considerations and salaries of comparative positions at similar
companies. The Target Variable Compensation Plan, approved by the
Stock Option and Executive Compensation Committee in May 1995,
replaces the Key Employee Bonus Plan and is the vehicle by which
executives can earn variable compensation annually based on Company
performance. Under the Target Variable Compensation Plan, a threshold
minimum Company performance level, based on achieving the lesser of a
percentage of the profit plan or a defined return on equity (ROE)
objective, must be reached in order for any variable compensation to
be paid. The ROE objective is determined by reference to the Standard
& Poor's 600 index with the Company's minimum ROE target set at the
median ROE for the S&P 600 companies. There are then three levels of
Company performance, namely threshold, target and maximum, determined
by profit plan and ROE objectives which define guidelines for
percentage of salary that can be paid as a bonus. Given the overall
Company's performance ranking and the resulting percentage of base
salary guideline, individual awards are determined based on an equal
weighting of business unit performance versus the profit plan and
success in reaching specific individual, personal objectives.
Stock option or long-term incentive awards granted pursuant to the
stockholder-approved 1992 Long-Term Incentive Plan are designed to
attract and retain employees who contribute to the Company's success
by enabling those persons to participate in that success and growth
through an equity stake in the Company. Stock option grants to
executive officers are made at the discretion of the Committee and
reflect the relative value of the individual's position as well as the
<PAGE>
current performance and continuing contribution of that individual to
the Company. Typically, options granted are non-qualified options
with the exercise price equalling the market value of the underlying
common stock on the date of grant and are exercisable for 10 years
vesting 25% at the end of each year after the date of grant. The
Company's long-term performance ultimately determines compensation
from stock options, since stock options only have value if the stock
price appreciates in value from the date the options are granted.
The Company has not utilized below-market options, stock appreciation
rights, phantom stock or performance units.
Senior executives have recommended stock ownership guidelines to
attain over a five year period. These shares are to be acquired
through open market purchases, the Employee Stock Ownership Plan,
shares held from stock option exercises and share awards under the
Target Variable Compensation Plan. Neither Mr. Knobloch nor Mr. Ogren
have ever sold any Production Operators' stock, rather they both
continue to increase their overall holdings.
The Committee periodically retains independent compensation
consultants to compare base salary and incentive compensation programs
for the Company's executive officers with those of other firms of
comparable size.
In 1995 the Company's revenues and net income from continuing
operations improved significantly and the return on equity increased
to 10.3% from 9.3% last year. This 1995 performance exceeded
threshold or minimum level payouts by a small margin under the
Company's Target Variable Compensation Plan. In 1995 long-term
incentive awards were granted through non-qualified stock options.
The individual option grants reflected the relative value of the
individual's position and their current performance. Mr. Knobloch,
the Company's Chairman of the Board of Directors (and President until
June 1994), recommended for the past four years that he receive no
options in order to maximize the availability of options for awards to
other members of management. The Committee approved Mr. Knobloch's
recommendation based on their mutual agreement to maximize the
opportunity for other key members of management who are not yet
significant owners to increase their equity interest in the Company.
The Committee last approved in November 1992 a salary increase for Mr.
Knobloch based on the Company's exceptional 1992 results. Mr.
Knobloch received a bonus award of $26,495 based on the Company's 1995
performance as dictated by the guidelines in the Target Variable
Compensation Plan.
On June 16, 1994 the Committee and the Board of Directors approved
the election of D. John Ogren as President of the Company and a
director. Based on the Company's fiscal 1995 results, Mr. Ogren
received a bonus award of $27,600 in accordance with the guidelines in
the Target Variable Compensation Plan. For his 1995 long-term
compensation, Mr. Ogren was granted 12,570 options at the closing
market price of the Company's stock on the date of grant.
The Internal Revenue Service ("IRS") has issued proposed
regulations implementing Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code") relating to the limitation of the
deductibility for federal income tax purposes of executive
compensation in excess of $1 million annually paid to the Chief
Executive Officer or four other most highly compensated executive
officers. Section 162(m) is applicable to such compensation that
would otherwise be deductible in years beginning on or after January
1, 1994. During 1995 no executive of the Company will receive
compensation in excess of $1 million.
