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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-18437
POOL ENERGY SERVICES CO.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 76-0263755
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10375 RICHMOND AVENUE
HOUSTON, TEXAS 77042
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 954-3000
--------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF NAME OF EACH EXCHANGE
EACH CLASS ON WHICH REGISTERED
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NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, NO PAR VALUE
(TITLE OF CLASS)
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO
THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [X]
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
--- ---
THE NUMBER OF SHARES OF THE REGISTRANT'S COMMON STOCK OUTSTANDING ON
FEBRUARY 14, 1997 WAS 19,137,074.
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF
THE REGISTRANT AT FEBRUARY 14, 1997 BASED ON THE CLOSING PRICE ON THE NASDAQ
NATIONAL MARKET ON THAT DATE WAS APPROXIMATELY $323,325,163.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE PROXY STATEMENT WITH RESPECT TO THE 1997 ANNUAL MEETING OF
SHAREHOLDERS ARE INCORPORATED BY REFERENCE IN PART III OF THIS REPORT.
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POOL ENERGY SERVICES CO.
INDEX TO REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
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PAGE
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PART I
Item 1. Business .................................................................. 3
Item 2. Properties ................................................................ 12
Item 3. Legal Proceedings ......................................................... 13
Item 4. Submission of Matters to a Vote of Security Holders ....................... 13
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters ..... 14
Item 6. Selected Financial Data ................................................... 15
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................... 17
Item 8. Financial Statements and Supplementary Data ............................... 25
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure .................................................... 66
PART III
Item 10. Directors and Executive Officers of the Registrant ........................ 66
Item 11. Executive Compensation .................................................... 66
Item 12. Security Ownership of Certain Beneficial Owners and Management ............ 66
Item 13. Certain Relationships and Related Transactions ............................ 66
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ........... 66
</TABLE>
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PART I
ITEM 1. BUSINESS
Pool Energy Services Co. (the "Company") is the largest well-servicing and
workover company in the world based on the number of rigs it operates. The
Company performs the ongoing maintenance and major overhauls necessary to
optimize the level of production from existing oil and natural gas wells and
provides certain ancillary services for the drilling and completion of new oil
and natural gas wells. The Company also provides contract drilling services in
Alaska, the Gulf of Mexico and certain international locations. Typically, the
Company provides a well-servicing, workover or drilling rig, the crew to
operate the rig and such other specialized equipment as may be needed to meet a
customer's requirements. The Company operates onshore and offshore, both
domestically and internationally, providing services for a diverse group of
multi-national, foreign national and independent oil and natural gas producers.
As of December 31, 1996, the Company's worldwide fleet totaled 755 rigs,
including 703 land well-servicing/workover rigs, 26 land drilling rigs, 20
offshore platform rigs (15 workover rigs and five drilling rigs) and six
offshore jackup rigs. In the United States, the Company operates in several oil
and natural gas producing states, with specific concentration onshore in Texas,
California, Alaska and Oklahoma, and offshore in the Gulf of Mexico. The
Company also owns or leases and operates 266 fluid hauling trucks, 652 frac
tanks, ten salt water disposal wells and other auxiliary equipment in its
domestic onshore operations.
Internationally, the Company has a substantial presence in Saudi Arabia
where it is one of the largest providers of drilling and workover services and
has been providing such services for approximately 20 years. Other
international markets where the Company has an established presence include
Australia, Ecuador, Malaysia, Oman and Pakistan. In August 1996, the Company
acquired a 51% controlling interest in a newly formed Argentina corporation.
The Company was formed in 1988 and made an initial public offering in
1990, in order to acquire Pool Company, which was founded in 1948. As used in
this document, except where the context otherwise requires, the term "Company"
refers to Pool Energy Services Co., its subsidiaries and its unconsolidated
affiliates.
BUSINESS STRATEGY
In early 1994, the Company developed a strategic plan designed to further
strengthen its competitive position and market share in the oilfield services
industry, in order to achieve growth in revenues, EBITDA (earnings before
interest, taxes, depreciation and amortization, minority interest, provision
for leasehold impairment and writedown of assets) and earnings. Key components
of the Company's business strategy include: (i) expanding opportunities in
existing core market areas through acquisitions that result in consolidation
savings; (ii) upgrading and enhancing the capabilities of the Company's
existing fleet and building certain specialized rig equipment to operate in
markets with high levels of activity and strong pricing fundamentals; (iii)
entering new foreign markets that offer significant development and production
activity; and (iv) offering additional core services and equipment that
complement the Company's businesses in its existing field locations.
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STRATEGY IMPLEMENTATION
Notable events in the implementation of the Company's business strategy
include:
Acquisitions of joint venture partners' interests:
o In October 1996, the Company acquired the 51% interest that it
did not already own in Antah Drilling Sdn. Bhd.("Antah
Drilling")and repaid indebtedness of Antah Drilling owed to the
Company's partner in that venture for a total of $9.0 million in
cash. Antah Drilling's assets include Rig 489, a new state-of-
the-art 2,000 horsepower offshore platform drilling rig, which
commenced operations in August 1996 on a three-year term contract
for Esso Australia, Ltd. in Australia and an offshore platform
workover rig currently operating in Malaysia.
o In September 1994, the Company acquired the 60.7% partnership
interest that it did not already own in Pool Arctic Alaska for
$12.1 million in cash. This acquisition expanded the Company's
wholly-owned Alaska operation to include the three specialized
Arctic land drilling rigs and related equipment formerly owned
by the partnership.
Expansion and enhancement of rig fleet:
o In December 1996, the Company completed construction of a new
platform workover rig, at a cost of $5.4 million, for operation
offshore California for Chevron U.S.A. under a term contract.
o In August 1996, the Company acquired for cash of approximately
$8.7 million a 51% controlling interest in Pool International
Argentina S. A. ("PIASA"), a newly formed Argentina corporation
which provides well-servicing, workover and drilling services in
Argentina. PIASA owns nine land drilling rigs and 11 land
workover rigs, all of which are located in Argentina.
o In June 1996, the Company purchased the operating assets
(including approximately 23 land well-servicing rigs) of Western
Oil Well Service Co. ("Western Oil") in the Williston Basin for
approximately $4.0 million in cash.
o In March 1996, the Company received a term contract for Rig 18,
a previously idle platform drilling rig, which was refurbished
for a cost of approximately $8.4 million. This 2,000 horsepower
rig was placed in service in the Gulf of Mexico for Shell
Offshore in September 1996.
o In March 1996, the Company completed the construction of, and
placed in operation, a multi-purpose, electrically-powered
platform workover rig at a cost of approximately $2.5 million.
During 1996, an additional $1.0 million in improvements were
made to this rig, which commenced operations in November 1996
under a term contract for Oryx Energy, operating on the Neptune
SPAR floating platform in the Gulf of Mexico.
o In the second half of 1995, the Company reestablished its
presence in Australia by placing in operation a platform
workover rig, which was designed and constructed by the Company.
o In June 1995, the Company acquired Golden Pacific Corp. ("GPC")
for $18.8 million. This acquisition included, among other
assets, the GPC fleet of approximately 155 land well-servicing
rigs in California. The Company is now the market leader in
California with a total of 256 land well-servicing rigs.
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TYPES OF SERVICES PROVIDED
There are approximately 900,000 producing oil wells in the world today, of
which approximately 570,000 are in the United States. In addition, there are
approximately 290,000 producing natural gas wells in the United States and a
large number in the rest of the world. While some wells in the United States
flow oil to the surface without mechanical assistance, most are in mature
production areas that require pumping or some other form of artificial lift.
Pumping oil wells characteristically require more maintenance than flowing
wells due to the operation of the mechanical pumping equipment installed. The
extent and type of services provided by the Company on producing wells is
dependent upon many variables. The following is a summary of the services the
Company provides.
WELL-SERVICING/MAINTENANCE SERVICES
The Company provides maintenance services on the mechanical apparatus used
to pump or lift oil from producing wells. These services include, among other
things, repairing and replacing pumps, sucker rods and tubing. The Company
provides the rigs, equipment and crews for these tasks, which are performed on
both oil and natural gas wells, but which are more commonly required on oil
wells. Well-servicing rigs have the same basic components as drilling rigs
(i.e., a derrick, a hoisting mechanism and an engine). Many of these rigs also
have pumps and tanks that can be used for circulating fluids into and out of
the well. Maintenance jobs typically take less than 48 hours to complete.
WORKOVER SERVICES
In addition to needing periodic maintenance, producing oil and natural gas
wells occasionally require major repairs or modifications, called "workovers."
Workovers may be done, for example, to remedy equipment failures, deepen a well
in order to reach a new producing reservoir, plug back the bottom of a well to
reduce the amount of water being produced with the oil and natural gas, clean
out and recomplete a well if production has declined, repair leaks, or convert
a producing well to an injection well for secondary or enhanced recovery
projects. These extensive workover operations are normally carried out with a
well-servicing rig that includes additional specialized accessory equipment,
which may include rotary drilling equipment, mud pumps, mud tanks and blowout
preventers, depending upon the particular type of workover operation. Most of
the Company's well-servicing rigs are designed and can be equipped to handle
the more complex workover operations. A workover may last anywhere from a few
days to several weeks.
COMPLETION SERVICES
The kinds of activities necessary to carry out a workover operation are
essentially the same as those that are required to "complete" a well when it is
first drilled. The completion process may involve selectively perforating the
well casing at the depth of discrete producing zones, stimulating and testing
these zones and installing down-hole equipment. Independent oil and gas
production companies often find it more efficient to move a larger and more
expensive drilling rig off location after an oil or natural gas well has been
drilled and to move in a specialized well-servicing rig to perform completion
operations. The Company's rigs are often used for this purpose. The completion
process may require from a few days to several weeks.
CONTRACT DRILLING SERVICES
The Company provides contract drilling services to oil and natural gas
operators in all the markets in which it operates, except that the amount of
such services it provides onshore in the lower 48 states is minimal. Workover
rigs can be used for drilling, although specialized drilling rigs are typically
used for such operations. The Company also provides specialized accessory
equipment, including pumps, rotary drilling equipment, top drive units, trucks,
camps and cranes. Several of the Company's land drilling rigs are equipped for
self-sustained operations in remote areas in Alaska and certain overseas
locations.
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OFFSHORE SERVICES
The Company generally utilizes its offshore jackup and platform rigs to
service wells located on platforms. Platform rigs consist of well-servicing
and/or drilling equipment and machinery arranged in modular packages which are
transported to and assembled and installed on fixed offshore platforms owned by
the customer. Fixed offshore platforms are steel tower-like structures that
stand on the ocean floor, with the top portion, which is above the water level,
forming the foundation upon which the platform rig is placed. Certain of the
Company's heavy platform rigs are capable of operating at well depths of as
much as 18,000 feet, and several of the Company's platform rigs are
specifically designed for drilling. The Company is performing an increasing
amount of drilling and horizontal re-entry services utilizing portable top
drives, enhanced pumps and solids control equipment for drilling fluids. Jackup
rigs are mobile, self-elevating platforms equipped with legs that can be
lowered to the ocean floor until a foundation is established to support the
hull, which contains the drilling and/or workover equipment, jacking system,
crew quarters, loading and unloading facilities, storage areas for bulk and
liquid materials, helicopter landing deck and other related equipment. The rig
legs may operate independently or have a mat attached to the lower portion of
the legs in order to provide a more stable foundation in soft bottom areas. All
of the Company's jackup rigs are cantilever design - - a feature that permits
the drilling platform to be extended out from the hull, allowing it to perform
drilling or workover operations over fixed platforms.
PRODUCTION AND OTHER SPECIALIZED SERVICES
The Company provides other specialized services that are required, or can
be used effectively, in conjunction with the previously described basic
services. The main additional services are production services, consisting of
the provision of onsite temporary fluid-storage facilities, the provision,
removal and disposal of specialized fluids used during certain completion and
workover operations, and the removal and disposal of salt water that is often
produced in conjunction with the production of oil and natural gas. The Company
also provides plugging services for wells from which the oil and natural gas
has been depleted and further production has become uneconomical.
BUSINESS BY GEOGRAPHIC AREA
Financial data by geographic area for the three years ended December
31, 1996 are presented in Note 10 of Notes to Consolidated Financial
Statements.
BUSINESS BY SERVICE LINE
The Company operates in only one business segment - the oilfield services
industry. Within that segment, the Company conducts business in the following
distinct markets or business lines: domestic onshore well-servicing and
production services, Gulf of Mexico offshore workover/drilling, international
workover/drilling and related services and Alaska onshore and offshore
workover/drilling.
DOMESTIC ONSHORE
The Company's domestic onshore operation, which provides well-servicing,
workover and production services, has locations in many of the major oil and
natural gas producing fields in the lower 48 states. This operation currently
provides services in 11 states and is divided into two separate geographic
divisions: (i) the Central division (principally Texas and Oklahoma) and (ii)
the California division. The Company's domestic onshore operation has 673
well-servicing rigs, of which 295 are located in Texas, 256 in California, 52
in Oklahoma and 70 in North Dakota, New Mexico, Arkansas, Montana, Utah and
Louisiana. In 1996, rig hours for this unit were comprised of
well-servicing/maintenance (62%), workover (25%), completion (10%) and plugging
operations (3%).
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In general, well-servicing rigs are provided to customers on a call-out
basis. The Company is paid an hourly rate and work is generally performed five
days a week during daylight hours.
The Company's domestic onshore operation also provides production services
consisting chiefly of fluid hauling and frac tank rental. The production
services assets, located primarily in Texas, consist of 266 fluid hauling
trucks and ten saltwater disposal wells, which are utilized for the
transportation and disposal of drilling and used completion fluids and salt
water produced from operating wells, and 652 frac tanks, which are utilized for
the storage of fluids used in the fracturing of producing zones during the
completion or workover of wells.
GULF OF MEXICO OFFSHORE
Offshore in the Gulf of Mexico, the Company provides workover,
well-servicing, completion and drilling services with its fleet of 14 platform
rigs and five jackup rigs. The Company also provides crews to oil and natural
gas well operators under labor contracts. During the year ended December 31,
1996, approximately 76% of the Company's Gulf of Mexico offshore rig hours were
related to workover, well-servicing and completion operations with the balance
related to contract drilling. Offshore operations are normally conducted 24
hours a day, seven days a week, under a term contract that is either for a
specific period of time or until a program of work is completed. The Company is
paid on a daily rate basis for its services.
INTERNATIONAL
Internationally, the Company provides workover, well-servicing and
drilling services, both onshore and offshore, with specialized rigs designed
and fabricated to meet various types of operating conditions. During 1996, the
Company operated in ten foreign countries. The Company has 56 rigs in foreign
locations, of which 23 are located in the Middle East, principally in Saudi
Arabia, 29 in South America, principally in Argentina, two in Australia, one in
Malaysia and one in Tunisia. Rig operations are normally conducted 24 hours a
day, seven days a week, under a term contract that is for a specific period of
time or until a customer's program is completed. The Company is paid on a daily
rate basis for its services. The Company currently conducts a part of its
foreign operations through unconsolidated joint venture companies in each of
which it has approximately a 50% participation. The principal joint venture
operation is conducted in Saudi Arabia (Pool Arabia, Ltd.). The Company uses
the equity method to account for its unconsolidated affiliates. See Note 9 of
Notes to Consolidated Financial Statements.
ALASKA
In Alaska, the Company provides drilling, workover and well-servicing with
its fleet of three specialized Arctic land drilling rigs, two offshore platform
rigs and one multi-purpose rig. The Company also provides crews to oil and
natural gas well operators in Alaska under labor contracts. The Company's
services are principally provided onshore on the North Slope and offshore in
the Cook Inlet. Rig operations are normally conducted 24 hours a day, seven
days a week, under a term contract that is for a specific period of time or
until a program is completed. The Company is paid on a daily rate basis for its
services. In September 1994, the Company acquired the 60.7% partnership
interest not already owned by the Company in Pool Arctic Alaska for $12.1
million in cash. For further information related to this acquisition, see Note
3 of Notes to Consolidated Financial Statements.
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FINANCIAL DATA BY SERVICE LINES
The following table presents information by service lines:
<TABLE>
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FOR THE YEAR ENDED DECEMBER 31
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1996 1995 1994
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(IN THOUSANDS)
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Revenues:
Domestic onshore well-servicing and production services:
Central division ......................................... $ 138,428 $ 134,423 $ 131,904
California division ...................................... 81,416 58,780 26,603
Gulf of Mexico offshore workover/drilling .................... 58,545 37,415 36,020
International workover/drilling and related services ......... 45,536 26,260 24,708
Alaska workover/drilling ..................................... 24,633 20,427 9,940
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Total ............................................... $ 348,558 $ 277,305 $ 229,175
=========== =========== ===========
Earnings Attributable to Unconsolidated Affiliates (1):
International workover/drilling and related services ......... $ 2,244 $ 2,955 $ 4,495
Alaska workover/drilling ..................................... - - 521
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Total ............................................... $ 2,244 $ 2,955 $ 5,016
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Depreciation and Amortization (2):
Domestic onshore well-servicing and production services:
Central division ......................................... $ 5,094 $ 5,238 $ 6,446
California division ...................................... 3,230 2,134 1,052
Gulf of Mexico offshore workover/drilling .................... 3,028 2,212 2,283
International workover/drilling and related services ......... 3,810 2,424 2,742
Alaska workover/drilling ..................................... 3,248 2,845 1,089
Corporate .................................................... 135 149 148
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Total ............................................... $ 18,545 $ 15,002 $ 13,760
=========== =========== ===========
Income (Loss) Before Income Taxes and Minority Interest
(Excluding Provision for Leasehold Impairment) (3):
Domestic onshore well-servicing and production services:
Central division ......................................... $ 8,903 $ 5,927 $ 2,799
California division ...................................... 4,531 3,828 (630)
Gulf of Mexico offshore workover/drilling .................... 6,536 161 (1,307)
International workover/drilling and related services ......... 4,954 2,682 4,759
Alaska workover/drilling ..................................... 1,259 (367) 3,247
Corporate .................................................... (9,122) (7,118) (6,427)
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Total ............................................... $ 17,061 $ 5,113 $ 2,441
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</TABLE>
(1) Some of the Company's operations are conducted through unconsolidated
affiliates, which are accounted for using the equity method. See Note 3 of
Notes to Consolidated Financial Statements for information related to the
Pool Arctic Alaska acquisition in 1994 and the Antah Drilling acquisition
in 1996.
(2) See Note 1 of Notes to Consolidated Financial Statements for information
related to the revision of estimated remaining depreciable lives of
certain rigs and equipment in October 1994.
(3) See Note 6 of Notes to Consolidated Financial Statements for information
related to the provision for leasehold impairment in 1994.
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EMPLOYEES
At December 31, 1996, the Company had 5,651 employees, of whom 515 were
employed by unconsolidated affiliates. None of the employees at any of the
Company's locations (except for approximately 108 employees in Argentina and 70
employees in Australia) are represented by a collective bargaining unit.
Management believes that the Company's relationship with its employees is
excellent.
OTHER MATTERS
RISKS INHERENT IN INTERNATIONAL OPERATIONS
The Company's foreign operations are subject to various risks associated
with doing business overseas, such as the possibility of armed conflict and
civil disturbance, the instability of foreign economies, currency fluctuations
and devaluations, adverse tax policies and governmental activities that may
limit or disrupt markets, restrict payments or the movement of funds or result
in the deprivation of contract rights or the expropriation of property.
Additionally, the ability of the Company to compete overseas may be adversely
affected by foreign governmental regulations that encourage or mandate the
hiring of local contractors, or by regulations that require foreign contractors
to employ citizens of, or purchase supplies from, a particular jurisdiction.
The Company is subject to taxation in many jurisdictions, and the final
determination of its tax liabilities involves the interpretation of the
statutes and requirements of various domestic and foreign taxing authorities.
Foreign income tax returns of foreign subsidiaries, unconsolidated affiliates
and related entities are routinely examined by foreign tax authorities. The
Company maintains reserves for potential tax audit assessments and, in the
opinion of management, any additional provision ultimately determined to be
required as a result of such examinations or assessments will not be material
to the Company's financial position or operations.
ENVIRONMENTAL REGULATION AND CLAIMS
The Company's well-servicing, workover and production services operations
routinely involve the handling of significant amounts of waste materials, some
of which are classified as hazardous substances. The Company's operations and
facilities are subject to numerous state and federal environmental laws, rules
and regulations, including, without limitation, laws concerning the containment
and disposal of hazardous materials, oilfield waste and other waste materials,
the use of underground storage tanks and the use of underground injection
wells. The Company employs personnel responsible for monitoring environmental
compliance and arranging for remedial actions that may be required from time to
time and also uses outside experts to advise on and assist with the Company's
environmental compliance efforts. Costs incurred by the Company to investigate
and remediate contaminated sites are expensed unless the remediation extends
the useful lives of the assets employed at the site. Remediation costs that
extend the useful lives of the assets are capitalized and amortized over the
remaining useful lives of such assets. Liabilities are recorded when the need
for environmental assessments and/or remedial efforts become known or probable
and the cost can be reasonably estimated.
Laws protecting the environment have generally become more stringent than
in the past and are expected to continue to do so. Environmental laws and
regulations typically impose "strict liability," which means that in some
situations the Company could be exposed to liability for cleanup costs and
other damages as a result of conduct of the Company that was lawful at the time
it occurred or conduct of, or conditions caused by, others. Cleanup costs and
other damages arising as a result of environmental laws, and costs associated
with changes in environmental laws and regulations could be substantial and
could have a material adverse effect on the Company's financial condition. From
time to time, claims have been made and litigation has been brought against the
Company under such laws. However, the costs incurred in connection with such
claims and other
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costs of environmental compliance have not had any material adverse effect on
the Company's operations, financial condition or competitive position in the
past, and management is not currently aware of any situation or condition that
it believes is likely to have any such material adverse effect in the future.
Under the Comprehensive Environmental Response, Compensation and Liability
Act and related state laws and regulations, liability can be imposed without
regard to fault or the legality of the original conduct on certain classes of
persons that contributed to the release of a "hazardous substance" into the
environment. The Company has been notified of its possible involvement with
respect to the cleanup of two sites which were formerly operated by parties
unrelated to the Company as oilfield waste disposal facilities, and has been
named as a potentially responsible party with respect to the cleanup of one
other site which was formerly operated by various parties unrelated to the
Company as an oil refining and reclamation facility. Although at this time
information about these matters has not been fully developed and it is not
feasible to predict their outcome with certainty, management is of the opinion
that their ultimate resolution should not have a material adverse effect on the
Company's financial condition.
Changes to federal and state environmental regulations may also negatively
impact oil and natural gas exploration and production companies, which in turn
could have a material adverse effect on the Company. For example, legislation
has been proposed from time to time in Congress which would reclassify oil and
natural gas production wastes as "hazardous wastes." If enacted, such
legislation could dramatically increase operating costs for domestic oil and
natural gas companies and this could reduce the market for the Company's
services by making many wells and/or oilfields uneconomical to operate. To
date, such legislation has not made significant progress toward enactment.
PATENTS AND TRADEMARKS
The Company owns several U.S. patents on designs for various types of
oilfield equipment and on methods for conducting certain oilfield activities.
The Company uses some of these designs and methods in the conduct of its
business. The patents expire at various times through 2014. The Company also
has several trademarks and service marks that it uses in various aspects of its
business. While management believes the Company's patent and trademark rights
are valuable, the expiration or loss thereof would not have a material adverse
effect on the Company's financial condition or results of operations.
COMPETITIVE CONDITIONS
Although the number of available rigs has materially decreased over the
past ten years, the well-servicing, workover and drilling industry remains very
competitive. The number of rigs continues to exceed demand, resulting in severe
price competition. Many of the total available contracts are currently awarded
on a bid basis, which further increases competition based on price. In all of
the Company's market areas, competitive factors also include: the availability
and condition of equipment to meet both special and general customer needs; the
availability of trained personnel possessing the required specialized skills;
the overall quality of service and safety record; and domestically, the ability
to offer ancillary services such as fluid hauling, frac tank rental and salt
water disposal. As an enhancement to its competitive position, the Company has
been able to establish strategic alliances with major customers in its domestic
onshore, international and Alaska markets. Many smaller competitors may not be
able to allocate the resources necessary to enter into such alliances. One
customer, Shell Oil Company and its affiliates, accounted for approximately 11%
of the Company's consolidated revenues during both 1996 and 1995.
Certain competitors are present in more than one of the Company's markets,
although no one competitor operates in all of these areas. With 673 rigs, the
Company has the most land well-servicing rigs of any company in the domestic
onshore market. In this market, the second and third largest competitors have
approximately 400 rigs each, one competitor has approximately 100 rigs, and
several hundred competitors have smaller regional or local rig operations. In
each of its domestic onshore locations, the Company competes with several firms
of varying size. In the Gulf of Mexico, the Company is among five principal
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competitors providing workover/maintenance services, the two largest of which
are Pride Petroleum Services, Inc. and an affiliate of Nabors Industries, Inc.
Internationally, the Company competes directly with various competitors at each
location where it operates, none of which is dominant. In Alaska, the Company
has six major competitors, the largest of which are Nabors Industries, Inc. and
Doyon Drilling, Inc.
EXECUTIVE OFFICERS
The following table sets forth the names, ages and positions of the
executive officers of the Company. Officers are elected annually following the
Annual Meeting of Shareholders and serve one-year terms or until their
successors are elected and qualified to serve.
<TABLE>
<CAPTION>
NAME AGE POSITION
---------------------- ------- -------------------------------------
<S> <C> <C>
James T. Jongebloed 55 Chairman, President and Chief Executive Officer
William J Myers 60 Group Vice President - U.S. Operations
Ronald G. Hale 48 Group Vice President - International Operations
Ernest J. Spillard 57 Senior Vice President, Finance
G. Geoffrey Arms 53 Vice President and General Counsel; Corporate Secretary
Louis E. Dupre 50 Vice President, Human Resources
</TABLE>
Set forth below are descriptions of the backgrounds of the executive
officers of the Company and their principal occupations for at least the past
five years.
Mr. Jongebloed has been Chairman since 1994 and President and Chief
Executive Officer of the Company since 1990. He served as President and Chief
Operating Officer from 1989 to 1990 and in various executive positions with the
Company since 1978.
Mr. Myers has served as Group Vice President - U.S. Operations of the
Company since 1988.
Mr. Hale has served as Group Vice President - International Operations
since 1989 and in various management and executive positions with the Company
since 1978.
Mr. Spillard has served as Senior Vice President, Finance of the Company
since 1987 and in various management and executive positions with the Company
since 1979.
Mr. Arms has served as Vice President and General Counsel of the Company
since 1985 and Corporate Secretary since 1990.
Mr. Dupre has been Vice President, Human Resources of the Company since
1994, and served as the Company's Controller from 1986 to 1994.
11
<PAGE> 12
ITEM 2. PROPERTIES
RIG AND EQUIPMENT FLEET
The following table sets forth the type, number and location of the
domestic onshore equipment operated by the Company (excluding Alaska) as of
December 31, 1996:
<TABLE>
<CAPTION>
WELL- FLUID
SERVICING HAULING FRAC DISPOSAL
RIGS TRUCKS TANKS WELLS
--------- ------- ----- --------
<S> <C> <C> <C> <C>
Central Division:
Western District (West Texas and New Mexico) ............... 215 131 317 5
Eastern District (Central and East Texas and Louisiana) .... 34 50 182 2
South Texas District ....................................... 46 59 126 1
Rocky Mountain District (North Dakota, Montana and Utah).... 52 2 -- -
Oklahoma District (North Texas, Arkansas and Oklahoma) ..... 70 16 27 2
---- ---- ---- ----
417 258 652 10
---- ---- ---- ----
California Division:
Northern District ......................................... 166 8 -- --
Southern District ......................................... 90 -- -- --
---- ---- ---- ----
256 8 -- --
---- ---- ---- ----
Total ....................................................... 673 266 652 10
==== ==== ==== ====
</TABLE>
The following table sets forth the type, number and location of the
Alaska, Gulf of Mexico, California offshore and International rigs owned by the
Company and its joint ventures as of December 31, 1996:
<TABLE>
<CAPTION>
LAND PLATFORM JACKUP
------------------- ------------------- -------------------
DRILLING WORKOVER DRILLING WORKOVER DRILLING WORKOVER TOTAL
-------- -------- -------- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Alaska 3 1(a) 2 -- -- -- 6
Gulf of Mexico -- -- 2 12 -- 5 19
California Offshore -- -- -- 1 -- -- 1
International:
Saudi Arabia 6 8 -- -- 1 -- 15
Oman 2 3 -- -- -- -- 5
Pakistan 1 2 -- -- -- -- 3
Ecuador 4 5 -- -- -- -- 9
Argentina 9 11 -- -- -- -- 20
Malaysia -- -- -- 1 -- -- 1
Tunisia 1 -- -- -- -- -- 1
Australia -- -- 1 1 -- -- 2
-------- -------- -------- -------- -------- -------- -----
Total International 23 29 1 2 1 -- 56
-------- -------- -------- -------- -------- -------- -----
Total 26 30 5 15 1 5 82
======== ======== ======== ======== ======== ======== =====
</TABLE>
(a) A multi-purpose workover or drilling rig that can be configured for either
onshore or offshore use.
OTHER PROPERTIES
The Company's corporate offices are located in Houston, Texas, where the
Company subleases office space from ENSERCH Corporation at market rates under
an agreement that expires in November 1997. The Company also leases from an
unrelated party a 65-acre former rig and equipment manufacturing and storage
12
<PAGE> 13
facility in San Angelo, Texas, which includes approximately 245,000 square feet
of buildings and other structural facilities. The annual lease payments are
$2.2 million through March 1998 and $4.4 million thereafter for the remaining
five years of the lease. Effective October 1, 1994, the Company vacated this
facility and subleased it in its entirety for $0.5 million per year under an
operating sublease which expires in September 1997. Based on a conclusion that
none of the facility is likely to be used in its future operations, the
Company, in the fourth quarter of 1994, recorded a provision of $23.6 million
to recognize all future lease expense, net of anticipated sublease income. The
Company owns 33 and leases 54 domestic office and yard locations of which nine
locations are not currently used. Internationally, the Company leases office
and yard facilities at 14 locations and owns facilities at seven locations of
which one location is not currently used. In Alaska, the Company leases an
office and yard facility in Anchorage and a yard facility on the North Slope.
As partial consideration for the acquisition of GPC, the Company issued
subordinated notes which are collateralized by the well-servicing rigs and
related equipment and certain real property obtained in the GPC acquisition.
The property owned by the Company's Alaska subsidiary is pledged as collateral
to secure payment of the Company's syndicated bank revolving line of credit and
$10 million term loan (of which $4.6 million was outstanding at December 31,
1996). Eight domestic well-servicing rigs and related equipment purchased in
1994 are pledged as security for long-term debt related to the purchase
thereof. The Company's offshore platform workover rig located in Australia, Rig
453, is pledged as security for a four-year loan related to the construction of
such rig. The offshore platform rigs owned by Antah Drilling are pledged as
security for the term loans assumed in the Antah Drilling acquisition.
ITEM 3. LEGAL PROCEEDINGS
The Company from time to time is involved in ordinary and routine
litigation incidental to its business, which often involves claims for
significant monetary amounts, some, but not all, of which would be covered by
insurance. In the opinion of management, none of the existing litigation will
have any material adverse effect on the Company. See also "Item 1. Business -
Other Matters - Environmental Regulation and Claims."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
13
<PAGE> 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET PRICES AND COMMON STOCK DATA
The Company's common stock is traded on the Nasdaq National Market under
the symbol "PESC." At February 14, 1997, the approximate number of holders of
record of the Company's common stock was 3,261. The following table sets forth
the high and low sale prices per share of the Company's common stock for the
periods indicated, as reported by Nasdaq.
<TABLE>
<CAPTION>
PRICE
---------------------
HIGH LOW
------- -------
<S> <C> <C>
1996
Fourth Quarter .............................. $16 5/8 $12 1/2
Third Quarter ............................... 13 1/2 10 1/8
Second Quarter .............................. 14 5/8 11
First Quarter ............................... 11 5/8 8 5/8
1995
Fourth Quarter .............................. $ 9 7/8 $ 8 1/2
Third Quarter ............................... 9 7/8 7 7/8
Second Quarter .............................. 9 3/8 7 1/2
First Quarter ............................... 8 5/8 6 5/8
</TABLE>
DIVIDEND POLICY
The Company has not paid dividends on its common stock. The Board of
Directors currently intends to retain any earnings for use in the Company's
business and does not intend to pay dividends in the foreseeable future. In
addition, certain of the Company's credit facilities prohibit the payment of
dividends. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Financial Condition and Liquidity" and Note 5 of Notes
to the Consolidated Financial Statements.
14
<PAGE> 15
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain historical consolidated financial
data of the Company and should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations and
the Consolidated Financial Statements and Notes thereto included elsewhere
herein. The data have been derived from the Company's audited consolidated
financial statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------
1996 (1) 1995 (2) 1994 (3) 1993 1992
--------- --------- --------- --------- ---------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues ................................................. $ 348,558 $ 277,305 $ 229,175 $ 240,524 $ 216,512
Earnings Attributable to Unconsolidated Affiliates ....... 2,244 2,955 5,016 6,860 9,261
Costs and Expenses:
Operating expenses ................................... 267,692 219,074 182,012 187,412 168,446
Selling, general and administrative expenses ......... 46,773 39,927 36,927 37,797 40,213
Depreciation and amortization (4) .................... 18,545 15,002 13,760 16,307 18,022
Acquisition related costs (5) ........................ 33 622 - - -
Provision for leasehold impairment (6) ............... - - 23,551 - -
Writedown of assets (7) .............................. - - - - 4,617
--------- --------- --------- --------- ---------
Total ..................................... 333,043 274,625 256,250 241,516 231,298
--------- --------- --------- --------- ---------
Other Income (Expense) - Net ............................. 2,095 1,289 1,202 2,239 (288)
Interest Expense ......................................... 2,793 1,811 253 508 917
--------- --------- --------- --------- ---------
Income (Loss) Before Income Taxes and Minority
Interest ............................................. 17,061 5,113 (21,110) 7,599 (6,730)
Income Tax Provision (Credit) ............................ 7,524 1,981 (8,381) 1,399 (3,762)
Minority Interest in Loss of Consolidated
Subsidiary............................................ (103) - - - -
--------- --------- --------- --------- ---------
Income (Loss) Before Cumulative Effect of
Accounting Change .................................... 9,640 3,132 (12,729) 6,200 (2,968)
Cumulative Effect on Prior Years of Change in
Accounting for Income Taxes (8) ...................... - - - - 1,159
--------- --------- --------- --------- ---------
Net Income (Loss) ........................................ $ 9,640 $ 3,132 $ (12,729) $ 6,200 $ (1,809)
========= ========= ========= ========= =========
Per Share of Common Stock:
Income (loss) before cumulative effect of
accounting change ................................ $ .58 $ .23 $ (.94) $ .46 $ (.22)
Cumulative effect of accounting change ............... - - - - .09
--------- --------- --------- --------- ---------
Earnings (loss) ...................................... $ .58 $ .23 $ (.94) $ .46 $ (.13)
========= ========= ========= ========= =========
BALANCE SHEET DATA (AT PERIOD END):
Cash and Cash Equivalents ................................ $ 21,837 $ 5,492 $ 2,560 $ 4,603 $ 3,183
Property, Plant and Equipment - Net ...................... 189,125 124,024 101,536 85,297 97,198
Total Assets ............................................. 341,217 248,443 209,818 193,154 196,486
Long-Term Debt and Notes Payable to Related
Parties (excluding current maturities) ............... 23,068 15,784 369 - -
Shareholders' Equity ..................................... 197,123 136,027 128,639 141,345 135,037
OTHER DATA:
EBITDA (9) ............................................... $ 38,399 $ 21,926 $ 16,454 $ 24,414 $ 16,826
Property Additions (10) .................................. 30,662 23,436 10,897 14,223 11,581
</TABLE>
- ------------
(See footnotes on following page.)
15
<PAGE> 16
(1) Includes the results from Antah Drilling since the October 1996
acquisition and PIASA since the August 1996 purchase of the 51%
controlling interest, both of which were accounted for under the
purchase method. See Note 3 of Notes to Consolidated Financial
Statements.
(2) Includes the results from GPC since the June 1995 acquisition, which was
accounted for under the purchase method. See Note 3 of Notes to
Consolidated Financial Statements.
(3) Includes the results from Pool Arctic Alaska since the September 1994
acquisition, which was accounted for under the purchase method. See Note
3 of Notes to Consolidated Financial Statements.
(4) At the beginning of the fourth quarter of 1994, the Company revised its
estimate of the remaining depreciable lives of certain rigs and equipment
to better reflect the remaining economic lives of the assets. The effect
of this change in accounting estimate was to increase the 1995 net income
by approximately $2.1 million or $.15 per share and to decrease the 1994
net loss by approximately $0.5 million or $.04 per share
(5) See Note 3 of Notes to Consolidated Financial Statements for a discussion
of the June 1995 GPC acquisition related costs of $0.6 million pretax
($0.4 million, or $.03 per share, after-tax).
(6) See Note 6 of Notes to Consolidated Financial Statements for a discussion
of the $23.6 million pretax ($15.3 million, or $1.13 per share,
after-tax) provision for leasehold impairment.
(7) In 1992, the Company recorded a $4.6 million pretax ($3.0 million, or
$.23 per share, after-tax) writedown of certain of the Company's domestic
offshore rigs and equipment.
(8) The Company changed its method of accounting for income taxes in 1992.
(9) EBITDA (earnings before interest, taxes, depreciation and amortization,
minority interest, provision for leasehold impairment and writedown of
assets) is presented here to provide additional information about the
Company's operations. EBITDA should not be considered as an alternative
to net income as an indicator of the Company's operating performance or
as an alternative to cash flows as a better measure of liquidity. EBITDA
presented above may not be comparable to similarly titled measures of
other companies.
(10) Excluding acquisitions of businesses.
16
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
SECONDARY PUBLIC OFFERING
In July 1996, the Company completed the sale to the public of 4,600,000
shares of its common stock, no par value, from which it received cash proceeds
of approximately $47.5 million, net of expenses. The Company has used or
intends to use the net proceeds principally as follows: (i) $10.9 million in
connection with the August 1996 acquisition of a 51% controlling interest in
PIASA, (ii) approximately $9 million in connection with the October 1996
acquisition of the 51% interest not already owned by the Company in Antah
Drilling, (iii) $4.5 million in connection with the June 1996 purchase of the
operating assets of Western Oil, (iv) $8.4 million in connection with the
refurbishment of Rig 18, a previously idle platform drilling rig in the Gulf of
Mexico, and (v) for repayment of debt under the Company's syndicated bank
revolving line of credit and general corporate purposes. The amounts described
above include both acquisition expenditures and related working capital
advances.
ACQUISITIONS
Antah Drilling Acquisition. In October 1996, the Company acquired the 51%
interest that it did not already own in Antah Drilling. The purchase price and
the repayment of certain indebtedness of Antah Drilling owed to the Company's
partner in that venture totaled $9.0 million. Antah Drilling's assets include
Rig 489, a new state-of-the-art 2,000 horsepower offshore platform drilling
rig, which commenced a three-year contract in Australia in August 1996, and an
offshore platform workover rig currently operating in Malaysia. See "- Financial
Condition and Liquidity - Long-Term Debt - Antah Drilling Acquisition Debt" and
Note 3 of Notes to Consolidated Financial Statements for a discussion of this
acquisition.
Argentina Acquisition. In August 1996, the Company acquired for cash of
approximately $8.7 million a 51% controlling interest in PIASA. The Company
advanced $1.3 million to PIASA during 1996 for working capital purposes.
PIASA's nine land drilling rigs and 11 land workover rigs operate in the
Mendoza and Neuquen basins of Argentina. For financial reporting purposes, 100%
of the assets, liabilities, results of operations and cash flows of PIASA are
consolidated with those of the Company. The minority shareholder's interest in
PIASA and the earnings or losses therefrom have been reflected as "minority
interest" in the Company's consolidated financial statements.
Acquisition of Operating Assets of Western Oil. In June 1996, the Company
purchased the operating assets (including approximately 23 land well-servicing
rigs) of Western Oil for approximately $4.0 million in cash.
Golden Pacific Corp. Acquisition. In June 1995, the Company acquired all
of the outstanding capital stock of GPC. GPC's assets included a fleet of
approximately 155 land well-servicing rigs and related equipment in California.
See "- Financial Condition and Liquidity - Long-Term Debt - Golden Pacific
Corp. Acquisition Debt" and Note 3 of Notes to Consolidated Financial
Statements for a discussion of this acquisition.
Pool Arctic Alaska Acquisition. In September 1994, the Company acquired
the 60.7% partnership interest in Pool Arctic Alaska it did not previously own
for $12.1 million in cash. This acquisition expanded the Company's wholly-owned
Alaska operation to include the three specialized Arctic land drilling rigs and
related equipment formerly owned by the partnership. See "- Financial Condition
and Liquidity - Long-Term
17
<PAGE> 18
Debt - Pool Arctic Alaska Acquisition Debt" and Note 3 of Notes to Consolidated
Financial Statements for a discussion of this acquisition.
1996 COMPARED TO 1995
The Company had net income of $9.6 million in 1996, compared with $3.1
million in 1995. The 1995 net income included a $0.4 million after-tax charge
for costs related to the GPC acquisition. The average price of crude oil was
approximately 20% higher in 1996 than in 1995, and average natural gas prices
increased approximately 64%, comparing the same periods. Results from the
Company's domestic operations improved primarily due to the higher activity and
increased rates for the Company's jackup rigs in the Gulf of Mexico and the
inclusion in 1996 of a full year's results from rigs and equipment acquired in
the June 1995 GPC acquisition. The Company's domestic onshore operation
reported rig hours 12% higher for 1996 than 1995, primarily due to the
inclusion of rigs acquired in the GPC acquisition. The Company's offshore
operation in the Gulf of Mexico experienced rig utilization of 71% in 1996,
compared to 65% in 1995; average rig rates were 29% higher in the 1996 period.
Results from the Company's international operations increased primarily due to
higher land drilling activity in Ecuador and the operation of two new offshore
platform rigs in Australia (Rig 453, an offshore platform workover rig
constructed in 1995, and Rig 489, a newly constructed offshore platform
drilling rig owned by Antah Drilling). See "- Acquisitions - Antah Drilling
Acquisition."
Revenues. Revenues were $348.6 million in 1996, compared to $277.3 million
in 1995. This increase was attributable to (i) the inclusion of revenues for
the entire year of 1996 from rigs and equipment acquired in the June 1995 GPC
acquisition (see "- Acquisitions - Golden Pacific Corp. Acquisition"), (ii)
higher activity and increased rates for the jackup rigs, increased rates for
the platform rigs and increased labor contract activity in the Gulf of Mexico,
(iii) a full year's revenues for Rig 453 in Australia, (iv) higher land
drilling activity in Ecuador, (v) the inclusion since October 1996 of revenues
from the two offshore rigs owned by Antah Drilling (see "- Acquisitions - Antah
Drilling Acquisition"), (vi) the inclusion since August 1996 of revenues from
the Argentina rigs acquired in the PIASA acquisition (see "- Acquisitions -
Argentina Acquisition"), and (vii) higher revenues from the operation of an
Arctic land drilling rig that had been on standby status for all of 1995.
Domestic onshore well-servicing and production services revenues increased
$26.6 million or 14% in 1996 from 1995, chiefly as a result of the GPC
acquisition. Domestic onshore rig utilization was 52% in both 1996 and 1995.
Domestic onshore well-servicing rig hours increased from approximately
1,003,000 in 1995 to 1,119,000 in 1996, due primarily to the GPC acquisition.
In 1996, Gulf of Mexico offshore workover and drilling revenues increased $21.1
million or 56%, international operations revenues increased $19.3 million or
73%, and Alaska operations revenues increased $4.2 million or 21%, compared to
1995.
Earnings Attributable to Unconsolidated Affiliates. Earnings attributable
to unconsolidated affiliates were $2.2 million in 1996, compared to $3.0
million in 1995. Earnings attributable to Pool Arabia, Ltd., the Company's
Saudi Arabia affiliate, decreased $0.6 million from 1995 to $1.7 million in
1996 primarily as a result of higher margins earned on rig moves during 1995.
Earnings from Antah Drilling ceased to be included in earnings attributable to
unconsolidated affiliates immediately following the Company's purchase of its
partner's interest in October 1996.
Costs and Expenses. The Company's costs and expenses were $333.0 million
in 1996, compared to $274.6 million in 1995. Such increase was chiefly
attributable to the inclusion in 1996 of a full year's costs and expenses
related to the rigs and equipment obtained in the June 1995 acquisition of GPC.