<PAGE>
The Committee believes the policies and programs described in this
Report appropriately align the Company's executive compensation with
corporate performance and the interests of shareholders.
F. E. Ellis Henry E. Longley
C. Rahl George Lester Varn, Jr., Chairman
John R. Huff
Executive Compensation
Summary Compensation Table
The following table shows the compensation for services rendered to
the Company and its subsidiaries in all capacities for the three
fiscal years ended September 30, 1995 of the five most highly
compensated executive officers of the Company:
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
Securities
Name of Individual Variable Underlying All Other
and Capacities in Compen- Options Tax Pay- Compen-
Which Served Salary sation<F1> (# Shares) ment<F2> sation<F3>
<S> <C> <C> <C> <C> <C> <C>
CARL W. KNOBLOCH, JR. 1995 $159,996 $26,495 -- $ -- $11,853
Chairman and Director of 1994 159,996 -- -- -- 12,027
Registrant 1993 158,996 -- -- 1,327,085 15,335
D. JOHN OGREN 1995 200,000 27,600 12,570 -- 7,805
President and Director of 1994 50,000 -- 41,237 -- --
Registrant 1993 -- -- -- -- --
C. RICHARD CLARK 1995 130,200 8,385 7,140 284,625 8,963
Vice President of 1994 130,200 10,000 6,850 -- 8,855
Registrant and President 1993 126,000 12,000 6,850 -- 11,674
of Kamlok Oil & Gas, Inc.
(subsidiary)
THOMAS R. REINHART 1995 122,400 14,092 6,590 -- 22,686
Vice President of 1994 115,002 12,000 6,300 -- 23,697
Registrant and Executive 1993 108,754 12,000 6,050 -- 25,476
Vice President of
Production Operators, Inc.
(subsidiary)
WILLIAM S. ROBINSON, JR. 1995 81,300 8,558 2,690 6,306 8,206
Treasurer of Registrant and 1994 76,200 6,000 2,460 -- 5,758
of Production Operators, 1993 72,850 6,000 2,800 -- 6,930
Inc. (subsidiary)
<FN>
<F1> Mr. Knobloch, Mr. Ogren, Mr. Clark, Mr. Reinhart and Mr. Robinson are eligible to receive
variable compensation under the Target Variable Compensation Plan of Production Operators, Inc.
Continuance of the Target Variable Compensation Plan is subject to annual review by the Board of
Directors of the subsidiary. This annual variable compensation is awarded in a combination of cash
and stock.
<F2> Stock options granted prior to 1992 provide for supplemental cash payments to be made upon
exercise of the stock option in the amount equal to the estimated income tax payable by the Holder
on the taxable gain resulting from the exercise of the option. The supplemental cash payment shall
not exceed the estimated tax benefits to be realized by the Company from any tax deduction
available to the Company as a result of the option exercise.
<F3> All other compensation consists of Company-matched Thrift Plan contributions, Employee Stock
Ownership Plan (ESOP) allocations and supplemental retirement and death benefit plan contributions.<PAGE>
</FN>
</TABLE>
<PAGE>
Company's Compensation Plans for Key Officers
Salary
Salaries of officers are reviewed annually and recommended
increases for those whose salaries exceed $75,000 annually are
reviewed and approved by the Stock Option and Executive Compensation
Committee.
Target Variable Compensation Plan
The Target Variable Compensation Plan, approved by the Stock
Option and Executive Compensation Committee in May 1995, replaces the
Key Employee Bonus Plan and is the vehicle by which executives can
earn variable compensation annually based on Company performance.