In addition, costs and expenses increased due to (i) the higher jackup rig and
labor contract activity in the Gulf of Mexico, (ii) a full year's operating
costs for Rig 453 in Australia, (iii) higher land drilling activity in Ecuador,
(iv) the inclusion since October 1996 of costs and expenses related to the rigs
owned by Antah Drilling, (v) the inclusion since August 1996 of costs and
expenses related to the Argentina rigs, (vi) higher costs and expenses relating
to the operation of the Arctic land drilling rig that had been on standby
status for all of 1995, and (vii) higher corporate expenses due to increased
bonus and supplementary executive retirement plans expenses.
18
<PAGE> 19
Costs and expenses in 1995 included $0.6 million of expenses related to the GPC
acquisition, primarily for yard closings.
Other Income - Net. Other income-net was $0.8 million higher in 1996 than
in 1995 primarily due to interest income earned on temporary cash investments.
Interest Expense. Interest expense was $1.0 million higher in 1996 than in
1995 primarily due to the term loan used to refinance the construction costs
for Rig 453 located in Australia, the GPC acquisition debt and the term loans
assumed in the Antah Drilling acquisition, offset partly by lower average
borrowings in 1996 under the Company's syndicated bank revolving line of
credit.
Income Taxes. The Company recorded income tax expense of $7.5 million on
income before income taxes and minority interest of $17.1 million in 1996,
compared to income tax expense of $2.0 million on income before income taxes of
$5.1 million in 1995. The increase in income tax expense was primarily due to
stronger operating results in 1996 compared to 1995. The 1995 income tax
expense included the effect of certain amendments to prior period U.S. federal
tax returns, partly offset by the reversal of no longer needed deferred foreign
taxes for 1990 income tax indemnities and the elimination of the Company's
valuation allowance related to its U.S. federal net operating loss ("NOL")
carryforwards. At December 31, 1996 the Company had recognized $1.1 million of
deferred income tax assets, net of valuation allowance, in excess of deferred
income tax liabilities. The net deferred income tax assets resulted primarily
from the 1994 provision for leasehold impairment and the Company's U.S. federal
income tax NOL carryforwards, which are expected to be realized within the
15-year carryforward periods. The U.S. NOL carryforwards at December 31, 1996
were $3.1 million from 1991, $18.4 million from 1992, $7.6 million from 1994
and $5.0 million from 1995; they are available for utilization through the
year(s) 2006, 2007, 2009 and 2010, respectively. The NOL carryforwards are
expected to be realized in part due to the majority of existing property being
fully depreciated for U.S. tax purposes and the incremental taxable income
resulting from the GPC acquisition. If necessary, the Company also will
consider repatriating future foreign earnings in order to fully realize the NOL
carryforwards before their expiration. See Note 4 of Notes to Consolidated
Financial Statements.
1995 COMPARED TO 1994
The Company had net income of $3.1 million in 1995, compared with a net
loss of $12.7 million in 1994. The 1995 net income included a $0.4 million
after-tax charge for costs related to the GPC acquisition. The 1994 results
included a $23.6 million ($15.3 million after-tax) provision for leasehold
impairment. (See "- Other Matters - San Angelo Lease Commitment.") The average
price per barrel of West Texas Intermediate crude oil was higher by
approximately 7% in 1995 than in 1994. Although average natural gas prices
dropped approximately 15% from 1994 to 1995, natural gas prices in December
1995 rose above $2.00 per mcf, the highest they had been since the first
quarter of 1994. Results from the Company's domestic operations improved
primarily because of increased activity onshore in the lower 48 states,
offsetting the effect of reduced operating results in Alaska. The Company's
domestic onshore operation reported rig hours 28% higher for 1995 than in 1994,
primarily due to the inclusion of rigs from the GPC acquisition since June
1995. The Company's offshore operation in the Gulf of Mexico experienced rig
utilization of 65% in 1995, compared to 53% in 1994; average rig rates,
however, were lower, particularly for the jackup rigs. Earnings from the
Company's Alaska operations decreased from 1994 due to one of its three Arctic
land drilling rigs being on standby status for all of 1995, whereas it operated
for the first four months of 1994 before going on standby status for the
remainder of the year, and due to the completion in late 1994 of a long-term
offshore drilling rig contract. Results from the Company's international
operations decreased primarily due to lower earnings from Pool Arabia, Ltd.,
reduced land drilling activity in Ecuador and the completion in mid-1994 of two
rig contracts in Kuwait.
Revenues. Revenues were $277.3 million in 1995, compared to $229.2 million
in 1994. This increase was attributable to the inclusion of revenues for the
entire year of 1995 from rigs and equipment previously owned by the Pool Arctic
Alaska partnership compared to three months of revenues in 1994 (see "-
19
<PAGE> 20
Acquisitions - Pool Arctic Alaska Acquisition"), revenues from rigs and
equipment acquired in the GPC acquisition (see "- Acquisitions - Golden Pacific
Corp. Acquisition"), a higher level of activity by the Company's domestic
onshore well-servicing rig fleet, increased rig activity in Tunisia, Oman and
Pakistan, revenues attributable to a new offshore platform workover rig in
Australia, Rig 453, and increased domestic production services activity in
1995. Increased revenues in 1995 were offset partly by the completion in
mid-1994 of two rig contracts in Kuwait which were not replaced in 1995 and
reduced land drilling activity in Ecuador.
Domestic onshore well-servicing and related services revenues increased
$33.5 million or 29% in 1995 from 1994, chiefly as a result of the GPC
acquisition. In addition, domestic production services revenues increased $1.2
million or 3% in 1995 from 1994. Domestic onshore rig utilization was 52% in
1995, compared to 48% in 1994. Domestic onshore well-servicing rig hours
increased from approximately 784,000 in 1994 to 1,003,000 in 1995, due
primarily to the purchase of GPC. Gulf of Mexico offshore workover and drilling
revenues in 1995 increased $1.4 million or 4% compared to 1994, due to higher
rig utilization, which was somewhat offset by lower rig rates. Revenues from
international operations increased $1.6 million or 6% in 1995 from 1994, due to
increased rig activity in Tunisia, Oman, Pakistan and Australia, offset partly
by the completion in mid-1994 of two rig contracts in Kuwait which were not
replaced during 1995 and reduced land drilling activity in Ecuador. Revenues
for international operations did not include revenues from the Company's
foreign joint ventures, which were unconsolidated affiliates.
In September 1994, the Company acquired the 60.7% partnership interest
in Pool Arctic Alaska that was not already owned by the Company (see
"- Acquisitions - Pool Arctic Alaska Acquisition"), and, accordingly, revenues
generated from Pool Arctic Alaska rigs and equipment have been included in the
Company's consolidated financial statements since the date of such acquisition.
Revenues for Alaska operations included in the Company's consolidated financial
statements were $20.4 million in 1995. Revenues generated by the Company's
wholly-owned operations in Alaska in 1994 were $9.9 million, which included $5.7
million from an offshore rig operating in the Cook Inlet and $4.2 million
generated after the Pool Arctic Alaska acquisition by the Pool Arctic Alaska
rigs and equipment. Prior to the date of such acquisition, the Company's
revenues did not include revenues of Pool Arctic Alaska, which was an
unconsolidated affiliate, but did include revenues from the Company's
wholly-owned operations in Alaska.
Earnings Attributable to Unconsolidated Affiliates. Earnings attributable
to unconsolidated affiliates were $3.0 million in 1995, compared to $5.0
million in 1994. Earnings attributable to Pool Arabia, Ltd. decreased $1.3
million from 1994 to $2.3 million in 1995 primarily as a result of the
completion in early 1995 of three land workover rig contracts in Kuwait and the
completion in March 1995 of a land drilling contract in Saudi Arabia. Earnings
attributable to Pool Arctic Alaska in 1994 were $0.5 million through the date
of acquisition (see "- Acquisitions - Pool Arctic Alaska Acquisition").
Earnings from Pool Arctic Alaska ceased to be included in earnings attributable
to unconsolidated affiliates immediately following the Company's purchase of
its partner's interest in September 1994.
Costs and Expenses. The Company's costs and expenses were $274.6 million
in 1995, compared to $232.7 million in 1994 (excluding the provision for
leasehold impairment). Such increase was attributable to (i) the inclusion, for
the period June 14 through December 31, 1995, of costs and expenses related to
the rigs and equipment obtained in the GPC acquisition, (ii) the inclusion in
1995 of a full year's costs and expenses related to the Pool Arctic Alaska rigs
and equipment, (iii) $0.6 million of expenses related to the GPC acquisition,
primarily for yard closings, and (iv) costs associated with higher levels of
activity in the Company's domestic onshore well-servicing line as well as in
Tunisia, Oman, Pakistan and Australia. Partially offsetting these higher costs
and expenses were lower repair and maintenance expenses for the Company's Gulf
of Mexico offshore fleet, lower costs and expenses in Ecuador, due to a reduced
level of land drilling activity, and a reduction in the accrued liability for
workers' compensation and property damage claims. For a discussion of the $23.6
million provision for leasehold impairment included in the Company's 1994 costs
and expenses, see "- Other Matters - San Angelo Lease Commitment." At the
beginning of the fourth quarter of 1994, the Company revised its estimate of
the remaining depreciable lives of certain rigs and
20
<PAGE> 21
equipment to better reflect the remaining economic lives of such assets. Such
change increased net income for 1995 as compared to 1994 by approximately $1.6
million or $.11 per share.
Other Income - Net. Other income - net in 1994 included a $0.5 million
gain resulting from a settlement related to the sale in 1991 of Libya assets
that had been written off in the mid-1980's when the Company terminated
operations in that country.
Interest Expense. Interest expense was $1.6 million higher in 1995 than in
1994, due primarily to the $10 million term loan to refinance the Pool Arctic
Alaska acquisition, the GPC acquisition debt and higher average borrowings
under the Company's syndicated bank revolving line of credit.
Income Taxes. The Company recorded income tax expense of $2.0 million on
income before income taxes of $5.1 million in 1995, compared to an income tax
benefit of $8.4 million on a loss before income taxes of $21.1 million in 1994.
The Company had income tax expense in 1995, compared to an income tax benefit
in 1994, primarily as a result of the Company's recording a provision for
leasehold impairment in 1994, which generated a deferred income tax benefit of
$8.2 million. The 1995 tax expense was due to stronger domestic operating
results in 1995 plus the effect of certain amendments to prior period U.S.
federal tax returns, partly offset by the reversal of no longer needed deferred
foreign taxes for 1990 income tax indemnities and the elimination of the
Company's valuation allowance related to its U.S. federal NOL carryforwards.
The 1994 tax benefit also included a net reversal of $0.6 million of previously
accrued foreign income taxes.
FINANCIAL CONDITION AND LIQUIDITY
The Company had cash and cash equivalents of $21.8 million at December 31,
1996 compared to $5.5 million at December 31, 1995. Working capital was $47.6
million and $27.0 million at December 31, 1996 and 1995, respectively.
CASH FLOWS
For the year ended December 31, 1996, net cash flows provided by operating
activities were $17.7 million, compared with $23.6 million and $8.3 million in
1995 and 1994, respectively. The Company used a net $50.6 million for investing
activities in 1996, primarily for capital expenditures of $30.7 million,
including $8.4 million for the refurbishment of Rig 18. Cash used for investing
activities during 1996 also included $8.9 million, net of cash acquired, for
the purchase of 51% of Antah Drilling, $8.7 million for the acquisition of a
51% controlling interest in PIASA, and $4.0 million for the purchase of the
operating assets of Western Oil, offset partly by $2.3 million of proceeds from
dispositions of equipment. The Company used a net $24.1 million for investing
activities in 1995, primarily for capital expenditures of $23.4 million,
including $6.9 million for the construction of a new offshore platform workover
rig, Rig 453, which began earning revenues in Australia in the third quarter of
1995, and $3.4 million, net of cash acquired, used in connection with the GPC
acquisition and the related direct acquisition costs, partly offset by $2.4
million of proceeds from dispositions of equipment. The Company used a net
$12.4 million for investing activities in 1994. This included the Pool Arctic
Alaska acquisition for $11.3 million, net of cash acquired, and $11.4 million
of other capital expenditures, offset partly by $7.0 million of proceeds from
the sale and leaseback of three offshore jackup rigs and $3.4 million of
proceeds from sales of other equipment.
21
<PAGE> 22
SECONDARY PUBLIC OFFERING
In July 1996, the Company completed the sale of 4,600,000 shares of common
stock in a secondary public offering and received cash proceeds of $47.5
million, net of expenses. See "- Results of Operations - Public Offering" for a
discussion of the use of such net proceeds.
CREDIT FACILITIES
The Company has available a syndicated bank revolving line of credit (the
"Line of Credit") to finance temporary working capital requirements and to
support the issuance of letters of credit. During 1996, expiration of the Line
of Credit was extended from April 1997 to April 1999, and the maximum
availability thereunder was increased. The maximum availability is the lesser
of (i) $40 million (previously $35 million), or (ii) a calculated amount based
upon a percentage of domestic receivables meeting certain criteria. At February
18, 1997, the maximum availability was $37.1 million, of which none had been
drawn in cash and $12.3 million was being utilized to support the issuance of
letters of credit. The interest rate is a floating rate which is, at the
Company's option, (i) the lenders' prime rate plus 0.25%, or (ii) the London
Interbank Offered Rate (LIBOR) plus 2.625%, with the Company's choice of a
one-, two-, three-, or six-month interest period. There is an approximate 1/2
of 1% commitment fee on the unutilized portion. The terms of the Line of Credit
include restrictive covenants which, among other things, limit capital
expenditures, prohibit certain liens, prohibit payment of dividends, limit
additional debt and set certain minimum financial requirements. Advances under
the Line of Credit are secured by certain accounts receivable, certain deposit
accounts, all of the stock of or equivalent interests in the Company's domestic
subsidiaries, 66% of the stock of the Company's consolidated foreign
subsidiaries and the property of the Company's Alaska subsidiary. See Note 5 of
Notes to Consolidated Financial Statements for further discussion.
LONG-TERM DEBT
Antah Drilling Acquisition Debt. In connection with the Antah Drilling
acquisition, the Company agreed to assume liability under Antah Drilling's term
loans, which aggregated $14.6 million at October 1996. The Company made
scheduled principal payments of $1.4 million between October and December of
1996. See Notes 3 and 5 of Notes to Consolidated Financial Statements for
further discussion.
Australia Rig 453 Debt. In January 1996, the Company received $6.5 million
under a four-year term loan agreement (the "Australia Loan") in order to
refinance the construction costs incurred during 1995 to build Rig 453. The rig
construction costs were initially funded from the Company's cash resources and
borrowings under its Line of Credit. During 1996, the Company made scheduled
principal payments on the Australia Loan of $1.8 million. See Note 5 of Notes
to Consolidated Financial Statements for further discussion.
Golden Pacific Corp. Acquisition Debt. In June 1995, the Company acquired
all of the outstanding capital stock of GPC for approximately $18.8 million,
consisting of $11.5 million of subordinated long-term notes due in 2005,
approximately $3.1 million in cash and 493,543 shares of the Company's common
stock valued at $4.2 million. During 1996, the Company made scheduled principal
payments of $1.5 million related to these long-term notes. See Notes 3 and 5 of
Notes to Consolidated Financial Statements for further discussion.
Also in connection with the GPC acquisition, the Company assumed a
liability for certain deferred compensation obligations of GPC. To evidence
such obligations, the Company issued notes aggregating $1.5 million in
principal amount to three employees of GPC and made scheduled principal
payments with respect to such notes during 1996 and 1995 of $0.4 million and
$0.2 million, respectively. See Note 5 of Notes to Consolidated Financial
Statements for further discussion.
22
<PAGE> 23
As part of the GPC acquisition, the Company assumed GPC's debt of $2.0
million, all of which was retired in June 1995.
Pool Arctic Alaska Acquisition Debt. The Pool Arctic Alaska acquisition
was initially funded from the Company's cash resources and approximately $6.7
million borrowed under the Line of Credit. In April 1995, the Company obtained
a three-year term loan (the "Alaska Loan") to refinance $10.0 million of the
purchase price. During 1996 and 1995, the Company made scheduled principal
payments of $2.8 million and $2.6 million, respectively, on the Alaska Loan.
See Note 5 of Notes to Consolidated Financial Statements for further
discussion.
CAPITAL EXPENDITURES
The Company anticipates that 1997 capital expenditures for improvements
and upgrades to its existing rig fleet will be approximately $30 million, most
of which are not subject to fixed commitments. It is anticipated that these
expenditures will be financed chiefly through internally generated funds,
although the Company may avail itself of borrowings as needed. Acquisitions of
additional assets and businesses are expected to continue to be an important
part of the Company's strategy for growth. The Company would, under certain
circumstances, need to obtain additional debt and/or equity financing to fund
such acquisitions.
OTHER MATTERS
ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." This statement requires
that long-lived assets and certain identifiable intangibles held and used by
the Company be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The adoption of this statement in 1996 had no effect on the
Company's financial position or results of operations.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), which sets forth alternative accounting and
disclosure requirements for stock-based compensation arrangements. SFAS 123
does not rescind the existing accounting for employee stock-based compensation
under APB Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB
25"). Companies may continue to follow the current accounting to measure and
recognize employee stock-based compensation; however, SFAS 123 requires
disclosure of pro forma net income and earnings per share that would have been
reported under the "fair value" based recognition provisions of SFAS 123. The
Company has elected to continue to follow the provisions of APB 25 for employee
compensation and has disclosed the pro forma information required under SFAS
123 in Note 2 of Notes to Consolidated Financial Statements.
23
<PAGE> 24
SAN ANGELO LEASE COMMITMENT
The Company has an operating lease, effective through March 2003, for a
65-acre facility at San Angelo, Texas, which it previously used for rig and
equipment manufacturing and storage. Annual lease payments are $2.2 million
through March 1998 and $4.4 million thereafter for the remaining five years of
the lease. Effective October 1, 1994, the Company vacated this facility and
subleased it in its entirety for $0.5 million per year under an operating
sublease which expires in September 1997. Prior to subleasing and vacating this
facility in 1994, the Company beneficially utilized approximately 12% of the
facility and charged to operations a proportionate share of the cost of the
lease. In September 1988, the Company, anticipating that it would not be able
to fully utilize the facility for a period of years, accrued a $15.9 million
liability for the expected underutilization. After September 1988, the cost
associated with the unutilized portion of the facility was charged against this
accrued liability, which as of the fourth quarter of 1994 had substantially
been used. In the fourth quarter of 1994 the Company recorded a provision for
leasehold impairment of $23.6 million, as the Company did not anticipate
utilizing any of this facility in its future operations nor did it expect to be
able to sublease this facility to third parties for an amount equivalent to the
annual lease payments. This provision recognized all future lease expense, net
of anticipated sublease income. Such provision for leasehold impairment
decreased 1994 net income by $15.3 million, or $1.13 per share. Future lease
payments will be charged against such provision.
24
<PAGE> 25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
Pool Energy Services Co.:
We have audited the accompanying consolidated balance sheets of Pool Energy
Services Co. and its subsidiaries (the "Company") as of December 31, 1996 and
1995, and the related statements of consolidated operations and cash flows for
each of the three years in the period ended December 31, 1996. Our audits also
included the financial statement schedule listed in the Index at Item 14.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on the financial statements and financial statement schedule based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Pool Energy Services Co. and
its subsidiaries at December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Houston, Texas
February 21, 1997
25
<PAGE> 26
POOL ENERGY SERVICES CO.
STATEMENTS OF CONSOLIDATED OPERATIONS
(IN THOUSANDS EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . $ 348,558 $ 277,305 $ 229,175
Earnings Attributable to Unconsolidated Affiliates . . . . 2,244 2,955 5,016
------------ ------------ ------------
Total . . . . . . . . . . . . . . . . . . . . . . 350,802 280,260 234,191
------------ ------------ ------------
Costs and Expenses:
Operating expenses . . . . . . . . . . . . . . . . . 267,692 219,074 182,012
Selling, general and administrative expenses . . . . 46,773 39,927 36,927
Depreciation and amortization . . . . . . . . . . . . 18,545 15,002 13,760
Acquisition related costs . . . . . . . . . . . . . . 33 622 -
Provision for leasehold impairment . . . . . . . . . - - 23,551
------------ ------------ ------------
Total . . . . . . . . . . . . . . . . . . . . . . 333,043 274,625 256,250
------------ ------------ ------------
Other Income (Expense) - Net . . . . . . . . . . . . . . . 2,095 1,289 1,202
Interest Expense . . . . . . . . . . . . . . . . . . . . . 2,793 1,811 253
------------ ------------ ------------
Income (Loss) Before Income Taxes and
Minority Interest . . . . . . . . . . . . . . . . . . 17,061 5,113 (21,110)
Income Tax Provision (Credit) . . . . . . . . . . . . . . 7,524 1,981 (8,381)
Minority Interest in Loss of Consolidated Subsidiary. . . . (103) - -
------------ ------------ ------------
Net Income (Loss) . . . . . . . . . . . . . . . . . . . . $ 9,640 $ 3,132 $ (12,729)
============ ============ ============
Earnings (Loss) Per Share of Common Stock . . . . . . . . $ .58 $ .23 $ (.94)
============ ============ ============
Average Common Shares Outstanding . . . . . . . . . . . . 16,504,853 13,840,122 13,559,108
============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
26
<PAGE> 27
POOL ENERGY SERVICES CO.
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------
1996 1995 1994
---------- ---------- ---------
<S> <C> <C> <C>
Operating Activities:
Net Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . $ 9,640 $ 3,132 $ (12,729)
Noncash items included above:
Depreciation and amortization . . . . . . . . . . . . . . . . . 18,545 15,002 13,760
Deferred income taxes (credit) . . . . . . . . . . . . . . . . 4,178 1,261 (9,155)
Undistributed earnings of unconsolidated affiliates . . . . . . (2,221) (2,895) (5,055)
Provision for leasehold impairment . . . . . . . . . . . . . . - - 23,551
Performance of prepaid rig services . . . . . . . . . . . . . . - - (1,000)
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . (753) (218) (921)
Payment of pre-1990 personal injury and property damage claims . (45) (37) (322)
Payment for lease of manufacturing facility, net of sublease . . (1,610) (2,060) (1,604)
Cash dividends received from unconsolidated affiliates . . . . . 1,663 2,885 2,918
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . (963) (723) (953)
Net effect of changes in operating working capital . . . . . . . (10,719) 7,248 (166)
---------- ---------- ---------
Net Cash Flows Provided by Operating Activities . . . . . . . . . 17,715 23,595 8,324
---------- ---------- ---------
Investing Activities:
Property additions . . . . . . . . . . . . . . . . . . . . . . . (30,662) (23,436) (10,897)
Expenditures for acquisitions, including acquisition costs, less
cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . (22,366) (3,431) (11,250)
Expenditures for modification of Alaska Rig 428 . . . . . . . . . - - (527)
Proceeds from disposition of property, plant and equipment . . . 2,335 2,400 3,383
Proceeds from sale of rigs to leasing company . . . . . . . . . . - - 7,000
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 358 (147)
---------- ---------- ---------
Net Cash Flows Used for Investing Activities . . . . . . . . . . (50,556) (24,109) (12,438)
---------- ---------- ---------
Financing Activities:
Proceeds from issuance of common stock, net . . . . . . . . . . . 47,455 - -
Proceeds from exercise of stock options . . . . . . . . . . . . . 3,376 61 45
Proceeds and repayments of short-term borrowings - net . . . . . - (1,600) 1,600
Retirement of debt assumed in GPC acquisition . . . . . . . . . . - (1,962) -
Payments for debt financing costs . . . . . . . . . . . . . . . . (199) (102) (69)
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . 6,500 10,000 545
Principal payments on long-term debt . . . . . . . . . . . . . . (7,546) (2,751) (50)
Principal payments on notes payable to related parties . . . . . (400) (200) -
---------- ---------- ---------
Net Cash Flows Provided by Financing Activities . . . . . . . . . 49,186 3,446 2,071
---------- ---------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents . . . . . . . . 16,345 2,932 (2,043)
Cash and Cash Equivalents at January 1, . . . . . . . . . . . . . . 5,492 2,560 4,603
---------- ---------- ---------
Cash and Cash Equivalents at December 31, . . . . . . . . . . . . . $ 21,837 $ 5,492 $ 2,560
========== ========== =========
</TABLE>
See Notes to Consolidated Financial Statements.
27
<PAGE> 28
POOL ENERGY SERVICES CO.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . $ 21,837 $ 5,492
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 163
Accounts and notes receivable (net of allowance for doubtful accounts of
$1,235 and $1,059) . . . . . . . . . . . . . . . . . . . . . . . . . . 63,067 47,941
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,483 3,754
Accounts receivable from affiliates . . . . . . . . . . . . . . . . . . . 1,064 3,289
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,726 10,516
Deferred income tax asset . . . . . . . . . . . . . . . . . . . . . . . . 3,807 3,469
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 4,213 3,525
--------- ---------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . 114,380 78,149
Property, Plant and Equipment - Net . . . . . . . . . . . . . . . . . . . . 189,125 124,024
Investment in and Noncurrent Receivables from Unconsolidated Affiliates . . 19,104 26,001
Goodwill, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,880 11,174
Noncurrent Deferred Income Tax Asset . . . . . . . . . . . . . . . . . . . . 1,506 5,528
Noncurrent Receivables (net of allowance for doubtful accounts of $1,219 and
$2,824) and Other Assets . . . . . . . . . . . . . . . . . . . . . . . . 3,421 2,594
Noncurrent Restricted Cash . . . . . . . . . . . . . . . . . . . . . . . . . 801 973
--------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 341,217 $ 248,443
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . $ 9,702 $ 4,385
Current portion of notes payable to related parties . . . . . . . . . . . 925 400
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . 20,771 24,123
Accounts payable to affiliate . . . . . . . . . . . . . . . . . . . . . . 1,251 -
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,505 19,615
Accrued taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,590 2,647
--------- ---------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . 66,744 51,170
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,068 14,859
Notes Payable to Related Parties . . . . . . . . . . . . . . . . . . . . . . - 925
Deferred Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,199 2,323
Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,036 43,139
Minority Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,047 -
Shareholders' Equity:
Common stock, no par value:
40,000,000 and 25,000,000 shares authorized; 19,094,824 and
14,063,983 shares issued and outstanding . . . . . . . . . . . . . . 186,785 134,438
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,551 1,911
Unearned compensation - restricted stock . . . . . . . . . . . . . . . . (891) -
Cumulative foreign currency translation adjustments . . . . . . . . . . . (322) (322)
--------- ---------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . 197,123 136,027
--------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 341,217 $ 248,443
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
28
<PAGE> 29
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
All dollar amounts in the tabulations in the notes to the consolidated
financial statements are stated in thousands unless otherwise indicated. All
dollar amounts included in the text are in whole dollars, unless otherwise
indicated. Certain reclassifications have been made in the 1994 and 1995
consolidated financial statements to conform with the 1996 presentation.
The Company
Pool Energy Services Co. (the "Company") was formed in November 1988 to
acquire all of the oilfield services business of ENSERCH Corporation
("ENSERCH"), and that acquisition was consummated in April 1990. As used
herein, except where the context otherwise requires, the term "Company" refers
to Pool Energy Services Co., its subsidiary corporations and its unconsolidated
affiliates. The Company operates in only one business segment - the oilfield
services industry. Within the oilfield services industry, the Company provides
services and products to oil and natural gas well operators for the workover,
maintenance and plugging of existing oil and natural gas wells and for the
drilling and completion of new oil and natural gas wells. The Company operates
in the United States, South America, the Middle East, Asia, Africa and
Australia.
Principles of Consolidation
The consolidated financial statements include the financial statements of
the Company and all subsidiaries in which a controlling interest is held. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The Company uses the equity method to account for affiliates in
which it does not have control. The Company acquired a 51% controlling
interest in a newly formed Argentina corporation, Pool International Argentina
S.A. ("PIASA"), in August 1996 (see Note 3). For financial reporting
purposes, 100% of the assets, liabilities, results of operations and cash flows
of PIASA are consolidated with those of the Company. The minority
shareholder's interest in PIASA and the earnings or losses therefrom have been
reflected as "minority interest" in the Company's consolidated financial
statements.
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 and
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. Actual results could differ from those estimates.
Revenue Recognition
The Company generally recognizes revenue when services are rendered or
products are shipped.
Foreign Currency Gains and Losses
The U.S. dollar is the functional currency for all of the Company's foreign
operations, and for those operations, foreign currency gains and losses are
included in the statement of consolidated operations as incurred. The
cumulative translation gains and losses reflected as a separate component of
shareholders' equity arose prior to April 1996, when the functional currency of
the Company's then unconsolidated affiliate in Trinidad was the Trinidad and
Tobago dollar.
29
<PAGE> 30
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Property, Plant and Equipment
Depreciation of plant and equipment is provided on a straight-line basis
over the estimated useful lives of the assets. The components of a rig that
generally require replacement during the rig's life have useful lives that
range from three to 12 years. The basic rigs, excluding such components, have
estimated useful lives from date of original manufacture ranging from 22 to 35
years. Other property and equipment have useful lives that range from three to
seven years. Estimated salvage values are assigned to the rigs based on an
individual assessment of each rig and generally approximate 15% of cost. The
estimated remaining depreciable lives of certain rigs and equipment were
revised in October 1994 to better reflect their remaining economic lives. The
effect of this change in accounting estimate was to increase 1995 net income by
approximately $2.1 million or $.15 per share and to decrease the 1994 net loss
by approximately $0.5 million or $.04 per share.
Effective January 1, 1996 the Company adopted Financial Accounting
Standards Board Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." This statement requires
that long-lived assets and certain identifiable intangibles held and used by
the Company be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Since adoption of this statement no impairment losses have been
recognized.
Goodwill
Goodwill, totaling $12.9 million and $11.2 million at December 31, 1996 and
1995, respectively, represents the cost in excess of fair value of the net
assets of companies acquired and is being amortized using the straight-line
method over a period of 30 years. Amortization of goodwill for the years ended
December 31, 1996 and 1995 amounted to $0.4 million and $0.2 million,
respectively. The carrying amount of unamortized goodwill is reviewed for
potential impairment loss when events or changes in circumstances indicate that
the carrying amount of goodwill may not be recoverable.
Environmental Remediation and Compliance
Costs incurred to investigate and remediate contaminated sites are expensed
unless the remediation extends the useful lives of the assets employed at the
site. Remediation costs that extend the useful lives of the assets are
capitalized and amortized over the remaining economic lives of such assets.
Liabilities are recorded when the need for environmental assessments and/or
remedial efforts become known or probable and the cost can be reasonably
estimated.
Income Taxes
The Company is subject to both U.S. and foreign income taxes. The Company
accounts for income taxes based upon Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" which requires recognition of
deferred income tax liabilities and assets for the expected future tax
consequences of events that have been recognized in the Company's financial
statements or tax returns. Under this method, deferred income tax liabilities
and assets are determined based on the temporary differences between the
financial statement carrying amounts and the tax bases of existing assets and
liabilities and available tax credit carryforwards.
30
<PAGE> 31
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Inventories
Inventories of spare parts, materials and supplies held for consumption are
stated principally at average cost.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist primarily of temporary cash investments
and trade receivables. The Company restricts investment of temporary cash
investments to financial institutions with high credit standing and by policy
limits the amount of credit exposure to any one financial institution. The
Company's customer base consists primarily of multi-national, foreign national
and independent oil and natural gas producers. One customer accounted for
approximately 11% of the Company's consolidated revenues in both 1996 and 1995.
During 1994, no customer accounted for more than 10% of consolidated revenues.
The Company performs ongoing credit evaluations of its customers and generally
does not require collateral on its trade receivables. Such credit risk is
considered by management to be limited due to the large number of customers
comprising the Company's customer base. The Company maintains reserves for
potential credit losses, and such losses have been within management's
expectations.
Fair Values of Financial Instruments
Except for investments in its unconsolidated affiliates, which are
accounted for under the equity method, the Company's financial instruments
consist primarily of short-term, variable rate items for which management
believes fair value approximates carrying value.
Foreign Exchange Risk Management
The Company operates internationally, giving rise to exposure to market
risks from changes in foreign exchange rates. The Company uses forward
exchange contracts as economic hedges of exposed net investments in foreign
entities in which that exposure exceeds $0.2 million and in currencies for
which such contracts are available. The Company's foreign exchange contracts
do not subject the Company to the risk of exchange rate movements because gains
and losses on these contracts offset gains and losses on the exposed
investments being hedged. Realized and unrealized gains and losses on these
contracts are recognized currently in the statement of consolidated operations.
The forward exchange contracts generally have maturities which do not exceed 31
days. The Company had forward exchange contracts to purchase $2.5 million in
Malaysian ringgits and $2.0 million in Australian dollars at December 31, 1996
and $3.3 million in Malaysian ringgits at December 31, 1995. The Company does
not hold or issue financial instruments for trading purposes.
31
<PAGE> 32
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Stock Incentive Plans
The Company accounts for stock option grants using the intrinsic value
method of accounting prescribed by APB Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25"). Under the Company's stock incentive plans,
the price of the stock on the grant date is the same as the amount an employee
must pay to exercise the option to acquire the stock; accordingly, the options
have no intrinsic value at grant date, and in accordance with the provisions of
APB 25 no compensation cost is recognized.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), which sets forth alternative accounting and
disclosure requirements for stock-based compensation arrangements. SFAS 123
does not rescind the existing accounting for employee stock-based compensation
under APB 25. Companies may continue to follow the current accounting to
measure and recognize employee stock-based compensation; however, SFAS 123
requires disclosure of pro forma net income and earnings per share that would
have been reported under the "fair value" based recognition provisions of SFAS
123. The Company has disclosed in Note 2 the pro forma information required
under SFAS 123.
Cash Equivalents
The Company considers all unrestricted highly liquid investments with less
than a three-month maturity when purchased as cash equivalents.
Earnings Per Share of Common Stock
Earnings per share is based on the weighted average number of common shares
and common equivalent shares outstanding during the year.
32
<PAGE> 33
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. SHAREHOLDERS' EQUITY
The following is a summary of transactions affecting shareholders' equity
for the last three fiscal years:
<TABLE>
<CAPTION>
CUMULATIVE
UNEARNED FOREIGN
RETAINED COMPENSATION CURRENCY
COMMON EARNINGS -RESTRICTED TRANSLATION
STOCK (DEFICIT) STOCK ADJUSTMENTS
-------- -------- ---------- -------------
<S> <C> <C> <C> <C>
Balance, January 1, 1994 . . . . . . . . . . . . $130,132 $ 11,508 $ - $ (295)
Net loss . . . . . . . . . . . . . . . . . - (12,729) - -
Common stock options exercised . . . . . . 45 - - -
Translation adjustment . . . . . . . . . . - - - (22)
-------- -------- ------ -------
Balance, December 31, 1994 . . . . . . . . . . . 130,177 (1,221) - (317)
Net income . . . . . . . . . . . . . . . . - 3,132 - -
Issuance of common stock for:
Stock options exercised . . . . . . . . 61 - - -
Business acquisition . . . . . . . . . 4,200 - - -
Translation adjustment . . . . . . . . . . - - - (5)
-------- -------- ------ --------
Balance, December 31, 1995 . . . . . . . . . . . 134,438 1,911 - (322)
Net income . . . . . . . . . . . . . . . . - 9,640 - -
Issuance of common stock for:
Stock options exercised . . . . . . . . 3,376 - - -
Public offering, net . . . . . . . . . 47,455 - - -
Issuance of restricted common stock . . . . . 949 - (949) -
Tax benefit from stock options
exercised . . . . . . . . . . . . . . . . 567 - - -
Compensation expense . . . . . . . . . . . - - 58 -
-------- -------- ------ -------
Balance, December 31, 1996 . . . . . . . . . . . $186,785 $ 11,551 $ (891) $ (322)
======== ======== ====== =======
</TABLE>
Common Stock
In July 1996, the Company completed the sale to the public of 4,600,000
shares of its common stock, no par value, from which it received cash proceeds
of approximately $47.5 million, net of expenses. The Company has used or
intends to use the net proceeds principally as follows: (i) $10.9 million in
connection with the August 1996 acquisition of a 51% controlling interest in
PIASA, a newly formed Argentina corporation which provides well-servicing,
workover and drilling services in Argentina, (ii) approximately $9 million in
connection with the October 1996 acquisition of the 51% interest not already
owned by the Company in Antah Drilling Sdn. Bhd. ("Antah Drilling"), (iii) $4.5
million in connection with the June 1996 purchase of the operating assets of
Western Oil Well Service Co. ("Western Oil"), (iv) $8.4 million in connection
with the refurbishment of Rig 18, a previously idle platform drilling rig in
the Gulf of Mexico, and (v) for repayment of debt under the Company's
syndicated bank revolving line of credit and general corporate purposes. The
amounts described above include both acquisition expenditures and related
working capital advances. See Note 3 for additional descriptions of these
acquisitions.
33
<PAGE> 34
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Preferred Stock
The 1,000 shares of the Company's authorized and issued preferred stock is
currently held in treasury.
Shareholder Rights Plan
The Company maintains a Shareholder Rights Plan (the "Rights Plan") that is
designed to deter coercive or unfair takeover tactics, to prevent a person or
group from gaining control of the Company without offering fair value to all
shareholders and to deter other abusive takeover tactics which are not in the
best interests of shareholders. The Company's Board of Directors adopted the
Rights Plan in June 1994 and declared a dividend to the shareholders of one
right ("Right") for each outstanding share of the Company's common stock. The
Rights only become exercisable, and transferable apart from the Company's
common stock, ten business days following a public announcement that a person
or group ("Acquirer") has acquired beneficial ownership of, or has commenced a
tender or exchange offer for, 15% or more of the Company's common stock (each a
"Triggering Event").
Each Right initially entitles the holder to purchase one-third of one share
of the Company's common stock at a price of $9.00, subject to adjustment. Upon
the occurrence of a Triggering Event, each Right, in the absence of timely
redemption of the Rights by the Company, will entitle the holder thereof (other
than the Acquirer), instead, to receive upon exercise of the Right a number of
the Company's common shares (or, in certain circumstances, cash, property or
other securities of the Company) having a current market value equal to twice
the exercise price for a full share of common stock. Following the occurrence
of a Triggering Event, if the Company is acquired in a merger or other business
combination, or 50% or more of the Company's assets or earning power are sold
or transferred, each Right, in the absence of timely redemption of the Rights
by the Company, will entitle the holder thereof (other than the Acquirer) to
receive a number of shares of common stock of the acquiring company having a
current market value equal to twice the exercise price for a full share of
common stock.
The Rights may be redeemed by the Company in whole, but not in part, at a
redemption price of $.01 per Right at any time prior to the Rights becoming
exercisable. The Rights will expire in June 2004. Until the Rights become
exercisable, they have no dilutive effect on earnings per share. As of
December 31, 1996, a total of 5,754,071 shares of the Company's common stock
were reserved for issuance upon exercise of Rights.
The description and terms of the Rights are set forth in a Rights Agreement
between the Company and the First National Bank of Boston, as Rights Agent.
Stock Incentive Plans
The Company's 1993 Employee Stock Incentive Plan is for officers and key
employees, which plan reserved for issuance up to 600,000 shares of the
Company's common stock. The shares may be issued upon the exercise of
non-qualified stock options granted under the plan or may be granted as
restricted stock awards or bonus stock awards. Subject to earlier termination
under certain circumstances, stock options are exercisable over a ten-year term
and, unless specified otherwise at the time of the grant, vest at the rate of
25 percent per year of continuous employment following the grant of the
options. As of December 31, 1996 the Company had issued 13,062 shares as a
result of the exercise of options pursuant to such plan. Shares of common
stock awarded as restricted stock are subject to restrictions on transfer and
subject to risk of forfeiture until earned by continued employment or the
achievement of specific goals. During the restriction period, holders of
restricted stock have the right to vote; cash dividends, if any, are accrued
but not paid until
34
<PAGE> 35
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
satisfaction of the applicable restrictions. During 1996, 64,000 shares of
restricted stock were awarded, having a market value of $13.75 per share, which
is being amortized over the three-year restriction period.
The Company also has a 1990 Employee Stock Option Plan for officers and key
employees, which plan reserved for issuance up to 1,000,000 shares of the
Company's common stock, of which 390,609 shares had been issued as of December
31, 1996 through the exercise of options. Subject to earlier termination under
certain circumstances, options are exercisable over a ten-year term and, unless
specified otherwise at the time of the grant, vest at the rate of 25 percent
per year of continuous employment following the grant of the options. Since
the adoption of the 1993 Employee Stock Incentive Plan, no additional options
may be granted under the 1990 Employee Stock Option Plan.
Effective February 1996, the Company adopted the 1996 Directors' Stock
Incentive Plan for members of its Board of Directors who are not full-time
employees of the Company. The plan reserved for issuance up to 200,000 shares
of the Company's common stock which may be issued upon the exercise of stock
options or may be awarded as restricted stock. During 1996, 6,000 shares of
restricted stock, having a market value of $11.50 per share, were issued. The
Plan provides for each person who is elected or appointed a director for the
first time after the effective date to receive automatically an initial option
of 8,000 shares and to receive automatically an option for 4,000 shares on the
date of each Annual Meeting of Shareholders after the initial grant at which
such director is reelected. Also, each director will receive an award of 1,000
shares of restricted stock, with a one-year restriction period, on the date of
each Annual Meeting of Shareholders. Options expire ten years after the date of
grant. Each option becomes exercisable at the end of one year from the date of
grant.
The Company also has a 1991 Directors' Stock Option Plan for members of its
Board of Directors who are not full-time employees of the Company. Such plan
reserved for issuance up to 150,000 shares of the Company's common stock, of
which 27,000 shares had been issued as of December 31, 1996 through the
exercise of options. Subject to earlier termination under certain
circumstances, options expire ten years after the date of the grant. Each
option becomes exercisable as to 50% of the shares covered thereby at the end
of one year from the date of grant and as to the remaining 50% at the end of
two years from the date of grant. Since the adoption of the 1996 Directors'
Stock Incentive Plan no additional options may be granted under the 1991
Directors' Stock Option Plan.
The fair market value at the date the restricted stock was issued has been
recorded as unearned compensation - restricted stock and is shown as a separate
component of shareholders' equity. The unearned restricted stock compensation
is amortized to operations over the related restriction period. Such
compensation expense amounted to $0.1 million in 1996.
35
<PAGE> 36
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The exercise price of options under all plans is the fair market value per
share on the date the options are granted. The exercise of stock options
results in a U.S. tax deduction to the Company equal to the income tax effect
of the difference between the exercise price and the market price at the
exercise date. For financial reporting purposes, this tax benefit is accounted
for as a credit to common stock. During 1996, $0.6 million was credited to
common stock as a result of stock option exercises. The following table
summarizes the stock option activity related to the Company's plans:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------- ----------------------------- ----------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------ ---------------- ------ ---------------- ------ ----------------
(IN THOUSANDS EXCEPT WEIGHTED AVERAGE EXERCISE PRICE)
<S> <C> <C> <C> <C> <C> <C>
Outstanding, January 1 . . 1,142 $ 9.07 1,000 $ 9.27 901 $ 9.23
Granted . . . . . . . 274 $ 10.81 205 $ 8.20 118 $ 9.37
Exercised . . . . . . (361) $ 9.36 (9) $ 6.80 (7) $ 6.50
Forfeited . . . . . . (12) $ 9.17 (54) $ 10.00 (12) $ 8.83
----- ----- -----
Outstanding, December 31 . 1,043 $ 9.42 1,142 $ 9.07 1,000 $ 9.27
===== ===== =====
Exercisable, December 31 . 569 $ 9.04 799 $ 9.36 768 $ 9.55
</TABLE>
The following table provides information for the stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------ -------------------------------------
NUMBER OF SHARES WEIGHTED-AVERAGE NUMBER OF SHARES
RANGE OF OUTSTANDING AT REMAINING WEIGHTED AVERAGE EXERCISABLE AT WEIGHTED AVERAGE
EXERCISE PRICES DECEMBER 31, 1996 CONTRACTUAL LIFE EXERCISE PRICE DECEMBER 31, 1996 EXERCISE PRICE
- --------------- ----------------- ---------------- ---------------- ------------------ ----------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
$6.125 - $8.75 332 7 years $ 7.40 195 $6.89
$9.25 - $12.50 711 6.4 years $10.37 374 $10.17
------ ---
1,043 569
====== ===
</TABLE>
The Company applies the intrinsic value based method of APB 25 in
accounting for its stock incentive plans. Accordingly, no compensation expense
has been recognized for any stock options issued under its plans. Had
compensation expense for the Company's stock options granted during 1996 and
1995 been recognized based on the fair value at the grant dates, using the
methodology prescribed by SFAS 123, the Company's net income and earnings per
share would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(IN THOUSANDS EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Net Income:
As reported . . . . . . . . . . . . . . . . . . . . $ 9,640 $ 3,132
Pro forma . . . . . . . . . . . . . . . . . . . . . 9,270 3,019
Earnings Per Share:
As reported . . . . . . . . . . . . . . . . . . . . $ .58 $ .23
Pro forma . . . . . . . . . . . . . . . . . . . . . .56 .22
</TABLE>
Since SFAS 123 does not apply to options granted prior to January 1, 1995,
the pro forma effect disclosed above may not be representative of pro forma
amounts in future years.