Under the Target Variable Compensation Plan, a threshold minimum
Company performance level, based on achieving the lesser of a
percentage of the profit plan or a defined return on equity (ROE)
objective, must be reached in order for any variable compensation to
be paid. The ROE objective is determined by reference to the Standard
& Poor's 600 index with the Company's minimum ROE target set at the
median ROE for the S&P 600 companies. There are then three levels of
Company performance, namely threshold, target and maximum, determined
by profit plan and ROE objectives which define guidelines for
percentage of salary that can be paid as a bonus. Given the overall
Company's performance ranking and the resulting percentage of base
salary guideline, individual awards are determined based on an equal
weighting of business unit performance versus the profit plan and
success in reaching specific individual, personal objectives. Eighty-
six key personnel currently participate in the Target Variable
Compensation Plan. Except as to variable compensation for those
included in the compensation table, which are determined by the Board
of Directors, the Target Variable Compensation Plan is administered by
the president and the key employee's supervisor. Awards for the
fiscal year ended September 30, 1995 were as follows: Mr. Knobloch --
$26,495; Mr. Ogren -- $27,600; Mr. Clark -- $8,385; Mr. Reinhart --
$14,092; Mr. Robinson -- $8,558; all executive officers as a group --
$85,130 and all employees as a group -- $384,429. Awards to executive
officers under the Target Variable Compensation Plan for the fiscal
year ended September 30, 1995 are included in the compensation table.
Thrift Plan
The Company has a tax-qualified thrift plan (the "Thrift Plan") to
encourage the employees of the Company and its subsidiary, Production
Operators, Inc., to save for their retirement or other contingencies.
All employees are eligible to participate in the Thrift Plan after one
year of service and may contribute up to 6% of base pay to the Thrift
Plan. The Company contributes 50% of the amount contributed by the
employees. An employee may contribute up to 6% more but without the
50% matching contribution by the employer. Contributions are invested
in various types of investments selected by the employee. Employees
become vested in employer contributions after 6 years of service.
Employees may withdraw vested Company contributions upon termination
of employment, retirement or death. The Company's contributions to
the Thrift Plan during the fiscal year ended September 30, 1995 were
as follows: Mr. Knobloch -- $4,620; Mr. Ogren -- $0; Mr. Clark --
$3,418; Mr. Reinhart -- $2,142; Mr. Robinson -- $4,620; all executive
officers as a group --$14,800 and all employees as a group --
$327,000.
<PAGE>
Employee Stock Ownership Plan
The Company adopted an Employee Stock Ownership Plan (the "ESOP")
effective October 1, 1988. Trustees of the ESOP purchased 358,000
shares of the Common Stock. The total purchase price of $3,222,000
was financed by an initial Company contribution of $322,000 together
with a seven-year term bank borrowing of $2,900,000. This loan was
repaid in full during fiscal 1994. In July 1993 the Company's Board
of Directors authorized a loan to the ESOP to purchase up to 200,000
shares of the Common Stock. The Trustees have purchased 162,000
shares for $3,925,000. The Company will fund the repayment
requirements by contributing the amount that otherwise would have been
contributed to the Company's Profit Sharing Plan and such other
amounts as may be authorized by the Board of Directors. All employees
participate and do not directly contribute to the ESOP. Individual
employee allocations are based on years of service and annual base
earnings. Employees vest 20% after 3 years of service and at the rate
of 20% per year thereafter, becoming fully vested after 7 years of
service. Withdrawal of vested shares of stock may be made upon
termination of employment, retirement or death. For the fiscal year
ended September 30, 1995, the cost of the shares allocated to accounts
were as follows: Mr. Knobloch -- $7,233; Mr. Ogren -- $7,805; Mr.
Clark -- $5,545; Mr. Reinhart -- $5,334; Mr. Robinson -- $3,586; all
executive officers as a group -- $29,503 and all employees as a group
- -- $818,000.
Profit Sharing Plan
The Company has a Profit Sharing Plan (the "Plan") for employees
of the Company and its subsidiary, Production Operators, Inc., to
which it may contribute annually an amount not greater than the lesser
of 5% of its annual adjusted net profits or the maximum allowable
deduction for income tax purposes. Contributions are invested in
various types of investments selected by an independent trustee. All
employees participate in the Plan. Individual employee allocations
are based on years of service and annual base earnings. An employee
will receive on retiring at age 65 or thereafter, at the option of
each, a lump-sum payment or an actuarially determined periodic
payment. The Plan is to provide retirement income security for its
employees. The Plan is a tax-qualified, defined contribution plan.
The Plan is fully paid for by Production Operators, Inc., and the
accounts of employees vest 20% after 2 years of service and at the
rate of 10% per year thereafter, becoming fully vested after 10 years
of service. The normal retirement age under the Plan is age 65. No
contributions were made in fiscal year 1995 since the amounts that
otherwise would have been contributed to this Plan were used as
contributions to the ESOP (see "Employee Stock Ownership Plan" above).