36
<PAGE> 37
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The weighted-average fair values of options granted during 1996 and 1995
were $5.25 and $4.97 per share, respectively. The fair value of each stock
option granted during 1996 and 1995 was estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
YEAR OF GRANT
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Risk-free interest rate . . . . . . . . . . . . . . . 6.36% 6.78%
Expected life of options . . . . . . . . . . . . . . 8 years 8 years
Expected volatility of the Company's stock price . . 43% 44%
Expected dividend yield of the Company's stock . . . 0% 0%
</TABLE>
3. ACQUISITIONS
1996 Acquisitions
Antah Drilling Sdn. Bhd. Acquisition. In October 1996, the Company
acquired the 51% interest that it did not already own in Antah Drilling. The
purchase price and the repayment of certain indebtedness of Antah Drilling owed
to the Company's partner in that venture totaled $9.0 million. Antah
Drilling's assets include Rig 489, a new state-of-the-art 2,000 horsepower
offshore platform drilling rig, which commenced a three-year contract in
Australia in August 1996, and an offshore platform workover rig currently
operating in Malaysia. In connection with the Antah Drilling acquisition, the
Company agreed to assume liability under Antah Drilling's term loans, which
aggregated $14.6 million (see Note 5). Prior to the date of acquisition, Antah
Drilling was accounted for under the equity method based upon the Company's 49%
ownership interest.
Pool International Argentina S. A. Acquisition. In August 1996, the
Company acquired for cash of approximately $8.7 million a 51% controlling
interest in PIASA. PIASA owns nine land drilling rigs and 11 land workover
rigs, all of which are located in Argentina. Additionally, the Company
advanced $1.3 million to PIASA during 1996 for working capital purposes.
Western Oil Operating Assets Acquisition. In June 1996, the Company
purchased the operating assets, including approximately 23 land well-servicing
rigs, of Western Oil for approximately $4.0 million in cash.
Each of the 1996 acquisitions discussed above was recorded under the
purchase method of accounting and, accordingly, the results of operations of
each acquired entity have been included in the accompanying consolidated
financial statements from the date such entity was acquired. The purchase
price of each acquisition was allocated based on the estimated fair market
value of the assets acquired and liabilities assumed at the date of
acquisition. Such allocations resulted in goodwill of approximately $1.8
million, which is being amortized on a straight-line basis over 30 years.
37
<PAGE> 38
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Golden Pacific Corp. Acquisition
In June 1995, the Company acquired all of the outstanding capital stock of
GPC, a privately-owned California well-servicing company with a fleet of
approximately 155 rigs and related equipment, for $18.8 million, consisting of
long-term notes in the amount of $11.5 million, $3.1 million in cash and
493,543 shares of the Company's common stock valued at $4.2 million. The cash
paid in the transaction was provided by the Company's existing syndicated bank
revolving line of credit.
The acquisition was accounted for under the purchase method, and
accordingly the results of GPC have been included in the accompanying
consolidated financial statements since the date of acquisition. The purchase
price was allocated on the basis of the estimated fair market value of the
assets acquired and the liabilities assumed as of the date of acquisition.
This allocation resulted in goodwill of approximately $11.7 million, which is
being amortized on a straight-line basis over 30 years.
Pool Arctic Alaska Acquisition
In September 1994, the Company acquired the 60.7% interest not already
owned by the Company in Pool Arctic Alaska, a partnership, for $12.1 million in
cash. This acquisition expanded the Company's wholly-owned Alaska operation to
include the three specialized Arctic land drilling rigs and related equipment
formerly owned by the partnership. The acquisition was funded initially from
the Company's existing syndicated bank revolving line of credit and cash
resources. During 1995, the Company obtained a three-year term loan to
refinance $10 million of the purchase price (see Note 5).
The acquisition has been accounted for under the purchase method and,
accordingly, the results of Pool Arctic Alaska have been included in the
accompanying consolidated financial statements since the date of acquisition.
The cost of the acquisition was allocated on the basis of the estimated fair
market value of the assets acquired and the liabilities assumed. Prior to the
date of acquisition, Pool Arctic Alaska was accounted for under the equity
method based upon the Company's 39.3% partnership interest.
38
<PAGE> 39
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
4. INCOME TAXES
Provision (credit) for income taxes is summarized below:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
----------------------------------
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Current:
Federal . . . . . . . . . . . . . . . . . $ 166 $ - $ 57
State . . . . . . . . . . . . . . . . . . 316 270 380
Foreign . . . . . . . . . . . . . . . . . 2,864 450 337
--------- -------- -------
Total current . . . . . . . . . . . . 3,346 720 774
--------- -------- -------
Deferred:
Federal . . . . . . . . . . . . . . . . . 4,680 1,564 (8,674)
State . . . . . . . . . . . . . . . . . . - - 96
Foreign . . . . . . . . . . . . . . . . . (502) (303) (577)
--------- -------- -------
Total deferred . . . . . . . . . . . 4,178 1,261 (9,155)
--------- -------- -------
Provision (credit) for income taxes . . . $ 7,524 $ 1,981 $(8,381)
========= ======== =======
</TABLE>
The 1996 deferred income tax provision resulted primarily from a decrease
in deferred tax assets due to current year utilization of U.S. federal net
operating loss ("NOL") carryforwards. The 1995 deferred income tax provision
resulted primarily from the effect of certain amendments to prior period U.S.
federal tax returns, partly offset by the reversal of no longer needed deferred
foreign taxes for 1990 income tax indemnities and the elimination of the
Company's valuation allowance related to the NOL carryforwards. The 1994
deferred income tax benefit resulted primarily from the Company's recording a
provision for leasehold impairment which generated an income tax benefit of
$8.2 million. The 1994 tax benefit also included a net reversal of $0.6
million of previously accrued foreign income taxes.
Temporary differences and carryforwards which gave rise to deferred tax
assets and liabilities as of December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------------- -----------------------------
DEFERRED TAX DEFERRED TAX DEFERRED TAX DEFERRED TAX
ASSETS LIABILITIES ASSETS LIABILITIES
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investment in subsidiaries and affiliates . . . . $ 2,130 $ 1,780 $ 2,192 $ 1,821
Property . . . . . . . . . . . . . . . . . . . . 931 32,922 - 27,393
Personal injury and property
damage claims . . . . . . . . . . . . . . . 3,624 - 4,004 -
Leases . . . . . . . . . . . . . . . . . . . . . 8,680 - 9,574 -
Accrued liabilities . . . . . . . . . . . . . . 4,819 - 4,356 -
Inventory valuation . . . . . . . . . . . . . . 461 27 453 27
Accounts receivable valuation . . . . . . . . . 472 - 467 -
Net operating loss carryforward . . . . . . . . 20,383 - 21,448 -
Other . . . . . . . . . . . . . . . . . . . . . 592 872 386 244
--------- -------- -------- ---------
Subtotal . . . . . . . . . . . . . . . . . 42,092 35,601 42,880 29,485
Valuation allowance . . . . . . . . . . . . . . (5,377) - (6,721) -
--------- -------- -------- ---------
Total . . . . . . . . . . . . . . . . . . . $ 36,715 $ 35,601 $ 36,159 $ 29,485
========= ======== ======== =========
</TABLE>
The total valuation allowance decreased a net $1.3 million in 1996 and $2.2
million in 1995.
39
<PAGE> 40
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In 1995, the Company eliminated the valuation allowance related to its U.S.
federal NOL carryforwards. Management believes that it is now more likely than
not that the Company will generate taxable income sufficient to realize the tax
benefit of the NOL carryforwards prior to their expiration due to among other
factors, anticipated lower tax depreciation charges as a result of the majority
of existing property being fully depreciated for U.S. tax purposes, the
incremental taxable income resulting from the GPC acquisition and consideration
of available tax planning strategies. If necessary, the Company also will
consider repatriating future foreign earnings in order to fully realize the NOL
carryforwards before their expiration.
At December 31, 1996, the Company had $34.1 million of NOL available for
carryforward to reduce U.S. federal income taxes payable in future years. The
U.S. NOL carryforwards were $3.1 million from 1991, $18.4 million from 1992,
$7.6 million from 1994, $5.0 million from 1995; they are available for
utilization through the years 2006, 2007, 2009 and 2010, respectively. State
NOL carryforwards have been substantially reserved for in the Company's
consolidated balance sheet.
The Company had $15.3 million of foreign NOL carryforwards at December 31,
1996, with $5.8 million fully reserved. Management believes the Company will
generate future foreign taxable income sufficient to utilize the remaining $9.5
million of foreign NOL carryforwards with $0.8 million expiring after 2000,
$2.8 million expiring after 2001 and $5.9 million being carried forward
indefinitely.
A reconciliation between income taxes computed at the U.S. federal
statutory rate and the Company's income taxes for financial reporting purposes
is shown below:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
---------------------------------
1996 1995 1994
-------- -------- ---------
<S> <C> <C> <C>
U.S. federal statutory tax rate . . . . . . . . . . . . . 35% 35% 35%
Provision (credit) for income taxes computed at U.S. federal
statutory tax rate . . . . . . . . . . . . . . . . . . $ 5,971 $ 1,790 $ (7,389)
Effect of:
Foreign tax rates different than U.S. federal
statutory tax rate . . . . . . . . . . . . . . . . . . 738 (132) (1,086)
Alternative minimum tax . . . . . . . . . . . . . . . . 166 - 57
State income taxes . . . . . . . . . . . . . . . . . . 205 175 414
Other - net . . . . . . . . . . . . . . . . . . . . . . 444 148 (377)
-------- -------- --------
Provision (credit) for income taxes . . . . . . . . . . . . $ 7,524 $ 1,981 $ (8,381)
======== ======== =========
Effective income tax rate . . . . . . . . . . . . . . . . 44.1% 38.7% (39.7)%
======== ======== ========
</TABLE>
Foreign income before income taxes is defined as income generated from
operations in a foreign country, regardless of whether it is currently
reportable for U.S. tax purposes. Components of income (loss) before income
taxes are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
----------------------------------
1996 1995 1994
-------- -------- ---------
<S> <C> <C> <C>
Domestic . . . . . . . . . . . . . . . . . . . . . . . . $ 9,423 $ 513 $ (27,075)
Foreign . . . . . . . . . . . . . . . . . . . . . . . . 7,638 4,600 5,965
-------- -------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . $ 17,061 $ 5,113 $ (21,110)
======== ======== =========
</TABLE>
40
<PAGE> 41
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The earnings of the Company's foreign subsidiaries and affiliates are
indefinitely invested outside the United States, and the Company estimates that
no U.S. income taxes would be payable upon distribution of those unremitted
earnings.
The Company is subject to taxation in many jurisdictions, and the final
determination of its tax liabilities involves the interpretation of the
statutes and requirements of various domestic and foreign taxing authorities.
At December 31, 1996, foreign income tax returns for prior years of certain
foreign subsidiaries, unconsolidated affiliates and related entities were under
examination and/or tax deficiencies had been assessed. In the opinion of
management, any additional provisions for taxes which may ultimately be
determined to be required as a result of such examinations or assessments will
not be material to the Company's financial position or operations.
5. LONG-TERM DEBT AND LINES OF CREDIT
Lines of Credit
The Company has a syndicated bank revolving line of credit (the "Line of
Credit") to finance temporary working capital requirements and to support the
issuance of letters of credit. During 1996 the expiration date of the Line of
Credit was extended from April 1997 to April 1999 and the maximum availability
thereunder was increased. The maximum availability under the Line of Credit is
the lesser of (i) $40 million (previously $35 million), or (ii) a calculated
amount based upon a percentage of domestic receivables which meet certain
criteria. At December 31, 1996, the Company had $36.2 million available under
the Line of Credit of which none had been drawn in cash and $12.6 million was
being utilized to support the issuance of letters of credit. The Line of
Credit provides for certain restrictions on the Company, including a
prohibition against additional debt (excluding $7 million of overdraft
facilities), a prohibition on payment of dividends, a prohibition on certain
liens, a limitation on capital expenditures, and minimum net worth and working
capital covenants. Advances under the Line of Credit are secured by certain
accounts receivable, certain deposit accounts, all of the stock of or
equivalent interests in the Company's domestic subsidiaries, 66% of the stock
of the Company's consolidated foreign subsidiaries and the property owned by
the Company's Alaska subsidiary (net book value of $24.4 million at December
31, 1996). The interest rate for the Line of Credit is a floating rate which
is, at the Company's option, (i) the lenders' prime rate plus 0.25%, or (ii)
the London Interbank Offered Rate (LIBOR) plus 2.625%, with the Company's
choice of a one-, two-, three-, or six-month interest period. The applicable
interest rate was 8.5% and 8.75% at December 31, 1996 and 1995, respectively.
There is an approximately 1/2 of 1% commitment fee on the unutilized portion
of the Line of Credit.
At December 31, 1996, the Company's unconsolidated affiliates had $4.1
million of unused short-term lines of credit and overdraft facilities.
41
<PAGE> 42
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Long-Term Debt
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
-------- ---------
<S> <C> <C>
$23.5 Million Term Loan (Antah Drilling - Australia Rig 489) . . . . . $ 12,066 $ -
10% Subordinated Notes (GPC) . . . . . . . . . . . . . . . . . . . . . 10,000 11,500
$6.5 Million Term Loan (Australia Rig 453) . . . . . . . . . . . . . . 4,695 -
$10 Million Term Loan (Alaska) . . . . . . . . . . . . . . . . . . . . 4,625 7,375
$4 Million Term Loan (Antah Drilling - Malaysia Rig 488) . . . . . . . 1,150 -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234 369
-------- ---------
32,770 19,244
Less current maturities of long-term debt . . . . . . . . . . . . . . 9,702 4,385
-------- ---------
$ 23,068 $ 14,859
======== =========
</TABLE>
In connection with the October 1996 acquisition of Antah Drilling, the
Company agreed to assume liability under Antah Drilling's term loans, which
loans aggregated $14.6 million as of October 1, 1996. Such loans bear interest
at the Singapore Interbank Offered Rate (SIBOR) plus 1%, with the Company's
choice of a one-, three-, or six-month interest period; the applicable interest
rates approximated 6.65% at December 31, 1996. The loans are collateralized by
Antah Drilling's offshore platform rigs (approximate net book value of $38.7
million at December 31, 1996) and all payments under, and proceeds of, the
contracts under which such rigs are operating.
In January 1996, the Company received $6.5 million under a term loan
agreement in order to refinance the construction costs incurred during 1995 to
build a new offshore platform workover rig, Rig 453, under contract in
Australia. The rig construction costs were initially funded from the Company's
cash resources and borrowings under its Line of Credit. At the Company's
option, interest accrues at a floating rate based upon (i) the lenders' prime
rate plus 0.5% or (ii) LIBOR plus 2.75%, with the Company's choice of a one-,
two-, three- or six-month interest period. The applicable interest rate on
amounts outstanding at December 31, 1996 was 8.13%. The loan is collateralized
by the offshore platform workover rig (net book value of $6.8 million at
December 31, 1996) and all payments under, and proceeds of, the rig contract.
In June 1995, as partial consideration for the acquisition of GPC, the
Company issued 10% subordinated notes aggregating $11.5 million which are due
in 2005. These notes are subordinate to the Company's Line of Credit and $10
million term loan and are collateralized by (i) the well-servicing rigs and
related equipment of the acquired business which had an aggregate net book
value of $7.8 million at December 31, 1996, (ii) a second priority security
interest in certain real property of the acquired business which had a carrying
value of $1.4 million at December 31, 1996, and (iii) a $5.0 million letter of
credit. The agreement pertaining to the subordinated notes contains various
restrictive covenants, including covenants pertaining to the creation of
certain encumbrances, the transaction of certain mergers or sales of assets,
the creation of certain additional debt and other matters.
In April 1995, the Company obtained a three-year term loan (the "Alaska
Loan") to refinance $10 million of the purchase price for the 60.7% partnership
interest in Pool Arctic Alaska which was acquired in September 1994. This
acquisition was originally funded from the Company's cash resources and
approximately $6.7 million borrowed under the Line of Credit. The Alaska Loan
agreement contains restrictive covenants similar to those pertaining to the
Line of Credit and, in addition, includes a fixed charge coverage ratio
covenant. At the Company's option, interest accrues at a floating rate based
upon (i) the lenders' prime rate plus 0.5%, or (ii) LIBOR plus 2.75%, with the
Company's choice of a one-, two-, three-, or
42
<PAGE> 43
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
six-month interest period. The applicable interest rate on amounts outstanding
at December 31, 1996 and 1995 was 8.13% and 8.5%, respectively. The Alaska
Loan is cross-collateralized to the Line of Credit.
The annual maturities of long-term debt outstanding as of December 31, 1996
(including current portion) are as follows:
<TABLE>
<S> <C>
1997 . . . . . . . . . . . $ 9,702
1998 . . . . . . . . . . . 8,121
1999 . . . . . . . . . . . 6,822
2000 . . . . . . . . . . . 625
2001 . . . . . . . . . . . 1,500
Thereafter . . . . . . . . 6,000
--------
$ 32,770
========
</TABLE>
Based on rates currently available to the Company for debt with similar
terms and remaining maturities, the Company believes that the recorded value of
long-term debt approximates fair market value at December 31, 1996.
Notes Payable to Related Parties
In connection with the GPC acquisition in June 1995 the Company issued
notes, aggregating $1.5 million in principal amount, to three employees related
to certain deferred compensation obligations of GPC. These 10% two-year
promissory notes are secured by a first priority security interest in certain
real property of the acquired business, which had a carrying value of $1.4
million at December 31, 1996.
6. COMMITMENTS AND CONTINGENT LIABILITIES
Legal Proceedings
The Company is routinely involved in litigation incidental to its business,
which often involves claims for significant monetary amounts, some, but not
all, of which would be covered by insurance. In the opinion of management,
none of the existing litigation will have any material adverse effect on the
Company.
Personal Injury and Property Damage Liability Claims
Some of the operations of the Company are hazardous, and the Company has
experienced personal injury and property damage incidents. For claims prior to
1990, the Company maintains a reserve for the self-insured portion of its
personal injury and property damage coverage. Periodically, the Company
evaluates the adequacy of this reserve as compared with estimated settlements
for filed and anticipated claims. Estimated settlements for claims are based
on the Company's historical experience, type of claim, knowledge of the
specific circumstances of the claim and judgment of the possible effect that
future economic and legal factors might have on the ultimate settlement of the
claim. The Company believes that for claims prior to 1990, the accrued
liability for personal injury and property damage claims aggregating $2.7
million at December 31, 1996 is adequate.
43
<PAGE> 44
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Beginning in 1990, the Company obtained workers' compensation and
third-party liability insurance under which its exposure to the risks covered
by those policies is significantly lower than under the pre-1990 coverage. The
Company provided $3.5 million, $4.0 million, and $3.1 million in 1996, 1995 and
1994, respectively, as estimates of the aggregate uninsured portion of claims
for those years. The accrued liability for the uninsured portion of workers'
compensation and third-party claims incurred after 1989 was $7.1 million at
December 31, 1996, of which $0.3 million was held in a deposit account
accessible by the insurance underwriters. In addition, at December 31, 1996
the Company had a $0.7 million receivable related to claims payments made by
the Company that are reimbursable by insurance underwriters.
Lease Commitments
At December 31, 1996, the Company had a number of noncancelable long-term
operating leases, principally for yards and office space, rigs, computer
equipment, and a manufacturing and storage facility, with various expiration
dates. Future minimum net rentals under such leases aggregate $6.1 million for
1997; $6.2 million for 1998; $6.4 million for 1999; $5.9 million for 2000; $4.6
million for 2001; and $6.1 million thereafter. Rental expense incurred under
operating leases aggregated $13.5 million in 1996, $13.3 million in 1995, and
$11.2 million in 1994.
The Company has an operating lease, effective through March 2003, for a
65-acre facility at San Angelo, Texas which it previously used for rig and
equipment manufacturing and storage. The annual lease payments, which are
included in future minimum net rentals above, are $2.2 million through March
1998 and $4.4 million thereafter for the remaining five years of the lease.
Effective October 1, 1994, the Company vacated this facility and subleased it
in its entirety under an operating sublease which expires in September 1997.
The sublease provides for minimum sublease payments of $0.5 million per year
for three years. Prior to subleasing and vacating this facility in 1994, the
Company beneficially utilized approximately 12% of the facility and charged to
operations a proportionate share of the cost of the lease. In September 1988,
the Company, anticipating that it would not be able to fully utilize the
facility for a period of years, accrued a $15.9 million liability for the
expected underutilization. After September 1988, the cost associated with the
unutilized portion of the facility was charged against this accrued liability,
which as of the fourth quarter of 1994, had substantially been used. For the
remainder of the lease term, the Company did not anticipate utilizing any of
this facility in its future operations nor did it expect to be able to sublease
this facility to third parties for an amount equivalent to the annual lease
payments; therefore, in the fourth quarter of 1994 the Company recorded a
provision for leasehold impairment of $23.6 million (see Note 10). The
provision recognized all future lease expense, net of anticipated sublease
income. The impact of the provision for leasehold impairment was to decrease
1994 net income by $15.3 million, or $1.13 per share.
In December 1993 the Company entered into sale/leaseback agreements with a
leasing company with respect to three offshore jackup rigs located in the Gulf
of Mexico. The three jackup rigs had been purchased from a third party for
$7.0 million and were sold to the leasing company for $7.0 million in cash,
which was received in early 1994. The leases, classified as operating leases,
have an aggregate annual lease rate of approximately $1 million per year for
seven years and are included in the future minimum net rentals above. The sale
and leaseback agreements required the Company to place cash in a restricted
investment account which serves as collateral for the leases and will reduce as
lease payments are made. As of December 31, 1996, the Company had $1.0 million
of restricted cash of which $0.8 million was classified as noncurrent.
44
<PAGE> 45
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Employment Contracts
In connection with the GPC acquisition, the Company entered into three-year
employment contracts in June 1995 with three key employees previously employed
by GPC. One of the contracts was terminated in 1996 due to the employee's
resignation. The Company's minimum aggregate salary and bonus obligation
remaining at December 31, 1996 under such contracts was approximately $0.6
million.
7. PENSION, POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
Pension Plans
The Pool Company Retirement Income Plan, a defined benefit plan, covers
substantially all of the Company's domestic employees. The Company's policy
is to fund the minimum amount required by the Employee Retirement Income
Security Act of 1974. The benefits are based on years of service and the
average of the highest five consecutive years of compensation during the final
ten years of employment.
Supplementary executive retirement plans provide certain management
employees with defined benefits in excess of those provided by the Retirement
Income Plan. The Company's policy is to fund annually, within 60 days
following the end of the plan year, the amount necessary to make plan assets
sufficient to pay each participant or beneficiary the benefits payable as of
the close of that plan year. The benefits are based on years of service and
the average of the five highest years of compensation, including any bonus
earned, during the final ten years of employment.
The following is a summary of the components of net pension cost:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
----------------------------------
1996 1995 1994
-------- -------- ---------
<S> <C> <C> <C>
Service cost - benefits earned during the period . $ 2,000 $ 1,580 $ 1,336
Interest cost on projected benefit obligation . . . 781 525 425
Actual loss (return) on plan assets . . . . . . . . (841) (869) 26
Net amortization and deferral . . . . . . . . . . . 667 509 (256)
-------- -------- ---------
Net pension cost . . . . . . . . . . . . . . . . . $ 2,607 $ 1,745 $ 1,531
======== ======== =========
</TABLE>
45
<PAGE> 46
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The following table sets forth the funded status of the plans and amounts
recognized in the Company's consolidated balance sheets at December 31:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefit obligation . . . . . . . . . . . . . . . . . . $ (7,915) $ (4,936)
========= ========
Accumulated benefit obligation . . . . . . . . . . . . . . . $ (8,810) $ (6,911)
========= ========
Projected benefit obligation . . . . . . . . . . . . . . . . $ (11,660) $ (9,285)
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . 8,125 5,557
--------- --------
Projected benefit obligation in excess of plan assets . . . . . . (3,535) (3,728)
Unrecognized net (gain) loss . . . . . . . . . . . . . . . . . . (272) 1,464
Unrecognized prior service cost . . . . . . . . . . . . . . . . . 1,751 591
Adjustment to recognize minimum liability . . . . . . . . . . . . (706) (406)
--------- --------
Net pension liability . . . . . . . . . . . . . . . . . . . . . . $ (2,762) $ (2,079)
========= ========
</TABLE>
Assumptions used in the accounting at December 31 were:
<TABLE>
<CAPTION>
1996 1995
-------- ---------
<S> <C> <C>
Pool Company Retirement Income Plan:
Weighted average discount rate . . . . . . . . . . . . . . . 7.75% 7.25%
Annual rate of increase in future compensation levels . . . . 4.50% 4.50%
Expected long-term rate of return on plan assets . . . . . . 9.00% 9.00%
Supplementary executive retirement plans:
Weighted average discount rate . . . . . . . . . . . . . . . 7.75% 7.25%
Annual rate of increase in future compensation levels . . . . 6.00% 6.00%
Expected long-term rate of return on plan assets . . . . . . 9.00% 9.00%
</TABLE>
Postretirement Benefits Other Than Pensions
The Company provides certain health care and life insurance benefits to all
of its retirees who meet eligibility requirements based on age and years of
service. The benefits are paid from the general funds of the Company and, in
the case of the health care benefits, are partially funded by contributions from
the retirees.
The Company accounts for postretirement benefits other than pensions based
upon Statement of Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions" ("SFAS 106") which requires the
Company to accrue the estimated cost of its retiree health care and life
insurance benefits during the years the employees provide services entitling
them to the benefits. In accordance with the provisions of SFAS 106, the
Company has elected to recognize the liability of approximately $2.9 million at
the January 1, 1993 implementation date over a period of twenty years.
46
<PAGE> 47
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The following table sets forth certain information with respect to the
Company's postretirement benefits obligation at December 31:
<TABLE>
<CAPTION>
1996 1995
-------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,630) $(1,472)
Other fully eligible plan participants . . . . . . . . . . . . . (2,096) (1,876)
Other active plan participants . . . . . . . . . . . . . . . . . (4,720) (4,708)
------- -------
Total accumulated postretirement benefit obligation . . . . . . . . (8,446) (8,056)
Unrecognized transition obligation . . . . . . . . . . . . . . . . 2,236 2,376
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . 203 226
Unamortized net loss . . . . . . . . . . . . . . . . . . . . . . . 1,646 2,737
------- -------
Accrued postretirement benefit liability . . . . . . . . . . . . . $(4,361) $(2,717)
======= =======
</TABLE>
Net periodic postretirement benefit cost consisted of the following
components:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
----------------------------------
1996 1995 1994
-------- -------- ---------
<S> <C> <C> <C>
Service cost - benefits earned during the year . . . $ 1,023 $ 750 $ 534
Interest cost on accumulated postretirement
benefit obligation . . . . . . . . . . . . . . . . 546 461 405
Net amortization and deferral . . . . . . . . . . . . 167 93 79
Amortization of transition obligation . . . . . . . . 140 140 168
-------- -------- ---------
Net periodic postretirement benefit cost . . . . . . $ 1,876 $ 1,444 $ 1,186
======== ======== =========
</TABLE>
The assumed health care cost trend rate used to measure the expected cost
of the benefits was 6.5% for 1996 and thereafter. If the assumed health care
cost trend rate were increased by one percent, the accumulated postretirement
benefit obligation as of December 31, 1996 would have increased by 11%, and the
aggregate of service and interest cost components for 1996 would have increased
15%. The assumed discount rate used in determining the accumulated
postretirement benefit obligation was 7.75% in 1996, 7.25% in 1995 and 8.5% in
1994.
Postemployment Benefits
The Company accounts for postemployment benefits based on Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits," which requires the accrual of benefits provided after
employment but before retirement to former or inactive employees, their
beneficiaries, and covered dependents.
47
<PAGE> 48
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
8. TRANSACTIONS WITH ENSERCH
ENSERCH leases office space to the Company and previously provided claims
handling services, both at negotiated rates. Total direct costs charged by
ENSERCH were $0.8 million in 1996, $0.8 million in 1995 and $0.9 million in
1994.
In connection with the Company becoming an independent public company,
ENSERCH and the Company entered into a contingent support agreement (the
"Contingent Support Agreement") which relates to ENSERCH's guarantee of the
Company's lease obligations with respect to the facility in San Angelo, Texas,
through March 2003 ($24.5 million outstanding at December 31, 1996). The
Company is obligated to reimburse ENSERCH for any amounts paid out under this
guarantee.
Under the Contingent Support Agreement, ENSERCH advanced $4.0 million in
cash to the Company in 1990 in payment of future domestic onshore
well-servicing and production services to be applied annually against the first
$1.0 million of such services. During the years 1991 through 1994, the Company
performed $1.0 million of such services in each year and has now fulfilled its
obligation.
Certain oilfield services are performed for various affiliates and entities
managed by affiliates of ENSERCH at prices comparable to those received from
nonaffiliated customers. Revenues from the performance of those services,
including the $1.0 million of prepaid services in 1994, amounted to $2.3
million in 1996, $1.8 million in 1995 and $2.9 million in 1994.
9. UNCONSOLIDATED AFFILIATES
Some of the Company's operations are conducted through unconsolidated
affiliates, in which the Company held the following indicated ownership
interest at December 31, 1996: Pool Arabia, Ltd. - 51% and Intairdril Oman
L.L.C. - 49%. The Company charges its unconsolidated affiliates for the
provision of management services and, in some cases, financing and equipment
rental.
48
<PAGE> 49
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The following table sets forth certain summarized financial information of
the Company's unconsolidated affiliates as shown by the financial statements of
the affiliates. Pool Arabia's 1996 net loss included a $2.3 million pretax
loss on disposal of two offshore jackup rigs sold to a third party. The loss
on disposal had no effect on the Company's equity in income from Pool Arabia
because the Company's basis in the rigs was lower than Pool Arabia's basis in
the rigs. Pool Arctic Alaska's 1994 net income included a $1.0 million gain on
debt restructuring.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
----------------------------------
1996 1995 1994
-------- -------- ---------
<S> <C> <C> <C>
Revenues:
Pool Arabia, Ltd. . . . . . . . . . . . . . . . . . $ 29,238 $ 28,150 $ 36,281
Pool Arctic Alaska (b) . . . . . . . . . . . . . . - - 20,693
Antah Drilling Sdn. Bhd. (c) . . . . . . . . . . . 4,363 4,218 3,654
Pool Santana, Limited (d) . . . . . . . . . . . . . 960 5,785 4,916
Intairdril Oman L.L.C. . . . . . . . . . . . . . . 334 434 856
-------- -------- ---------
Total . . . . . . . . . . . . . . . . . . . . . $ 34,895 $ 38,587 $ 66,400
======== ======== =========
Gross profit (a):
Pool Arabia, Ltd. . . . . . . . . . . . . . . . . . $ 9,192 $ 10,106 $ 13,583
Pool Arctic Alaska (b) . . . . . . . . . . . . . . - - 5,330
Antah Drilling Sdn. Bhd. (c) . . . . . . . . . . . 2,442 2,357 2,570
Pool Santana, Limited (d) . . . . . . . . . . . . . 333 2,522 2,183
Intairdril Oman L.L.C. . . . . . . . . . . . . . . 153 223 543
-------- -------- ---------
Total . . . . . . . . . . . . . . . . . . . . . $ 12,120 $ 15,208 $ 24,209
======== ======== =========
Net income (loss):
Pool Arabia, Ltd. . . . . . . . . . . . . . . . . . $(3,586) $ (536) $ 1,640
Pool Arctic Alaska (b) . . . . . . . . . . . . . . . - - 1,903
Antah Drilling Sdn. Bhd. (c) . . . . . . . . . . . (50) (210) 386
Pool Santana, Limited (d) . . . . . . . . . . . . . 89 927 853
Intairdril Oman L.L.C. . . . . . . . . . . . . . . . (30) (392) (57)
------- ------- ---------
Total . . . . . . . . . . . . . . . . . . . . . $(3,577) $ (211) $ 4,725
======= ======= =========
</TABLE>
- ---------
(a) Gross profit is computed as revenues less operating expenses (which
excludes depreciation and amortization and selling, general and
administrative expenses).
(b) In September 1994, the Company acquired the 60.7% interest not already
owned by the Company in Pool Arctic Alaska, a partnership. The results of
Pool Arctic Alaska have been included in the accompanying consolidated
financial statements since the date of such acquisition (see Note 3).
(c) In October 1996, the Company acquired the 51% interest not already owned by
the Company in Antah Drilling. Antah Drilling's results have been included
in the accompanying financial statements since the date of such acquisition
(see Note 3).
(d) In April 1996, the Company acquired the 51% interest not already owned by
the Company in Pool Santana, Limited, a Trinidad corporation, the assets of
which consisted primarily of a platform workover rig and its related
equipment which were subsequently transferred to the Company's Gulf of
Mexico operation.
49
<PAGE> 50
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company's investment in its unconsolidated affiliates differs from its
ownership percentage of the affiliates' equity based on the financial
statements of the affiliates chiefly because of the allocation of the purchase
price for the 1990 purchase of ENSERCH's oilfield services business,
unrecognized gains on asset sales and other transactions as set forth below.
<TABLE>
<CAPTION>
AS OF DECEMBER 31
---------------------
1996 1995
-------- ---------
<S> <C> <C>
Combined Balance Sheet Data of Unconsolidated Affiliates:
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,277 $ 19,229
Noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . 39,342 88,197
-------- ---------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . 68,619 107,426
-------- ---------
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . 4,752 18,046
Noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . 42,562 56,876
-------- ---------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . 47,314 74,922
-------- ---------
Net assets of unconsolidated affiliates . . . . . . . . . . . . . $ 21,305 $ 32,504
======== =========
Investment in and Noncurrent Receivables from Unconsolidated Affiliates:
The Company's portion of net assets . . . . . . . . . . . . . . . $ 10,852 $ 16,414
Differences between affiliates' bases and Company's carrying value (12,408) (15,567)
Long-term advances . . . . . . . . . . . . . . . . . . . . . . . 19,334 19,396
-------- ---------
Equity in net assets . . . . . . . . . . . . . . . . . . . . . . 17,778 20,243
Noncurrent receivables . . . . . . . . . . . . . . . . . . . . . 1,326 5,758
-------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,104 $ 26,001
======== =========
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
----------------------------------
1996 1995 1994
-------- -------- ---------
<S> <C> <C> <C>
Earnings Attributable to Unconsolidated Affiliates:
The Company's portion of net income (loss) . . . . . $ (1,825) $ (114) $ 2,163
Adjustment to reconcile differences between affiliates'
bases and Company's carrying value . . . . . . . 4,046 3,009 2,892
-------- -------- ---------
Equity in income . . . . . . . . . . . . . . . . . 2,221 2,895 5,055
Other income (expense) . . . . . . . . . . . . . . 23 60 (39)
-------- -------- ---------
Total . . . . . . . . . . . . . . . . . . . . . $ 2,244 $ 2,955 $ 5,016
======== ======== =========
</TABLE>
At December 31, 1996, the Company's investment in unconsolidated affiliates
included $7.0 million of net undistributed earnings of the affiliates. Pool
Arabia, Ltd. is party to an agreement which contains a covenant restricting the
ability to distribute, by dividend or otherwise, its earnings to the Company.
The Company received dividends from unconsolidated affiliates of $1.7 million
in 1996, $2.9 million in 1995 and $2.9 million in 1994.
In management's opinion, the Company has no significant exposure from
currency restrictions on its foreign subsidiaries and affiliates (see Note 1).
50
<PAGE> 51
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
10. SUPPLEMENTAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
AS OF DECEMBER 31
------------------------------
1996 1995
------------- -------------
<S> <C> <C>
BALANCE SHEET ITEMS:
Property, plant and equipment comprised the following:
Rigs and related equipment . . . . . . . . . . . . . . . . . $ 256,420 $ 180,240
Transportation equipment . . . . . . . . . . . . . . . . . . 5,302 4,955
Other machinery and equipment . . . . . . . . . . . . . . . 5,953 4,803
Land and buildings . . . . . . . . . . . . . . . . . . . . . 7,765 6,587
Leasehold improvements . . . . . . . . . . . . . . . . . . . 2,463 2,300
Furniture and office equipment . . . . . . . . . . . . . . . 2,699 2,221
------------- -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . 280,602 201,106
Less - Accumulated depreciation . . . . . . . . . . . . . . 91,477 77,082
------------- -------------
Property, plant and equipment - net . . . . . . . . . $ 189,125 $ 124,024
============= =============
Accrued liabilities are summarized below:
Accrued compensation and benefits . . . . . . . . . . . . . $ 18,934 $ 10,386
Deferred rig mobilization . . . . . . . . . . . . . . . . . 3,155 225
Personal injury and property damage claims . . . . . . . . . 925 1,648
Other accruals . . . . . . . . . . . . . . . . . . . . . . . 6,491 7,356
------------- -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,505 $ 19,615
============= =============
Other liabilities (noncurrent) are summarized below:
Accrued rental cost of underutilized facilities . . . . . . $ 24,476 $ 25,750
Personal injury and property damage claims - noncurrent . . 9,436 9,660
Deferred rig mobilization . . . . . . . . . . . . . . . . . 5,055 -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,069 7,729
------------- -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 46,036 $ 43,139
============= =============
</TABLE>
51
<PAGE> 52
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
----------------------------------
1996 1995 1994
---------- ----------- --------
<S> <C> <C> <C>
INCOME STATEMENT ITEMS:
Revenues:
Domestic onshore
Central division well-servicing . . . . . . . . . . . . . . . . . $ 91,304 $ 86,880 $ 84,988
California division well-servicing . . . . . . . . . . . . . . . 71,519 52,511 24,471
Production services . . . . . . . . . . . . . . . . . . . . . . . 44,459 43,221 42,067
Gulf of Mexico offshore workover and drilling . . . . . . . . . . . . 58,545 37,415 36,020
International workover and drilling . . . . . . . . . . . . . . . . . 42,191 23,579 19,866
Alaska workover and drilling . . . . . . . . . . . . . . . . . . . . 24,633 20,427 9,940
Other services . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,907 13,272 11,823
---------- --------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 348,558 $ 277,305 $229,175
========== ========= ========
Operating expenses included:
Provision (credit) for uncollectible accounts . . . . . . . . . . . . $ (551) $ 765 $ (59)
========== ========= ========
Other income (expense) - net:
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,302 $ 435 $ 418
Gain (loss) on disposal of assets . . . . . . . . . . . . . . . . . . 1,015 1,164 359
Settlement related to sale of Libya assets . . . . . . . . . . . . . - - 500
Foreign currency gain (loss) . . . . . . . . . . . . . . . . . . . . (191) (285) (72)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (31) (25) (3)
---------- --------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,095 $ 1,289 $ 1,202
========== ========== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Federal, state and foreign income tax payments (refunds), net . . . . . . $ 2,499 $ 138 $ 150
Interest payments, net of amounts capitalized, to third parties . . . . . . 2,744 1,458 100
Net changes in the components of operating working capital
were as follows:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (12,472) $ 5,653 $ (3,080)
Accounts receivable from affiliates . . . . . . . . . . . . . . . . . (604) (1,587) (468)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 (38) (612)
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . (127) 123 (10)
Trade accounts payable and accrued liabilities . . . . . . . . . . . 1,288 5,295 3,419
Accrued taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,124 (2,198) 585
---------- --------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (10,719) $ 7,248 $ (166)
========== ========= ========
</TABLE>
52
<PAGE> 53
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Expenditures for acquisitions, including acquisition costs, less cash acquired:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ---------- ---------
<S> <C> <C> <C>
Fair value of assets acquired . . . . . . . . . . . . . . $ 56,881 $ 37,808 $ 13,761
Long-term notes issued . . . . . . . . . . . . . . . . . - (11,500) -
Company's common stock issued . . . . . . . . . . . . . . - (4,200) -
Liabilities assumed . . . . . . . . . . . . . . . . . . . (33,756) (18,023) (1,621)
----------- ---------- ---------
Cash paid, including acquisition related expenditures . . 23,125 4,085 12,140
Less: cash acquired . . . . . . . . . . . . . . . . . . 759 654 890
----------- ---------- ---------
Net cash used for acquisitions . . . . . . . . . . . . . $ 22,366 $ 3,431 $ 11,250
=========== ========== =========
</TABLE>
The Company also reclassified its investment in Pool Arctic Alaska in 1994
of $10.9 million and in Antah Drilling and Pool Santana in 1996 of $1.6 million
and $1.5 million, respectively, to their related assets and liabilities at the
time of each acquisition (see Note 3).
In December 1993, the Company entered into agreements with a leasing
company to sell for $7.0 million and lease back three offshore jackup rigs
which the Company had recently purchased from a third party; the sales proceeds
were received in January 1994 (see Note 6).
53
<PAGE> 54
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
BUSINESS BY GEOGRAPHIC AREA:
The following table sets forth certain financial data of the Company by
geographic area:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
United States . . . . . . . . . . . . . . . . $ 304,406 $ 252,056 $ 206,301
Europe and Africa . . . . . . . . . . . . . . 799 1,865 897
Middle East . . . . . . . . . . . . . . . . . 9,074 7,873 3,976
Asia . . . . . . . . . . . . . . . . . . . . 1,158 - -
Australia . . . . . . . . . . . . . . . . . . 10,529 2,248 -
South America . . . . . . . . . . . . . . . . 22,592 13,263 18,001
----------- ----------- -----------
Total . . . . . . . . . . . . . . . . . . $ 348,558 $ 277,305 $ 229,175
=========== =========== ===========
Earnings Attributable to Unconsolidated Affiliates:
United States . . . . . . . . . . . . . . . . $ - $ - $ 521
Middle East . . . . . . . . . . . . . . . . . 1,669 2,163 3,688
Asia . . . . . . . . . . . . . . . . . . . . 523 271 146
South America . . . . . . . . . . . . . . . . 52 521 661
----------- ----------- -----------
Total . . . . . . . . . . . . . . . . . . $ 2,244 $ 2,955 $ 5,016
=========== =========== ===========
Operating Income (Loss) (a):
United States . . . . . . . . . . . . . . . . $ 9,563 $ 1,105 $ (29,347) (b)
Europe and Africa . . . . . . . . . . . . . . (402) (430) (140)
Middle East . . . . . . . . . . . . . . . . . 1,522 928 1,294
Asia . . . . . . . . . . . . . . . . . . . . 326 (2) (50)
Australia . . . . . . . . . . . . . . . . . . 2,937 902 -
South America . . . . . . . . . . . . . . . . 1,569 177 1,168
----------- ----------- -----------
Total . . . . . . . . . . . . . . . . . . $ 15,515 $ 2,680 $ (27,075)
=========== =========== ===========
Income (Loss) Before Income Taxes and Minority Interest:
United States . . . . . . . . . . . . . . . . $ 9,423 $ 513 $ (27,075) (b)
Europe and Africa . . . . . . . . . . . . . . (388) (441) (79)
Middle East . . . . . . . . . . . . . . . . . 3,230 3,279 4,103
Asia . . . . . . . . . . . . . . . . . . . . 853 269 96
Australia . . . . . . . . . . . . . . . . . . 2,234 891 -
South America . . . . . . . . . . . . . . . . 1,709 602 1,845
----------- ----------- -----------
Total . . . . . . . . . . . . . . . . . . $ 17,061 $ 5,113 $ (21,110)
=========== =========== ===========
</TABLE>
- -----------------
(a) Operating income (loss) is revenues less related costs and expenses; it
excludes earnings attributable to unconsolidated affiliates.
(b) A provision for leasehold impairment of $23.6 million was recorded in 1994
to offset all future lease expense, net of anticipated sublease income,
related to the facility in San Angelo, Texas. See Note 6.
54
<PAGE> 55
POOL ENERGY SERVICES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
<TABLE>
<CAPTION>
AS OF DECEMBER 31
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Identifiable Assets:
United States . . . . . . . . . . . . . . . . $ 222,656 $ 183,850 $ 149,058
Europe and Africa . . . . . . . . . . . . . . 1,691 2,003 3,507
Middle East . . . . . . . . . . . . . . . . . 28,065 26,655 29,050
Asia . . . . . . . . . . . . . . . . . . . . 6,062 8,035 6,313
Australia . . . . . . . . . . . . . . . . . . 46,769 8,334 -
South America . . . . . . . . . . . . . . . . 35,974 19,566 21,890
----------- ----------- -----------
Total . . . . . . . . . . . . . . . . . . $ 341,217 $ 248,443 $ 209,818
=========== =========== ===========
</TABLE>
11. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of unaudited quarterly financial data for 1996
and 1995.
<TABLE>
<CAPTION>
4TH 3RD 2ND 1ST
QUARTER QUARTER QUARTER QUARTER
------- --------- -------- -------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1996:
Revenues . . . . . . . . . . . . . . . . . . $ 99,910 $ 83,978 $ 82,988 $ 81,682
Earnings Attributable to Unconsolidated
Affiliates . . . . . . . . . . . . . . . . 334 728 524 658
Gross Profit (a) . . . . . . . . . . . . . . 25,450 19,910 18,991 18,759
Income Before Income Taxes and
Minority Interest . . . . . . . . . . . . . 6,965 3,992 3,377 2,727
Net Income . . . . . . . . . . . . . . . . . 3,798 2,586 1,833 1,423
Earnings Per Share of Common Stock . . . . . . $ .20 $ .14 $ .13 $ .10
1995:
Revenues . . . . . . . . . . . . . . . . . . $ 75,131 $ 75,515 $ 63,805 $ 62,854
Earnings Attributable to Unconsolidated
Affiliates . . . . . . . . . . . . . . . . 785 752 643 775
Gross Profit (a) . . . . . . . . . . . . . . 17,703 15,963 15,069 12,451
Income Before Income Taxes . . . . . . . . . 2,746 1,001 1,282 (b) 84
Net Income . . . . . . . . . . . . . . . . . 1,718 644 555 (b) 215
Earnings Per Share of Common Stock . . . . . . $ .12 $ .05 $ .04 (b) $ .02
</TABLE>
- ------------
(a) Gross profit is computed as consolidated revenues plus earnings
attributable to unconsolidated affiliates, less operating expenses (which
excludes selling, general and administrative expenses, depreciation and
amortization and acquisition related costs).
(b) Includes GPC acquisition related costs of $0.6 million pretax ($0.4
million, or $.03 per share after-tax). See Note 3.
55
<PAGE> 56
INDEPENDENT AUDITORS' REPORT
Pool Arabia, Ltd.:
We have audited the accompanying balance sheets of Pool Arabia, Ltd. (the
"Company") as of December 31, 1996 and 1995, and the related statements of
operations and cash flows for each of the three years in the period ended
December 31, 1996. Our audits also included the financial statement schedule
listed in the Index at Item 14. These financial statements and the financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1996 and 1995,
and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles. Also, in our opinion, the financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Houston, Texas
January 31, 1997
56
<PAGE> 57
POOL ARABIA, LTD.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Well servicing and drilling fees ................. $ 29,238 $ 28,150 $ 36,092
Other ............................................ -- -- 189
-------- -------- --------
Total revenues ...................... 29,238 28,150 36,281
-------- -------- --------
Costs and Expenses:
Well servicing and drilling:
Salaries, wages and employee benefits ......... 10,981 9,925 11,735
Depreciation .................................. 6,450 6,465 7,372
Maintenance, repairs and operating supplies ... 6,141 4,718 6,105
Other ......................................... 2,924 3,401 4,858
-------- -------- --------
Total well servicing and drilling ... 26,496 24,509 30,070
General and administrative ....................... 888 917 1,185
-------- -------- --------
Total costs and expenses ............ 27,384 25,426 31,255
-------- -------- --------
Operating Income .................................... 1,854 2,724 5,026
Interest Expense .................................... 3,028 3,369 2,693
Loss on Disposal of Rigs ............................ 2,332 -- --
Other Expense (Income) - Net ........................ (11) (169) 29
-------- -------- --------
Income (Loss) Before Zakat and Income Taxes ......... (3,495) (476) 2,304
Zakat ............................................... 42 -- --
Saudi Arabian Income Taxes:
Current provision - net ........................ 894 -- 442
Deferred tax provision (credit) ................ (845) 60 222
-------- -------- --------
Total ............................. 49 60 664
-------- -------- --------
Net Income (Loss) ................................... $ (3,586) $ (536) $ 1,640
======== ======== ========
</TABLE>
See Notes to Financial Statements.
57
<PAGE> 58
POOL ARABIA, LTD.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Operating Activities:
Net Income (Loss) ................................................. $ (3,586) $ (536) $ 1,640
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation ................................................... 6,450 6,465 7,372
Deferred Saudi Arabian income tax provision (credit) ........... (845) 60 222
(Gain) loss on disposal of property and equipment .............. 2,321 (152) (90)
Changes in:
Accounts receivable ......................................... (3,327) 4,087 (487)
Inventory ................................................... 1 475 (312)
Prepayments and other current assets ........................ (53) (1) 24
Retentions receivable - noncurrent .......................... (418) (1,964) (528)
Accounts payable ............................................ 514 (78) (2)
Accrued salaries and wages .................................. 92 (121) (2)
Saudi Arabian income taxes payable .......................... 824 (493) (560)
Other accrued liabilities ................................... 270 (289) 44
Deferred mobilization fees - net ............................ -- -- (103)
Other liabilities ........................................... 98 41 67
-------- -------- --------
Net Cash Flows Provided by Operating Activities ...... 2,341 7,494 7,285
-------- -------- --------
Investing Activities:
Purchases of property and equipment ............................... (5,269) (3,428) (1,961)
Net proceeds from disposal of property and equipment .............. 15,940 316 221
-------- -------- --------
Net Cash Flows Used in Investing Activities........... 10,671 (3,112) (1,740)
-------- -------- --------
Financing Activities:
Repayment of long-term debt ....................................... (1,121) (2,239) (2,239)
Dividends paid .................................................... (168) (2,131) (3,767)
-------- -------- --------
Net Cash Flows Used in Financing Activities .......... (1,289) (4,370) (6,006)
-------- -------- --------
Net Increase (Decrease) in Cash and Cash Equivalents ................. 11,723 12 (461)
Cash and Cash Equivalents at January 1, .............................. 2,912 2,900 3,361
-------- -------- --------
Cash and Cash Equivalents at December 31, ............................ $ 14,635 $ 2,912 $ 2,900
======== ======== ========
</TABLE>
See Notes to Financial Statements.
58
<PAGE> 59
POOL ARABIA, LTD.
BALANCE SHEETS
(IN THOUSANDS EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNT)
<TABLE>
<CAPTION>
DECEMBER 31
------------------
ASSETS 1996 1995
------- -------
<S> <C> <C>
Current Assets:
Cash and cash equivalents .................................. $14,635 $ 2,912
Accounts receivable - trade ................................ 7,900 4,573
Inventory - materials and supplies, at average cost ........ 5,853 5,854
Prepayments and other current assets ....................... 202 149
------- -------
Total current assets .......................... 28,590 13,488
Property and Equipment - Net .................................. 34,023 53,465
Retentions Receivable - Noncurrent ............................ 5,063 4,645
------- -------
Total ......................................................... $67,676 $71,598
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt .......................... $ -- $ 1,121
Accounts payable - principally trade ....................... 1,247 733
Accrued salaries and wages ................................. 619 527
Saudi Arabian income taxes payable ......................... 910 86
Other accrued liabilities .................................. 1,826 1,556
------- -------
Total current liabilities ..................... 4,602 4,023
------- -------
Other Liabilities:
Note payable ............................................... 40,000 40,000
Deferred Saudi Arabian income taxes ........................ 1,761 2,606
Other ...................................................... 712 614
------- -------
Total other liabilities ....................... 42,473 43,220
------- -------
Shareholders' Equity:
Share capital, par value Saudi riyals 3,000 per share;
1,000 shares authorized, issued and outstanding ......... 857 857
Legal reserve .............................................. 429 429
Retained earnings .......................................... 19,315 23,069
------- -------
Total shareholders' equity .................... 20,601 24,355
------- -------
Total ......................................................... $67,676 $71,598
======= =======
</TABLE>
See Notes to Financial Statements.
59
<PAGE> 60
POOL ARABIA, LTD.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
All dollar amounts in the tabulations in the notes to the financial
statements are in thousands unless otherwise indicated. All dollar amounts
included in the text are in whole dollars, unless otherwise indicated. Certain
amounts in the 1995 and 1994 financial statements have been reclassified to
conform with the 1996 presentation.
The Company - Pool Arabia, Ltd. (the "Company") is a limited liability
company formed under the Regulations for Companies in the Kingdom of Saudi
Arabia for the purpose of performing oil and gas production services. The
Company's Commercial Registration No. 2051002523 was issued in Dammam on
September 15, 1976 and the Company commenced operations on May 1, 1977. The
Company is owned 51% by Pool International, Inc. ("Pool"), a U.S. corporation
and wholly owned subsidiary of Pool Energy Services Co., and 49% by Arabian
Petroleum Services ("Petroserv"), a Saudi Arabian company.
The primary business of the Company is operating workover and drilling
rigs (onshore and offshore) under contracts with Saudi Arabian Oil Company
("Saudi Aramco") and with the Joint Operations of Kuwait Oil Company and Saudi
Arabian Texaco, Inc. ("Joint Operations"). During 1996, 100% of revenues were
earned from Saudi Aramco (1995 - 98%; 1994 - 86%). No revenues were earned
from the Joint Operations during 1996 (1995 - 2%; 1994 - 14%).
Foreign Currency Translation - The Company's functional currency is the
United States dollar. Transactions denominated in foreign currencies are
translated into United States dollars at exchange rates prevailing at the dates
of such transactions. Assets and liabilities denominated in foreign currencies
are translated into United States dollars at exchange rates prevailing on the
balance sheet date. Translation gains (losses) resulting from changes in
exchange rates are credited (charged) to income in the current period. The net
amount of such gains (losses) during each of the three years in the period
ended December 31, 1996 was not significant.
Property and Equipment - Property and equipment are stated at cost, less
a 1985 provision to reduce the carrying value of certain rig equipment to
reflect an impairment in value resulting from the depressed conditions in the
oilfield service industry. Maintenance and repairs are charged to expense as
incurred. Depreciation of rigs and related equipment is computed principally
using a service life method equivalent to straight-line depreciation on a
ten-year service life if the rigs were continuously utilized. The actual
useful lives of such assets extend beyond the nominal service life period
because of anticipated periods of nonutilization and because of maintenance and
rebuilding expenditures during periods of such nonutilization. The carrying
values and service lives of such assets are periodically assessed to assure
that, at the minimum, the cost of assets is depreciated over a period of time
that is not greater than their remaining useful lives. Depreciation of
buildings and certain other equipment (primarily vehicles) is computed using
the straight-line method over the estimated useful lives of the related assets.
See also Note 4.
60
<PAGE> 61
POOL ARABIA, LTD.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This statement
requires that long-lived assets and certain identifiable intangibles held and
used by the Company be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Since adoption of this statement no impairment losses have been
recognized.
Revenue Recognition - The Company generally recognizes revenue when
services are rendered. Mobilization fees received from customers net of
mobilization costs are deferred. Deferred mobilization fees - net are
amortized over the terms of the related contracts.
Deferred Saudi Arabian Income Taxes - The Company accounts for income
taxes based upon Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" which requires recognition of deferred income tax
liabilities and assets for the expected future tax consequences of events that
have been recognized in the Company's financial statements or tax returns.
Under this method, deferred income tax liabilities and assets are determined
based on the temporary differences between the financial statement carrying
amounts and the tax bases of existing assets and liabilities. These temporary
differences are principally due to differences in depreciation methods used for
financial reporting and tax purposes. See also Note 7.
Cash Flows - During each of the three years in the period ended December
31, 1996, the Company paid interest charges and income taxes and zakat as
follows:
<TABLE>
<CAPTION>
INTEREST INCOME TAXES
CHARGES AND ZAKAT
----------- ------------
<S> <C> <C>
1996 ......................................... $ 3,155 $ 114
1995 ......................................... 3,613 507
1994 ......................................... 2,610 1,068
</TABLE>
Cash Equivalents - Time deposits with less than a three-month maturity
when purchased are considered cash equivalents and are included in cash and
cash equivalents.
Fair Values of Financial Instruments - The Company estimates the fair
values of its financial instruments, which consist of variable rate debt and
short-term items, to approximate the related carrying values.
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 and 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. Actual results could differ from those estimates.
61
<PAGE> 62
POOL ARABIA, LTD.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
2. SHAREHOLDERS' EQUITY
The following is a summary of transactions affecting shareholders' equity
for the last three fiscal years.
<TABLE>
<CAPTION>
SHARE LEGAL RETAINED
CAPITAL RESERVE EARNINGS
-------- -------- --------
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1994 .......... $ 857 $ 429 $ 27,863
Net income ........................ -- -- 1,640
Dividends ......................... -- -- (3,767)
-------- -------- --------
BALANCE, DECEMBER 31, 1994 ........ 857 429 25,736
Net loss .......................... -- -- (536)
Dividends ......................... -- -- (2,131)
-------- -------- --------
BALANCE, DECEMBER 31, 1995 ........ 857 429 23,069
Net loss .......................... -- -- (3,586)
Dividends ......................... -- -- (168)
-------- -------- --------
BALANCE, DECEMBER 31, 1996 ........ $ 857 $ 429 $ 19,315
======== ======== ========
</TABLE>
3. ACCOUNTS RECEIVABLE
Accounts receivable - trade at December 31, 1996 include current
retentions of $2.4 million (1995 - $1.9 million), which represent withholdings
from periodic contract billings.
4. PROPERTY AND EQUIPMENT
Property and equipment - net at December 31 was comprised of:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Drilling and workover rigs ............... $ 104,852 $ 136,700
Buildings, camps and improvements ........ 8,775 8,345
Vehicles ................................. 10,557 9,650
Furniture and fixtures ................... 306 306
Work in progress ......................... 475 --
--------- ---------
Total .................................... 124,965 155,001
Less accumulated depreciation ............ (90,942) (101,536)
--------- ---------
Property and equipment - net ............. $ 34,023 $ 53,465
========= =========
</TABLE>
As explained in Note 1, rigs and related equipment are depreciated using
a service life method which results in suspension of depreciation on
temporarily idle rigs and related equipment during periods of nonutilization.
During 1993, the Company commenced recording depreciation on temporarily idle
rigs and
62
<PAGE> 63
POOL ARABIA, LTD.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
equipment at the rate of approximately one-quarter of the normal in-service
depreciation rate in order to recognize an estimated reduction in the remaining
useful lives of such assets. At December 31, 1996, property and equipment
includes temporarily idle rigs and equipment with a cost of $17.9 million (1995
- - $64.8 million) and net book value of $7.2 million (1995 - $29.2 million).
During 1996 the Company sold two of its idle rigs, which had a total net
book value of $18.3 million, for $16.0 million resulting in a loss of $2.3
million. Such loss is included in the accompanying 1996 statement of
operations.
5. SHORT-TERM CREDIT FACILITIES
At December 31, 1996 the Company had short-term credit and guarantee
facilities totaling Saudi riyals 29 million (equivalent to $7.7 million) out of
which Saudi riyals 13 million (equivalent to $3.6 million) were utilized for
issuance of bank guarantees (see Note 11). Short-term borrowings under these
facilities bear interest principally at the Saudi Interbank Offer Rate plus
0.75% or 1%. The commitment fee payable on these facilities is not
significant.
The credit facility agreement with the bank places restrictions on any
dividend distributions and any repayment of advances from the shareholders. In
1996, 1995 and 1994, the Company obtained waivers of these restrictions in
order to repay advances from shareholders and to pay dividends.
6. LONG-TERM DEBT AND NOTE PAYABLE
Long-term debt at December 31, 1995 was collateralized by a standby
letter of credit from Pool and a guarantee by Petroserv in proportions
equivalent to their respective shareholdings. Certain contract revenues were
also assigned as collateral for the loan. Semi-annually, the Company could
elect the denomination of the loan as either United States dollars or Saudi
riyals. At December 31, 1995 the Company had elected Saudi riyals. The
outstanding balance of the loan at December 31, 1995 was repaid in 1996. The
loan agreement required interest charges ranging from 3/16% to 7/8% over the
London or Riyadh Interbank Offer Rates.
The loan agreement placed restrictions on any dividend distributions and
any repayment of advances from shareholders. In 1996, 1995 and 1994, the
Company obtained waivers of these restrictions in order to repay advances from
shareholders and to pay dividends.
During 1993, the Company borrowed Saudi riyals 150 million ($40 million)
from a bank in Bahrain under a demand note. The note bears interest at a
variable rate, which was 7.5% per annum at December 31, 1996. The Company does
not expect the bank to require repayment within the next year, nor does the
Company intend to repay any of the outstanding principal in 1997. In addition,
the Company's shareholders have agreed that if the bank called the note, any
repayment would be effected through an increase in shareholders' contributions.
7. SAUDI ARABIAN INCOME TAXES AND ZAKAT
The Company provides for Saudi Arabian income taxes on the portion of
income attributable to Pool and for zakat, which is attributable to Petroserv.
For purposes of determining the distributable share of retained earnings, these
amounts are charged against the retained earnings of the individual
shareholders.
63
<PAGE> 64
POOL ARABIA, LTD.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
The Company has received assessments from the Department of Zakat and
Income Tax (DZIT) for additional taxes and zakat totaling Saudi riyals 13.4
million (equivalent to $3.6 million) related to the years 1980 through 1994
which are summarized as follows:
<TABLE>
<S> <C>
Income taxes and related delay penalties ............... $3,196
Zakat .................................................. 203
Capital gains tax related to an ownership change in 1981 168
------
Total .................................................. $3,567
======
</TABLE>
The Company has appealed the assessments. Management is unable to
determine the ultimate liability, if any, which may result from these
assessments; accordingly, no provision for any liability which may result from
the assessments has been made in the accompanying financial statements.
8. SHAREHOLDERS' AGREEMENT
Pursuant to a shareholders' agreement between Pool and Petroserv,
Petroserv has the option to acquire additional ownership from Pool, and
ultimately ownership of the Company could change to 65% by Petroserv and 35% by
Pool. The purchase price for Petroserv to acquire additional ownership is to
be determined as provided in the agreement.
The Board of Directors of the Company consists of nine persons: five
named by Pool and four by Petroserv. Decisions affecting, among other things,
capital contributions by the shareholders, capital expenditures, issuance of
indebtedness, and payment of a liquidation dividend must be unanimously
approved by the Board of Directors. Certain specific actions shall be
undertaken by the Company only with the unanimous consent of its shareholders.
9. LEGAL RESERVE
In accordance with the Regulations for Companies in the Kingdom of Saudi
Arabia, the Company maintains a legal reserve equal to one-half of its share
capital. Such reserve currently is not available for distribution to the
shareholders.
10. RELATED PARTY TRANSACTIONS
Significant related party transactions were as follows:
a) $5.8 million of property, equipment and inventory was acquired in
1996 from affiliates (1995 - $4.0 million; 1994 - $4.2 million).
b) $0.7 million of costs and expenses was charged in 1996 by affiliates
(1995 - $0.6 million; 1994 - $1.7 million).
Accounts payable at December 31, 1996 include $0.6 million due to related
parties (1995 - $0.3 million).
64
<PAGE> 65
POOL ARABIA, LTD.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
11. CONTINGENCIES
At December 31, 1996, the Company had outstanding bank guarantees of $3.6
million issued in connection with its contracts (1995 - $2.0 million). See
also Note 7 related to income tax contingencies.
65
<PAGE> 66
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEMS 10-13.
Pursuant to Instruction G(3) to Form 10-K, the information required in
Items 10-13 is incorporated by reference from the Company's definitive proxy
statement, which will be filed with the Commission pursuant to Regulation 14A
within 120 days of December 31, 1996.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)-1 FINANCIAL STATEMENTS
Included in Part II of this report:
PAGE
----
<TABLE>
<S> <C>
Pool Energy Services Co.:
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . 25
Statements of Consolidated Operations for Each of the Three Years
in the Period Ended December 31, 1996 . . . . . . . . . . . . . 26
Statements of Consolidated Cash Flows for Each of the Three Years
in the Period Ended December 31, 1996 . . . . . . . . . .. . . 27
Consolidated Balance Sheets at December 31, 1996 and 1995 . . . . 28
Notes to Consolidated Financial Statements . . . . . . . . . . . . 29
Pool Arabia, Ltd.:
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . 56
Statements of Operations for Each of the Three Years in the Period
Ended December 31, 1996 . . . . . . . . . . . . . . . . . . . . 57
Statements of Cash Flows for Each of the Three Years in the Period
Ended December 31, 1996 . . . . . . . . . . . . . . . . . . . . 58
Balance Sheets at December 31, 1996 and 1995 . . . . . . . . . . . 59
Notes to Financial Statements . . . . . . . . . . . . . . . . . . 60
(a)-2 FINANCIAL STATEMENT SCHEDULES
Included in Part IV of this report:
Pool Energy Services Co.:
Consolidated Supplementary Financial Statement Schedules As of and for Each
of the Three Years Ended December 31, 1996:
II - Consolidated Valuation and Qualifying Accounts . . . . . . 72
</TABLE>
66
<PAGE> 67
(a)-2 FINANCIAL STATEMENT SCHEDULES - (CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Pool Arabia, Ltd.:
Supplementary Financial Statement Schedules As of and for Each of the
Three Years Ended December 31, 1996:
II - Valuation Accounts . . . . . . . . . . . . . . . . . . . . 73
</TABLE>
The supplemental schedules other than those listed above are omitted
because of the absence of the conditions under which they are required or
because the required information is included in the Financial Statements or
Notes thereto.
(a)-3 EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
- ----------- --------
<S> <C>
3.1 - Articles of Incorporation of the Company, as amended
(incorporated by reference to Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the period ended March 31,
1996, Commission File No. 0-18437)
3.2 - Bylaws of the Company as currently in effect (incorporated by
reference to Exhibit 3.2.1 to the Company's Quarterly Report
on Form 10-Q for the period ended September 30, 1994,
Commission File No. 0-18437)
4.1 - Rights Agreement dated as of June 7, 1994 between Pool Energy
Services Co. and The First National Bank of Boston, as Rights
Agent, which includes as Exhibit A the form of Rights
Certificate and as Exhibit B the form of Summary of Rights to
Purchase Shares (incorporated by reference to Exhibit 1 to the
Company's Current Report on Form 8-K dated June 7, 1994,
Commission File No. 0-18437)
10.1 - Contingent Support Agreement (incorporated by reference to
Exhibit 10.2.1 to the Company's Registration Statement on Form
S-1 No. 33-33726)
10.1.1 - Amendment to Contingent Support Agreement (incorporated by
reference to Exhibit 10.2.1 to the Company's Form 10-K for the
year ended December 31, 1990, Commission File No. 0-18437)
10.2 - Sublease Agreement (incorporated by reference to Exhibit 10.3
to the Company's Registration Statement on Form S-1 No. 33-
25535)
10.2.1 - First Amendment to Sublease Agreement (incorporated by
reference to Exhibit 10.3.1 to the Company's Registration
Statement on Form S-1 No. 33-36622)
10.2.2 - Second Amendment to Sublease Agreement (incorporated by
reference to Exhibit 10.3.2 to the Company's Form 10-K for the
year ended December 31, 1992, Commission File No. 0-18437)
10.3(*) - Pool Energy Services Co. Stock Option Plan (incorporated by
reference to Exhibit 10.4.1 to the Company's Registration
Statement on Form S-1 No. 33-36622)
10.4 - Credit Agreement between Pool Company and NCNB Texas National
Bank, N.A. (incorporated by reference to Exhibit 10.7 to the
Company's Registration Statement on Form S-1 No. 33-33726)
10.4.1 - First Amendment to Credit Agreement (incorporated by reference
to Exhibit 10.6.1 to the Company's Form 10-K for the year
ended December 31, 1990, Commission File No. 0-18437)
</TABLE>
67
<PAGE> 68
(a)-3 EXHIBITS - (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
- ----------- --------
<S> <C>
10.4.2 - Waiver under Credit Agreement (incorporated by reference to
Exhibit 10.6.2 to the Company's Form 10-K for the year ended
December 31, 1990, Commission File No. 0-18437)
10.4.3 - Second Amendment to Credit Agreement (incorporated by
reference to Exhibit 10.6.3 to the Company's Form 10-K for the
year ended December 31, 1991, Commission File No. 0-
18437)
10.4.4 - Third Amendment to Credit Agreement dated July 31, 1992
(incorporated by reference to Exhibit 10.6.4 to the Company's
Registration Statement on Form S-1 No. 33-53860)
10.4.5 - Fourth Amendment to Credit Agreement dated August 4, 1993
(incorporated by reference to Exhibit 10.6.5 to the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
1993, Commission File No. 0-18437)
10.5 - $30 million Restated Credit Agreement dated as of August 15,
1994 between Pool Company and NationsBank of Texas, N.A., as
Agent (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1994, Commission File No. 0-18437)
10.5.1 - First Amendment to 1994 Restated Credit Agreement dated
February 28, 1995 (incorporated by reference to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the period
ended March 31, 1995, Commission File No. 0-18437)
10.5.2 - Second Amendment to 1994 Restated Credit Agreement dated April
21, 1995 (incorporated by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1995, Commission File No. 0-18437)
10.5.3 - Third Amendment and Waiver to 1994 Restated Credit Agreement,
and First Amendment and Waiver to 1995 Term Loan Agreement
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
1995, Commission File No. 0-18437)
10.5.4 - Fourth Amendment to 1994 Restated Credit Agreement
(incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
1995, Commission File No. 0-18437)
10.6 - Term Loan Agreement among Pool Company, NationsBank of Texas,
N.A. and Certain Lenders dated April 21, 1995 (incorporated by
reference to Exhibit 10.3 to the Company's Quarterly Report on
Form 10-Q for the period ended March 31, 1995, Commission File
No. 0-18437)
10.7(*) - Pool Energy Services Co. 1991 Directors Stock Option Plan
(incorporated by reference to Exhibit 10.6.2 to the Company's
Registration Statement on Form S-8 No. 33-50844)
10.8 - Sublease Agreement dated March 15, 1983 between Pool Company
and Sanan Leasing Corporation (incorporated by reference to
Exhibit 19.1 of the Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1992, Commission File No.
0-18437)
10.9(*) - Supplemental Executive Retirement Plan of Pool Company, as
amended (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1993, Commission File No. 0-18437)
10.9.1(*) (**)- Amended and Restated Supplementary Executive Retirement Plan
of Pool Company
10.10 - Agreement in Relation to Bareboat Charter (Pool Ranger IV)
dated December 30, 1993 between Pool Company and Nationsbanc
Leasing Corporation of North Carolina (incorporated by
reference to Exhibit 10.13 to the Company's Form 10-K for the
year ended December 31, 1993, Commission File No. 0-18437)
</TABLE>
68
<PAGE> 69
(a)-3 EXHIBITS - (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
- ----------- --------
<S> <C>
10.11 - Agreement in Relation to Bareboat Charter (Pool Ranger V)
dated December 30, 1993 between Pool Company and Nationsbanc
Leasing Corporation of North Carolina (incorporated by
reference to Exhibit 10.14 to the Company's Form 10-K for the
year ended December 31, 1993, Commission File No. 0-18437)
10.12 - Agreement in Relation to Bareboat Charter (Pool Ranger VI)
dated December 30, 1993 between Pool Company and Nationsbanc
Leasing Corporation of North Carolina (incorporated by
reference to Exhibit 10.15 to the Company's Form 10-K for the
year ended December 31, 1993, Commission File No. 0-18437)
10.13(*) - Pool Energy Services Co. 1993 Employee Stock Incentive Plan
(incorporated by reference to Exhibit 10.16 to the Company's
Quarterly Report on Form 10-Q for the period ended March 31,
1994, Commission File No. 0-18437)
10.14(*) - Change in Control Agreement, as amended, between the Company
and J. T. Jongebloed (incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1994, Commission File No. 0-18437)
10.15(*) - Change in Control Agreement, as amended, between the Company
and E. J. Spillard (incorporated by reference to Exhibit 10.2
to the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1994, Commission File No. 0-18437)
10.16(*) - Change in Control Agreement, as amended, between the Company
and W. J Myers (incorporated by reference to Exhibit 10.3 to
the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1994, Commission File No. 0-18437)
10.17(*) - Change in Control Agreement, as amended, between the Company
and R. G. Hale (incorporated by reference to Exhibit 10.4 to
the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1994, Commission File No. 0-18437)
10.18(*) - Change in Control Agreement, as amended, between the Company
and G. G. Arms (incorporated by reference to Exhibit 10.5 to
the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1994, Commission File No. 0-18437)
10.19(*) - Change in Control Agreement, as amended, between the Company
and L. E. Dupre (incorporated by reference to Exhibit 10.6 to
the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1994, Commission File No. 0-18437)
10.20(*) - Pool Energy Services Co. 1995 Management Bonus Plan - Senior
Executive Level (incorporated by reference to Exhibit 10.23 to
the Company's Form 10-K for the year ended December 31, 1994,
Commission File No. 0-18437)
10.21 - Stock Purchase Agreement dated June 13, 1995 by and among
Robert D. Hillman, Barbara A. Hillman, Richard H. Hillman,
Robert D. Hillman, Jr., Golden Pacific Corp., Pool Company and
Pool Energy Services Co. (incorporated by reference to Exhibit
2.1 to the Company's Current Report on Form 8-K (Date of
Event: June 13, 1995) dated June 27, 1995, Commission File No.
0-18437)
10.22 - Agreement regarding Deferred Payment of Purchase Price dated
June 13, 1995 by and among Robert D. Hillman, Barbara A.
Hillman, Richard H. Hillman, Robert D. Hillman, Jr., Golden
Pacific Corp., Pool Company and Pool Energy Services Co.,
including Promissory Notes, and Exhibits B, C, D and F to such
agreement (incorporated by reference to Exhibit 2.2 to the
Company's Current Report on Form 8-K (Date of Event: June 13,
1995) dated June 27, 1995, Commission File No. 0-18437)
</TABLE>
69
<PAGE> 70
(a)-3 EXHIBITS - (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
- ----------- --------
<S> <C>
10.23 - Voting Agreement and Agreement Restricting Transfer dated June
13, 1995 by and among Robert D. Hillman, Barbara A. Hillman,
Richard H. Hillman, Robert D. Hillman, Jr., Golden Pacific
Corp., Pool Company and Pool Energy Services Co. (incorporated
by reference to Exhibit 2.3 to the Company's Current Report on
Form 8-K (Date of Event: June 13, 1995) dated June 27, 1995,
Commission File No. 0-18437)
10.24 - Agreement dated September 28, 1994 between Pool Alaska, Inc.
and Arctic Alaska Drilling Company, Inc. (incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the period ended September 30, 1994, Commission
File No. 0-18437)
10.25 - $35 million Restated Revolving Credit Agreement dated as of
November 30, 1995 between Pool Company and NationsBank of
Texas, N.A., as Agent (incorporated by reference to Exhibit
10.26 to the Company's Form 10-K for the year ended December
31, 1995, Commission File No. 0-18437)
10.25.1 - First Amendment and Waiver to $35 million Restated Revolving
Credit Agreement and $10 million Restated Term Loan Agreement
(incorporated by reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-3 No. 333-5229)
10.25.2 - First Amendment to ISDL Term Loan Agreement, Second Amendment
to Pool Company Restated Revolving Credit Agreement, and
Restated Term Loan Agreement (incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1996, Commission File No.
0-18437)
10.25.3(**) - Second Amendment to ISDL Term Loan Agreement, Third Amendment
to Pool Company Restated Revolving Credit Agreement, and Third
Amendment to Pool Company Restated Term Loan Agreement
10.26 - $6.5 million Term Loan Agreement dated as of November 30, 1995
between International Sea Drilling Ltd. and NationsBank of
Texas, N.A., as Agent (incorporated by reference to Exhibit
10.27 to the Company's Form 10-K for the year ended December
31, 1995, Commission File No. 0-18437)
10.27 - $10 million Restated Term Loan Agreement dated as of November
30, 1995 between Pool Company and NationsBank of Texas, N.A.,
as Agent (incorporated by reference to Exhibit 10.28 to the
Company's Form 10-K for the year ended December 31, 1995,
Commission File No. 0-18437)
10.28(*) - Pool Energy Service Co. 1996 Management Bonus Plan - Senior
Executive Level (incorporated by reference to Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for the period
ended March 31, 1996, Commission File No. 0-18437)
10.29(*)(**) - Pool Energy Service Co. 1996 Longterm Incentive Plan
(corrected version replacing Exhibit 10.3 to the Company's
Quarterly Report on Form 10-Q for the period ended March 31,
1996, Commission File No. 0-18437)
10.30(*) - Pool Energy Service Co. 1996 Directors' Stock Incentive Plan
(incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement of Form S-8 No. 333-03159 filed with
the commission on May 3, 1996)
10.30.1(*) - Form of Stock Option Agreement, Pool Energy Services Co. 1996
Directors' Stock Incentive Plan (incorporated by reference to
Exhibit 4.2 to the Company's Registration Statement on Form S-
8 No. 333-03159 filed with the commission on May 3, 1996)
10.31(**) - Loan Agreement between Antah Drilling Sdn. Bhd. and the
Hongkong and Shanghai Banking Corporation Limited
</TABLE>
70
<PAGE> 71
(a)-3 EXHIBITS - (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
- ----------- --------
<S> <C>
10.31.1(**) - Supplemental Agreement between Antah Drilling Sdn. Bhd. and
the Hongkong and Shanghai Banking Corporation Limited
10.32(*)(**) - Pool Energy Services Co. 1997 Senior Executive Bonus Plan
21(**) - List of Subsidiaries
23(**) - Consent of Deloitte & Touche LLP
24(**) - Powers of Attorney
27(**) - Financial Data Schedule
</TABLE>
- --------------------
(*) Management contract or compensatory plan or arrangement
(**) Filed herewith
The schedules to Exhibits 10.25, 10.26 and 10.27 have been omitted. The
Company hereby agrees to furnish supplementally to the Commission upon request
copies of any such omitted schedules.
(b) REPORTS ON FORM 8-K - There were no reports on Form 8-K filed during the
quarter ended December 31, 1996.
71
<PAGE> 72
SCHEDULE II
POOL ENERGY SERVICES CO.
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
AS OF DECEMBER 31
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
---------------------
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER OTHER AT END
OF YEAR EXPENSES ACCOUNTS CHANGES of YEAR
---------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
1996 . . . . . . . . . . $ 1,059 $ 249 $ 29 $ (102) (a) (b) $ 1,235
1995 . . . . . . . . . . 1,622 1,255 191 (2,009) (a) (c) 1,059
1994 . . . . . . . . . . 1,952 648 18 (996) (a) (d) 1,622
Allowance for Inventory Shrinkage:
1996 . . . . . . . . . . $ 1,585 $ 341 $ 34 $ (104) $ 1,856
1995 . . . . . . . . . . 1,432 244 - (91) 1,585
1994 . . . . . . . . . . 2,996 304 - (1,868) (e) 1,432
Allowance for Doubtful Noncurrent
Receivables:
1996 . . . . . . . . . . $ 2,824 $ - $ - $(1,605) (a) (f) $ 1,219
1995 . . . . . . . . . . 3,667 - - (843) (a) (g) 2,824
1994 . . . . . . . . . . 4,153 - - (486) (a) (h) 3,667
</TABLE>
- ------------------------------
(a) Includes amounts reclassified between allowance for doubtful accounts and
allowance for doubtful noncurrent receivables.
(b) Includes a reduction of $800 of allowance related to a revised estimate of
the accounts receivable allowance.
(c) Includes a reduction of $490 of allowance related to a revised estimate of
the accounts receivable allowance.
(d) Includes a reduction of $707 of allowance related to a revised estimate of
the accounts receivable allowance.
(e) Includes $1,077 related to inventory written off and $589 related to
inventory sold.
(f) Includes a reduction of $908 of allowance related to accounts receivable
written off.
(g) Includes a reduction of $2,362 of allowance related to accounts receivable
written off.
(h) Includes a reduction of $775 of allowance related to accounts receivable
written off.
72
<PAGE> 73
SCHEDULE II
POOL ARABIA, LTD.
VALUATION ACCOUNTS
AS OF DECEMBER 31
(IN THOUSANDS)
<TABLE>
<CAPTION>
CHARGED
BALANCE AT TO COST BALANCE
BEGINNING AND OTHER AT END
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS CHANGES OF YEAR
- ------------------------------------ -------------- --------- ---------- ------- -------
Allowance for Inventory Obsolescence:
<S> <C> <C> <C> <C> <C>
1996 $334 $-- $-- $-- $334
---- ---- ---- ---- ----
1995 $334 $-- $-- $-- $334
---- ---- ---- ---- ----
1994 $334 $-- $-- $-- $334
---- ---- ---- ---- ----
</TABLE>
73
<PAGE> 74
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
By: /s/ J. T. JONGEBLOED
-----------------------------------------------
J. T. Jongebloed
Chairman, President and Chief Executive Officer
Dated: March 12, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME AND
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C> <C>
-----
/S/ J. T. JONGEBLOED Chairman, President and Chief }
------------------------------ Executive Officer }
J. T. Jongebloed }
}
/S/ E. J. SPILLARD Senior Vice President, Finance }
------------------------------ (principal financial officer) }
E. J. Spillard }
}
/S/ B. G. GORDON Controller (principal accounting }
------------------------------ officer) }
B. G. Gordon }
}
W. C. MCCORD Director* }
}
WILLIAM H. MOBLEY Director* } March 12, 1997
}
JOSEPH R. MUSOLINO Director* }
}
GARY D. NICHOLSON Director* }
}
JAMES L. PAYNE Director* }
}
DONALD D. SYKORA Director* }
}
}
*By: /s/ J. T. JONGEBLOED }
---------------------------------------- }
(J. T. Jongebloed, as Attorney-In-Fact }
for each of the persons indicated ) }
-----
</TABLE>
74
<PAGE> 75
POOL ENERGY SERVICES CO.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
- ----------- --------
<S> <C>
3.1 - Articles of Incorporation of the Company, as amended
(incorporated by reference to Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the period ended March 31,
1996, Commission File No. 0-18437)
3.2 - Bylaws of the Company as currently in effect (incorporated by
reference to Exhibit 3.2.1 to the Company's Quarterly Report
on Form 10-Q for the period ended September 30, 1994,
Commission File No. 0-18437)
4.1 - Rights Agreement dated as of June 7, 1994 between Pool Energy
Services Co. and The First National Bank of Boston, as Rights
Agent, which includes as Exhibit A the form of Rights
Certificate and as Exhibit B the form of Summary of Rights to
Purchase Shares (incorporated by reference to Exhibit 1 to the
Company's Current Report on Form 8-K dated June 7, 1994,
Commission File No. 0-18437)
10.1 - Contingent Support Agreement (incorporated by reference to
Exhibit 10.2.1 to the Company's Registration Statement on Form
S-1 No. 33-33726)
10.1.1 - Amendment to Contingent Support Agreement (incorporated by
reference to Exhibit 10.2.1 to the Company's Form 10-K for the
year ended December 31, 1990, Commission File No. 0-18437)
10.2 - Sublease Agreement (incorporated by reference to Exhibit 10.3
to the Company's Registration Statement on Form S-1 No. 33-
25535)
10.2.1 - First Amendment to Sublease Agreement (incorporated by
reference to Exhibit 10.3.1 to the Company's Registration
Statement on Form S-1 No. 33-36622)
10.2.2 - Second Amendment to Sublease Agreement (incorporated by
reference to Exhibit 10.3.2 to the Company's Form 10-K for the
year ended December 31, 1992, Commission File No. 0-18437)
10.3(*) - Pool Energy Services Co. Stock Option Plan (incorporated by
reference to Exhibit 10.4.1 to the Company's Registration
Statement on Form S-1 No. 33-36622)
10.4 - Credit Agreement between Pool Company and NCNB Texas National
Bank, N.A. (incorporated by reference to Exhibit 10.7 to the
Company's Registration Statement on Form S-1 No. 33-33726)
10.4.1 - First Amendment to Credit Agreement (incorporated by reference
to Exhibit 10.6.1 to the Company's Form 10-K for the year
ended December 31, 1990, Commission File No. 0-18437)
10.4.2 - Waiver under Credit Agreement (incorporated by reference to
Exhibit 10.6.2 to the Company's Form 10-K for the year ended
December 31, 1990, Commission File No. 0-18437)
10.4.3 - Second Amendment to Credit Agreement (incorporated by
reference to Exhibit 10.6.3 to the Company's Form 10-K for the
year ended December 31, 1991, Commission File No. 0-
18437)
10.4.4 - Third Amendment to Credit Agreement dated July 31, 1992
(incorporated by reference to Exhibit 10.6.4 to the Company's
Registration Statement on Form S-1 No. 33-53860)
10.4.5 - Fourth Amendment to Credit Agreement dated August 4, 1993
(incorporated by reference to Exhibit 10.6.5 to the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
1993, Commission File No. 0-18437)
10.5 - $30 million Restated Credit Agreement dated as of August 15,
1994 between Pool Company and NationsBank of Texas, N.A., as
Agent (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1994, Commission File No. 0-18437)
</TABLE>
75
<PAGE> 76
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
- ----------- --------
<S> <C>
10.5.1 - First Amendment to 1994 Restated Credit Agreement dated
February 28, 1995 (incorporated by reference to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the period
ended March 31, 1995, Commission File No. 0-18437)
10.5.2 - Second Amendment to 1994 Restated Credit Agreement dated April
21, 1995 (incorporated by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1995, Commission File No. 0-18437)
10.5.3 - Third Amendment and Waiver to 1994 Restated Credit Agreement,
and First Amendment and Waiver to 1995 Term Loan Agreement
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
1995, Commission File No. 0-18437)
10.5.4 - Fourth Amendment to 1994 Restated Credit Agreement
(incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
1995, Commission File No. 0-18437)
10.6 - Term Loan Agreement among Pool Company, NationsBank of Texas,
N.A. and Certain Lenders dated April 21, 1995 (incorporated by
reference to Exhibit 10.3 to the Company's Quarterly Report on
Form 10-Q for the period ended March 31, 1995, Commission File
No. 0-18437)
10.7(*) - Pool Energy Services Co. 1991 Directors Stock Option Plan
(incorporated by reference to Exhibit 10.6.2 to the Company's
Registration Statement on Form S-8 No. 33-50844)
10.8 - Sublease Agreement dated March 15, 1983 between Pool Company
and Sanan Leasing Corporation (incorporated by reference to
Exhibit 19.1 of the Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1992, Commission File No.
0-18437)
10.9(*) - Supplemental Executive Retirement Plan of Pool Company, as
amended (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1993, Commission File No. 0-18437)
10.9.1(*)(**) - Amended and Restated Supplementary Executive Retirement Plan
of Pool Company
10.10 - Agreement in Relation to Bareboat Charter (Pool Ranger IV)
dated December 30, 1993 between Pool Company and Nationsbanc
Leasing Corporation of North Carolina (incorporated by
reference to Exhibit 10.13 to the Company's Form 10-K for the
year ended December 31, 1993, Commission File No. 0-18437)
10.11 - Agreement in Relation to Bareboat Charter (Pool Ranger V)
dated December 30, 1993 between Pool Company and Nationsbanc
Leasing Corporation of North Carolina (incorporated by
reference to Exhibit 10.14 to the Company's Form 10-K for the
year ended December 31, 1993, Commission File No. 0-18437)
10.12 - Agreement in Relation to Bareboat Charter (Pool Ranger VI)
dated December 30, 1993 between Pool Company and Nationsbanc
Leasing Corporation of North Carolina (incorporated by
reference to Exhibit 10.15 to the Company's Form 10-K for the
year ended December 31, 1993, Commission File No. 0-18437)
10.13(*) - Pool Energy Services Co. 1993 Employee Stock Incentive Plan
(incorporated by reference to Exhibit 10.16 to the Company's
Quarterly Report on Form 10-Q for the period ended March 31,
1994, Commission File No. 0-18437)
10.14(*) - Change in Control Agreement, as amended, between the Company
and J. T. Jongebloed (incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1994, Commission File No. 0-18437)
10.15(*) - Change in Control Agreement, as amended, between the Company
and E. J. Spillard (incorporated by reference to Exhibit 10.2
to the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1994, Commission File No. 0-18437)
10.16(*) - Change in Control Agreement, as amended, between the Company
and W. J Myers (incorporated by reference to Exhibit 10.3 to
the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1994, Commission File No. 0-18437)
</TABLE>
76
<PAGE> 77
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
- ----------- --------
<S> <C>
10.17(*) - Change in Control Agreement, as amended, between the Company
and R. G. Hale (incorporated by reference to Exhibit 10.4 to
the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1994, Commission File No. 0-18437)
10.18(*) - Change in Control Agreement, as amended, between the Company
and G. G. Arms (incorporated by reference to Exhibit 10.5 to
the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1994, Commission File No. 0-18437)
10.19(*) - Change in Control Agreement, as amended, between the Company
and L. E. Dupre (incorporated by reference to Exhibit 10.6 to
the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1994, Commission File No. 0-18437)
10.20(*) - Pool Energy Services Co. 1995 Management Bonus Plan - Senior
Executive Level (incorporated by reference to Exhibit 10.23 to
the Company's Form 10-K for the year ended December 31, 1994,
Commission File No. 0-18437)
10.21 - Stock Purchase Agreement dated June 13, 1995 by and among
Robert D. Hillman, Barbara A. Hillman, Richard H. Hillman,
Robert D. Hillman, Jr., Golden Pacific Corp., Pool Company and
Pool Energy Services Co. (incorporated by reference to Exhibit
2.1 to the Company's Current Report on Form 8-K (Date of
Event: June 13, 1995) dated June 27, 1995, Commission File No.