Supplemental Retirement and Death Benefit Plan
In fiscal 1992 the Board provided a supplemental retirement and
death benefit plan for the benefit of Mr. Reinhart. Under the terms
of the plan, Mr. Reinhart beginning at age 65 will receive annual
payments of $75,000. Such payments are to continue for life with a 15
year minimum. In the event of death while in the employment of the
Company but prior to retirement age, an annual death benefit of
$75,000 will be paid to the designees of Mr. Reinhart for 15 years.
The benefits payable under the plan vest, beginning in fiscal 1997, at
an annual rate of 9.09% for Mr. Reinhart. The Company makes an annual
nondeductible funding contribution to the plan for the benefit of Mr.
Reinhart which is included in all other compensation of the Summary
Compensation Table. Benefits which may be payable under this plan are
not included in the Summary Compensation Table.
<PAGE>
1992 Long-Term Incentive Plan
The 1992 Long-Term Incentive Plan was approved by the stockholders
in February 1993. The Plan provides for the Award of Stock Options,
Stock Appreciation Rights, Restricted Stock, Unrestricted Stock,
Deferred Stock, Performance Units, Other Stock-Based Awards and
certain Supplemental Grants. The Plan shall be effective for a term
of ten years after its adoption. The maximum number of shares of
Common Stock reserved and available for distribution pursuant to the
Plan shall be 700,000 shares. This Plan is intended by the Company to
replace the expired 1980 Long-Term Incentive Plan.
The purpose of the Plan is to enhance the ability of the Company
to attract and retain key employees and is intended to stimulate the
efforts of these employees by providing an opportunity for capital
appreciation and recognition of outstanding service to the Company,
all of which management believes will contribute to the long-term
growth and profitability of the Company.
Persons eligible to participate are limited to those officers and
key employees, including those listed in the compensation table, of
the Company or its subsidiaries, who are in positions in which their
decisions, actions and counsel significantly impact upon the
performance of the Company or its subsidiaries. Directors of the
Company who are not otherwise salaried employees of the Company are
not eligible to participate in the 1992 Plan.
All outstanding Options expire ten years after the date of grant
and become exercisable on a cumulative basis with respect to 25% of
the shares covered thereby on each of the first four anniversaries of
the date of grant. The 1980 and 1992 Plans provide for the
acceleration of the vesting schedule of outstanding Options under
certain circumstances involving a change in control of the Company.
Stock Option Grant Table
The following table sets forth certain information concerning
stock options granted during 1995 by the Company to the five most
highly compensated executive officers of the Company. Future
compensation resulting from option grants is based solely on the
performance of the Company's stock.
<TABLE>
1995 Option Grants
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
Number of Individual Grants for Option Term<F3><F4>
Securities % of Total
Underlying Options
Options Granted to Exercise Expiration
Name Granted<F1> Employees Price<F2> Date 0%($) 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C> <C>
C. W. Knobloch, Jr. -- -- % $ -- -- $ -- $ -- $ --
D. J. Ogren 12,570 15.0 23.875 2/22/05 -- 191,441 485,201
C. R. Clark 7,140 8.5 23.875 2/22/05 -- 107,207 271,713
T. R. Reinhart 6,590 7.9 23.875 2/22/05 -- 98,949 250,782
W. S. Robinson, Jr. 2,690 3.2 23.875 2/22/05 -- 40,390 102,368
<FN>
<F1> All options were granted on February 22, 1995 and become exercisable in installments of 25%
per year on each of the first through the fourth anniversaries of the grant date. All outstanding
stock options would 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.
<F2> All grants were made at 100% of fair market value as of date of grant. The exercise price of
the options may be paid in cash or by tendering shares of Common Stock and applicable tax
obligations may be paid by the withholding of shares of Common Stock, instead of cash.
<F3> "Potential realizable value" is disclosed in response to SEC rules which require such
disclosure for illustration only. The values disclosed are not intended to be, and should not be
interpreted by stockholders as representations or projections of future value of the Company's
stock or of the stock price. These amounts, based on assumed appreciation rates of 0% and the 5%
and 10% rates prescribed by the Securities and Exchange Commission rules are not intended to
forecast possible future appreciation, if any, of the Company's stock price. The Company did not
use an alternative formula for a grant date valuation as it is not aware of any formula which will
determine with reasonable accuracy a present value based on future unknown or volatile factors.