0-18437)
10.22 - Agreement regarding Deferred Payment of Purchase Price dated
June 13, 1995 by and among Robert D. Hillman, Barbara A.
Hillman, Richard H. Hillman, Robert D. Hillman, Jr., Golden
Pacific Corp., Pool Company and Pool Energy Services Co.,
including Promissory Notes, and Exhibits B, C, D and F to such
agreement (incorporated by reference to Exhibit 2.2 to the
Company's Current Report on Form 8-K (Date of Event: June 13,
1995) dated June 27, 1995, Commission File No. 0-18437)
10.23 - Voting Agreement and Agreement Restricting Transfer dated June
13, 1995 by and among Robert D. Hillman, Barbara A. Hillman,
Richard H. Hillman, Robert D. Hillman, Jr., Golden Pacific
Corp., Pool Company and Pool Energy Services Co. (incorporated
by reference to Exhibit 2.3 to the Company's Current Report on
Form 8-K (Date of Event: June 13, 1995) dated June 27, 1995,
Commission File No. 0-18437)
10.24 - Agreement dated September 28, 1994 between Pool Alaska, Inc.
and Arctic Alaska Drilling Company, Inc. (incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the period ended September 30, 1994, Commission
File No. 0-18437)
10.25 - $35 million Restated Revolving Credit Agreement dated as of
November 30, 1995 between Pool Company and NationsBank of
Texas, N.A., as Agent (incorporated by reference to Exhibit
10.26 to the Company's Form 10-K for the year ended December
31, 1995, Commission File No. 0-18437)
10.25.1 - First Amendment and Waiver to $35 million Restated Revolving
Credit Agreement and $10 million Restated Term Loan Agreement
(incorporated by reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-3 No. 333-5229)
10.25.2 - First Amendment to ISDL Term Loan Agreement, Second Amendment
to Pool Company Restated Revolving Credit Agreement, and
Restated Term Loan Agreement (incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1996, Commission File No.
0-18437)
10.25.3(**) - Second Amendment to ISDL Term Loan Agreement, Third Amendment
to Pool Company Restated Revolving Credit Agreement, and Third
Amendment to Pool Company Restated Term Loan Agreement
10.26 - $6.5 million Term Loan Agreement dated as of November 30, 1995
between International Sea Drilling Ltd. and NationsBank of
Texas, N.A., as Agent (incorporated by reference to Exhibit
10.27 to the Company's Form 10-K for the year ended December
31, 1995, Commission File No. 0-18437)
</TABLE>
77
<PAGE> 78
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
- ----------- --------
<S> <C>
10.27 - $10 million Restated Term Loan Agreement dated as of November
30, 1995 between Pool Company and NationsBank of Texas, N.A.,
as Agent (incorporated by reference to Exhibit 10.28 to the
Company's Form 10-K for the year ended December 31, 1995,
Commission File No. 0-18437)
10.28(*) - Pool Energy Service Co. 1996 Management Bonus Plan - Senior
Executive Level (incorporated by reference to Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for the period
ended March 31, 1996, Commission File No. 0-18437)
10.29(*)(**) - Pool Energy Service Co. 1996 Longterm Incentive Plan
(corrected version replacing Exhibit 10.3 to the Company's
Quarterly Report on Form 10-Q for the period ended March 31,
1996, Commission File No. 0-18437)
10.30(*) - Pool Energy Service Co. 1996 Directors' Stock Incentive Plan
(incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement of Form S-8 No. 333-03159 filed with
the commission on May 3, 1996)
10.30.1(*) - Form of Stock Option Agreement, Pool Energy Services Co. 1996
Directors' Stock Incentive Plan (incorporated by reference to
Exhibit 4.2 to the Company's Registration Statement on Form S-
8 No. 333-03159 filed with the commission on May 3, 1996)
10.31(**) - Loan Agreement between Antah Drilling Sdn. Bhd. and the
Hongkong and Shanghai Banking Corporation Limited
10.31.1(**) - Supplemental Agreement between Antah Drilling Sdn. Bhd. and
the Hongkong and Shanghai Banking Corporation Limited
10.32(*)(**) - Pool Energy Services Co. 1997 Senior Executive Bonus Plan
21(**) - List of Subsidiaries
23(**) - Consent of Deloitte & Touche LLP
24(**) - Powers of Attorney
27(**) - Financial Data Schedule
</TABLE>
- --------------------
(*) Management contract or compensatory plan or arrangement
(**) Filed herewith
78
<PAGE> 1
EXHIBIT 10.9.1
AMENDED AND RESTATED
SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN
OF POOL COMPANY
EFFECTIVE SEPTEMBER 30, 1996
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I - Purpose, Definitions and Construction
1.1 Purpose of the Plan 1
1.2 Definitions 1
1.3 Construction 4
ARTICLE II - Source of Funds
2.1 Source of Funds 5
2.2 Trust Requirements 5
2.3 Status of Participants 5
ARTICLE III - Benefits Under the Plan
3.1 Retirement Benefit 6
3.2 Minimum Late Retirement Benefit 6
3.3 Benefit at Termination of Employment 6
3.4 Benefit Upon Termination of the Plan 7
3.5 Pre-Retirement Death Benefit 7
3.6 Forfeiture 7
3.7 Time of Payment 7
ARTICLE IV - Change in Control
4.1 Benefit Entitlement 8
4.2 Benefit Upon Termination 8
Following Change in Control
4.3 Definition of Change in Control 9
4.4 Cause 10
4.5 Good Reason 11
4.6 Successor's Binding Agreement 12
ARTICLE V - Miscellaneous
5.1 Administration of the Plan 13
5.2 Amendment of the Plan 13
5.3 Termination of the Plan 13
5.4 Notices to Participants 13
5.5 Non-Alienation 13
</TABLE>
<PAGE> 3
ARTICLE I
PURPOSE, DEFINITIONS AND CONSTRUCTION
1.1 Purpose of the Plan
This Plan is established by the Employer to provide an additional
benefit for certain select management employees defined below in recognition of
their past and future valuable services to the Employer and to augment the
retirement benefit which is otherwise provided to such employees under the
tax-qualified defined benefit plan maintained by the Employer. Those benefiting
under this Plan are those most adversely affected by the termination of the
tax-qualified defined benefit plan previously maintained by the Employer and
ENSERCH Corporation. This Plan is not intended to and does not qualify under
Sections 401(a) and 501(a) of the Internal Revenue Code and is designed to be
exempt from the requirements of the Employee Retirement Income Security Act.
1.2 Definitions
The following terms, when found in the Plan, shall have the meanings
set forth below:
(a) Actuarial Equivalent or Actuarially Equivalent: The equivalent
in value of the amounts expected to be received under the Plan under the lump
sum form of payment, determined on the basis of (i) one hundred percent (100%)
of the interest rate (as of the first day of the Plan Year for which the
determination is being made) that would be used by the Pension Benefit Guaranty
Corporation to value annuities, both immediate and deferred, upon Plan
termination; and (ii) the 1984 Unisex Pension (UP84) Mortality Table.
When and if the interest rate indicated in (i) above is no longer
published as a variable standard, a comparable standard (i.e., a rate which
produces a lump sum value at an assumed retirement age of 60 which is at least
as favorable to the Participant as the lump sum value that would have been
produced by using the rate in (i) above) shall be determined and substituted
for the current basis. For the purpose of this Section 1.2(a), the
comparability of an actuarial basis to another shall be determined as of the
day the last published interest rate indicated in (i) above is effective.
(b) Code: The Internal Revenue Code of 1986, as it may be amended
from time to time, including any successor.
(c) Compensation: Compensation for any calendar year shall be the sum
of base salary paid during the year plus Bonus Earned. Bonus Earned shall be
the bonus earned (whether paid in cash or otherwise) during the calendar year
under any annual incentive plan of PESCO or the Employer, including the Pool
Energy Services Co. 1996 Management Bonus Plan and any predecessor/successor
plans, whether or not paid in the year it was earned.
-1-
<PAGE> 4
(d) Credited Service: With respect to each Participant, Service
shall be credited on an elapsed time basis from the date specified below for
that Participant until the earliest of 1) the date that Participant's
employment with the Employer first terminates after the Effective Date; or 2)
the effective date of termination of the Plan.
President September 12, 1978
Group Vice President - U.S. Operations January 24, 1988
Group Vice President - International Operations November 16, 1971
Senior Vice President, Finance December 15, 1979
Vice President and General Counsel October 15, 1975
Vice President, Human Resources January 31, 1978
(e) Early Retirement Date: The first day of the calendar month which
(i) is prior to a Participant's Normal Retirement Date, (ii) immediately
follows the calendar month in which his employment with the Employer is
terminated, and (iii) begins after his attainment of age fifty-five (55) and
completion of not less than five (5) years of Credited Service.
(f) Effective Date: January 1, 1993.
(g) Eligible Employee: A person who, on the Effective Date, was
employed by the Employer in one of the following positions, all of whom are
members of the select group of management or highly compensated employees of
the Employer as such term is defined under Section 201 of the Employee
Retirement Income Security Act of 1974 and regulations and rulings promulgated
thereunder by the Department of Labor.
President
Group Vice President - U.S. Operations
Group Vice President - International Operations
Senior Vice President, Finance
Vice President and General Counsel
Vice President, Human Resources
(h) Employer: Pool Company, a corporation organized and existing
under the laws of the State of Texas, and any subsidiaries thereof.
(i) Final Average Compensation: The average of a Participant's five
(5) highest years of Compensation out of the last ten (10) consecutive calendar
years including his year of termination of employment.
(j) Late Retirement Date: The first day of the calendar month which
(i) follows the calendar month that includes a Participant's Normal Retirement
Date and (ii) begins immediately after the month in which his employment with
the Employer is terminated.
(k) Normal Retirement Age: Age 65
-2-
<PAGE> 5
(l) Normal Retirement Date: The first day of the calendar month
immediately following the calendar month in which the Participant attains his
Normal Retirement Age.
(m) Participant: An Eligible Employee.
(n) PESCO: Pool Energy Services Co., a corporation organized and
existing under the laws of the State of Texas.
(o) Plan: The Supplementary Executive Retirement Plan of Pool
Company, as set forth herein, and as it may be amended from time to time.
(p) Plan Year: The twelve-month period beginning on January 1 and
ending on December 31 each year.
(q) Social Security Benefit: The estimated annual amount payable
under Title II of the Social Security Act as in effect as of the date of
determination, determined as follows:
(1) With respect to a Participant who, as of the date of
determination, is eligible for Early, Normal, or Late Retirement--
(i) Determine the Social Security Benefit assuming that the
Participant will retire at the greater of age 62 or current
age, assuming he has always been covered under Social Security
and had earned and will earn at least the Social Security
taxable wage base for each full calendar year ($62,700 in
1996) until such age;
(ii) Multiply the benefit determined in (i) by a fraction,
where the numerator equals the number of years of his Credited
Service as of the date of determination and the denominator
equals the greater of (a) 35 years or (b) the greater of the
number of years of Credited Service if the Participant
remained employed by the Employer until age 62 or the number
of years of his Credited Service as of the date of
determination.
(2) With respect to all other Participants --
(i) Determine the Social Security Benefit assuming the
Participant will retire at age 65, assuming he had always been
covered under Social Security and had earned and will earn at
least the Social Security taxable wage base for each full
calendar year ($62,700 in 1996) until such age;
(ii) Multiply the benefit determined in (i) by a fraction,
where the numerator equals the number of years of his Credited
Service as of the date of determination and the denominator
equals the greater of (a) 35 years or (b) the number of years
of Credited Service if the Participant remained employed by
the Employer until age 65.
-3-
<PAGE> 6
1.3 Construction
Where appearing in the Plan, singular may indicate the plural, unless
the context clearly indicates the contrary. The words "hereof," "herein,"
"hereunder" and other similar compounds of the word "here" shall, unless
otherwise specifically stated, mean and refer to the entire Plan, not to any
particular provision or Section. Article and Section headings are included for
convenience of reference and are not intended to add to or subtract from the
terms of the Plan.
-4-
<PAGE> 7
ARTICLE II
FUNDING
2.1 Source of Funds
The Employer may establish an irrevocable grantor trust by executing a
trust agreement in the form attached hereto as Exhibit "A" to provide itself
with a source of funds for meeting its liability under the Plan and shall make
contributions to the trust in accordance with the provisions thereof. It is
the intention of the Employer that any trust established for this purpose shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of highly compensated or management employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974.
The Employer may make payment of benefits direct to Participants or their
Beneficiaries as they become due under the terms of the Plan. In addition, if
the principal of the trust established for this purpose, and any earnings
thereon, are not sufficient to make payments of benefits in accordance with the
terms of the Plan, the Employer shall make the balance of each such payment as
it falls due.
2.2 Trust Requirements
Any trust created by the Employer and any assets held by the Trust to
assist in meeting its obligation under the Plan shall conform to the terms of
the model trust as described in Revenue Procedure 92-64.
2.3 Status of Participants
The Participants shall have the same status as general unsecured
creditors of the Employer and the Plan constitutes a mere promise by the
Employer to make benefit payments in the future.
-5-
<PAGE> 8
ARTICLE III
BENEFITS UNDER THE PLAN
3.1 Retirement Benefit
The benefit to be paid immediately pursuant to this Plan to a
Participant who retires at any time coincident with or following his Early
Retirement Date shall be the immediate Actuarially Equivalent lump sum value of
(a) less (b) less (c) less (d) where:
(a) is 2% of Final Average Compensation multiplied by the years, and
fractions thereof, of Credited Service up to 35 years, reduced by 1/8% for each
month that payments commence prior to age 65 or increased by 1/8% for each
month that payments commence after age 65;
(b) is the benefit payable under any qualified defined benefit plan
of the Employer at Normal, Early, or Late Retirement Date, as applicable;
(c) is the benefit payable as a Life Only annuity at Normal, Early,
or Late Retirement Date, as applicable, under any qualified defined benefit
plan of ENSERCH Corporation; and
(d) is the Social Security Benefit defined in Section 1.2(q)(1),
considering that the Social Security Benefit commences at the later of the
Participant's age 62 or current age.
3.2 Minimum Late Retirement Benefit
Notwithstanding the provisions of Paragraph 3.1(a), for any
Participant whose employment is terminated after his Normal Retirement Date,
the benefit determined in Section 3.1 shall not be less, in terms of monthly
benefit or Lump Sum Actuarial Equivalent of such benefit, than the benefit
which would otherwise have been payable at the Participant's Normal Retirement
Date but actuarially increased from his Normal Retirement Date to his Late
Retirement Date based upon the actuarial assumptions outlined in Section 1.2(a)
of this Plan.
3.3 Benefit at Termination of Employment
The benefit to be paid immediately pursuant to this Plan to a
Participant whose employment is terminated for any reason other than death at a
time when he is not entitled to a Normal Retirement, Early Retirement or Late
Retirement Benefit shall be a single sum amount determined on an Actuarial
Equivalent basis of a deferred annual benefit payable as of the Participant's
Normal Retirement Date, equal to (a) less (b) less (c) less (d), where:
-6-
<PAGE> 9
(a) is 2% of Final Average Compensation multiplied by the years, and
fractions thereof, of Credited Service as of the date of determination up to 35
years;
(b) is the benefit accrued as of the date of determination under any
qualified defined benefit plan of the Employer, payable at Normal Retirement
Date;
(c) is the benefit payable as a Life Only annuity at Normal
Retirement Date under any qualified defined benefit plan of ENSERCH
Corporation; and
(d) is the Social Security Benefit as defined in Section 1.2(q)(2),
considering that the Social Security Benefit commences on the date the
Participant reaches age 65.
3.4 Benefit Upon Termination of the Plan
Upon termination of the Plan in accordance with Section 5.3:
(a) If a Participant is eligible for Early, Normal or Late
Retirement, a benefit determined under the provisions of Sections 3.1 and 3.2
hereof shall be immediately payable.
(b) If a Participant is not eligible for Early, Normal or Late
Retirement, a benefit determined under the provisions of Section 3.3 hereof
shall be immediately payable.
3.5 Pre-Retirement Death Benefit
If a Participant dies while in the active service of the Employer and
is married at the time of his death, his spouse shall be entitled to receive
the Actuarial Equivalent lump sum value determined under Sections 3.1, 3.2 or
3.3, depending on whether he is eligible for Early, Normal or Late Retirement
as of the date of his death.
3.6 Forfeiture
Notwithstanding any provisions herein to the contrary, if a
Participant is discharged because of theft, dishonesty, embezzlement,
extortion, or fraud in connection with his employment, the Participant's
benefits hereunder shall be forfeited.
3.7 Time of Payment
All payments under the Plan will be made within thirty days after all
conditions for payment have been met.
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<PAGE> 10
ARTICLE IV
CHANGE IN CONTROL
4.1 Benefit Entitlement
If and only if any of the events described in Section 4.3 hereof
constituting a Change in Control of PESCO shall have occurred, the Participant
shall be entitled to the benefits described in Section 4.2 below upon
termination (within three years after such Change in Control) of his
employment, unless such termination is:
(a) because of his death, disability, or Retirement on or after his
Normal Retirement Date (that is, early retirement initiated by the Employer
shall be treated as a dismissal and not a voluntary early retirement);
(b) by the Employer for Cause as described in Section 4.4 below; or
(c) by the Participant other than for Good Reason as described in
Section 4.5 below.
4.2 Benefits upon Termination Following Change in Control
The benefits payable to a Participant eligible for benefits upon
termination following Change in Control in accordance with Section 4.1 hereof
are as follows:
(a) If a Participant is eligible for Early, Normal or Late
Retirement, his benefit under this Article IV shall be the single sum amount
determined on an Actuarial Equivalent basis of an immediate annual benefit
determined under the provisions of Section 3.1 hereof.
If a Participant is not eligible for Early, Normal or Late Retirement,
his benefit under this Article IV shall be the single sum amount determined on
an Actuarial Equivalent basis of a deferred annual benefit payable on the date
the Participant reaches age 55, equal to (i) less (ii) less (iii) less (iv),
where:
(i) is 2% of Final Average Compensation multiplied by the
years, and fractions thereof, of Credited Service up to 35
years, reduced by 15% (1/8% for each month age 55 precedes age
65);
(ii) is the benefit accrued as of the date of determination
under any qualified defined benefit plan of the Employer,
payable at Normal Retirement Date (or age 55, if payable
to the Participant under such plan at such age);
(iii) is the benefit payable as a Life Only annuity under any
qualified defined benefit plan of ENSERCH Corporation at
Normal Retirement Date (or age 55, if payable to the
Participant under such plan at such age); and
-8-
<PAGE> 11
(iv) is the Social Security Benefit as defined in Section
1.2(q)(1), considering that the Social Security Benefit
commences at age 62.
(b) In addition to any benefits described in Section 4.2(a) hereof,
the Participant shall receive, at the time he is first entitled to receive any
payment under Section 4.2(a), an amount (calculated and paid in the form of a
lump sum) equal to (i) less (ii), where:
(i) is the Actuarially Equivalent lump sum value of any
benefit the Participant becomes entitled to receive at such
time under Section 4.2(a) if it had been calculated as if the
Participant had been deemed to have had two additional years
of Credited Service; and
(ii) is the Actuarially Equivalent
lump sum value of any benefit the Participant becomes entitled
to receive at such time under Section 4.2(a).
(c) In the event that the Participant becomes entitled to the
payments provided under Sections 4.2(a) and 4.2(b) (the "Benefit Payments"), if
any of those payments will be subject to the tax (the "Excise Tax") imposed by
Section 4999 of the Code (or any similar tax that may hereafter be imposed),
the Employer shall pay or cause to be paid to the Participant an additional
amount (the "Gross-up Payment") such that the net amount retained by the
Participant, after deduction of any Excise Tax on the Benefit Payments and any
federal, state and local income tax and Excise Tax on the Gross-up Payment, but
before deduction of any federal, state, or local income tax on the Benefit
Payments, shall be equal to the Benefit Payments.
For purposes of determining the amount of the Gross-up Payment, the
Participant shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation for the calendar year in which the Gross-up
Payment is to be made and the applicable state and local income taxes at the
highest marginal rate of taxation for the calendar year in which the Gross-up
Payment is to be made, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local taxes.
4.3 Definition of Change in Control
For purposes of this Plan, "Change in Control" is a change in control
of a nature that would be required to be reported in response to Item l(a) of
the Current Report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended
("Exchange Act") or would have been required to be so reported but for the fact
that such event had been "previously reported" as that term is defined in Rule
12b-2 of Regulation 12B of the Exchange Act; provided that, without limitation
such a Change in Control shall be deemed to have occurred if:
(a) any Person is or becomes the beneficial owner (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of PESCO
representing 20% or more of the combined voting power of PESCO's then
outstanding securities ordinarily (apart from rights accruing under special
circumstances) having the right to vote at election of directors ("Voting
Securities"),
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<PAGE> 12
(b) individuals who constitute the Board on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the date
hereof whose election, or nomination for election by PESCO's shareholders, was
approved by a vote of at least three-quarters of the directors comprising the
remaining members of the Incumbent Board (either by a specific vote or by
approval of the proxy statement of PESCO in which such person is named as a
nominee for director, without objection to such nomination) shall be, for
purposes of this clause (b), considered as though such person were a member of
the Incumbent Board, or
(c) a recapitalization of PESCO occurs which results in either a
decrease by 33% or more in the aggregate percentage ownership of Voting
Securities held by Independent Shareholders (on a primary basis or on a fully
diluted basis after giving effect to the exercise of stock options and
warrants) or an increase in the aggregate percentage ownership of Voting
Securities held by non-Independent Shareholders (on a primary basis or on a
fully diluted basis after giving effect to the exercise of stock options and
warrants) to greater than 50%.
The term "Persons" shall mean and include any individual, corporation,
partnership, group, association or other "person" as such term is used in
Section 14(d) of the Exchange Act, other than PESCO, a subsidiary of PESCO or
any employee benefit plan(s) sponsored or maintained by PESCO or any subsidiary
thereof, and the term "Independent Shareholder" shall mean any shareholder of
PESCO except any employee(s) or director(s) of PESCO or any employee benefit
plan(s) sponsored or maintained by PESCO or any subsidiary thereof.
4.4 Cause
Termination of the Participant's employment with the Employer for
"Cause" shall mean termination upon:
(a) the willful and continued failure by the Participant
substantially to perform his duties (other than any such failure resulting from
his incapacity due to physical or mental illness), after a demand for
substantial performance is delivered to the Participant by the Chairman, the
Board or the President of PESCO which specifically identifies the manner in
which it is believed that the Participant has not substantially performed his
duties, and a reasonable period of opportunity for such substantial performance
is provided; or
(b) the willful engaging by the Participant in illegal misconduct
materially and demonstrably injurious to PESCO or any of its subsidiaries.
For purposes of this Section 4.4, no act, or failure to act, on the
Participant's part shall be considered "willful" unless done, or omitted to be
done, by the Participant not in good faith and without reasonable belief that
his action or omission was in the best interest of the Employer. Any act, or
failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board of Directors of PESCO or based upon the advice of counsel
for PESCO shall be conclusively presumed to be done, or omitted to be done, by
the Participant in good faith and
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<PAGE> 13
in the best interest of the Employer. Notwithstanding the foregoing, the
Participant shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to the Participant a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
the purpose (after reasonable notice to the Participant and an opportunity for
him, together with his counsel, to be heard before the Board), finding that in
the good faith opinion of the Board the Participant was guilty of conduct set
forth above in clauses (a) or (b) in this Section 4.4 and specifying the
particulars thereof in detail.
4.5 Good Reason
"Good Reason" for the Participant to terminate his employment shall
mean:
(a) An adverse change in his status or position(s) as an executive of
the Employer as in effect immediately prior to the Change in Control,
including, without limitation, any adverse change in his status or position as
a result of a material diminution in his duties or responsibilities (other
than, if applicable, any such change directly attributable to the fact that
less than 50% of PESCO's voting Securities are publicly owned) or a material
change in the Participant's business location or the assignment to him of any
duties or responsibilities which, in his reasonable judgment, are inconsistent
with such status or position(s), or any removal of the Participant from or any
failure to reappoint or reelect the Participant to such position(s) (except in
connection with the termination of his employment for Cause, Disability or
Retirement or as a result of his death or by the Participant other than for
Good Reason);
(b) A reduction by the Employer in the Participant's base salary as
in effect immediately prior to the Change in Control or in the number of
vacation days to which the Participant is then entitled under the Employer's
vacation policy as in effect immediately prior to the Change in Control;
(c) The taking of any action by PESCO or any of its subsidiaries
(including the elimination of a plan without providing substitutes therefor or
the reduction of the Participant's awards thereunder), that would substantially
diminish the aggregate projected value of his awards under any bonus, stock
option or other management incentive plans in which the Participant is
participating at the time of a Change in Control of PESCO;
(d) The taking of any action by PESCO or the Employer that would
substantially diminish the aggregate value of the benefits provided the
Participant under the Employer's medical, health, dental, accident, disability,
life insurance, stock purchase or retirement plans in which he was
participating at the time of a Change in Control of PESCO;
(e) A failure by PESCO to obtain from any successor (as hereinafter
defined) the assent to this Article IV contemplated by Section 4.6 hereof;
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<PAGE> 14
(f) Any purported termination by the Employer of the Participant's
employment that is not effected pursuant to Section 4.1 above (if applicable)
or a Notice of Termination as described below; for purposes of this Article IV,
no such purported termination shall be effective; or
(g) A Change in Control, as defined in Section 4.3 above, but only if
the Participant terminates his employment pursuant to this subsection (g)
within the period beginning 60 days after the date of such Change in Control
and ending one year after the date of such Change in Control and only upon a
good faith determination by the Participant that he cannot continue to fulfill
the responsibilities for which he was employed.
Any termination by the Employer pursuant to Section 4.4 above or by
the Participant pursuant to this Section 4.5 shall be communicated by written
Notice of Termination to the other party hereto. For purposes of this Section
4.5, a "Notice of Termination" shall mean a notice specifying the termination
provision in this Article IV relied upon and setting forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Participant's employment under the provision so specified. "Date of
Termination" shall mean, if the Participant terminated his employment
pursuant to this Section 4.5, the date specified in the Notice of Termination.
4.6 Successor's Binding Agreement
PESCO will seek, by written request at least five business days prior
to the time a Person becomes a Successor (as hereinafter defined), to have such
Person, by agreement in form and substance satisfactory to the Participant,
assent to the fulfillment of PESCO's obligations under this Article IV.
Failure of such Person to furnish such assent by the later of (i) three
business days prior to the time such Person becomes a Successor or (ii) two
business days after such person receives a written request to so assent shall
constitute Good Reason for termination by the Participant of his employment if
a Change in Control of PESCO occurs or has occurred.
For purposes of this Article IV, "Successor" shall mean any person
that succeeds to, or has the practical ability to control (either immediately
or with the passage of time), PESCO's business directly, by merger or
consolidation, or indirectly, by purchase of PESCO's Voting Securities or
otherwise.
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<PAGE> 15
ARTICLE V
MISCELLANEOUS
5.l Administration of the Plan
The Plan shall be administered by the Employer. The books and records
of the Plan shall be maintained by the Employer at its expense and no member of
the Board of Directors of Pool Company or PESCO or any employee of the Employer
acting on its behalf shall be liable to any person for any action taken or
omitted in connection with the administration of the Plan, unless attributable
to his own fraud or willful misconduct.
5.2 Amendment of the Plan
The Plan may be amended, in whole or in part, from time to time, by
the Board of Directors of Pool Company without the consent of any other party.
No amendment shall reduce, directly or indirectly, any accrued benefit of any
Participant.
5.3 Termination of the Plan
The Plan may be prospectively terminated at any time by action of the
Board of Directors of Pool Company without the consent of any other party.
Other than as specified in Sections 3.3 and 4.2 hereof, the termination of this
Plan shall not result in the granting of any additional benefit to any
Participant, nor shall it reduce, directly or indirectly, any accrued benefit
of any Participant.
5.4 Notices to Participants
A Participant will be provided written notice of any amendment of the
Plan that affects his rights herein, and of the termination of the Plan.
5.5 Non-alienation
The right of any Participant or beneficiary to benefits hereunder
shall not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment, or garnishment by creditors of the
Participant or the Participant's beneficiary.
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<PAGE> 1
EXHIBIT 10.25.3
As of December 20, 1996
International Sea Drilling Ltd. and Pool Company
c/o Pool Company
10375 Richmond Avenue
Houston, Texas 77042
Attention: R. A. Johannsen, Treasurer
Re: (a) Second Amendment to ISDL Term Loan Agreement, (b) Third
Amendment to Pool Company Restated Revolving Credit Agreement,
and (c) Third Amendment to Pool Company Restated Term Loan
Agreement
Gentlemen:
Reference is made to (a) the Term Loan Agreement dated as of November
30, 1995, as modified by the First Amendment dated as of July 31, 1996 (the
"ISDL AGREEMENT"), among International Sea Drilling Ltd. ("ISDL"), NationsBank
of Texas, N.A., National Bank of Canada and National Bank of Alaska
(collectively, "LENDERS"), and NationsBank of Texas, N.A., as agent ("AGENT"),
(b) the Restated Credit Agreement dated as of November 30, 1995, as modified by
the First Amendment and Waiver dated as of April 3, 1996, and the Second
Amendment dated as of July 31, 1996 (the "REVOLVING CREDIT AGREEMENT"), among
Pool Company, Lenders and Agent, and (c) the Restated Term Loan Agreement dated
as of November 30, 1995, as modified by the First Amendment and Waiver dated as
of April 3, 1996, and the Second Amendment dated as of July 31, 1996 (the "TERM
LOAN AGREEMENT"), among Pool Company, Lenders, and Agent. Unless otherwise
indicated, all capitalized terms herein are used as defined in the ISDL
Agreement, the Revolving Credit Agreement and the Term Loan Agreement.
ISDL and Pool Company have each advised Agent and Lenders that it
wishes to modify certain provisions of the ISDL Agreement, the Revolving Credit
Agreement and the Term Loan Agreement. Therefore, for good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, ISDL,
Pool Company, Agent and Lenders agree as follows:
1. Increase in Total Credit Commitment. The cover page of the
Revolving Credit Agreement is hereby amended by deleting "$35,000,000" before
the phrase "Revolving Line of Credit" and inserting in lieu thereof
"$40,000,000", to reflect the increased credit commitment pursuant to this
Amendment.
2. Borrowing Base. SECTION 1.2(A) of the Revolving Credit
Agreement is hereby amended by deleting the previous maximum amounts described
therein, and inserting the amounts shown in bold and italics below so that such
SECTION 1.2(A) reads as follows:
a. 80% of domestic consolidated receivables of the
Material Obligors for inventory sold or services rendered in the
ordinary course of business, payable in cash, and outstanding less
than 121 days after the first invoice date; provided that (i) the
amount, if any, by which the total balance of accounts receivable
(notwithstanding any Charge-Offs) of any customer owing to the
Material Obligors exceeds $250,000 may only be included in the
Borrowing Base if first approved by Determining Lenders in their sole
discretion and in accordance with their respective customary credit
policies and credit procedures, and (ii) receivables owed by any
customer and not paid within 120 days after the first invoice date may
not be included in the calculation of the Borrowing Base, and, if the
current and delinquent receivables owed by that customer (including
Charge- Offs) aggregate:
(1) $250,000 or more, then the portion of the
receivables owed by that customer which exceeds $250,000,
regardless of aging, must be excluded from the calculation of
the Borrowing Base unless Determining Lenders in their sole
discretion determine that customer to be a reasonably
acceptable
<PAGE> 2
International Sea Drilling Ltd.
and Pool Company
As of December 20, 1996
Page 2
credit risk, in which event the receivables owed by that
customer and outstanding less than 121 days after the first
invoice date may be included in the calculation of the
Borrowing Base; or
(2) Less than $250,000, then all receivables owed
by that customer, regardless of aging, shall be excluded from
the calculation of the Borrowing Base unless Borrower's chief
financial officer or treasurer certifies to Lenders the
customer is a reasonably acceptable credit risk, that the
delinquency is not the result of a credit problem, and that
the Material Obligors are continuing to maintain a credit line
(and stipulating that the amount of that credit line equals or
exceeds the amount of that customer's receivables eligible for
inclusion in the calculation of the Borrowing Base) with that
customer, in which event the portion of the receivables owed
by that customer and outstanding less than 121 days after the
first invoice date may be included in the calculation of the
Borrowing Base up to an aggregate amount of receivables for
all such customers equal to the sum of:
(a) $2,500,000 (or such other amount
acceptable to Borrower and Determining Lenders) for
those customers for whom the delinquent (more than
120 days after first invoicing) amount of receivables
(including Charge-Offs) for each such customer equals
less than 10% of that customer's total accounts
receivable obligations to the Material Obligors
(including Charge-Offs); provided, that the maximum
amount for any customer whose delinquent amount of
receivables (including Charge-Offs) represents
between 3% and 10% of that customer's total accounts
receivable obligations to the Material Obligors
(including Charge-Offs) cannot exceed $500,000; plus
(b) $250,000 for those customers for
whom the delinquent (more than 120 days after first
invoicing) amount of receivables (including
Charge-Offs) for each such customer equals 10% or
more of that customer's total accounts receivable
obligations to the Material Obligors (including
Charge-Offs).
3. Collateral.
a. SECTION 4.2(D) of the Revolving Credit Agreement is
hereby amended by inserting the phrase "(or equivalent interests)"
after the words "capital stock" in the first line thereof, after the
words "such shares" in the second line thereof, and after the words
"such shares" in the fourth line thereof.
b. SECTION 4.2(F) of the Revolving Credit Agreement,
regarding the thirteen platform rigs operating the Gulf of Mexico
pledged by Borrower as security thereunder, is hereby deleted in its
entirety, and Agent hereby agrees to execute and deliver to Borrower
such documentation as may be necessary to terminate and release its
liens on such rigs. The effect of this provision is that such rigs
shall no longer be security under either the Revolving Credit
Agreement or the Term Loan Agreement.
4. Pool Company Debt for Asset Purchases. SECTION 7.11(H) of the
Revolving Credit Agreement and SECTION 7.11(H) of the Term Loan Agreement are
hereby amended in their entirety by deleting the previous maximum amount
described therein and inserting the amount shown in bold and italics below so
that SECTION 7.11(H) reads as follows:
(h) Debt relating to purchases of assets not exceeding
$1,000,000 in the aggregate outstanding at any one time for all of
PESCO and its consolidated Subsidiaries,
5. Pool Company Debt for ADSB Purchase and Credit Card Payment
Guarantees. SECTION 7.11 of the Revolving Credit Agreement and SECTION 7.11 of
the Term Loan Agreement are hereby further amended by revising
<PAGE> 3
International Sea Drilling Ltd.
and Pool Company
As of December 20, 1996
Page 3
clause (r), deleting clause (s), deleting the word "and" before clause (t),
redesignating clause (t) as clause (s), and adding a new clause (t), so that
clauses (r) through (t) of such section shall now read in their entirety as
follows:
(r) ADSB letters of credit and guarantees of up to $500,000 (or its
equivalent in other currencies) in the aggregate, (s) payroll transfer
guarantees of up to $400,000 by ISDL to allow for Rig 489 employees to
be paid by ISDL, and (t) a guaranty or guarantees by Borrower of up to
an aggregate of $14,100,000 in connection with the ADSB purchase,
pursuant to that certain $23,500,000 Loan Agreement, as amended,
between Antah Drilling Sdn. Bhd. and The Hongkong and Shanghai
Banking Corporation Limited (Offshore Banking Unit, Labuan) and that
certain $4,000,000 Loan Agreement, as amended, between Antah Drilling
Sdn. Bhd. and The Hongkong and Shanghai Banking Corporation Limited
(Offshore Banking Unit, Labuan), and (v) obligations of and guarantees
by the Borrower and/or its Subsidiaries under credit card purchasing
arrangements with respect to possible refunds of monies received by
the Borrower and/or its Subsidiaries.
6. Loans, Advances and Investments to Consolidated Subsidiaries.
SECTION 7.16(A) of the Revolving Credit Agreement and SECTION 7.16(A) of the
Term Loan Agreement are hereby amended by deleting the previous maximum amount
described therein, and inserting the amount shown in bold and italics below so
that such SECTION 7.16(A) reads as follows:
(a) advances to or investments in any of PESCO's consolidated
Subsidiaries, provided that such advances and investments made after
July 1, 1993, by the Material Obligors to or in Companies that are not
Material Obligors may not in the aggregate for all such Companies at
any time outstanding exceed $7,500,000;
7. Loans, Advances, and Investments to Unconsolidated
Subsidiaries and Joint Ventures. SECTION 7.16(B) of the Revolving Credit
Agreement and SECTION 7.16(B) of the Term Loan Agreement are hereby amended by
deleting the previous maximum amount described therein, and inserting the
amount shown in bold and italics below so that such SECTION 7.16(B) reads as
follows:
(b) advances or investments by Material Obligors to or in PESCO's
unconsolidated Subsidiaries and its or their Joint Ventures which are
not Companies which do not in the aggregate at any time outstanding
exceed $7,500,000, provided that such advances and investments shall
for purposes of this clause be deemed to be capital expenditures and
may not in the aggregate for all such entities exceed 40% of the
amount of capital expenditures permitted under SECTION 7.13;
8. Issuing Lender. SECTION 10.3 of the Revolving Credit
Agreement is hereby amended by revising the definition of "Issuing Lender" to
read in its entirety as follows:
ISSUING LENDER means, for any LC, NationsBank of Texas, N.A.,
or any other Lender selected by Borrower and approved in writing by
Agent (which approval may not be unreasonably withheld).
9. Termination Date. SECTION 10.3 of the Revolving Credit
Agreement is hereby further amended by revising the definition of "Termination
Date" to read in its entirety as follows:
TERMINATION DATE means 12:00 Noon on the earlier of either (a)
April 1, 1999, or (b) the date Lenders' Commitments are terminated in
accordance with this Agreement.
10. Material Obligors and Obligors. SECTION 10.3 of the Revolving
Credit Agreement and SECTION 10.3 of the Term Loan Agreement are hereby further
amended by revising the definitions of "Material Obligors" and "Obligors" to
read in their entirety as follows:
<PAGE> 4
International Sea Drilling Ltd.
and Pool Company
As of December 20, 1996
Page 4
MATERIAL OBLIGORS means PESCO, PESCO Subsidiary, Borrower,
Pool Alaska, PTX, Inc., Pool Houston #1, Inc., Pool Houston Ltd., Pool
Texas Ltd., PCNV, Inc., Associated Petroleum Services, Inc., Pool
Production Services, Inc., PCESI and Big 10.
OBLIGORS means PESCO, PESCO Subsidiary, Borrower and
Borrower's present and future consolidated Subsidiaries which are
incorporated within the United States (including, without limitation,
Pool Texas Ltd. and Pool Houston Ltd.)
11. Other Definitions. For purposes of this Amendment, Pool
Company Houston Ltd. is referred to as "POOL HOUSTON LTD." and Pool Company
Texas Ltd. is referred to as "POOL TEXAS LTD." SECTION 10.3 of the Revolving
Credit Agreement and SECTION 10.3 of the Term Loan Agreement are hereby amended
by adding the following definitions:
POOL HOUSTON LTD. means Pool Company Houston Ltd., a Texas
limited partnership, of which Borrower is the 1% general partner and
PCNV, Inc., a Nevada corporation and a wholly-owned subsidiary of
Borrower, is the 99% limited partner.
POOL TEXAS LTD. means Pool Company Texas Ltd., a Texas limited
partnership, of which Borrower is the 1% general partner and PCNV,
Inc., a Nevada corporation and a wholly-owned subsidiary of Borrower,
is the 99% limited partner.
12. PTX, Inc. The name of Pool Company (Texas) Inc. has been
changed to PTX, Inc. Accordingly, all references in any of the Loan Papers
described in the Revolving Credit Agreement and the Term Loan Agreement to
"Pool Company (Texas) Inc." and the defined term "Pool Texas" are hereby
amended to refer to "PTX, Inc."
13. Schedules. SCHEDULES 1(A), 5.1 and 5.2 of the Revolving
Credit Agreement and SCHEDULES 1, 5.1 and 5.2 of the Term Loan Agreement are
hereby amended in their entirety, and replaced by the new SCHEDULES 1 5.1 and
5.2, in the form attached hereto. All references to "Schedule 1(a)" or
"Schedule 1(b)" in the Revolving Credit Agreement are hereby amended to refer
to "Schedule 1."
14. Additional Lenders and Assignments. On the effective date of
this Amendment, the Revolving Credit Agreement, the Term Loan Agreement and the
ISDL Agreement (for purposes of this paragraph, collectively, the AGREEMENTS"),
are each hereby amended to add Bank One, Texas, N.A., and The Hongkong and
Shanghai Banking Corporation Ltd. (collectively, the "NEW LENDERS") as Lenders
thereunder, whose addresses for purposes of SECTION 12.3 of each Agreement
shall be as set forth on the SCHEDULE 1 attached to this Amendment.
Accordingly, NationsBank of Texas, N.A., National Bank of Canada, and National
Bank of Alaska (collectively, the "EXISTING LENDERS") hereby sell, assign,
transfer and convey, and the New Lenders hereby purchase and accept so much of
the indebtedness and all of the rights, titles, benefits, interests,
privileges, claims, liens, security interests, and obligations existing and to
exist under the Agreements such that each Lender's Commitment Percentage of the
outstanding Commitments under the Agreements, as amended by this Amendment
shall be as set forth on SCHEDULE 1 to the Revolving Credit Agreement (attached
hereto), with respect to the Revolving Credit Agreement, and EXHIBIT A to this
Amendment, with respect to the Term Loan Agreement and the ISDL Agreement. The
foregoing assignment, transfer and conveyance is made pursuant to SECTION 12.14
of each of the Agreements, and the terms and conditions of the assignment
agreement attached as Exhibit E to the Revolving Credit Agreement, Exhibit D to
the Term Loan Agreement and Exhibit D to the ISDL Agreement are hereby
incorporated by reference and made a part of this assignment by the Existing
Lenders, as Assignors, to the New Lenders, as Assignees. The requirements of
SECTION 12.14 of each of the Agreements that an assignment agreement be
delivered to Agent and that a fee be paid to Agent in connection with the
assignment are hereby waived, and the transfers and assignments shall be deemed
to be consummated upon the effective date of this Amendment.
<PAGE> 5
International Sea Drilling Ltd.
and Pool Company
As of December 20, 1996
Page 5
15. Conditions. This instrument shall not be effective until it
has been duly executed and delivered by all parties named below, and Agent has
received from Borrower any documentation that Agent may reasonably request
related hereto, including, without limitation, the following:
(a) A Guaranty from PCNV, Inc., Pool Texas Ltd. and Pool
Houston Ltd. in accordance with SECTIONS 4.2 and 7.29(A) of the
Revolving Credit Agreement and SECTION 7.28(A) of the Term Loan
Agreement.
(b) A Security Agreement (together with corresponding
Financing Statements) from PCNV, Inc., Pool Texas Ltd. and Pool
Houston Ltd. in accordance with SECTIONS 4.2 and 7.29(A) of the
Revolving Credit Agreement and SECTION 7.28(A) of the Term Loan
Agreement.
(c) Stock certificates and stock powers with respect to
the stock of PCNV, Inc., and replacement stock certificates and stock
powers with respect to the stock of PTX, Inc. and Pool Houston #1,
Inc.
(d) Pledge of partnership interests from Borrower and
PCNV, Inc. with respect to Pool Houston Ltd. and Pool Texas Ltd.
(e) New Notes payable to each Lender, reflecting the
assignments made pursuant to paragraph 14 above.
(f) With respect to PCNV, Inc., an Officer's Certificate
covering incumbency, authorizing resolutions, articles of
incorporation, bylaws and certificate of existence.
(g) With respect to Pool Texas Ltd. and Pool Houston
Ltd., certified consent of partners or other evidence satisfactory to
Agent that all necessary partnership action on the part of such
entities has been taken, together with copies of organizational
documents and certificates of existence.
(h) With respect to PTX, Inc. and Pool Houston #1, Inc.,
evidence of name changes, and UCC-3 Financing Statement amendments
with respect to such name changes.
(i) An amendment fee, payable to Agent for the ratable
account of the Lenders, is hereby waived.
16. Dissolution of Immaterial Subsidiaries. Agent and Lenders
hereby consent to the dissolution of Pool Horizontal Drilling Services Co.,
Pool Houston #1, Inc., and ENS Equipment Leasing B.V.
17. Representations and Warranties. ISDL and Pool Company each
represents and warrants that it possesses all requisite power and authority to
execute, deliver and comply with the terms of this instrument, which has been
duly authorized and approved by all necessary corporate action and for which no
consent of any person is required, and agrees to furnish Agent with evidence of
such authorization and approval upon request.