If the Company's stock price increased 5 percent per year for 10 years (disregarding dividends and
assuming for purposes of the calculation a constant number of shares outstanding), the total
increase in value of all shares outstanding would be $152,182,160; and if the stock price increased
10 percent per year over such period, the increase in value would be $385,700,440. This potential
realizable value is based on a price of $23.875 on February 21, 1995 and a total of 10,135,342
shares of Common Stock outstanding.
<F4> No gain to the optionees is possible without an increase in stock price, which will benefit
all stockholders.
</FN>
</TABLE>
Stock Option Exercises and September 30, 1995 Stock Option Value Table
The following table sets forth certain information concerning
stock options exercised during 1995 by the five most highly
compensated executive officers of the Company and the number and value
of specified unexercised options at September 30, 1995. The values of
unexercised in-the-money stock options at September 30, 1995 shown
below are presented pursuant to SEC 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.
<TABLE>
Aggregated Option Exercises in 1995
And Fiscal Yearend Option Values
<CAPTION>
Number of Securities Value of
Underlying Unexercised In-
Unexercised Options the-Money
at September 30, 1995 Options at
September 30,
1995<F2>
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized<F1> Unexercisable Unexercisable
<S> <C> <C> <C> <C>
C. W. Knobloch, Jr. -- $ -- 66,500/ $1,343,375/
0 0
D. J. Ogren -- -- 10,309/ 67,009/
43,498 287,451
C. R. Clark 44,000 831,750 8,513/ 41,406/
16,827 104,557
T. R. Reinhart -- -- 19,150/ 248,081/
15,465 95,706
W. S. Robinson, Jr. 750 19,407 9,390/ 128,268/
6,310 39,490
<FN>
<F1> Market value of stock at exercise minus the option price.
<F2> Market value of stock at yearend September 30, 1995 minus the option price. The closing
market price of the stock on September 30, 1995 was $30.75.
</FN>
</TABLE>
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 Corporate Performance Graph is being filed by hard copy with the SEC.
Interest in Certain Transactions
The Company and C. Rahl George executed a compensation agreement
under which, if reelected, Mr. George will continue to serve as a
director of the Company and will be paid the fees of a nonemployee
director. Such agreement was originally entered into on June 1, 1981
and subsequently revised on October 19, 1984. As retirement
compensation from January 1, 1985, and continuing through the life of
Mr. George and his wife, Catharine Marie George, the Company will pay
$3,000 per month to him or to her if he predeceases her. During the
fiscal year ended September 30, 1995, the Company paid Mr. George
retirement compensation of $36,000.
The Company and Jorge E. Estrada M. executed an agreement for the
ownership and management of Production Operators Argentina, S.A.
("POA") whereby POA is owned 80% by POI and 20% by Mr. Estrada M. If
reelected, Mr. Estrada M. will serve as an employee director of
Production Operators Corp.
INDEPENDENT AUDITORS
The Board of Directors has selected Arthur Andersen LLP as the
independent auditors of the Company for the current fiscal year.
Arthur Andersen LLP has served as the Company's independent auditors
since 1967. Arthur Andersen LLP plans to have a representative
present at the stockholders' meeting who will have the opportunity to
make a statement if he desires to do so and is expected to respond to
appropriate questions which the stockholders might have.
1997 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1997
Annual Meeting of Stockholders must be received by the Secretary of
the Company at 11302 Tanner Road, Houston, Texas 77041, no later than
September 6, 1996. The stockholder should also notify the Company in
writing of an intention to appear and personally present the proposal
at the meeting.
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K filed with the
SEC for the most recent fiscal year, including financial statements
and schedules, will be furnished without charge to interested persons,
upon written request, to the Secretary or Assistant Secretary of the
Company at 11302 Tanner Road, Houston, Texas 77041.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters
which may come before the meeting. However, if any matters other than
those referred to above should properly come before the meeting, it is
the intention of the persons named in the enclosed proxy to vote such
proxy in accordance with their best judgment.