18. Fees and Expenses. Pool Company agrees to pay the reasonable
fees and expenses of counsel to Agent for services rendered in connection with
the preparation, negotiation and execution of this instrument.
19. Loan Paper; Effect. This instrument is a Loan Paper and,
therefore, is subject to the applicable provisions of SECTION 12 of the ISDL
Agreement, SECTION 12 of the Revolving Credit Agreement and SECTION 12 of the
Term Loan Agreement, all of which are incorporated herein by reference the same
as if set forth herein verbatim. Except as amended in this instrument, the
Loan Papers are and shall be unchanged and shall remain in full force and
effect. In the event of any inconsistency between the terms of the ISDL
Agreement, the Revolving Credit Agreement and the Term Loan Agreement as hereby
modified (the "AMENDED AGREEMENTS") and any other Loan Papers, the terms of the
Amended Agreements shall
<PAGE> 6
International Sea Drilling Ltd.
and Pool Company
As of December 20, 1996
Page 6
control and such other document shall be deemed to be amended hereby to conform
to the terms of the Amended Agreements. ISDL and Pool Company each hereby
releases Agent and Lenders from any liability for actions or failures to act in
connection with the Loan Papers prior to the date hereof.
20. No Waiver of Defaults. This instrument does not constitute a
waiver of Lenders' right to insist upon future compliance with each term,
covenant, condition and provision of the Loan Papers, and the Loan Papers shall
continue to be binding upon, and inure to the benefit of, ISDL, Pool Company,
Guarantors, Lenders, Agent, and their respective successors and assigns.
21. Multiple Counterparts. This instrument may be executed in
more than one counterpart, each of which shall be deemed an original, but all
of which when taken together shall constitute one instrument.
22. Final Agreement. THE LOAN PAPERS, AS AMENDED HEREBY,
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.
If the foregoing terms and conditions are acceptable, please indicate
your acceptance by signing in the space provided below, whereupon this letter
shall become an agreement binding upon and inuring to the benefit of Agent,
Lenders, ISDL and Pool Company and their respective successors and assigns.
Very truly yours,
NATIONSBANK OF TEXAS, N.A., NATIONAL BANK OF CANADA,
as Agent and a Lender as a Lender
By: /s/ JAMES R. ALLRED By: /s/ DOUGLAS G. CLARK
----------------------------- ------------------------------
James R. Allred Douglas G. Clark
Senior Vice President Vice President
NATIONAL BANK OF ALASKA, By: /s/ JOHN T. DIXON
as a Lender ------------------------------
Name: John T. Dixon
-----------------------------
Title: Vice President
----------------------------
By: /s/ PATRICIA JELLEY BENZ
-----------------------------
Patricia Jelley Benz
Vice President
THE HONGKONG AND SHANGHAI
BANK ONE, TEXAS, N.A., BANKING CORPORATION LTD.,
as a Lender as a Lender
By: /s/ KELLY L. ELMORE III By: /s/ CHRISTOPHER J. CASEY
-------------------------------- ------------------------------
Name: Kelly L. Elmore III Name: Christopher J. Casey
------------------------------ ----------------------------
Title: Vice President Title: Vice President
----------------------------- ---------------------------
<PAGE> 7
International Sea Drilling Ltd.
and Pool Company
As of December 20, 1996
Page 7
Accepted and agreed to as of the day and year first set forth in the
foregoing letter.
INTERNATIONAL SEA DRILLING LTD.
POOL COMPANY
By: /s/ J. T. JONGEBLOED
----------------------------------
J. T. Jongebloed
President of each of the above
Borrowers
By: /s/ R.A. JOHANNSEN
----------------------------------
R. A. Johannsen
Treasurer of each of the above
Borrowers
<PAGE> 8
International Sea Drilling Ltd.
and Pool Company
As of December 20, 1996
Page 8
GUARANTORS' CONSENT AND AGREEMENT
As an inducement to Agent and Lenders to execute, and in consideration
of Agent's and Lenders' execution of the foregoing, the undersigned hereby
consent thereto and agree that the same shall in no way release, diminish,
impair, reduce or otherwise adversely affect the respective obligations and
liabilities of each of the undersigned under the Guaranty described in the
Revolving Credit Agreement (and, in the case of Pool Energy Services Co., Pool
Energy Holding, Inc., and Pool Company, the Guaranty described in the ISDL
Agreement) executed by the undersigned, or any agreements, documents or
instruments executed by any of the undersigned to create liens, security
interests or charges to secure any of the indebtedness under the Loan Papers
(as described in the Revolving Credit Agreement, the Term Loan Agreement or the
ISDL Agreement), all of which obligations and liabilities are, and shall
continue to be, in full force and effect. This consent and agreement shall be
binding upon the undersigned, and the respective successors and assigns of
each, and shall inure to the benefit of Agent and Lenders, and respective
successors and assigns of each.
ASSOCIATED PETROLEUM SERVICES, INC. POOL COMPANY HOUSTON LTD.
BIG 10 FISHING TOOL COMPANY, INC. POOL COMPANY TEXAS LTD.
PCNV, INC.
POOL ALASKA, INC. By: POOL COMPANY, General Partner of
POOL AMERICAS, INC. each of the above Obligors
POOL-AUSTRALIA, INC.
POOL CALIFORNIA ENERGY SERVICES, INC.
POOL COMPANY By: /s/ J. T. JONGEBLOED
POOL ENERGY HOLDING, INC. -------------------------
POOL ENERGY SERVICES CO. J. T. Jongebloed
POOL INTERNATIONAL, INC. President
POOL PRODUCTION SERVICES, INC.
PTX, INC.
THE INTERNATIONAL AIR DRILLING
COMPANY By: /s/ R. A. JOHANNSEN
WESTEX PRODUCTION SERVICE, INC. --------------------------
R. A. Johannsen
Treasurer
By: /s/ J. T. JONGEBLOED
-------------------------------------------
J. T. Jongebloed
President of each of the above Obligors
By: /s/ R. A. JOHANNSEN
-------------------------------------------
R. A. Johannsen
Treasurer of each of the above Obligors
<PAGE> 9
EXHIBIT A
<TABLE>
<CAPTION>
Pool Company Term Loan ISDL Term Loan
Lenders and Commitment Percentage Committed Amount Committed Amount
--------------------------------- ---------------------- ----------------
<S> <C> <C>
NationsBank of Texas, N.A. [30%] $1,575,000 $1,450,739
National Bank of Canada [27.5%] $1,443,750 $1,329,844
National Bank of Alaska [14.5%] $ 761,250 $ 701,191
Bank One, Texas, N.A. [14%] $ 735,000 $ 677,012
The Hongkong and Shanghai Banking
Corporation Ltd. [14%] $ 735,000 $ 677,012
Total Outstanding as of December 20, 1996: $5,250,000 $4,835,798
</TABLE>
<PAGE> 10
REVOLVING CREDIT NOTE
$12,000,000 Houston, Texas December 20, 1996
FOR VALUE RECEIVED, POOL COMPANY, a Texas corporation ("MAKER"),
hereby promises to pay to the order of NATIONSBANK OF TEXAS, N.A., a national
banking association ("PAYEE"), the principal amount of $12,000,000 or so much
thereof as may be disbursed and outstanding hereunder, together with interest,
as hereinafter described.
This promissory note has been executed and delivered under, and is
subject to the terms of, the $40,000,000 Restated Revolving Credit Agreement
(as amended, the "CREDIT AGREEMENT") dated as of November 30, 1995, among
Maker, NationsBank of Texas, N.A., as Agent, and Payee and the other Lenders
referred to therein, and is a "Note" referred to therein. Unless defined
herein or the context otherwise requires, capitalized terms used herein have
the meaning given to such terms in the Credit Agreement. Reference is made to
the Credit Agreement for provisions affecting this promissory note regarding
the place of payment, applicable interest rates, principal and interest payment
dates, final maturity, voluntary and mandatory prepayments, acceleration of
maturity, exercise of Rights, payment of attorneys' fees, court costs, and
other costs of collection, certain waivers by Maker and others now or hereafter
obligated for payment of any sums due hereunder, and security for the payment
hereof.
This promissory note and the similar promissory notes of Maker dated
of even date herewith have been issued under the Credit Agreement in
replacement for, but not as a novation of, those certain promissory notes of
Maker dated December 29, 1995, which were issued under the Credit Agreement.
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (I)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (II) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
POOL COMPANY
By:/s/J. T. JONGEBLOED
---------------------------
J. T. Jongebloed
President
By:/s/R. A. JOHANNSEN
---------------------------
R.A. Johannsen
Treasurer
<PAGE> 11
REVOLVING CREDIT NOTE
$11,000,000 Houston, Texas December 20, 1996
FOR VALUE RECEIVED, POOL COMPANY, a Texas corporation ("MAKER"),
hereby promises to pay to the order of NATIONAL BANK OF CANADA ("PAYEE"), the
principal amount of $11,000,000 or so much thereof as may be disbursed and
outstanding hereunder, together with interest, as hereinafter described.
This promissory note has been executed and delivered under, and is
subject to the terms of, the $40,000,000 Restated Revolving Credit Agreement
(as amended, the "CREDIT AGREEMENT") dated as of November 30, 1995, among
Maker, NationsBank of Texas, N.A., as Agent, and Payee and the other Lenders
referred to therein, and is a "Note" referred to therein. Unless defined
herein or the context otherwise requires, capitalized terms used herein have
the meaning given to such terms in the Credit Agreement. Reference is made to
the Credit Agreement for provisions affecting this promissory note regarding
the place of payment, applicable interest rates, principal and interest payment
dates, final maturity, voluntary and mandatory prepayments, acceleration of
maturity, exercise of Rights, payment of attorneys' fees, court costs, and
other costs of collection, certain waivers by Maker and others now or hereafter
obligated for payment of any sums due hereunder, and security for the payment
hereof.
This promissory note and the similar promissory notes of Maker dated
of even date herewith have been issued under the Credit Agreement in
replacement for, but not as a novation of, those certain promissory notes of
Maker dated December 29, 1995, which were issued under the Credit Agreement.
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (I)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (II) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
POOL COMPANY
By:/s/J. T. JONGEBLOED
---------------------------
J. T. Jongebloed
President
By:/s/R. A. JOHANNSEN
---------------------------
R.A. Johannsen
Treasurer
<PAGE> 12
REVOLVING CREDIT NOTE
$5,800,000 Houston, Texas December 20, 1996
FOR VALUE RECEIVED, POOL COMPANY, a Texas corporation ("MAKER"),
hereby promises to pay to the order of NATIONAL BANK OF ALASKA ("PAYEE"), the
principal amount of $5,800,000 or so much thereof as may be disbursed and
outstanding hereunder, together with interest, as hereinafter described.
This promissory note has been executed and delivered under, and is
subject to the terms of, the $40,000,000 Restated Revolving Credit Agreement
(as amended, the "CREDIT AGREEMENT") dated as of November 30, 1995, among
Maker, NationsBank of Texas, N.A., as Agent, and Payee and the other Lenders
referred to therein, and is a "Note" referred to therein. Unless defined
herein or the context otherwise requires, capitalized terms used herein have
the meaning given to such terms in the Credit Agreement. Reference is made to
the Credit Agreement for provisions affecting this promissory note regarding
the place of payment, applicable interest rates, principal and interest payment
dates, final maturity, voluntary and mandatory prepayments, acceleration of
maturity, exercise of Rights, payment of attorneys' fees, court costs, and
other costs of collection, certain waivers by Maker and others now or hereafter
obligated for payment of any sums due hereunder, and security for the payment
hereof.
This promissory note and the similar promissory notes of Maker dated
of even date herewith have been issued under the Credit Agreement in
replacement for, but not as a novation of, those certain promissory notes of
Maker dated December 29, 1995, which were issued under the Credit Agreement.
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (I)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (II) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
POOL COMPANY
By:/s/J. T. JONGEBLOED
---------------------------
J. T. Jongebloed
President
By:/s/R. A. JOHANNSEN
---------------------------
R.A. Johannsen
Treasurer
<PAGE> 13
REVOLVING CREDIT NOTE
$5,600,000 Houston, Texas December 20, 1996
FOR VALUE RECEIVED, POOL COMPANY, a Texas corporation ("MAKER"),
hereby promises to pay to the order of BANK ONE, TEXAS, N.A. ("PAYEE"), the
principal amount of $5,600,000 or so much thereof as may be disbursed and
outstanding hereunder, together with interest, as hereinafter described.
This promissory note has been executed and delivered under, and is
subject to the terms of, the $40,000,000 Restated Revolving Credit Agreement
(as amended, the "CREDIT AGREEMENT") dated as of November 30, 1995, among
Maker, NationsBank of Texas, N.A., as Agent, and Payee and the other Lenders
referred to therein, and is a "Note" referred to therein. Unless defined
herein or the context otherwise requires, capitalized terms used herein have
the meaning given to such terms in the Credit Agreement. Reference is made to
the Credit Agreement for provisions affecting this promissory note regarding
the place of payment, applicable interest rates, principal and interest payment
dates, final maturity, voluntary and mandatory prepayments, acceleration of
maturity, exercise of Rights, payment of attorneys' fees, court costs, and
other costs of collection, certain waivers by Maker and others now or hereafter
obligated for payment of any sums due hereunder, and security for the payment
hereof.
This promissory note and the similar promissory notes of Maker dated
of even date herewith have been issued under the Credit Agreement in
replacement for, but not as a novation of, those certain promissory notes of
Maker dated December 29, 1995, which were issued under the Credit Agreement.
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (I)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (II) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
POOL COMPANY
By:/s/J. T. JONGEBLOED
---------------------------
J. T. Jongebloed
President
By:/s/R. A. JOHANNSEN
---------------------------
R.A. Johannsen
Treasurer
<PAGE> 14
REVOLVING CREDIT NOTE
$5,600,000 Houston, Texas December 20, 1996
FOR VALUE RECEIVED, POOL COMPANY, a Texas corporation ("MAKER"),
hereby promises to pay to the order of THE HONGKONG AND SHANGHAI BANKING
CORPORATION LTD. ("PAYEE"), the principal amount of $5,600,000 or so much
thereof as may be disbursed and outstanding hereunder, together with interest,
as hereinafter described.
This promissory note has been executed and delivered under, and is
subject to the terms of, the $40,000,000 Restated Revolving Credit Agreement
(as amended, the "CREDIT AGREEMENT") dated as of November 30, 1995, among
Maker, NationsBank of Texas, N.A., as Agent, and Payee and the other Lenders
referred to therein, and is a "Note" referred to therein. Unless defined
herein or the context otherwise requires, capitalized terms used herein have
the meaning given to such terms in the Credit Agreement. Reference is made to
the Credit Agreement for provisions affecting this promissory note regarding
the place of payment, applicable interest rates, principal and interest payment
dates, final maturity, voluntary and mandatory prepayments, acceleration of
maturity, exercise of Rights, payment of attorneys' fees, court costs, and
other costs of collection, certain waivers by Maker and others now or hereafter
obligated for payment of any sums due hereunder, and security for the payment
hereof.
This promissory note and the similar promissory notes of Maker dated
of even date herewith have been issued under the Credit Agreement in
replacement for, but not as a novation of, those certain promissory notes of
Maker dated December 29, 1995, which were issued under the Credit Agreement.
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (I)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (II) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
POOL COMPANY
By:/s/J. T. JONGEBLOED
---------------------------
J. T. Jongebloed
President
By:/s/R. A. JOHANNSEN
---------------------------
R.A. Johannsen
Treasurer
<PAGE> 15
PROMISSORY NOTE
$1,575,000 Houston, Texas December 20, 1996
FOR VALUE RECEIVED, POOL COMPANY, a Texas corporation ("MAKER"),
hereby promises to pay to the order of NATIONSBANK OF TEXAS, N.A., a national
banking association ("PAYEE"), the principal amount of $1,575,000 together with
interest, as hereinafter described.
This promissory note has been executed and delivered under, and is
subject to the terms of, the $10,000,000 Restated Term Loan Agreement (as
amended, the "LOAN AGREEMENT") dated as of November 30, 1995, among Maker,
NationsBank of Texas, N.A., as Agent, and Payee and the other Lenders referred
to therein, and is a "Note" referred to therein. Unless defined herein or the
context otherwise requires, capitalized terms used herein have the meaning
given to such terms in the Loan Agreement. Reference is made to the Loan
Agreement for provisions affecting this promissory note regarding the place of
payment, applicable interest rates, principal and interest payment dates, final
maturity, voluntary prepayments, acceleration of maturity, exercise of Rights,
payment of attorneys' fees, court costs, and other costs of collection, certain
waivers by Maker and others now or hereafter obligated for payment of any sums
due hereunder, and security for the payment hereof.
This promissory note and the similar promissory notes of Maker dated
of even date herewith have been issued under the Loan Agreement in replacement
for, but not as a novation of, those certain promissory notes of Maker dated
December 29, 1995 which were issued under the Loan Agreement.
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (I)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (II) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
POOL COMPANY
By: /s/ J. T. JONGEBLOED
------------------------------------
J. T. Jongebloed
President
By: /s/ R. A. JOHANNSEN
------------------------------------
R.A. Johannsen
Treasurer
<PAGE> 16
PROMISSORY NOTE
$1,443,750 Houston, Texas December 20, 1996
FOR VALUE RECEIVED, POOL COMPANY, a Texas corporation ("MAKER"),
hereby promises to pay to the order of NATIONAL BANK OF CANADA ("PAYEE"), the
principal amount of $1,443,750 together with interest, as hereinafter
described.
This promissory note has been executed and delivered under, and is
subject to the terms of, the $10,000,000 Restated Term Loan Agreement (as
amended, the "LOAN AGREEMENT") dated as of November 30, 1995, among Maker,
NationsBank of Texas, N.A., as Agent, and Payee and the other Lenders referred
to therein, and is a "Note" referred to therein. Unless defined herein or the
context otherwise requires, capitalized terms used herein have the meaning
given to such terms in the Loan Agreement. Reference is made to the Loan
Agreement for provisions affecting this promissory note regarding the place of
payment, applicable interest rates, principal and interest payment dates, final
maturity, voluntary prepayments, acceleration of maturity, exercise of Rights,
payment of attorneys' fees, court costs, and other costs of collection, certain
waivers by Maker and others now or hereafter obligated for payment of any sums
due hereunder, and security for the payment hereof.
This promissory note and the similar promissory notes of Maker dated
of even date herewith have been issued under the Loan Agreement in replacement
for, but not as a novation of, those certain promissory notes of Maker dated
December 29, 1995 which were issued under the Loan Agreement.
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (I)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (II) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
POOL COMPANY
By: /s/ J. T. JONGEBLOED
------------------------------------
J. T. Jongebloed
President
By: /s/ R. A. JOHANNSEN
------------------------------------
R.A. Johannsen
Treasurer
<PAGE> 17
PROMISSORY NOTE
$761,250 Houston, Texas December 20, 1996
FOR VALUE RECEIVED, POOL COMPANY, a Texas corporation ("MAKER"),
hereby promises to pay to the order of NATIONAL BANK OF ALASKA ("PAYEE"), the
principal amount of $761,250 together with interest, as hereinafter described.
This promissory note has been executed and delivered under, and is
subject to the terms of, the $10,000,000 Restated Term Loan Agreement (as
amended, the "LOAN AGREEMENT") dated as of November 30, 1995, among Maker,
NationsBank of Texas, N.A., as Agent, and Payee and the other Lenders referred
to therein, and is a "Note" referred to therein. Unless defined herein or the
context otherwise requires, capitalized terms used herein have the meaning
given to such terms in the Loan Agreement. Reference is made to the Loan
Agreement for provisions affecting this promissory note regarding the place of
payment, applicable interest rates, principal and interest payment dates, final
maturity, voluntary prepayments, acceleration of maturity, exercise of Rights,
payment of attorneys' fees, court costs, and other costs of collection, certain
waivers by Maker and others now or hereafter obligated for payment of any sums
due hereunder, and security for the payment hereof.
This promissory note and the similar promissory notes of Maker dated
of even date herewith have been issued under the Loan Agreement in replacement
for, but not as a novation of, those certain promissory notes of Maker dated
December 29, 1995 which were issued under the Loan Agreement.
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (I)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (II) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
POOL COMPANY
By: /s/ J. T. JONGEBLOED
------------------------------------
J. T. Jongebloed
President
By: /s/ R. A. JOHANNSEN
------------------------------------
R.A. Johannsen
Treasurer
<PAGE> 18
PROMISSORY NOTE
$735,000 Houston, Texas December 20, 1996
FOR VALUE RECEIVED, POOL COMPANY, a Texas corporation ("MAKER"),
hereby promises to pay to the order of BANK ONE, TEXAS, N.A. ("PAYEE"), the
principal amount of $735,000 together with interest, as hereinafter described.
This promissory note has been executed and delivered under, and is
subject to the terms of, the $10,000,000 Restated Term Loan Agreement (as
amended, the "LOAN AGREEMENT") dated as of November 30, 1995, among Maker,
NationsBank of Texas, N.A., as Agent, and Payee and the other Lenders referred
to therein, and is a "Note" referred to therein. Unless defined herein or the
context otherwise requires, capitalized terms used herein have the meaning
given to such terms in the Loan Agreement. Reference is made to the Loan
Agreement for provisions affecting this promissory note regarding the place of
payment, applicable interest rates, principal and interest payment dates, final
maturity, voluntary prepayments, acceleration of maturity, exercise of Rights,
payment of attorneys' fees, court costs, and other costs of collection, certain
waivers by Maker and others now or hereafter obligated for payment of any sums
due hereunder, and security for the payment hereof.
This promissory note and the similar promissory notes of Maker dated
of even date herewith have been issued under the Loan Agreement in replacement
for, but not as a novation of, those certain promissory notes of Maker dated
December 29, 1995 which were issued under the Loan Agreement.
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (I)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (II) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
POOL COMPANY
By: /s/ J. T. JONGEBLOED
------------------------------------
J. T. Jongebloed
President
By: /s/ R. A. JOHANNSEN
------------------------------------
R.A. Johannsen
Treasurer
<PAGE> 19
PROMISSORY NOTE
$735,000 Houston, Texas December 20, 1996
FOR VALUE RECEIVED, POOL COMPANY, a Texas corporation ("MAKER"),
hereby promises to pay to the order of THE HONGKONG AND SHANGHAI BANKING
CORPORATION LTD. ("PAYEE"), the principal amount of $735,000 together with
interest, as hereinafter described.
This promissory note has been executed and delivered under, and is
subject to the terms of, the $10,000,000 Restated Term Loan Agreement (as
amended, the "LOAN AGREEMENT") dated as of November 30, 1995, among Maker,
NationsBank of Texas, N.A., as Agent, and Payee and the other Lenders referred
to therein, and is a "Note" referred to therein. Unless defined herein or the
context otherwise requires, capitalized terms used herein have the meaning
given to such terms in the Loan Agreement. Reference is made to the Loan
Agreement for provisions affecting this promissory note regarding the place of
payment, applicable interest rates, principal and interest payment dates, final
maturity, voluntary prepayments, acceleration of maturity, exercise of Rights,
payment of attorneys' fees, court costs, and other costs of collection, certain
waivers by Maker and others now or hereafter obligated for payment of any sums
due hereunder, and security for the payment hereof.
This promissory note and the similar promissory notes of Maker dated
of even date herewith have been issued under the Loan Agreement in replacement
for, but not as a novation of, those certain promissory notes of Maker dated
December 29, 1995 which were issued under the Loan Agreement.
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (I)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (II) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
POOL COMPANY
By: /s/ J. T. JONGEBLOED
------------------------------------
J. T. Jongebloed
President
By: /s/ R. A. JOHANNSEN
------------------------------------
R.A. Johannsen
Treasurer
<PAGE> 20
PROMISSORY NOTE
$1,450,739 Houston, Texas December 20, 1996
FOR VALUE RECEIVED, INTERNATIONAL SEA DRILLING LTD., a Cayman Islands
corporation ("MAKER"), hereby promises to pay to the order of NATIONSBANK OF
TEXAS, N.A., a national banking association ("PAYEE") the principal amount of
$1,450,739 together with interest, as hereinafter described.
This note has been executed and delivered under, and is subject to the
terms of, the $6,500,000 Term Loan Agreement (as amended, the "LOAN AGREEMENT")
dated as of November 30, 1995, among Maker, NationsBank of Texas, N.A., as
Agent, and Payee and the other Lenders referred to therein, and is a "Note"
referred to therein. Unless defined herein or the context otherwise requires,
capitalized terms used herein have the meaning given to such terms in the Loan
Agreement. Reference is made to the Loan Agreement for provisions affecting
this note regarding the place of payment, applicable interest rates, principal
and interest payment dates, final maturity, voluntary prepayments, acceleration
of maturity, exercise of Rights, payment of attorneys' fees, court costs, and
other costs of collection, certain waivers by Maker and others now or hereafter
obligated for payment of any sums due hereunder, and security for the payment
hereof.
This promissory note and the similar promissory notes of Maker dated
of even date herewith have been issued under the Loan Agreement in replacement
for, but not as a novation of, those certain promissory notes of Maker dated
December 29, 1995, which were issued under the Loan Agreement.
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (I)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (II) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
INTERNATIONAL SEA DRILLING LTD.
By: /s/ J. T. JONGEBLOED
-----------------------------------
J. T. Jongebloed
President
By: /s/ R. A. JOHANNSEN
-----------------------------------
R. A. Johannsen
Treasurer
<PAGE> 21
PROMISSORY NOTE
$1,329,844 Houston, Texas December 20, 1996
FOR VALUE RECEIVED, INTERNATIONAL SEA DRILLING LTD., a Cayman Islands
corporation ("MAKER"), hereby promises to pay to the order of NATIONAL BANK OF
CANADA ("PAYEE") the principal amount of $1,329,844 together with interest, as
hereinafter described.
This note has been executed and delivered under, and is subject to the
terms of, the $6,500,000 Term Loan Agreement (as amended, the "LOAN AGREEMENT")
dated as of November 30, 1995, among Maker, NationsBank of Texas, N.A., as
Agent, and Payee and the other Lenders referred to therein, and is a "Note"
referred to therein. Unless defined herein or the context otherwise requires,
capitalized terms used herein have the meaning given to such terms in the Loan
Agreement. Reference is made to the Loan Agreement for provisions affecting
this note regarding the place of payment, applicable interest rates, principal
and interest payment dates, final maturity, voluntary prepayments, acceleration
of maturity, exercise of Rights, payment of attorneys' fees, court costs, and
other costs of collection, certain waivers by Maker and others now or hereafter
obligated for payment of any sums due hereunder, and security for the payment
hereof.
This promissory note and the similar promissory notes of Maker dated
of even date herewith have been issued under the Loan Agreement in replacement
for, but not as a novation of, those certain promissory notes of Maker dated
December 29, 1995, which were issued under the Loan Agreement.
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (I)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (II) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
INTERNATIONAL SEA DRILLING LTD.
By: /s/ J. T. JONGEBLOED
-----------------------------------
J. T. Jongebloed
President
By: /s/ R. A. JOHANNSEN
-----------------------------------
R. A. Johannsen
Treasurer
<PAGE> 22
PROMISSORY NOTE
$701,191 Houston, Texas December 20, 1996
FOR VALUE RECEIVED, INTERNATIONAL SEA DRILLING LTD., a Cayman Islands
corporation ("MAKER"), hereby promises to pay to the order of NATIONAL BANK OF
ALASKA ("PAYEE") the principal amount of $701,191 together with interest, as
hereinafter described.
This note has been executed and delivered under, and is subject to the
terms of, the $6,500,000 Term Loan Agreement (as amended, the "LOAN AGREEMENT")
dated as of November 30, 1995, among Maker, NationsBank of Texas, N.A., as
Agent, and Payee and the other Lenders referred to therein, and is a "Note"
referred to therein. Unless defined herein or the context otherwise requires,
capitalized terms used herein have the meaning given to such terms in the Loan
Agreement. Reference is made to the Loan Agreement for provisions affecting
this note regarding the place of payment, applicable interest rates, principal
and interest payment dates, final maturity, voluntary prepayments, acceleration
of maturity, exercise of Rights, payment of attorneys' fees, court costs, and
other costs of collection, certain waivers by Maker and others now or hereafter
obligated for payment of any sums due hereunder, and security for the payment
hereof.
This promissory note and the similar promissory notes of Maker dated
of even date herewith have been issued under the Loan Agreement in replacement
for, but not as a novation of, those certain promissory notes of Maker dated
December 29, 1995, which were issued under the Loan Agreement.
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (I)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (II) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
INTERNATIONAL SEA DRILLING LTD.
By: /s/ J. T. JONGEBLOED
-----------------------------------
J. T. Jongebloed
President
By: /s/ R. A. JOHANNSEN
-----------------------------------
R. A. Johannsen
Treasurer
<PAGE> 23
PROMISSORY NOTE
$677,012 Houston, Texas December 20, 1996
FOR VALUE RECEIVED, INTERNATIONAL SEA DRILLING LTD., a Cayman Islands
corporation ("MAKER"), hereby promises to pay to the order of BANK ONE, TEXAS,
N.A. ("PAYEE") the principal amount of $677,012 together with interest, as
hereinafter described.
This note has been executed and delivered under, and is subject to the
terms of, the $6,500,000 Term Loan Agreement (as amended, the "LOAN AGREEMENT")
dated as of November 30, 1995, among Maker, NationsBank of Texas, N.A., as
Agent, and Payee and the other Lenders referred to therein, and is a "Note"
referred to therein. Unless defined herein or the context otherwise requires,
capitalized terms used herein have the meaning given to such terms in the Loan
Agreement. Reference is made to the Loan Agreement for provisions affecting
this note regarding the place of payment, applicable interest rates, principal
and interest payment dates, final maturity, voluntary prepayments, acceleration
of maturity, exercise of Rights, payment of attorneys' fees, court costs, and
other costs of collection, certain waivers by Maker and others now or hereafter
obligated for payment of any sums due hereunder, and security for the payment
hereof.
This promissory note and the similar promissory notes of Maker dated
of even date herewith have been issued under the Loan Agreement in replacement
for, but not as a novation of, those certain promissory notes of Maker dated
December 29, 1995, which were issued under the Loan Agreement.
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (I)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (II) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
INTERNATIONAL SEA DRILLING LTD.
By: /s/ J. T. JONGEBLOED
-----------------------------------
J. T. Jongebloed
President
By: /s/ R. A. JOHANNSEN
-----------------------------------
R. A. Johannsen
Treasurer
<PAGE> 24
PROMISSORY NOTE
$677,012 Houston, Texas December 20, 1996
FOR VALUE RECEIVED, INTERNATIONAL SEA DRILLING LTD., a Cayman Islands
corporation ("MAKER"), hereby promises to pay to the order of THE HONGKONG AND
SHANGHAI BANKING CORPORATION LTD. ("PAYEE") the principal amount of $677,012
together with interest, as hereinafter described.
This note has been executed and delivered under, and is subject to the
terms of, the $6,500,000 Term Loan Agreement (as amended, the "LOAN AGREEMENT")
dated as of November 30, 1995, among Maker, NationsBank of Texas, N.A., as
Agent, and Payee and the other Lenders referred to therein, and is a "Note"
referred to therein. Unless defined herein or the context otherwise requires,
capitalized terms used herein have the meaning given to such terms in the Loan
Agreement. Reference is made to the Loan Agreement for provisions affecting
this note regarding the place of payment, applicable interest rates, principal
and interest payment dates, final maturity, voluntary prepayments, acceleration
of maturity, exercise of Rights, payment of attorneys' fees, court costs, and
other costs of collection, certain waivers by Maker and others now or hereafter
obligated for payment of any sums due hereunder, and security for the payment
hereof.
This promissory note and the similar promissory notes of Maker dated
of even date herewith have been issued under the Loan Agreement in replacement
for, but not as a novation of, those certain promissory notes of Maker dated
December 29, 1995, which were issued under the Loan Agreement.
This promissory note is being executed and delivered, and is intended
to be performed, in the State of Texas, and the Laws of such State and of the
United States of America shall govern the rights and duties of the parties and
the validity, construction, enforcement, and interpretation hereof.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS, REPRESENT
THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (I)
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, OR (II) ANY COMMITMENT LETTER AMONG THE PARTIES (ALL THE TERMS AND
CONDITIONS OF WHICH ARE SUPERSEDED BY LOAN PAPERS). THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
INTERNATIONAL SEA DRILLING LTD.
By: /s/ J. T. JONGEBLOED
-----------------------------------
J. T. Jongebloed
President
By: /s/ R. A. JOHANNSEN
-----------------------------------
R. A. Johannsen
Treasurer
<PAGE> 25
GUARANTY
THIS GUARANTY is executed as of December 20, 1996, by the undersigned
(whether one or more, "GUARANTOR"), for the benefit of NATIONSBANK OF TEXAS,
N.A. ("AGENT"), and the Lenders (the "LENDERS") named in the Credit Agreement
and the Term Loan Agreement (as hereinafter defined).
WHEREAS, POOL COMPANY ("BORROWER"), Agent and Lenders have executed
(a) a Restated Credit Agreement dated as of November 30, 1995 (as amended,
supplemented, or restated, the "REVOLVING CREDIT AGREEMENT"), together with
certain other Loan Papers, and (b) a Term Loan Agreement dated as of November
30, 1995 (as amended, supplemented, or restated, the "TERM LOAN AGREEMENT"),
together with certain other Loan Papers; and
WHEREAS, Guarantor is an Affiliate of Borrower incorporated or
organized in the United States; and
WHEREAS, it is expressly understood among Borrower, Guarantor, Agent
and each Lender that the execution and delivery of this Guaranty is an integral
part of the transactions contemplated by the Revolving Credit Agreement, the
Term Loan Agreement, and the Loan Papers and a condition precedent to Agent's
and Lenders' obligations under the Revolving Credit Agreement and the Term Loan
Agreement;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, Guarantor hereby guarantees to Agent and
Lenders the prompt payment at maturity (by acceleration or otherwise), and at
all times thereafter, of the Guaranteed Indebtedness (hereinafter defined),
this Guaranty being upon the following terms and conditions:
1. Unless otherwise defined herein, all capitalized terms have
the meanings given to such terms in the Revolving Credit Agreement and the Term
Loan Agreement.
2. The term "BORROWER" shall include, without limitation,
Borrower, Borrower as a debtor-in-possession, and any receiver, trustee,
liquidator, conservator, custodian, or similar party hereafter appointed for
Borrower or all or substantially all of its assets pursuant to any liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization, or similar Debtor Relief Law from time to time in
effect affecting the rights of creditors generally.
3. The term "GUARANTEED INDEBTEDNESS" means the Obligation as
defined in the Revolving Credit Agreement and the Term Loan Agreement, together
with any and all costs, attorneys' fees, and expenses reasonably incurred by
Agent and Lenders by reason of Borrower's or Guarantor's default in payment of
any of the foregoing indebtedness.
4. This instrument shall be an absolute and continuing guaranty,
and the circumstance that at any time or from time to time the Guaranteed
Indebtedness may be paid in full shall not affect the obligation of Guarantor
with respect to the Guaranteed Indebtedness of Borrower to Agent and Lenders
thereafter incurred; provided that Guarantor may give written notice to Agent
and Lenders that Guarantor will not be liable hereunder for any indebtedness of
Borrower incurred after the giving of such notice (which notice shall not be
deemed to have been given until actually received by Agent and Lenders), and in
such event Guarantor shall remain liable for its obligations hereunder until
the payment in full of (a) the Guaranteed Indebtedness as it exists at the date
of the giving of such notice, and (b) loans made after such notice or pursuant
to any obligation of Agent and Lenders under any other commitment or agreement
made to or with Borrower prior to the giving of such notice.
5. Notwithstanding any contrary provision herein, Guarantor's
aggregate payments in respect of the Guaranteed Indebtedness shall never exceed
the greater of (a) 90% of its net worth (the amount by which the present fair
saleable value of its assets exceeds its liabilities on such date, without
giving effect to this Guaranty) or (b) the aggregate value of direct and
indirect benefits received under the Loan Papers.
6. If Guarantor becomes liable for any indebtedness owing by
Borrower to Agent or Lenders, by endorsement or otherwise, other than under
this Guaranty, such liability shall not be in any manner impaired or affected
hereby, and the rights of Agent and Lenders hereunder shall be cumulative of
any and all other rights that Agent and Lenders may ever have against
Guarantor. The exercise by Agent and Lenders of any right or remedy hereunder
or under any other agreement,
<PAGE> 26
document, or instrument, or at law or in equity, shall not preclude the
concurrent or subsequent exercise of any other right or remedy. Guarantor
covenants and agrees that it will not assert any rights arising from payment or
other performance hereunder until all of Guarantor's liability shall have been
discharged in full and all of the Guaranteed Indebtedness existing at the time
of discharge shall have been paid and performed in full.
7. Upon the occurrence and continuance of a Default, Guarantor
shall, on demand and without further notice of dishonor, without any notice
having been given to Guarantor previous to such demand of the acceptance by
Agent and Lenders of this Guaranty, and without any notice having been given to
Guarantor previous to such demand of the creating or incurring of such
indebtedness, pay the amount of the Guaranteed Indebtedness then due and
payable to Agent and Lenders, and it shall not be necessary for Agent and
Lenders, in order to enforce such payment by Guarantor, first or
contemporaneously to institute suit or exhaust remedies against Borrower or
others liable on such indebtedness, or to enforce rights against any security
ever given to secure such indebtedness.
8. All principal of and interest on all indebtedness,
liabilities, and obligations of Borrower to Guarantor (the "SUBORDINATED
DEBT"), whether direct, indirect, fixed, contingent, liquidated, unliquidated,
joint, several, or joint and several, now or hereafter existing, due or to
become due to Guarantor, or held or to be held by Guarantor, whether created
directly or acquired by assignment or otherwise, and whether evidenced by
written instrument or not, shall be expressly subordinated to the final payment
in full of the Guaranteed Indebtedness. Guarantor agrees not to receive or
accept any payment from Borrower with respect to the Subordinated Debt at any
time a Default has occurred and is continuing; and, in the event Guarantor
receives any payment on the Subordinated Debt in violation of the foregoing,
Guarantor will hold any such payment in trust for Agent and Lenders and
forthwith turn it over to Agent and Lenders, in the form received (with any
necessary endorsements), to be applied to the Guaranteed Indebtedness.
9. Guarantor shall not assert, enforce, or otherwise exercise (a)
any right of subrogation to any of the rights or liens of Agent and Lenders or
any other beneficiary against Borrower or any other obligor on the Guaranteed
Indebtedness or any collateral or other security, or (b) any right of recourse,
reimbursement, contribution, indemnification, or similar right against Borrower
or any other obligor on all or any part of the Guaranteed Indebtedness or any
guarantor thereof, and Guarantor hereby irrevocably waives any and all of the
foregoing rights. Guarantor irrevocably waives the benefit of, and any right
to participate in, any collateral or other security given to Agent and Lenders
or any other beneficiary to secure payment of the Guaranteed Indebtedness.
10. Guarantor hereby agrees that its obligations under the terms
of this Guaranty shall not be released, diminished, impaired, reduced, or
affected by the occurrence of any one or more of the following events: (a)
Agent's or any Lender's taking or accepting of any other security or guaranty
for any or all of the Guaranteed Indebtedness; (b) any release, surrender,
exchange, subordination, or loss of any security at any time existing in
connection with any or all of the Guaranteed Indebtedness; (c) any partial
release of the liability of Guarantor (or if there is more than one person or
entity signing this Guaranty, the release of any one or more of them) or the
release of any other obligor on the Obligation; (d) the insolvency, bankruptcy,
or lack of corporate or partnership power of Borrower, the undersigned, or any
party at any time liable for the payment of any or all of the Guaranteed
Indebtedness, whether now existing or hereafter occurring; (e) any renewal,
extension, or rearrangement of the payment of any or all of the Guaranteed
Indebtedness, either with or without notice to or consent of Guarantor, or any
adjustment, indulgence, forbearance, or compromise that may be granted or given
by Agent or Lenders to Borrower, Guarantor, or any other obligor on the
Obligation; (f) any neglect, delay, omission, failure, or refusal of Agent or
any Lender to take or prosecute any action for the collection of any or all of
the Guaranteed Indebtedness or to foreclose or take or prosecute any action in
connection with any instrument or agreement evidencing or securing any or all
of the Guaranteed Indebtedness; (g) any failure of Agent or any Lender to
notify Guarantor of any renewal, extension, or assignment of any or all of the
Guaranteed Indebtedness, or the release of any security or of any other action
taken or refrained from being taken by Agent or any Lender against Borrower or
any new agreement between Agent or any Lender and Borrower, it being understood
that Agent and Lenders shall not be required to give Guarantor any notice of
any kind under any circumstances whatsoever with respect to or in connection
with the Guaranteed Indebtedness, other than any notice required to be given to
Borrower or Guarantor elsewhere herein; (h) the unenforceability of any part of
the Guaranteed Indebtedness against Borrower by reason of the fact that the
Guaranteed Indebtedness exceeds the amount permitted by law, the act of
creating the Guaranteed Indebtedness, or any part thereof, is ultra vires, or
the officers creating same exceeded their authority or violated their fiduciary
duties in connection therewith; or (i) any payment by Borrower to Agent or
Lenders is held to constitute a preference under the bankruptcy laws or if for
any other reason Agent or any Lender is required to refund such payment or make
payment to someone else.
2
<PAGE> 27
11. Guarantor hereby waives all rights by which it might be
entitled to require suit on an accrued right of action in respect of any of the
Guaranteed Indebtedness or require suit against Borrower or others, whether
arising pursuant to Section 34.02 of the Texas Business and Commerce Code, as
amended (regarding Guarantor's right to require Agent or Lenders to sue
Borrower on accrued right of action following Guarantor's written notice to
Agent or Lenders), Section 17.001 of the Texas Civil Practice and Remedies
Code, as amended (allowing suit against Guarantor without suit against
Borrower, but precluding entry of judgment against Guarantor prior to entry of
judgment against Borrower), Rule 31 of the Texas Rules of Civil Procedure, as
amended (requiring Agent and Lenders to join Borrower in any suit against
Guarantor unless judgment has been previously entered against Borrower), or
otherwise.
12. Guarantor acknowledges that certain representations and
warranties set forth in Sections 5.1 through 5.15 of the Revolving Credit
Agreement and the Term Loan Agreement are applicable to Guarantor, and
Guarantor reaffirms that each such representation and warranty is true and
correct, except that with respect to any Guarantor that is a limited
partnership, the representations of Section 5.1(a) of the Revolving Credit
Agreement and the Term Loan Agreement are applicable to the general and limited
partners of such Guarantor and such Guarantor hereby affirms that such
representations are true and correct, and such Guarantor further affirms that
it is a limited partnership, duly formed and organized, validly existing and,
where applicable, in good standing under the Laws of its jurisdiction of
organization. Furthermore, Guarantor represents and warrants to Agent and
Lenders that the value of the consideration received and to be received by
Guarantor is reasonably worth at least as much as the liability and obligation
of Guarantor hereunder, and such liability and obligation may reasonably be
expected to benefit Guarantor directly or indirectly.
13. Guarantor acknowledges that certain covenants set forth in
Sections 7.1, 7.2, 7.4 through 7.29 of the Revolving Credit Agreement and the
Term Loan Agreement are applicable to the Guarantor or shall be imposed upon
the Guarantor, and Guarantor covenants and agrees to promptly and properly
perform, observe, and comply with each such covenant.
14. Guarantor expressly assumes all responsibilities to remain
informed of the financial condition of Borrower and any circumstances affecting
(a) Borrower's ability to perform under the Revolving Credit Agreement, the
Term Loan Agreement, and the other Loan Papers to which it is a party or (b)
collateral securing all or any part of the Guaranteed Indebtedness.
15. The Guaranteed Indebtedness shall not be reduced, discharged,
or released because or by reason of any existing or future offset, claim, or
defense (except for the defense of payment) of Borrower or any other party
against Agent or any Lender or against payment of the Guaranteed Indebtedness,
whether such offset, claim, or defense arises in connection with the Guaranteed
Indebtedness or otherwise. Such claims and defenses include, without
limitation, failure of consideration, breach of warranty, fraud, statute of
frauds, bankruptcy, infancy, statute of limitations, lender liability, accord
and satisfaction, and usury.
16. This Guaranty is for the benefit of Agent and Lenders and
their respective successors and assigns. Guarantor acknowledges that in the
event of an assignment of the Guaranteed Indebtedness, or any part thereof, the
rights and benefits hereunder, to the extent applicable to the indebtedness so
assigned, may be transferred with such indebtedness. This Guaranty is binding
on Guarantor and its successors and assigns.
17. This Guaranty is a Loan Paper and, therefore, this Guaranty is
subject to the applicable provisions of Section 12 of the Revolving Credit
Agreement and the Term Loan Agreement, all of which applicable provisions are
incorporated herein by reference the same as if set forth herein verbatim.
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<PAGE> 28
This Guaranty is executed as of the first date set forth herein.
The address and fax no. for
each of the undersigned is:
10375 Richmond Avenue
Houston, Texas 77042
Attn: R.A. Johannsen,
Treasurer
FAX No.: (713) 954-3037 PCNV, INC.
By: /s/ J. T. JONGEBLOED
------------------------------------
J. T. Jongebloed,
President
By: /s/ R. A. JOHANNSEN
------------------------------------
R. A. Johannsen,
Treasurer
POOL COMPANY HOUSTON LTD.
By: POOL COMPANY, its general partner
By: /s/ J. T. JONGEBLOED
--------------------------------
J. T. Jongebloed,
President
By: /s/ R. A. JOHANNSEN
--------------------------------
R. A. Johannsen,
Treasurer
POOL COMPANY TEXAS LTD.
By: POOL COMPANY, its general partner
By: /s/ J. T. JONGEBLOED
--------------------------------
J. T. Jongebloed,
President
By: /s/ R. A. JOHANNSEN
--------------------------------
R. A. Johannsen,
Treasurer
4
<PAGE> 29
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is executed as of December 20, 1996, by PCNV,
Inc., Pool Company Texas Ltd., and Pool Company Houston Ltd. (collectively
referred to herein as "DEBTOR") for the benefit of NationsBank of Texas, N.A.,
as Agent ("AGENT") and the Lenders ("LENDERS") named in the Revolving Credit
Agreement (as hereinafter defined) and the Term Loan Agreement (as hereinafter
defined) and for the benefit of NationsBank of Texas, N.A. ("NATIONSBANK") for
its own account with respect to its net exposure on foreign exchange contracts
between it and any Company (as defined in such Revolving Credit Agreement).
NationsBank, Agent and Lenders are each a SECURED PARTY, and are collectively
referred to herein as "SECURED PARTIES".
WHEREAS, Pool Company, a Texas Corporation ("BORROWER"), and Secured
Parties have entered into (i) a Restated Credit Agreement dated as of November
30, 1995 (as renewed, extended, or amended from time to time, the "REVOLVING
CREDIT AGREEMENT"), together with certain other Loan Papers, and (ii) a Term
Loan Agreement dated as of November 30, 1995 (as renewed, extended, or amended
from time to time, the "TERM LOAN AGREEMENT") together with certain other Loan
Papers; and
WHEREAS, Debtor is a direct or indirect consolidated Subsidiary of
Borrower incorporated or organized in the United States; and
WHEREAS, in Debtor's judgment, (a) the value of consideration received
and to be received by Debtor in connection with the transaction described above
is reasonably worth at least as much as the liability and obligation of Debtor
hereunder, and (b) such liability and obligation may reasonably be expected to
directly or indirectly benefit Debtor; and
WHEREAS, it is expressly understood among Secured Parties and Debtor
that the contemplated execution and delivery of this agreement is an integral
part of the transactions contemplated by the Loan Papers and a condition
precedent to Secured Parties' obligations to extend credit under the Revolving
Credit Agreement;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, Debtor hereby covenants and agrees with
Secured Parties as follows:
1. Certain Definitions. Unless otherwise defined herein, or the
context hereof otherwise requires, (a) capitalized terms have the meaning
ascribed to such terms in the Revolving Credit Agreement and the Term Loan
Agreement, and (b) each term defined in the UCC is used in this agreement with
the same meaning; provided that if any definition given a term in Chapter 9 of
the UCC conflicts with the definition given that term in any other chapter of
the UCC, the Chapter 9 definition shall prevail. As used herein, the following
terms have the meanings indicated:
Collateral has the meaning set forth in Paragraph 3.
Default has the meaning set forth in Paragraph 6.
Obligation means (a) the "Obligation" as defined in the
Revolving Credit Agreement, (b) the "Obligation" as defined in the Term Loan
Agreement, (c) NationsBank's net exposure on all foreign exchange contracts
between Debtor and NationsBank, (d) all indebtedness, liabilities, and
obligations of Debtor arising under this agreement, (e) interest accruing on,
and attorneys' fees, court costs, and other costs of collection reasonably
incurred in the collection or enforcement of, any of the indebtedness,
liabilities, or obligations described in clauses (a) through (d) above, and (f)
any and all renewals and extensions of, or amendments to, any of the
indebtedness, liabilities, and obligations described in clauses (a) through (e)
above. The foregoing includes future advances, it being the intention and
contemplation of Debtor and Secured Parties that future advances will be made
to Borrower under the Revolving Credit Agreement for a variety of purposes, and
that payment and repayment of all of the foregoing are intended to and shall be
part of the Obligation secured hereby.
Obligor means any person or entity obligated with respect to
any of the Collateral, whether as an account debtor, obligor on an instrument,
issuer of securities, or otherwise.
<PAGE> 30
Related Papers means (a) this agreement, (b) all present and
future agreements, documents, and instruments now or hereafter evidencing any
of the Obligation, or assuring or securing payment thereof, (c) all agreements,
documents, and instruments now or hereafter executed in connection herewith,
including, without limitation, the Loan Papers, and (d) any and all future
renewals and extensions or restatements of, or amendments or supplements to,
all or any part of the foregoing.
Security Interest means the security interest granted and the
pledge and assignment made under Paragraph 2.
UCC means the Uniform Commercial Code as enacted in the State
of Texas or other applicable jurisdiction, as amended at the time in question
2. Security Interest. In order to secure the full and complete
payment and performance of (a) the Obligation when due, and (b) NationsBank's
net exposure on all foreign exchange contracts between any Company and
NationsBank when due, Debtor hereby grants to Secured Parties a security
interest in the Collateral and pledges and assigns the Collateral to Secured
Parties, all upon and subject to the terms and conditions of this agreement.
Such Security Interest is granted and such pledge and assignment are made as
security only and shall not subject Secured Parties to, or transfer or in any
way affect or modify, any obligation of Debtor with respect to any of the
Collateral or any transaction involving or giving rise thereto. For purposes
of clarification, "net exposure on all foreign exchange contracts" refers to
the amount, if any, by which the purchase or sales prices stipulated in any
foreign exchange contracts on which a Company is in default are (i) less, in
the case of contracts to purchase currencies, or (ii) greater, in the case of
contracts to sell currencies, respectively, than the market prices for such
currencies (as determined on the agreed value date specified in each such
contract).
3. Collateral. As used herein, COLLATERAL includes all of the
following items and types of property now owned or hereafter acquired
(collectively, the "COLLATERAL"):
(a) All present and future accounts of Debtor, including,
without limitation, all accounts receivable and all other rights of Debtor to
payment for goods sold or leased or for services rendered, and all cash and
noncash proceeds, increases, profits, combinations, reclassifications,
substitutions, and replacements of or for all or any part of the foregoing;
(b) All present and future deposit accounts, restricted
and unrestricted cash collateral accounts, and cash equivalent instruments
(including, without limitation, certificates of deposit) of Debtor now or
hereafter held by or specifically assigned or granted to Secured Parties
(including, without limitation, the cash collateral account described in
Section 4.3 of the Revolving Credit Agreement, together with all present and
future funds on deposit therein and investments therefrom);
(c) All present and future Rights, titles, and interests
Debtor may have or be or become entitled to under or by virtue of the
Contingent Support Agreement and all cash and noncash proceeds, increases,
profits, combinations, reclassifications, substitutions, and replacements of or
for all or any part of the foregoing; and
(d) The present and future shares of the capital stock
(or equivalent interests) now or hereafter issued by the following entities to
Debtor, up to the percentage set forth below, and the certificates representing
such shares (or equivalent interests), and all dividends, cash, instruments,
and other property from time to time received, receivable, or otherwise
distributed in respect of or in exchange for any such shares (or equivalent
interests), and increases, proceeds, combinations, reclassifications,
substitutions, and replacements of or for all or any part of the foregoing:
100% All present and future consolidated
Subsidiaries which are incorporated
or formed within the United States
of America
66% All present and future consolidated
Subsidiaries which are not
incorporated or formed within the
United States of America
4. Representations and Warranties. Debtor acknowledges that
certain representations and warranties set forth in the Revolving Credit
Agreement and the Term Loan Agreement are applicable to Debtor, and Debtor
reaffirms that
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<PAGE> 31
each such representation and warranty is true and correct. In addition, Debtor
represents and warrants to Secured Parties that:
(a) With respect to any Debtor that is a limited
partnership, the representations of Section 5.1(a) of the Revolving Credit
Agreement and the Term Loan Agreement are applicable to the general and limited
partners of such Guarantor and such representations are true and correct, and
such Guarantor is a limited partnership, duly formed and organized, validly
existing and, where applicable, in good standing under the Laws of its
jurisdiction of organization.
(b) Debtor's chief executive office is where Debtor is
entitled to receive notices hereunder, and the present and foreseeable location
of Debtor's books and records concerning any Collateral that is accounts is as
set forth on Schedule 1 attached hereto.
(c) All Collateral that is securities is duly authorized,
validly issued, fully paid, and non-assessable, and its transfer is not subject
to any restrictions other than restrictions imposed by applicable securities
and corporate Laws.
(d) All Collateral that is accounts included in
calculating the Borrowing Base is free from any claim for credit, deduction, or
allowance of an Obligor (except for credits, deductions, or allowances granted
in the ordinary course of business), and free from any defense, dispute,
setoff, or counterclaim, and there is no extension or indulgence with respect
thereto.
(e) The Contingent Support Agreement is in full force and
effect; there have been no renewals or extensions of, or amendments,
modifications, or supplements to, any thereof about which Secured Parties have
not been advised in writing; and no default or potential default has occurred
and is continuing thereunder.
(f) Debtor owns all presently existing Collateral, and
will keep said Collateral and all hereafter-acquired Collateral, free and clear
of all Liens except Permitted Liens.
The delivery at any time by Debtor to any Secured Party of Collateral or of
additional specific descriptions of certain Collateral shall constitute a
representation and warranty by Debtor to Secured Parties that the
representations and warranties of this Paragraph 4 are true and correct in all
material respects with respect to each item of such Collateral.
5. Certain Covenants. Debtor acknowledges that certain covenants
set forth in the Revolving Credit Agreement and the Term Loan Agreement are
applicable to Debtor or shall be imposed upon Debtor, and Debtor covenants and
agrees to promptly and properly perform, observe, and comply with each such
covenant. In addition, Debtor further covenants and agrees with Secured
Parties that Debtor will:
(a) Maintain at one or more of the addresses set forth on
Schedule 1 a current record of where all Collateral is located, permit
representatives of any Secured Party (at such Secured Party's expense to the
extent so provided in the Revolving Credit Agreement) at any time during normal
business hours to inspect and make abstracts from such records, and furnish to
such Secured Party, at such intervals as such Secured Party may request, such
documents, lists, descriptions, certificates, and other information as may be
necessary or proper to keep such Secured Party informed with respect to the
identity, location, status, condition, and value of the Collateral.
(b) Perform in accordance with normal business practices
all of Debtor's duties under and in connection with each transaction to which
any Collateral relates.
(c) Promptly notify Secured Parties of any claim, action,
or proceeding affecting title to all or any of the Collateral or the Security
Interest and, at the request of any Secured Party, appear in and defend, at
Debtor's expense, any such action or proceeding.
(d) From time to time promptly execute and deliver to
Agent all such other assignments, certificates, supplemental documents, and
financing statements, and do all other acts or things as Secured Parties may
reasonably request in order to more fully create, evidence, perfect, continue,
and preserve the priority of the Security Interest.
(e) Not sell, lease, or otherwise dispose of, or permit
the sale, lease, or disposition of, any Collateral except for sales, leases,
and other dispositions permitted by the terms of the Revolving Credit
Agreement.
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<PAGE> 32
(f) Not create, incur, or suffer or permit to be created
or incurred or to exist any Lien upon or against any of the Collateral, except
for Permitted Liens.
(g) Not use, or permit the use of, any of the Collateral
for any unlawful purpose or in any manner inconsistent with the provisions or
requirements of any applicable insurance policy.
(h) Not amend, modify, surrender, cancel, terminate, or
replace, nor permit any such amendment, modification, surrender, cancellation,
termination, or replacement of, (i) the Contingent Support Agreement, without
each Secured Party's written consent, or (ii) other than in the ordinary course
of business, any other material contract to which any of the Collateral
relates.
(i) Not relocate Debtor's principal place of business,
chief executive office, or place where Debtor's books and records related to
accounts are kept, or otherwise relocate any of the other Collateral, to an
address in a Louisiana parish or other state other than to those Louisiana
parishes or other states in which addresses set forth on Schedule 1 are
located, or change Debtor's name or address to which it is entitled to receive
notices hereunder, unless prior thereto Debtor (i) gives Secured Parties 30
days prior written notice of such proposed relocation or change (such notice to
include, without limitation, the name of the Louisiana parish or other state
into which the Collateral is being relocated, and the new name and address of
Debtor) and (ii) (unless the Collateral is being relocated to a jurisdiction in
which existing financing statements or other required filings have previously
been made to perfect the Security Interest in such Collateral) executes and
delivers all such additional documents and performs all additional acts as
Secured Parties in their sole discretion may request in order to continue or
maintain the existence and priority of the Security Interest in such
Collateral.
6. Default. The term "Default," as used herein, means the
occurrence of any one or more of the events described in Section 8 of the
Revolving Credit Agreement or Section 8 of the Term Loan Agreement.
7. Remedies. Upon the occurrence and continuance of a Default,
Secured Parties may exercise any and all rights and remedies available to a
secured party under the UCC, in addition to any and all other rights and
remedies afforded by the Related Papers, at law, in equity, or otherwise,
including, without limitation, the rights and remedies described in Section 9
of the Revolving Credit Agreement and the Term Loan Agreement.
(a) Notice. Reasonable notification of the time and
place of any public sale of the Collateral, or reasonable notification of the
time after which any private sale or other intended disposition of the
Collateral is to be made, shall be sent to the Debtor and to any other Person
entitled to notice under the UCC; provided that if any of the Collateral
threatens to decline speedily in value or is of the type customarily sold on a
recognized market, Secured Parties may sell or otherwise dispose of the
Collateral without notification, advertisement, or other notice of any kind.
It is agreed that (i) notice sent or given not less than five Business Days
prior to the taking of the action to which the notice relates is reasonable
notification and notice for the purposes of this subparagraph, and (ii) any
sale of the Collateral may be conducted with reserve.
(b) Sales of Securities. In connection with the sale of
any Collateral that is securities, Secured Parties are authorized, but not
obligated, to limit prospective purchasers to the extent deemed necessary or
desirable by Secured Parties to render such sale exempt from the registration
requirements of the Securities Exchange Act of 1934 (as amended, the EXCHANGE
ACT) and any applicable state securities Laws, and no sale so made in good
faith by Secured Parties shall be deemed not to be "commercially reasonable"
because so made.
(c) Application of Proceeds. Secured Parties shall apply
the proceeds or any sale or other disposition of the Collateral under this
Paragraph 7 in the following order: First, to the payment of all its expenses
incurred in retaking, holding, and preparing any of the Collateral for sale(s)
or other disposition, in arranging for such sale(s) or other disposition, and
in actually selling or disposing of the same (all of which are part of the
Obligation); second, toward repayment of amounts expended by Secured Parties
under Paragraph 8; third, subject to Section 9.1 of the Revolving Credit
Agreement and the Term Loan Agreement, toward payment of the balance of the
Obligation and NationsBank's net exposure then existing under all foreign
exchange contracts between any Company and NationsBank in such order and manner
as Secured Parties, in their discretion, may deem advisable. Any surplus
remaining shall be delivered to the Debtor or Borrower or as a court of
competent jurisdiction may direct. If the proceeds are insufficient to pay the
Obligation in full, Borrower shall remain liable for any deficiency.
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<PAGE> 33
8. Other Rights of Secured Parties.
(a) Performance. If any covenant, duty, or agreement of
Debtor is not performed in accordance with its material terms, Secured Parties
may, at their option, perform, or attempt to perform, such covenant, duty, or
agreement on behalf of Debtor. Any amount reasonably expended by Secured
Parties in such performance or attempted performance shall be payable by Debtor
to Secured Parties on demand, shall become part of the Obligation, and shall
bear interest at the Default Rate from the date of such expenditure by Secured
Parties until paid. Notwithstanding the foregoing, it is expressly understood
that no Secured Party shall assume or have, except by express written consent
of such Secured Party, any liability or responsibility for the performance of
any covenant, duty, or agreement of Debtor.
(b) Collection. Upon notice from any Secured Party, each
Obligor with respect to any payments on any of the Collateral (including,
without limitation, dividends and other distributions with respect to
securities and insurance proceeds payable by reason of loss or damage to any of
the Collateral) is hereby authorized and directed by Debtor to make payment
directly to such Secured Party, regardless of whether Debtor was previously
making collections thereon. Subject to Paragraph 8(e), until such notice is
given, Debtor is authorized to retain and expend all payments made on
Collateral. Each Secured Party shall have the right in its own name or in the
name of Debtor to compromise or extend time of payment with respect to all or
any portion of the Collateral for such amounts and upon such terms as such
Secured Party may determine; to demand, collect, receive, receipt for, sue for,
compound, and give acquittances for any and all amounts due or to become due
with respect to Collateral; to take control of cash and other proceeds of any
Collateral; to endorse the name of Debtor on any notes, acceptances, checks,
drafts, money orders, or other evidences of payment on Collateral that may come
into the possession of such Secured Party; to sign the name of Debtor on any
invoice or bill of lading relating to any Collateral, on any drafts against
Obligors or other persons or entities making payment with respect to
Collateral, on assignments and verifications of accounts or other Collateral
and on notices to Obligors making payment with respect to Collateral; to send
requests for verification of obligations to any Obligor; and to do all other
acts and things necessary to carry out the intent of this agreement. If any
Obligor fails or refuses to make payment on any Collateral when due, each
Secured Party is authorized, in its sole discretion, either in its own name or
in the name of Debtor, to take such action as such Secured Party shall deem
appropriate for the collection of any amounts owed with respect to Collateral
or upon which a delinquency exists. Regardless of any other provision hereof,
however, a Secured Party shall never be liable for its failure to collect, or
for its failure to exercise diligence in the collection of, any amounts owed
with respect to Collateral, nor shall it be under any duty whatever to anyone
except Debtor to account for funds that it shall actually receive hereunder.
Without limiting the generality of the foregoing, no Secured Party shall have
responsibility for ascertaining any maturities, calls, conversions, exchanges,
offers, tenders, or similar matters relating to any Collateral, or for
informing Debtor with respect to any of such matters (irrespective of whether
such Secured Party actually has, or may be deemed to have, knowledge thereof).
The release of any Secured Party to any Obligor shall be a full and complete
release, discharge, and acquittance to such Obligor, to the extent of any
amount so paid to such Secured Party. The rights granted Secured Parties under
this subparagraph may be exercised only upon the occurrence and continuance of
a Default.
(c) Record Ownership of Securities. Upon the occurrence
and continuance of a Default, Secured Parties may have any Collateral that is
securities and that is in the possession of a Secured Party, or its nominee or
nominees, registered in its name, or in the name of its nominee or nominees, as
pledgee; and, as to any securities so registered, Debtor shall execute and
deliver (or cause to be executed and delivered) to such Secured Party all such
proxies, powers of attorney, dividend coupons or orders, and other documents as
such Secured Party may reasonably request for the purpose of enabling such
Secured Party to exercise the voting rights and powers which it is entitled to
exercise under this agreement or to receive the dividends and other payments in
respect of securities which it is authorized to receive and retain under this
agreement.
(d) Voting of Securities. As long as a Default has not
occurred and is not continuing, Debtor shall be entitled to exercise all voting
rights pertaining to any Collateral that is securities. After the occurrence
and during the continuance of a Default, the right to vote any Collateral that
is securities shall be vested exclusively in Secured Parties. To this end,
Debtor hereby irrevocably constitutes and appoints Agent, on behalf of Secured
Parties, the proxy and attorney-in-fact of Debtor, with full power of
substitution, to vote, and to act with respect to, any and all Collateral that
is securities standing in the name of Debtor or with respect to which Debtor is
entitled to vote and act, subject to the understanding that such proxy may not
be exercised unless a Default has occurred and is continuing. The proxy herein
granted is coupled with an interest, is irrevocable, and shall continue until
the Obligation has been paid and performed in full.
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<PAGE> 34
(e) Certain Proceeds. Notwithstanding any contrary
provision herein, any and all stock dividends or other non-cash distributions
made on or in respect of any Collateral that is securities, and any proceeds of
any Collateral that is securities, whether such dividends, distributions, or
proceeds result from a subdivision, combination, or reclassification of the
outstanding capital stock of any issuer thereof or as a result of any merger,
consolidation, acquisition, or other exchange of assets to which any issuer may
be a party, or otherwise, shall be part of the Collateral hereunder, shall, if
received by Debtor, be held in trust for the benefit of Secured Parties, and
shall be delivered promptly to Secured Parties or to Agent, on behalf of
Secured Parties, (accompanied by proper instruments of assignment and/or stock
and/or bond powers executed by Debtor in accordance with Secured Parties'
instructions) to be held subject to the terms of this agreement. Any cash
proceeds of Collateral which come into the possession of any Secured Party
(including, without limitation, insurance proceeds) may, at such Secured
Party's option, be applied in whole or in part to the Obligation (to the extent
then due) and to NationsBank's net exposure then existing under all foreign
exchange contracts between any Company and NationsBank, be released in whole or
in part to or on the written instructions of Debtor for any general or specific
purpose, or be retained in whole or in part by such Secured Party as additional
Collateral. Any cash Collateral in the possession of any Secured Party may be
invested by such Secured Party in (a) obligations of the United States of
America and agencies thereof and obligations guaranteed by the United States of
America maturing within one year from the date of acquisition, and (b)
certificates of deposit issued by commercial banks organized under the Laws of
the United States of America or any state thereof and having combined capital,
surplus, and undivided profits of not less than $100,000,000, which have a
rating from Moody's Investors Service, Inc., and Standard & Poors Corporation
of at least P-1 and A-1, respectively, or are insured by the Federal Deposit
Insurance Corporation. Secured Parties shall never be obligated to make any
such investment and shall never have any liability to Debtor for any loss which
may result therefrom. All interest and other amounts earned from any
investment of Collateral may be dealt with by Secured Parties in the same
manner as other cash Collateral. The provisions of this subparagraph shall be
applicable only upon the occurrence and continuance of a Default.
(f) Use and Operation of Collateral. Debtor covenants to
promptly reimburse and pay to any Secured Party, at such Secured Party's
request, the amount of all expenses reasonably incurred by such Secured Party
in connection with its custody and preservation of Collateral, and all such
expenses shall bear interest until repaid (i) at the lesser of the Designated
Rate or the Highest Lawful Rate, if no Default has occurred and is continuing,
and (ii) at the lesser of the Default Rate or the Highest Lawful Rate, upon the
occurrence and continuance of a Default. Such expenses, together with such
interest, shall be payable by Debtor to any Secured Party upon demand and shall
become part of the Obligation. However, the risk of accidental loss or damage
to, or diminution in value of, Collateral is on Debtor. With respect to
Collateral that is in the possession of a Secured Party, such Secured Party
shall have no duty to fix or preserve rights against prior parties to such
Collateral and shall never be liable for any failure to use diligence to
collect any amount payable in respect of such Collateral, but shall be liable
only to account to Debtor for what it may actually collect or receive thereon.
The provisions of this subparagraph shall be applicable whether or not a
Default has occurred and is continuing.
(g) INDEMNIFICATION. DEBTOR HEREBY ASSUMES ALL LIABILITY
FOR THE COLLATERAL, FOR THE SECURITY INTEREST, AND FOR ANY USE, POSSESSION,
MAINTENANCE, AND MANAGEMENT OF, ALL OR ANY OF THE COLLATERAL, INCLUDING,
WITHOUT LIMITATION, ANY TAXES ARISING AS A RESULT OF, OR IN CONNECTION WITH,
THE TRANSACTIONS CONTEMPLATED HEREIN, AND AGREES TO ASSUME LIABILITY FOR, AND
TO INDEMNIFY AND HOLD SECURED PARTIES HARMLESS FROM AND AGAINST, ANY AND ALL
CLAIMS, CAUSES OF ACTION, OR LIABILITY, FOR INJURIES TO OR DEATHS OF PERSONS
AND DAMAGE TO PROPERTY, HOWSOEVER ARISING FROM OR INCIDENT TO SUCH USE,
POSSESSION, MAINTENANCE, AND MANAGEMENT, WHETHER SUCH PERSONS BE AGENTS OR
EMPLOYEES OF DEBTOR OR OF THIRD PARTIES, OR SUCH DAMAGE TO PROPERTY OF DEBTOR
OR OF OTHERS. UNLESS EXPRESSLY PROHIBITED BY APPLICABLE LAW, DEBTOR AGREES TO
INDEMNIFY, SAVE, AND HOLD SECURED PARTIES HARMLESS FROM AND AGAINST, AND
COVENANTS TO DEFEND SECURED PARTIES AGAINST, ANY AND ALL LOSSES, DAMAGES,
CLAIMS, COSTS, PENALTIES, LIABILITIES, AND EXPENSES, INCLUDING, WITHOUT
LIMITATION, COURT COSTS AND ATTORNEYS' FEES, HOWSOEVER ARISING OR INCURRED
BECAUSE OF, INCIDENT TO, OR WITH RESPECT TO COLLATERAL OR ANY USE, POSSESSION,
MAINTENANCE, OR MANAGEMENT THEREOF, PROVIDED THAT DEBTOR SHALL NOT BE LIABLE
FOR LOSSES, DAMAGES, CLAIMS, COSTS, PENALTIES, LIABILITIES, AND EXPENSES
RESULTING FROM ANY SECURED PARTY'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
9. Miscellaneous.
(a) Reference to Miscellaneous Provisions. This
agreement is a Loan Paper, and, therefore, this agreement is subject to the
applicable provisions of Section 12 of the Revolving Credit Agreement, all of
which applicable provisions are incorporated herein by reference the same as if
set forth herein verbatim. Until changed by notice, the address
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<PAGE> 35
and facsimile number for each party hereto for purposes of communications are
as appear on the signature page(s) of this agreement.
(b) Term. This agreement shall terminate upon full and
final payment and performance of (a) the Obligation, and (b) all foreign
exchange contracts between each Company and NationsBank. No Obligor, if any,
on any of the Collateral shall ever be obligated to make inquiry as to the
termination of this agreement, but shall be fully protected in making payment
directly to Agent, on behalf of Secured Parties.
(c) Actions Not Releases. The Security Interest and
Debtor's obligations and Secured Parties' rights hereunder shall not be
released, diminished, impaired, or adversely affected by the occurrence of any
one or more of the following events: (i) The taking or accepting of any other
security or assurance for any or all of the Obligation; (ii) any release,
surrender, exchange, subordination, or loss of any security or assurance at any
time existing in connection with any or all of the Obligation; (iii) the
modification of, amendment to, or waiver of compliance with any terms of any of
its or any other Related Paper without the notification or consent of Debtor,
except as required therein (the right to such notification and consent being
specifically waived by Debtor); (iv) the insolvency, bankruptcy, or lack of
corporate, partnership or trust power of any party at any time liable for the
payment of any or all of the Obligation, whether now existing or hereafter
occurring; (v) any renewal, extension, or rearrangement of the payment of any
or all of the Obligation, either with or without notice to or consent of
Debtor, or any adjustment, indulgence, forbearance, or compromise that may be
granted or given by Secured Parties to Debtor; (vi) any neglect, delay,
omission, failure, or refusal of any Secured Party to take or prosecute any
action in connection with any other agreement, document, guaranty, or
instrument evidencing, securing, or assuring the payment of all or any of the
Obligation; (vii) any failure of any Secured Party to notify Debtor of any
renewal, extension, or assignment of the Obligation or any part thereof, or the
release of any security, or of any other action taken or refrained from being
taken by any Secured Party against Debtor or any new agreement between any
Secured Party and Debtor, it being understood that no Secured Party shall be
required to give Debtor (other than Borrower) any notice of any kind under any
circumstances whatsoever with respect to or in connection with the Obligation,
including, without limitation, notice of acceptance of this security agreement
or any Collateral ever delivered to or for the account of such Secured Party
hereunder; (viii) the illegality, invalidity, or unenforceability of all or any
part of the Obligation against any party obligated with respect thereto by
reason of the fact that the Obligation, or the interest paid or payable with
respect thereto, exceeds the amount permitted by Law, the act of creating the
Obligation, or any part thereof, is ultra vires, or the officers, partners, or
trustees creating same acted in excess of their authority, or for any other
reason; or (ix) if any payment by any party obligated with respect thereto is
held to constitute a preference under applicable Laws or for any other reason
any Secured Party is required to refund such payment or pay the amount thereof
to someone else.
(d) Waivers. Unless otherwise expressly provided herein
or in any other Related Paper, Debtor waives (i) any right to require Secured
Parties to proceed against any other Person, to exhaust its rights in
Collateral, or to pursue any other right which Secured Parties may have; (ii)
with respect to the Obligation, presentment and demand for payment, protest,
notice of protest and nonpayment, and notice of the intention to accelerate;
and (iii) all rights of marshaling in respect of any and all of the Collateral.
(e) Financing Statement. Secured Parties may file this
agreement or a carbon, photographic, or other reproduction of this agreement,
as a financing statement, but the failure of Secured Parties to do so shall not
impair the validity or enforceability of this agreement.
(f) Information. Except as otherwise provided by Law,
the charge of Secured Parties for furnishing each statement of account or each
list of Collateral shall be $10.00.
(g) Multiple Counterparts. This agreement has been
executed in a number of identical counterparts, each of which shall be deemed
an original for all purposes and all of which constitute, collectively, one
agreement; but, in making proof of this agreement, it shall not be necessary to
produce or account for more than one such counterpart.
(h) Parties Bound; Assignment. This agreement shall be
binding on and inure to the benefit of Debtor, Secured Parties, and their
respective successors and assigns. Debtor's obligations and agreements
hereunder are joint and several and shall be binding upon their respective
successors and assigns, and delivery or other accounting of Collateral to any
one or more of them shall discharge Secured Parties of all liability therefor.
Debtor may not, without the prior written consent of Secured Parties, assign
any rights, duties, or obligations hereunder. In the event of an assignment
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<PAGE> 36
of all or part of the Obligation, the Security Interest and other rights and
benefits hereunder, to the extent applicable to the part of the Obligation so
assigned, may be transferred therewith.
EXECUTED as of the day and year first herein set forth.
NATIONSBANK OF TEXAS, N.A. NATIONSBANK OF TEXAS, N.A., individually
700 Louisiana Street, 8th Floor and as Agent
Houston, Texas 77002
Attn: James R. Allred, By: /s/ JAMES R. ALLRED
Senior Vice President -------------------------------------
FAX No.: (713) 247-6568 James R. Allred
Senior Vice President
The address and fax no. for PCNV, INC.
each of the undersigned is:
10375 Richmond Avenue By: /s/ J. T. JONGEBLOED
Houston, Texas 77042 -------------------------------------
Attn: R. A. Johannsen, J. T. Jongebloed, President
Treasurer
FAX No.: (713) 954-3037
By: /s/ R. A. JOHANNSEN
-------------------------------------
R. A. Johannsen, Treasurer
POOL COMPANY HOUSTON LTD.
By: POOL COMPANY, its general partner
By: /s/ J. T. JONGEBLOED
---------------------------------
J. T. Jongebloed, President
By: /s/ R. A. JOHANNSEN
---------------------------------
R. A. Johannsen, Treasurer
POOL COMPANY TEXAS LTD.
By: POOL COMPANY, its general partner
By: /s/ J. T. JONGEBLOED
---------------------------------
J. T. Jongebloed, President
By: /s/ R. A. JOHANNSEN
---------------------------------
R. A. Johannsen, Treasurer
8
<PAGE> 37
PLEDGE OF PARTNERSHIP INTERESTS
THIS SECURITY AGREEMENT is executed as of December 20, 1996, by Pool
Company, a Texas corporation ("BORROWER") for the benefit of NationsBank of
Texas, N.A., as Agent ("AGENT") and the Lenders ("LENDERS") named in the
Revolving Credit Agreement (as hereinafter defined) and the Term Loan Agreement
(as hereinafter defined) and for the benefit of NationsBank of Texas, N.A.
("NATIONSBANK") for its own account with respect to its net exposure on foreign
exchange contracts between it and any Company (as defined in such Revolving
Credit Agreement). NationsBank, Agent and Lenders are each a SECURED PARTY,
and are collectively referred to herein as "SECURED PARTIES".
WHEREAS, Borrower and Secured Parties have entered into (i) a Restated
Credit Agreement dated as of November 30, 1995 (as renewed, extended, or
amended from time to time, the "REVOLVING CREDIT AGREEMENT"), together with
certain other Loan Papers, and (ii) a Term Loan Agreement dated as of November
30, 1995 (as renewed, extended, or amended from time to time, the "TERM LOAN
AGREEMENT") together with certain other Loan Papers; and
WHEREAS, Borrower is (i) the general partner of Pool Company Texas
Ltd., a Texas limited partnership ("POOL TEXAS LTD."), and (ii) the general
partner of Pool Company Houston Ltd., a Texas limited partnership ("POOL
HOUSTON LTD."); and
WHEREAS, in Borrower's judgment, (a) the value of consideration
received and to be received by Borrower in connection with the transaction
described above is reasonably worth at least as much as the liability and
obligation of Borrower hereunder, and (b) such liability and obligation may
reasonably be expected to directly or indirectly benefit Borrower; and
WHEREAS, it is expressly understood among Secured Parties and Borrower
that the contemplated execution and delivery of this agreement is an integral
part of the transactions contemplated by the Loan Papers and a condition
precedent to Secured Parties' obligations to extend credit under the Revolving
Credit Agreement;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, Borrower hereby covenants and agrees with
Secured Parties as follows:
1. Certain Definitions. Unless otherwise defined herein, or the
context hereof otherwise requires, (a) capitalized terms have the meaning
ascribed to such terms in the Revolving Credit Agreement and the Term Loan
Agreement, and (b) each term defined in the UCC is used in this agreement with
the same meaning; provided that if any definition given a term in Chapter 9 of
the UCC conflicts with the definition given that term in any other chapter of
the UCC, the Chapter 9 definition shall prevail. As used herein, the following
terms have the meanings indicated:
Collateral has the meaning set forth in Paragraph 3.
Default has the meaning set forth in Paragraph 6.
Obligation means (a) the "Obligation" as defined in the
Revolving Credit Agreement, (b) the "Obligation" as defined in the Term Loan
Agreement, (c) NationsBank's net exposure on all foreign exchange contracts
between Borrower and NationsBank, (d) all indebtedness, liabilities, and
obligations of Borrower arising under this agreement, (e) interest accruing on,
and attorneys' fees, court costs, and other costs of collection reasonably
incurred in the collection or enforcement of, any of the indebtedness,
liabilities, or obligations described in clauses (a) through (d) above, and (f)
any and all renewals and extensions of, or amendments to, any of the
indebtedness, liabilities, and obligations described in clauses (a) through (e)
above. The foregoing includes future advances, it being the intention and
contemplation of Borrower and Secured Parties that future advances will be made
to Borrower under the Revolving Credit Agreement for a variety of purposes, and
that payment and repayment of all of the foregoing are intended to and shall be
part of the Obligation secured hereby.
<PAGE> 38
Related Papers means (a) this agreement, (b) all present and
future agreements, documents, and instruments now or hereafter evidencing any
of the Obligation, or assuring or securing payment thereof, (c) all agreements,
documents, and instruments now or hereafter executed in connection herewith,
including, without limitation, the Loan Papers, and (d) any and all future
renewals and extensions or restatements of, or amendments or supplements to,
all or any part of the foregoing.
Security Interest means the security interest granted and the
pledge and assignment made under Paragraph 2.
UCC means the Uniform Commercial Code as enacted in the State
of Texas or other applicable jurisdiction, as amended at the time in question
2. Security Interest. In order to secure the full and complete
payment and performance of (a) the Obligation when due, and (b) NationsBank's
net exposure on all foreign exchange contracts between any Company and
NationsBank when due, Borrower hereby grants to Secured Parties a security
interest in the Collateral and pledges and assigns the Collateral to Secured
Parties, all upon and subject to the terms and conditions of this agreement.
Such Security Interest is granted and such pledge and assignment are made as
security only and shall not subject Secured Parties to, or transfer or in any
way affect or modify, any obligation of Borrower with respect to any of the
Collateral or any transaction involving or giving rise thereto. For purposes
of clarification, "net exposure on all foreign exchange contracts" refers to
the amount, if any, by which the purchase or sales prices stipulated in any
foreign exchange contracts on which a Company is in default are (i) less, in
the case of contracts to purchase currencies, or (ii) greater, in the case of
contracts to sell currencies, respectively, than the market prices for such
currencies (as determined on the agreed value date specified in each such
contract).
3. Collateral. As used herein, COLLATERAL includes all of
Borrower's right, title and interest in and to its partnership interests in
Pool Texas Ltd. and Pool Houston Ltd. now owned or hereafter acquired, and all
proceeds thereof (collectively, the "COLLATERAL").
4. Representations and Warranties. Borrower acknowledges that
certain representations and warranties set forth in the Revolving Credit
Agreement are applicable to Borrower, and Borrower reaffirms that each such
representation and warranty is true and correct. In addition, Borrower
represents and warrants to Secured Parties that:
(a) Borrower's chief executive office is where Borrower
is entitled to receive notices hereunder, and the present and foreseeable
location of Borrower's books and records concerning any Collateral is at the
address of Borrower set forth on the signature page attached hereto.
(b) All Collateral was duly authorized and validly issued
and its transfer is not subject to any restrictions other than restrictions
imposed by applicable securities and corporate Laws.
(c) Borrower owns all presently existing Collateral, and
will keep said Collateral and all hereafter-acquired Collateral, free and clear
of all Liens except Permitted Liens.
(d) Borrower has not executed any prior transfer,
assignment, pledge, security interest, or hypothecation covering the Collateral
or any interest in the Collateral.
(e) This Agreement creates a legal, valid and binding
Lien in and to the Collateral in favor of Secured Party and enforceable against
Borrower. The Security Interest created under this Agreement will be duly
perfected once the action required for perfection under applicable Law has been
taken. Once perfected, the Security Interest will constitute a first and prior
lien on the Collateral, subject only to Permitted Liens. The creation of the
Security Interest does not require the consent of any third party.
(f) Borrower has full power and authority to execute this
Agreement without breaching any material agreement to which Borrower is a
party.
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<PAGE> 39
The delivery at any time by Borrower to any Secured Party of Collateral or of
additional specific descriptions of certain Collateral shall constitute a
representation and warranty by Borrower to Secured Parties that the
representations and warranties of this Paragraph 4 are true and correct in all
material respects with respect to each item of such Collateral.
5. Certain Covenants. Borrower acknowledges that certain
covenants set forth in the Revolving Credit Agreement are applicable to
Borrower or shall be imposed upon Borrower, and Borrower covenants and agrees
to promptly and properly perform, observe, and comply with each such covenant.
In addition, Borrower further covenants and agrees with Secured Parties that
Borrower will:
(a) Maintain at the address of Borrower set forth on the
signature page hereto a current record of where all Collateral is located,
permit representatives of any Secured Party (at such Secured Party's expense to
the extent so provided in the Revolving Credit Agreement) at any time during
normal business hours to inspect and make abstracts from such records, and
furnish to such Secured Party, at such intervals as such Secured Party may
request, such documents, lists, descriptions, certificates, and other
information as may be necessary or proper to keep such Secured Party informed
with respect to the identity, location, status, condition, and value of the
Collateral.
(b) Perform in accordance with normal business practices
all of Borrower's duties under and in connection with each transaction to which
any Collateral relates.
(c) Promptly notify Secured Parties of any claim, action,
or proceeding affecting title to all or any of the Collateral or the Security
Interest and, at the request of any Secured Party, appear in and defend, at
Borrower's expense, any such action or proceeding.
(d) From time to time promptly execute and deliver to
Agent all such other assignments, certificates, supplemental documents, and
financing statements, and do all other acts or things as Secured Parties may
reasonably request in order to more fully create, evidence, perfect, continue,
and preserve the priority of the Security Interest.
(e) Not sell, lease, or otherwise dispose of, or permit
the sale, lease, or disposition of, any Collateral except for sales, leases,
and other dispositions permitted by the terms of the Revolving Credit
Agreement.
(f) Not create, incur, or suffer or permit to be created
or incurred or to exist any Lien upon or against any of the Collateral, except
for Permitted Liens.
(g) Not amend, modify, surrender, cancel, terminate, or
replace, nor permit any such amendment, modification, surrender, cancellation,
termination, or replacement of any of the Collateral or the Agreements of
Limited Partnership of Pool Texas Ltd. or Pool Houston Ltd. without Secured
Party's written consent as to the form and content of the amendment, alteration
or modification.
(h) After a Default occurs, take all actions Secured
Party requests to obtain any Tribunal's consent to or approval of Secured
Party's Rights under this Agreement, including, without limitation, the Right
to sell all or any part of the Collateral upon a Default without the Tribunal's
further consent or approval. Borrower agrees that Secured Party's remedies at
law for Borrower's failure to comply with this provision would be inadequate
and that the harm to Secured Party would not be adequately compensable in
damages. Borrower agrees that this provision may be specifically enforced.
6. Default. The term "Default," as used herein, means the
occurrence of any one or more of the events described in Section 8 of the
Revolving Credit Agreement and the Term Loan Agreement.
7. Remedies. Upon the occurrence and continuance of a Default,
Secured Parties may exercise any and all rights and remedies available to a
secured party under the UCC, in addition to any and all other rights and
remedies afforded by the Related Papers, at law, in equity, or otherwise,
including, without limitation, the rights and remedies described in Section 9
of the Revolving Credit Agreement and the Term Loan Agreement.
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<PAGE> 40
(a) Partnership Interest. Borrower acknowledges that
Secured Party must, in exercising its Rights to foreclose upon and sell the
Collateral, conduct itself in accordance with the applicable requirements of
the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, and state securities laws (collectively, and together with any rules
and regulations promulgated pursuant thereto, the "SECURITIES LAWS").
Accordingly, Secured Party may have difficulty, by reason of legal restrictions
and limitations imposed by the Securities Laws, in selling the Collateral at a
price which approximates its fair market value, were it not for such
restrictions. Borrower acknowledges and agrees that (i) Secured Party may seek
to dispose of the Collateral without registration or qualification under the
Securities Laws, and in any such transaction may require the purchaser or
purchasers thereof to represent and warrant their intent not to distribute the
Collateral in violation of the Securities Laws, and any disposition so effected
shall not thereby be deemed "commercially unreasonable," and (ii) Secured Party
may disclose any information it has obtained concerning any issuer of
Collateral, even if obtained in confidence, if Secured Party considers such
disclosure to potential purchasers of the Collateral at a foreclosure sale to
be useful or necessary to comply with the Securities Laws.
(b) Borrower's Agent. Secured Party shall be deemed to
be irrevocably appointed as Borrower's agent and attorney-in-fact with all
right and power to enforce all of Borrower's rights and remedies under or in
connection with the Collateral. All reasonable costs, expenses and liabilities
incurred and all payments made by Secured Party as Borrower's agent and
attorney-in-fact, including, without limitation, reasonable attorney's fees and
expenses, shall be considered a loan by Secured Party to Borrower which shall
be repayable on demand and shall accrue interest at the Default Rate. This
power of attorney is a power coupled with an interest and shall be irrevocable
until the Obligation is paid in full. The Secured Party shall be under no duty
to exercise or withhold the exercise of any of the rights, powers, privileges,
and options expressly or implicitly granted to it in this Agreement, and shall
not be liable for any failure to do so or any delay in doing so. This power of
attorney is conferred on Secured Party solely to protect, preserve, maintain,
and realize upon its Security Interest in the Collateral. Neither Secured
Party nor any of the Lenders shall be responsible for any decline or diminution
in the value of any of the Collateral, and neither Secured Party nor any of the
Lenders shall be required to take any steps to protect or preserve any of the
Collateral or any rights against prior parties or to protect, preserve, or
maintain any security interest or Lien given to secure the Collateral.
(c) Notice. Reasonable notification of the time and
place of any public sale of the Collateral, or reasonable notification of the
time after which any private sale or other intended disposition of the
Collateral is to be made, shall be sent to the Borrower and to any other Person
entitled to notice under the UCC; provided that if any of the Collateral
threatens to decline speedily in value or is of the type customarily sold on a
recognized market, Secured Parties may sell or otherwise dispose of the
Collateral without notification, advertisement, or other notice of any kind.
It is agreed that (i) notice sent or given not less than five Business Days
prior to the taking of the action to which the notice relates is reasonable
notification and notice for the purposes of this subparagraph, and (ii) any
sale of the Collateral may be conducted with reserve.