<PAGE>
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, FEBRUARY 28, 1996
PRODUCTION OPERATORS CORP
This Proxy Is Solicited By The Board Of Directors
KNOW ALL MEN BY THESE PRESENTS, that the undersigned stockholder of
Production Operators Corp hereby constitutes and appoints Carl W. Knobloch,
Jr., F.E. Ellis and C. Rahl George, and each of them, the true and lawful
attorneys, agents, and proxies of the undersigned, each with full power of
substitution, to vote by majority of those or their substitutes present and
acting at the meeting or, if only one shall be present and acting at the
meeting, then that one, all of the shares of stock of the corporation that
the undersigned would be entitled, if personally present, to vote at the
meeting of stockholders of the corporation to be held on Wednesday,
February 28, 1996, at 10:00 a.m. and at any adjournment thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy
will be voted for each of the nominees for director.
See other side for directions as to voting.
Production Operators Corp
P. O. Box 11146
New York, NY 10203-0146
1. Election of Directors
/ / FOR all nominees / / WITHHOLD AUTHORITY to vote / / *EXCEPTIONS
listed below for all nominees listed below
Nominees: F. E. Ellis, J. E. Estrada M., C. R. George, J. R. Huff, C. W.
Knobloch, Jr., H. E. Longley, D. J. Ogren and L. Varn, Jr.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the "Exceptions" box and write that nominees's name in the space
provided below.)
*Exceptions________________________________________________________________
2. In their discretion, upon other matters as may properly come before the
meeting and any adjournment thereof.
This Proxy Must be Signed Exactly as Name Appears Hereon. Each joint owner
shall sign. When signing as an attorney, executor, administrator, trustee,
etc., give full title as such. If the signer is a corporation, please sign
full corporate name by duly authorized officer.
Dated: __________________________________ 199_
______________________________________________
______________________________________________
Signature of Stockholder
Sign, Date and Return this Proxy Promptly Using the Enclosed Envelope.
Votes must be indicated (X) in Black or Blue Ink.
<PAGE>
(In lieu of appointment of proxy)
PRODUCTION OPERATORS CORP
Voting Instructions by Participant/Beneficiary in ESOP
The undersigned participant/beneficiary in the Production Operators,
Inc. Employee Stock Ownership Plan (the "POI ESOP") hereby instructs The
Bank of New York, as designated Voting Fiduciary, to vote, or to give other
parties a proxy to vote, all shares of Production Operators Corp stock
allocated to the undersigned's account in the POI ESOP at the meeting of
stockholders to be held on February 28, 1996, at 10:00 a.m. and at any
adjournment thereof.
If these instructions are properly executed, the Voting Fiduciary will
vote such shares as instructed.
If a participant/beneficiary fails to give instructions, the Voting
Fiduciary will vote such participant's shares, all other allocated shares
without instruction and all unallocated shares held in the POI ESOP in the
same proportion as the allocated shares for which the Voting Fiduciary
receives instructions.
All participant/beneficiary instructions (or failure to instruct) will
be confidential and will not be made known to any director, officer,
employee or other agent of Production Operators Corp or its subsidiaries.
See other side for directions as to voting.
1. Election of Directors
/ / FOR all nominees / / WITHHOLD AUTHORITY to vote
listed below for all nominees listed below
Nominees: F. E. Ellis, J. E. Estrada M., C. R. George, J. R. Huff, C. W.
Knobloch, Jr., H. E. Longley, D. J. Ogren and L. Varn, Jr.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
strike a line through that nominee's name.)
2. In their discretion, upon other matters as may properly come before the
meeting and any adjournment thereof.
PROXY DEPARTMENT
NEW YORK, NY 10203-0146
This Proxy Must be Signed Exactly as Name Appears Hereon. Each joint owner
shall sign. When signing as an attorney, executor, administrator, trustee,
etc., give full title as such. If the signer is a corporation, please sign
full corporate name by duly authorized officer.
Dated: __________________________________ 199_
______________________________________________
______________________________________________
Signature of Stockholder
Sign, Date and Return this Proxy Promptly Using the Enclosed Envelope.
Votes must be indicated (X) in Black or Blue Ink.