(d) Sales of Securities. In connection with the sale of
any Collateral that is securities, Secured Parties are authorized, but not
obligated, to limit prospective purchasers to the extent deemed necessary or
desirable by Secured Parties to render such sale exempt from the registration
requirements of the Securities Exchange Act of 1934 (as amended, the EXCHANGE
ACT) and any applicable state securities Laws, and no sale so made in good
faith by Secured Parties shall be deemed not to be "commercially reasonable"
because so made.
(e) Application of Proceeds. Secured Parties shall apply
the proceeds or any sale or other disposition of the Collateral under this
Paragraph 7 in the following order: First, to the payment of all its expenses
incurred in retaking, holding, and preparing any of the Collateral for sale(s)
or other disposition, in arranging for such sale(s) or other disposition, and
in actually selling or disposing of the same (all of which are part of the
Obligation); second, toward repayment of amounts expended by Secured Parties
under Paragraph 8; third, subject to Section 9.1 of the Revolving Credit
Agreement and the Term Loan Agreement, toward payment of the balance of the
Obligation and NationsBank's net exposure then existing under all foreign
exchange contracts between any Company and NationsBank in such order and manner
as Secured Parties, in their discretion, may deem advisable. Any surplus
remaining shall be delivered to the Borrower or Borrower or as a court of
competent jurisdiction may direct. If the proceeds are insufficient to pay the
Obligation in full, Borrower shall remain liable for any deficiency.
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<PAGE> 41
8. Other Rights of Secured Parties.
(a) Performance. If any covenant, duty, or agreement of
Borrower is not performed in accordance with its material terms, Secured
Parties may, at their option, perform, or attempt to perform, such covenant,
duty, or agreement on behalf of Borrower. Any amount reasonably expended by
Secured Parties in such performance or attempted performance shall be payable
by Borrower to Secured Parties on demand, shall become part of the Obligation,
and shall bear interest at the Default Rate from the date of such expenditure
by Secured Parties until paid. Notwithstanding the foregoing, it is expressly
understood that no Secured Party shall assume or have, except by express
written consent of such Secured Party, any liability or responsibility for the
performance of any covenant, duty, or agreement of Borrower.
(b) Record Ownership of Partnership Interest. If a
Default exists, Secured Party may have the Collateral registered in its name,
or in the name of its nominee or nominees, as pledgee, and, as to any
Collateral so registered, Borrower shall execute and deliver (or cause to be
executed and delivered) to Secured Party all such proxies, powers of attorney,
dividend coupons or orders, and other documents as Secured Party may reasonably
request to exercise the voting rights and powers to which it is entitled under
this Agreement or to receive any distributions and other payments with respect
to such Collateral which it is authorized to receive and retain under this
Agreement.
(c) Voting. If no Default exists and Borrower has not
received the notice referred to in the following sentence, Borrower may
exercise all voting rights pertaining to the Collateral. If a Default exists,
the right to vote the Collateral may, in Secured Party's sole discretion, be
vested exclusively in Secured Party by Secured Party giving notice of such
election to Borrower. Borrower hereby irrevocably constitutes and appoints
Secured Party the proxy and attorney-in-fact of Borrower, with full power of
substitution, to vote and to act with respect to any and all Collateral
standing in the name of Borrower or with respect to which Borrower is entitled
to vote and act, but such proxy may not be exercised unless a Default exists.
The proxy herein granted is coupled with an interest, is irrevocable, and shall
continue until the Obligation has been paid and performed in full.
(d) Certain Proceeds. All non-cash distributions made
on or with respect to the Collateral and any proceeds of any Collateral
(whether such distributions or proceeds result from a subdivision, combination
or reclassification of the outstanding partnership interests of Pool Houston
Ltd. or Pool Texas Ltd., or as a result of any merger, consolidation,
acquisition or other exchange of assets or otherwise) shall be part of the
Collateral hereunder, shall be held in trust for the benefit of Secured Party
and shall be delivered promptly to Secured Party (accompanied by proper
instruments of assignment and transfer powers executed by Borrower in
accordance with Secured Party's instructions) to be held subject to the terms
of this Agreement.
(e) INDEMNIFICATION. BORROWER HEREBY ASSUMES ALL
LIABILITY FOR THE COLLATERAL, FOR THE SECURITY INTEREST, AND FOR ANY USE,
POSSESSION, MAINTENANCE, AND MANAGEMENT OF, ALL OR ANY OF THE COLLATERAL,
INCLUDING, WITHOUT LIMITATION, ANY TAXES ARISING AS A RESULT OF, OR IN
CONNECTION WITH, THE TRANSACTIONS CONTEMPLATED HEREIN, AND AGREES TO ASSUME
LIABILITY FOR, AND TO INDEMNIFY AND HOLD SECURED PARTIES HARMLESS FROM AND
AGAINST, ANY AND ALL CLAIMS, CAUSES OF ACTION, OR LIABILITY, HOWSOEVER ARISING
FROM OR INCIDENT TO SUCH USE, POSSESSION, MAINTENANCE, AND MANAGEMENT, WHETHER
SUCH PERSONS BE AGENTS OR EMPLOYEES OF BORROWER OR OF THIRD PARTIES, OR SUCH
DAMAGE TO PROPERTY OF BORROWER OR OF OTHERS. UNLESS EXPRESSLY PROHIBITED BY
APPLICABLE LAW, BORROWER AGREES TO INDEMNIFY, SAVE, AND HOLD SECURED PARTIES
HARMLESS FROM AND AGAINST, AND COVENANTS TO DEFEND SECURED PARTIES AGAINST, ANY
AND ALL LOSSES, DAMAGES, CLAIMS, COSTS, PENALTIES, LIABILITIES, AND EXPENSES,
INCLUDING, WITHOUT LIMITATION, COURT COSTS AND ATTORNEYS' FEES, HOWSOEVER
ARISING OR INCURRED BECAUSE OF, INCIDENT TO, OR WITH RESPECT TO COLLATERAL OR
ANY USE, POSSESSION, MAINTENANCE, OR MANAGEMENT THEREOF, PROVIDED THAT BORROWER
SHALL NOT BE LIABLE FOR LOSSES, DAMAGES, CLAIMS, COSTS, PENALTIES, LIABILITIES,
AND EXPENSES RESULTING FROM ANY SECURED PARTY'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.
9. Miscellaneous.
(a) Reference to Miscellaneous Provisions. This
agreement is a Loan Paper, and, therefore, this agreement is subject to the
applicable provisions of Section 12 of the Revolving Credit Agreement, all of
which applicable provisions are incorporated herein by reference the same as if
set forth herein verbatim. Until changed by notice, the address
5
<PAGE> 42
and facsimile number for each party hereto for purposes of communications are
as appear on the signature page(s) of this agreement.
(b) Term. This agreement shall terminate upon full and
final payment and performance of (a) the Obligation, and (b) all foreign
exchange contracts between each Company and NationsBank.
(c) Actions Not Releases. The Security Interest and
Borrower's obligations and Secured Parties' rights hereunder shall not be
released, diminished, impaired, or adversely affected by the occurrence of any
one or more of the following events: (i) The taking or accepting of any other
security or assurance for any or all of the Obligation; (ii) any release,
surrender, exchange, subordination, or loss of any security or assurance at any
time existing in connection with any or all of the Obligation; (iii) the
modification of, amendment to, or waiver of compliance with any terms of any of
its or any other Related Paper without the notification or consent of Borrower,
except as required therein (the right to such notification and consent being
specifically waived by Borrower); (iv) the insolvency, bankruptcy, or lack of
corporate, partnership or trust power of any party at any time liable for the
payment of any or all of the Obligation, whether now existing or hereafter
occurring; (v) any renewal, extension, or rearrangement of the payment of any
or all of the Obligation, either with or without notice to or consent of
Borrower, or any adjustment, indulgence, forbearance, or compromise that may be
granted or given by Secured Parties to Borrower; (vi) any neglect, delay,
omission, failure, or refusal of any Secured Party to take or prosecute any
action in connection with any other agreement, document, guaranty, or
instrument evidencing, securing, or assuring the payment of all or any of the
Obligation; (vii) any failure of any Secured Party to notify Borrower of any
renewal, extension, or assignment of the Obligation or any part thereof, or the
release of any security, or of any other action taken or refrained from being
taken by any Secured Party against Borrower or any new agreement between any
Secured Party and Borrower, it being understood that no Secured Party shall be
required to give Borrower (other than Borrower) any notice of any kind under
any circumstances whatsoever with respect to or in connection with the
Obligation, including, without limitation, notice of acceptance of this
security agreement or any Collateral ever delivered to or for the account of
such Secured Party hereunder; (viii) the illegality, invalidity, or
unenforceability of all or any part of the Obligation against any party
obligated with respect thereto by reason of the fact that the Obligation, or
the interest paid or payable with respect thereto, exceeds the amount permitted
by Law, the act of creating the Obligation, or any part thereof, is ultra
vires, or the officers, partners, or trustees creating same acted in excess of
their authority, or for any other reason; or (ix) if any payment by any party
obligated with respect thereto is held to constitute a preference under
applicable Laws or for any other reason any Secured Party is required to refund
such payment or pay the amount thereof to someone else.
(d) Waivers. Unless otherwise expressly provided herein
or in any other Related Paper, Borrower waives (i) any right to require Secured
Parties to proceed against any other Person, to exhaust its rights in
Collateral, or to pursue any other right which Secured Parties may have; (ii)
with respect to the Obligation, presentment and demand for payment, protest,
notice of protest and nonpayment, and notice of the intention to accelerate;
and (iii) all rights of marshaling in respect of any and all of the Collateral.
(e) Financing Statement. Secured Parties may file this
agreement or a carbon, photographic, or other reproduction of this agreement,
as a financing statement, but the failure of Secured Parties to do so shall not
impair the validity or enforceability of this agreement.
(f) Information. Except as otherwise provided by Law,
the charge of Secured Parties for furnishing each statement of account or each
list of Collateral shall be $10.00.
(g) Multiple Counterparts. This agreement has been
executed in a number of identical counterparts, each of which shall be deemed
an original for all purposes and all of which constitute, collectively, one
agreement; but, in making proof of this agreement, it shall not be necessary to
produce or account for more than one such counterpart.
(h) Parties Bound; Assignment. This agreement shall be
binding on and inure to the benefit of Borrower, Secured Parties, and their
respective successors and assigns. Borrower's obligations and agreements
hereunder are joint and several and shall be binding upon their respective
successors and assigns, and delivery or other accounting of Collateral to any
one or more of them shall discharge Secured Parties of all liability therefor.
Borrower may not, without the prior written consent of Secured Parties, assign
any rights, duties, or obligations hereunder. In the event of an assignment
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<PAGE> 43
of all or part of the Obligation, the Security Interest and other rights and
benefits hereunder, to the extent applicable to the part of the Obligation so
assigned, may be transferred therewith.
EXECUTED as of the day and year first herein set forth.
NATIONSBANK OF TEXAS, N.A. NATIONSBANK OF TEXAS, N.A.,
700 Louisiana Street, 8th Floor individually and as Agent
Houston, Texas 77002
Attn: James R. Allred,
Senior Vice President By: /s/ JAMES R. ALLRED
FAX No.: (713) 247-6568 --------------------------------
James R. Allred
Senior Vice President
POOL COMPANY POOL COMPANY
10375 Richmond Avenue
Houston, Texas 77042
Attn: R. A. Johannsen,
Treasurer By: /s/ J. T. JONGEBLOED
FAX No.: (713) 954-3037 --------------------------------
J. T. Jongebloed, President
By: R. A. JOHANNSEN
--------------------------------
R. A. Johannsen, Treasurer
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<PAGE> 44
PLEDGE OF PARTNERSHIP INTERESTS
THIS SECURITY AGREEMENT is executed as of December 20, 1996, by PCNV,
Inc., a Nevada corporation ("PLEDGOR") for the benefit of NationsBank of Texas,
N.A., as Agent ("AGENT") and the Lenders ("LENDERS") named in the Revolving
Credit Agreement (as hereinafter defined) and the Term Loan Agreement (as
hereinafter defined) and for the benefit of NationsBank of Texas, N.A.
("NATIONSBANK") for its own account with respect to its net exposure on foreign
exchange contracts between it and any Company (as defined in such Revolving
Credit Agreement). NationsBank, Agent and Lenders are each a SECURED PARTY,
and are collectively referred to herein as "SECURED PARTIES".
WHEREAS, Pool Company, a Texas corporation ("BORROWER") and Secured
Parties have entered into (i) a Restated Credit Agreement dated as of November
30, 1995 (as renewed, extended, or amended from time to time, the "REVOLVING
CREDIT AGREEMENT"), together with certain other Loan Papers, and (ii) a Term
Loan Agreement dated as of November 30, 1995 (as renewed, extended, or amended
from time to time, the "TERM LOAN AGREEMENT") together with certain other Loan
Papers; and
WHEREAS, Pledgor is a wholly-owned subsidiary of Borrower; and
WHEREAS, Pledgor is (i) the limited partner of Pool Company Texas Ltd.,
a Texas limited partnership ("POOL TEXAS LTD."), and (ii) the limited partner
of Pool Company Houston Ltd., a Texas limited partnership ("POOL HOUSTON
LTD."); and
WHEREAS, in Pledgor's judgment, (a) the value of consideration received
and to be received by Pledgor in connection with the transaction described
above is reasonably worth at least as much as the liability and obligation of
Pledgor hereunder, and (b) such liability and obligation may reasonably be
expected to directly or indirectly benefit Pledgor; and
WHEREAS, it is expressly understood among Secured Parties and Pledgor
that the contemplated execution and delivery of this agreement is an integral
part of the transactions contemplated by the Loan Papers and a condition
precedent to Secured Parties' obligations to extend credit under the Revolving
Credit Agreement;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Pledgor hereby covenants and agrees with Secured
Parties as follows:
1. Certain Definitions. Unless otherwise defined herein, or the
context hereof otherwise requires, (a) capitalized terms have the meaning
ascribed to such terms in the Revolving Credit Agreement and the Term Loan
Agreement, and (b) each term defined in the UCC is used in this agreement with
the same meaning; provided that if any definition given a term in Chapter 9 of
the UCC conflicts with the definition given that term in any other chapter of
the UCC, the Chapter 9 definition shall prevail. As used herein, the following
terms have the meanings indicated:
Collateral has the meaning set forth in Paragraph 3.
Default has the meaning set forth in Paragraph 6.
Obligation means (a) the "Obligation" as defined in the
Revolving Credit Agreement, (b) the "Obligation" as defined in the Term Loan
Agreement, (c) NationsBank's net exposure on all foreign exchange contracts
between Borrower and NationsBank, (d) all indebtedness, liabilities, and
obligations of Pledgor arising under this agreement, (e) interest accruing on,
and attorneys' fees, court costs, and other costs of collection reasonably
incurred in the collection or enforcement of, any of the indebtedness,
liabilities, or obligations described in clauses (a) through (d) above, and (f)
any and all renewals and extensions of, or amendments to, any of the
indebtedness, liabilities, and obligations described in clauses (a) through (e)
above. The foregoing includes future advances, it being the intention and
contemplation of Pledgor and Secured Parties that future advances will be made
to Borrower under the Revolving Credit Agreement for a variety of purposes, and
that payment and repayment of all of the foregoing are intended to and shall be
part of the Obligation secured hereby.
<PAGE> 45
Related Papers means (a) this agreement, (b) all present and
future agreements, documents, and instruments now or hereafter evidencing any
of the Obligation, or assuring or securing payment thereof, (c) all agreements,
documents, and instruments now or hereafter executed in connection herewith,
including, without limitation, the Loan Papers, and (d) any and all future
renewals and extensions or restatements of, or amendments or supplements to,
all or any part of the foregoing.
Security Interest means the security interest granted and the
pledge and assignment made under Paragraph 2.
UCC means the Uniform Commercial Code as enacted in the State of
Texas or other applicable jurisdiction, as amended at the time in question
2. Security Interest. In order to secure the full and complete
payment and performance of (a) the Obligation when due, and (b) NationsBank's
net exposure on all foreign exchange contracts between any Company and
NationsBank when due, Pledgor hereby grants to Secured Parties a security
interest in the Collateral and pledges and assigns the Collateral to Secured
Parties, all upon and subject to the terms and conditions of this agreement.
Such Security Interest is granted and such pledge and assignment are made as
security only and shall not subject Secured Parties to, or transfer or in any
way affect or modify, any obligation of Pledgor with respect to any of the
Collateral or any transaction involving or giving rise thereto. For purposes
of clarification, "net exposure on all foreign exchange contracts" refers to
the amount, if any, by which the purchase or sales prices stipulated in any
foreign exchange contracts on which a Company is in default are (i) less, in
the case of contracts to purchase currencies, or (ii) greater, in the case of
contracts to sell currencies, respectively, than the market prices for such
currencies (as determined on the agreed value date specified in each such
contract).
3. Collateral. As used herein, COLLATERAL includes all of Pledgor's
right, title and interest in and to its partnership interests in Pool Texas
Ltd. and Pool Houston Ltd. now owned or hereafter acquired, and all proceeds
thereof (collectively, the "COLLATERAL").
4. Representations and Warranties. Pledgor acknowledges that
certain representations and warranties set forth in the Revolving Credit
Agreement are applicable to Pledgor, and Pledgor reaffirms that each such
representation and warranty is true and correct. In addition, Pledgor
represents and warrants to Secured Parties that:
(a) Pledgor's chief executive office is where Pledgor is
entitled to receive notices hereunder, and the present and foreseeable location
of Pledgor's books and records concerning any Collateral is at the address of
Pledgor set forth on the signature page attached hereto.
(b) All Collateral was duly authorized and validly issued and
its transfer is not subject to any restrictions other than restrictions imposed
by applicable securities and corporate Laws.
(c) Pledgor owns all presently existing Collateral, and will
keep said Collateral and all hereafter-acquired Collateral, free and clear of
all Liens except Permitted Liens.
(d) Pledgor has not executed any prior transfer, assignment,
pledge, security interest, or hypothecation covering the Collateral or any
interest in the Collateral.
(e) This Agreement creates a legal, valid and binding Lien in
and to the Collateral in favor of Secured Party and enforceable against
Pledgor. The Security Interest created under this Agreement will be duly
perfected once the action required for perfection under applicable Law has been
taken. Once perfected, the Security Interest will constitute a first and prior
lien on the Collateral, subject only to Permitted Liens. The creation of the
Security Interest does not require the consent of any third party.
(f) Pledgor has full power and authority to execute this
Agreement without breaching any material agreement to which Pledgor is a party.
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<PAGE> 46
The delivery at any time by Pledgor to any Secured Party of Collateral or of
additional specific descriptions of certain Collateral shall constitute a
representation and warranty by Pledgor to Secured Parties that the
representations and warranties of this Paragraph 4 are true and correct in all
material respects with respect to each item of such Collateral.
5. Certain Covenants. Pledgor acknowledges that certain covenants
set forth in the Revolving Credit Agreement are applicable to Pledgor or shall
be imposed upon Pledgor, and Pledgor covenants and agrees to promptly and
properly perform, observe, and comply with each such covenant. In addition,
Pledgor further covenants and agrees with Secured Parties that Pledgor will:
(a) Maintain at the address of Pledgor set forth on the
signature page hereto a current record of where all Collateral is located,
permit representatives of any Secured Party (at such Secured Party's expense to
the extent so provided in the Revolving Credit Agreement) at any time during
normal business hours to inspect and make abstracts from such records, and
furnish to such Secured Party, at such intervals as such Secured Party may
request, such documents, lists, descriptions, certificates, and other
information as may be necessary or proper to keep such Secured Party informed
with respect to the identity, location, status, condition, and value of the
Collateral.
(b) Perform in accordance with normal business practices all
of Pledgor's duties under and in connection with each transaction to which any
Collateral relates.
(c) Promptly notify Secured Parties of any claim, action, or
proceeding affecting title to all or any of the Collateral or the Security
Interest and, at the request of any Secured Party, appear in and defend, at
Pledgor's expense, any such action or proceeding.
(d) From time to time promptly execute and deliver to Agent
all such other assignments, certificates, supplemental documents, and financing
statements, and do all other acts or things as Secured Parties may reasonably
request in order to more fully create, evidence, perfect, continue, and
preserve the priority of the Security Interest.
(e) Not sell, lease, or otherwise dispose of, or permit the
sale, lease, or disposition of, any Collateral except for sales, leases, and
other dispositions permitted by the terms of the Revolving Credit Agreement.
(f) Not create, incur, or suffer or permit to be created or
incurred or to exist any Lien upon or against any of the Collateral, except for
Permitted Liens.
(g) Not amend, modify, surrender, cancel, terminate, or
replace, nor permit any such amendment, modification, surrender, cancellation,
termination, or replacement of any of the Collateral or the Agreements of
Limited Partnership of Pool Texas Ltd. or Pool Houston Ltd. without Secured
Party's written consent as to the form and content of the amendment, alteration
or modification.
(h) After a Default occurs, take all actions Secured Party
requests to obtain any Tribunal's consent to or approval of Secured Party's
Rights under this Agreement, including, without limitation, the Right to sell
all or any part of the Collateral upon a Default without the Tribunal's further
consent or approval. Pledgor agrees that Secured Party's remedies at law for
Pledgor's failure to comply with this provision would be inadequate and that
the harm to Secured Party would not be adequately compensable in damages.
Pledgor agrees that this provision may be specifically enforced.
6. Default. The term "Default," as used herein, means the
occurrence of any one or more of the events described in Section 8 of the
Revolving Credit Agreement and the Term Loan Agreement.
7. Remedies. Upon the occurrence and continuance of a Default,
Secured Parties may exercise any and all rights and remedies available to a
secured party under the UCC, in addition to any and all other rights and
remedies afforded by the Related Papers, at law, in equity, or otherwise,
including, without limitation, the rights and remedies described in Section 9
of the Revolving Credit Agreement and the Term Loan Agreement.
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<PAGE> 47
(a) Partnership Interest. Pledgor acknowledges that Secured
Party must, in exercising its Rights to foreclose upon and sell the Collateral,
conduct itself in accordance with the applicable requirements of the Securities
Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and
state securities laws (collectively, and together with any rules and
regulations promulgated pursuant thereto, the "SECURITIES LAWS"). Accordingly,
Secured Party may have difficulty, by reason of legal restrictions and
limitations imposed by the Securities Laws, in selling the Collateral at a
price which approximates its fair market value, were it not for such
restrictions. Pledgor acknowledges and agrees that (i) Secured Party may seek
to dispose of the Collateral without registration or qualification under the
Securities Laws, and in any such transaction may require the purchaser or
purchasers thereof to represent and warrant their intent not to distribute the
Collateral in violation of the Securities Laws, and any disposition so effected
shall not thereby be deemed "commercially unreasonable," and (ii) Secured Party
may disclose any information it has obtained concerning any issuer of
Collateral, even if obtained in confidence, if Secured Party considers such
disclosure to potential purchasers of the Collateral at a foreclosure sale to
be useful or necessary to comply with the Securities Laws.
(b) Pledgor's Agent. Secured Party shall be deemed to be
irrevocably appointed as Pledgor's agent and attorney-in-fact with all right
and power to enforce all of Pledgor's rights and remedies under or in
connection with the Collateral. All reasonable costs, expenses and liabilities
incurred and all payments made by Secured Party as Pledgor's agent and
attorney-in-fact, including, without limitation, reasonable attorney's fees and
expenses, shall be considered a loan by Secured Party to Pledgor which shall be
repayable on demand and shall accrue interest at the Default Rate. This power
of attorney is a power coupled with an interest and shall be irrevocable until
the Obligation is paid in full. The Secured Party shall be under no duty to
exercise or withhold the exercise of any of the rights, powers, privileges, and
options expressly or implicitly granted to it in this Agreement, and shall not
be liable for any failure to do so or any delay in doing so. This power of
attorney is conferred on Secured Party solely to protect, preserve, maintain,
and realize upon its Security Interest in the Collateral. Neither Secured
Party nor any of the Lenders shall be responsible for any decline or diminution
in the value of any of the Collateral, and neither Secured Party nor any of the
Lenders shall be required to take any steps to protect or preserve any of the
Collateral or any rights against prior parties or to protect, preserve, or
maintain any security interest or Lien given to secure the Collateral.
(c) Notice. Reasonable notification of the time and place of
any public sale of the Collateral, or reasonable notification of the time after
which any private sale or other intended disposition of the Collateral is to be
made, shall be sent to the Pledgor and to any other Person entitled to notice
under the UCC; provided that if any of the Collateral threatens to decline
speedily in value or is of the type customarily sold on a recognized market,
Secured Parties may sell or otherwise dispose of the Collateral without
notification, advertisement, or other notice of any kind. It is agreed that
(i) notice sent or given not less than five Business Days prior to the taking
of the action to which the notice relates is reasonable notification and notice
for the purposes of this subparagraph, and (ii) any sale of the Collateral may
be conducted with reserve.
(d) Sales of Securities. In connection with the sale of any
Collateral that is securities, Secured Parties are authorized, but not
obligated, to limit prospective purchasers to the extent deemed necessary or
desirable by Secured Parties to render such sale exempt from the registration
requirements of the Securities Exchange Act of 1934 (as amended, the EXCHANGE
ACT) and any applicable state securities Laws, and no sale so made in good
faith by Secured Parties shall be deemed not to be "commercially reasonable"
because so made.
(e) Application of Proceeds. Secured Parties shall apply the
proceeds or any sale or other disposition of the Collateral under this
Paragraph 7 in the following order: First, to the payment of all its expenses
incurred in retaking, holding, and preparing any of the Collateral for sale(s)
or other disposition, in arranging for such sale(s) or other disposition, and
in actually selling or disposing of the same (all of which are part of the
Obligation); second, toward repayment of amounts expended by Secured Parties
under Paragraph 8; third, subject to Section 9.1 of the Revolving Credit
Agreement and the Term Loan Agreement, toward payment of the balance of the
Obligation and NationsBank's net exposure then existing under all foreign
exchange contracts between any Company and NationsBank in such order and manner
as Secured Parties, in their discretion, may deem advisable. Any surplus
remaining shall be delivered to the Pledgor or Pledgor or as a court of
competent jurisdiction may direct. If the proceeds are insufficient to pay the
Obligation in full, Pledgor shall remain liable for any deficiency.
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<PAGE> 48
8. Other Rights of Secured Parties.
(a) Performance. If any covenant, duty, or agreement of
Pledgor is not performed in accordance with its material terms, Secured Parties
may, at their option, perform, or attempt to perform, such covenant, duty, or
agreement on behalf of Pledgor. Any amount reasonably expended by Secured
Parties in such performance or attempted performance shall be payable by
Pledgor to Secured Parties on demand, shall become part of the Obligation, and
shall bear interest at the Default Rate from the date of such expenditure by
Secured Parties until paid. Notwithstanding the foregoing, it is expressly
understood that no Secured Party shall assume or have, except by express
written consent of such Secured Party, any liability or responsibility for the
performance of any covenant, duty, or agreement of Pledgor.
(b) Record Ownership of Partnership Interest. If a Default
exists, Secured Party may have the Collateral registered in its name, or in the
name of its nominee or nominees, as pledgee, and, as to any Collateral so
registered, Pledgor shall execute and deliver (or cause to be executed and
delivered) to Secured Party all such proxies, powers of attorney, dividend
coupons or orders, and other documents as Secured Party may reasonably request
to exercise the voting rights and powers to which it is entitled under this
Agreement or to receive any distributions and other payments with respect to
such Collateral which it is authorized to receive and retain under this
Agreement.
(c) Voting. If no Default exists and Pledgor has not received
the notice referred to in the following sentence, Pledgor may exercise all
voting rights pertaining to the Collateral. If a Default exists, the right to
vote the Collateral may, in Secured Party's sole discretion, be vested
exclusively in Secured Party by Secured Party giving notice of such election to
Pledgor. Pledgor hereby irrevocably constitutes and appoints Secured Party the
proxy and attorney-in-fact of Pledgor, with full power of substitution, to vote
and to act with respect to any and all Collateral standing in the name of
Pledgor or with respect to which Pledgor is entitled to vote and act, but such
proxy may not be exercised unless a Default exists. The proxy herein granted
is coupled with an interest, is irrevocable, and shall continue until the
Obligation has been paid and performed in full.
(d) Certain Proceeds. All non-cash distributions made on or
with respect to the Collateral and any proceeds of any Collateral (whether such
distributions or proceeds result from a subdivision, combination or
reclassification of the outstanding partnership interests of Pool Houston Ltd.
or Pool Texas Ltd., or as a result of any merger, consolidation, acquisition or
other exchange of assets or otherwise) shall be part of the Collateral
hereunder, shall be held in trust for the benefit of Secured Party and shall be
delivered promptly to Secured Party (accompanied by proper instruments of
assignment and transfer powers executed by Pledgor in accordance with Secured
Party's instructions) to be held subject to the terms of this Agreement.
(e) INDEMNIFICATION. PLEDGOR HEREBY ASSUMES ALL LIABILITY FOR
THE COLLATERAL, FOR THE SECURITY INTEREST, AND FOR ANY USE, POSSESSION,
MAINTENANCE, AND MANAGEMENT OF, ALL OR ANY OF THE COLLATERAL, INCLUDING,
WITHOUT LIMITATION, ANY TAXES ARISING AS A RESULT OF, OR IN CONNECTION WITH,
THE TRANSACTIONS CONTEMPLATED HEREIN, AND AGREES TO ASSUME LIABILITY FOR, AND
TO INDEMNIFY AND HOLD SECURED PARTIES HARMLESS FROM AND AGAINST, ANY AND ALL
CLAIMS, CAUSES OF ACTION, OR LIABILITY, HOWSOEVER ARISING FROM OR INCIDENT TO
SUCH USE, POSSESSION, MAINTENANCE, AND MANAGEMENT, WHETHER SUCH PERSONS BE
AGENTS OR EMPLOYEES OF PLEDGOR OR OF THIRD PARTIES, OR SUCH DAMAGE TO PROPERTY
OF PLEDGOR OR OF OTHERS. UNLESS EXPRESSLY PROHIBITED BY APPLICABLE LAW,
PLEDGOR AGREES TO INDEMNIFY, SAVE, AND HOLD SECURED PARTIES HARMLESS FROM AND
AGAINST, AND COVENANTS TO DEFEND SECURED PARTIES AGAINST, ANY AND ALL LOSSES,
DAMAGES, CLAIMS, COSTS, PENALTIES, LIABILITIES, AND EXPENSES, INCLUDING,
WITHOUT LIMITATION, COURT COSTS AND ATTORNEYS' FEES, HOWSOEVER ARISING OR
INCURRED BECAUSE OF, INCIDENT TO, OR WITH RESPECT TO COLLATERAL OR ANY USE,
POSSESSION, MAINTENANCE, OR MANAGEMENT THEREOF, PROVIDED THAT PLEDGOR SHALL NOT
BE LIABLE FOR LOSSES, DAMAGES, CLAIMS, COSTS, PENALTIES, LIABILITIES, AND
EXPENSES RESULTING FROM ANY SECURED PARTY'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.
9. Miscellaneous.
(a) Reference to Miscellaneous Provisions. This agreement is
a Loan Paper, and, therefore, this agreement is subject to the applicable
provisions of Section 12 of the Revolving Credit Agreement, all of which
applicable provisions are incorporated herein by reference the same as if set
forth herein verbatim. Until changed by notice, the address
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<PAGE> 49
and facsimile number for each party hereto for purposes of communications are
as appear on the signature page(s) of this agreement.
(b) Term. This agreement shall terminate upon full and final
payment and performance of (a) the Obligation, and (b) all foreign exchange
contracts between each Company and NationsBank.
(c) Actions Not Releases. The Security Interest and Pledgor's
obligations and Secured Parties' rights hereunder shall not be released,
diminished, impaired, or adversely affected by the occurrence of any one or
more of the following events: (i) The taking or accepting of any other security
or assurance for any or all of the Obligation; (ii) any release, surrender,
exchange, subordination, or loss of any security or assurance at any time
existing in connection with any or all of the Obligation; (iii) the
modification of, amendment to, or waiver of compliance with any terms of any of
its or any other Related Paper without the notification or consent of Pledgor,
except as required therein (the right to such notification and consent being
specifically waived by Pledgor); (iv) the insolvency, bankruptcy, or lack of
corporate, partnership or trust power of any party at any time liable for the
payment of any or all of the Obligation, whether now existing or hereafter
occurring; (v) any renewal, extension, or rearrangement of the payment of any
or all of the Obligation, either with or without notice to or consent of
Pledgor, or any adjustment, indulgence, forbearance, or compromise that may be
granted or given by Secured Parties to Pledgor; (vi) any neglect, delay,
omission, failure, or refusal of any Secured Party to take or prosecute any
action in connection with any other agreement, document, guaranty, or
instrument evidencing, securing, or assuring the payment of all or any of the
Obligation; (vii) any failure of any Secured Party to notify Pledgor of any
renewal, extension, or assignment of the Obligation or any part thereof, or the
release of any security, or of any other action taken or refrained from being
taken by any Secured Party against Pledgor or any new agreement between any
Secured Party and Pledgor, it being understood that no Secured Party shall be
required to give Pledgor (other than Pledgor) any notice of any kind under any
circumstances whatsoever with respect to or in connection with the Obligation,
including, without limitation, notice of acceptance of this security agreement
or any Collateral ever delivered to or for the account of such Secured Party
hereunder; (viii) the illegality, invalidity, or unenforceability of all or any
part of the Obligation against any party obligated with respect thereto by
reason of the fact that the Obligation, or the interest paid or payable with
respect thereto, exceeds the amount permitted by Law, the act of creating the
Obligation, or any part thereof, is ultra vires, or the officers, partners, or
trustees creating same acted in excess of their authority, or for any other
reason; or (ix) if any payment by any party obligated with respect thereto is
held to constitute a preference under applicable Laws or for any other reason
any Secured Party is required to refund such payment or pay the amount thereof
to someone else.
(d) Waivers. Unless otherwise expressly provided herein or in
any other Related Paper, Pledgor waives (i) any right to require Secured
Parties to proceed against any other Person, to exhaust its rights in
Collateral, or to pursue any other right which Secured Parties may have; (ii)
with respect to the Obligation, presentment and demand for payment, protest,
notice of protest and nonpayment, and notice of the intention to accelerate;
and (iii) all rights of marshaling in respect of any and all of the Collateral.
(e) Financing Statement. Secured Parties may file this
agreement or a carbon, photographic, or other reproduction of this agreement,
as a financing statement, but the failure of Secured Parties to do so shall not
impair the validity or enforceability of this agreement.
(f) Information. Except as otherwise provided by Law, the
charge of Secured Parties for furnishing each statement of account or each list
of Collateral shall be $10.00.
(g) Multiple Counterparts. This agreement has been executed in
a number of identical counterparts, each of which shall be deemed an original
for all purposes and all of which constitute, collectively, one agreement; but,
in making proof of this agreement, it shall not be necessary to produce or
account for more than one such counterpart.
(h) Parties Bound; Assignment. This agreement shall be binding
on and inure to the benefit of Pledgor, Secured Parties, and their respective
successors and assigns. Pledgor's obligations and agreements hereunder are
joint and several and shall be binding upon their respective successors and
assigns, and delivery or other accounting of Collateral to any one or more of
them shall discharge Secured Parties of all liability therefor. Pledgor may
not, without the prior written consent of Secured Parties, assign any rights,
duties, or obligations hereunder. In the event of an assignment
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<PAGE> 50
of all or part of the Obligation, the Security Interest and other rights and
benefits hereunder, to the extent applicable to the part of the Obligation so
assigned, may be transferred therewith.
EXECUTED as of the day and year first herein set forth.
NATIONSBANK OF TEXAS, N.A. NATIONSBANK OF TEXAS, N.A., individually and
700 Louisiana Street, 8th Floor as Agent
Houston, Texas 77002
Attn: James R. Allred,
Senior Vice President By: /s/ JAMES R. ALLRED
FAX No.: (713) 247-6568 ---------------------------------
James R. Allred
Senior Vice President
PCNV, INC. PCNV, INC.
10375 Richmond Avenue
Houston, Texas 77042
Attn: R. A. Johannsen,
Treasurer By: /s/ J. T. JONGEBLOED
FAX No.: (713) 954-3037 ---------------------------------
J. T. Jongebloed, President
By: /s/ R. A. JOHANNSEN
---------------------------------
R. A. Johannsen, Treasurer
7
<PAGE> 1
EXHIBIT 10.29
POOL ENERGY SERVICES CO.
1996 LONGTERM INCENTIVE PLAN
SECTION 1. NAME
The name of the plan is the Pool Energy Services Co. 1996 Longterm
Incentive Plan (the "Plan").
SECTION 2. PURPOSE
The purpose of the Plan is to assist Pool Energy Services Co. (the
"Company") and its Affiliates in attracting and retaining qualified individuals
to serve as executive officers of the Company and to encourage such executive
officers to protect and increase shareholder value by aligning the interests of
the executive officers with those of the shareholders.
SECTION 3. PLAN PERIOD
The Plan shall be effective for the three-year period beginning
January 1, 1996 and ending December 31, 1998 (the "Plan Period").
SECTION 4. DEFINITIONS
The following words shall have the indicated meanings unless otherwise
required by the context:
a. "Affiliate" means any corporation, partnership or other entity
in which the Company owns, directly or indirectly, an equity interest of at
least thirty-five percent (35%).
b. "Base Salary" means the base salary of a Participant at the
beginning of the Plan Period as specified in the personnel and payroll records
of the employing Affiliate.
c. "Award" means the dollar amount granted to a Participant,
calculated in accordance with the provisions of Section 7 of the Plan.
d. "Cause" means (1) the willful and continued failure by a
Participant to substantially perform his duties with the Company or employing
Affiliates (other than any such failure resulting from his incapacity due to
physical or mental illness) or (2) the willful engaging by the Participant in
conduct which is demonstrably and materially injurious to the Company,
monetarily or otherwise. For this purpose, no act or failure to act shall be
deemed willful unless done in other than good faith and without reasonable
belief that the action or omission was in the best interest of the Company.
e. "Compensation Committee" means the Compensation Committee of
the Board of Directors of the Company, in its capacity as the committee
administering this Plan as provided for in Section 6 of the Plan, as such
committee may be constituted from time to time.
<PAGE> 2
1996 Longterm Incentive Plan
Page 2
f. "Dividends" means the total of dividends per share of common
stock paid during the Plan Period.
g. "EBITD" means earnings before Interest, Income Tax Provision
(Credit) and Depreciation and Amortization for the Plan Period as reflected in
the audited financial statements of the Company.
h. "GVP" means Group Vice President.
i. "Participant" means any person who is eligible, in accordance
with the provisions of Section 5 of the Plan, to receive an Award under the
Plan.
j. "Peer Group" means Atwood Oceanics, Inc.; Baker Hughes
Incorporated; BJ Services Company; Energy Service Company, Inc.; Energy
Ventures, Inc.; Global Marine Inc.; Halliburton Company; Helmerich & Payne,
Inc.; Noble Drilling Corporation; Parker Drilling Company; Pride Petroleum
Services, Inc.; Rowan Companies, Inc.; Tuboscope Vetco International
Corporation; Weatherford Enterra, Inc.; Western Atlas Inc.; and the Company.
If during the Plan Period a Peer Group company ceases to exist or changes to
such an extent that, in the opinion of the Compensation Committee, it no longer
qualifies as a Peer Group company, then the Total Return to Shareholders for
such company shall be deemed to be the average Total Return to Shareholders of
the other companies in the Peer Group.
k. "Restricted Stock" means Restricted Stock as defined in the
Pool Energy Services Co. 1993 Employee Stock Incentive Plan (the "Stock Plan").
l. "Retirement" means leaving the employment of the Company or an
Affiliate, other than for Cause, after attaining the age of fifty-five and
after having completed not less than five years employment with the Company or
an Affiliate.
m. "Stock Appreciation" means the change over the Plan Period in
the value of a share of common stock, measured as the difference between (1)
the average of the closing prices of the stock on the thirty trading days ended
on the last trading day preceding the Plan Period and (2) the average of the
closing prices of the stock on the thirty trading days ending on the last
trading day in the Plan Period, all such closing prices as reported on the
principal securities exchange on which such stock is listed or admitted to
trading, or if a stock is not listed or admitted to trading on any such
exchange but is traded over-the-counter and reported on the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ")
or any similar system then in use, then as reported on that system.
n. "Total Return to Shareholders" means the sum of Dividends and
Stock Appreciation divided by the value of a share of common stock at the
beginning of the Plan Period, such value to be based on the average of the
closing prices of the stock on the thirty trading days ended on the last
trading day preceding the Plan Period, with all such closing prices as reported
on the securities exchange or over-the-counter systems specified in paragraph
4.m. hereof.
o. "VPGC" means Vice President & General Counsel
<PAGE> 3
1996 Longterm Incentive Plan
Page 3
SECTION 5. ELIGIBILITY
The persons who shall be eligible to receive Awards shall be full-time
salaried employees of the Company or any of its Affiliates, including directors
of the Company who are full-time salaried employees, who are incumbents of the
position of President or of any executive position reporting directly to that
of President.
SECTION 6. ADMINISTRATION
a. The Compensation Committee. The Plan shall be administered by,
and the decisions concerning the Plan shall be made solely by, the Compensation
Committee. All questions of interpretation or application of the Plan or of an
Award shall be subject to the determination of the Compensation Committee,
which determination shall be final and binding upon all parties. The
Compensation Committee shall make Awards to Participants in accordance with the
provisions of Section 7 of the Plan.
Subject to the express provisions of the Plan, the Compensation
Committee shall have the authority, in its sole and absolute discretion, (a) to
adopt, amend or rescind administrative and interpretive rules and regulations
relating to the Plan, (b) to make all determinations necessary or advisable for
administering the Plan, and (c) to exercise any other powers conferred on the
Committee by the Plan. The Compensation Committee may correct any defect or
supply any omission or reconcile any inconsistency in the Plan in the manner
and to the extent it shall deem proper, and it shall be the sole and final
judge of such propriety. The determinations of the Compensation Committee on
the matters referred to in this Section 6 shall be final and conclusive.
b. The Plan Committee. There shall be a Plan Committee consisting of
the Company's President ("CEO"), its Senior Vice President, Finance ("CFO") and
its Vice President, Human Resources ("VPHR"). The Plan Committee shall make
decisions by majority vote, one of which must be that of the CEO.
The Plan Committee may recommend changes to the Plan or recommend the
termination of the Plan at any time subject to the provisions of Section 11
hereof. Final approval of any recommended changes or termination shall be by
the Compensation Committee.
The Plan Committee may recommend an increase or decrease in the amount
of an Award payable to any Participant when in the judgment of the majority of
the Plan Committee the Award otherwise payable would be excessive or inadequate
in view of the Participant's contribution to achieving the purpose of the Plan.
Final approval of any such adjustments shall be by the Compensation Committee.
<PAGE> 4
1996 Longterm Incentive Plan
Page 4
SECTION 7. CALCULATION OF AWARDS
a. EBITD. For each of the following conditions that is met, a
Participant shall receive an Award equivalent to the indicated percentage of
Base Salary:
<TABLE>
<CAPTION>
Condition Percentage
----------------- ------------------------------------
CFO/ VPGC/
CEO GVP VPHR
------- ------- ------
<S> <C> <C> <C> <C>
(1) EBITD is less None None None
than $65.78
million
(2) EBITD is $76.15 15% 10% 6.25%
million
(3) EBITD is $79.83 30% 20% 12.50%
million
(4) EBITD is $87.56 45% 30% 18.75%
million
</TABLE>
If EBITD falls between two of the above conditions, the percentage of
Base Salary will be calculated on the basis of straight-line interpolation
between the two levels.
b. Total Return to Shareholders ("TRS"). If the TRS achieved by the
Company exceeds the TRS achieved by the following number of the companies in
the Peer Group, a Participant shall receive an Award equivalent to the
indicated percentage of Base Salary:
<TABLE>
<CAPTION>
Number of Companies Percentage
------------------- -----------------------------------------------
CFO/ VPGC/
CEO GVP VPHR
------- ---- ----
<S> <C> <C> <C>
3 or less None None None
4, 5, 6 or 7 15% 10% 6.25%
8, 9, 10 or 11 30% 20% 12.50%
12 or more 45% 30% 18.75%
</TABLE>
<PAGE> 5
1996 Longterm Incentive Plan
Page 5
SECTION 8. PAYMENT OF AWARDS
A Participant's Award shall be paid no later than the March 15th first
following the close of the Plan Period as follows:
a. The Award shall be paid in Restricted Stock subject to the
restrictions specified in Section 9 hereof and in accordance with the
provisions of the Stock Plan. The number of shares of Restricted Stock so
awarded will be determined on the basis of the Fair Market Value, as defined in
the Stock Plan, on the final trading day of 1995 or such other date as the
Compensation Committee shall determine.
b. In the event that a sufficient number of shares to meet the
requirements of Paragraph 8.a. is not available under the Stock Plan, a portion
of the Award will be paid in cash as follows:
(1) The portion of the Award to be paid in Restricted
Stock will be determined by (a) multiplying the Fair
Market Value, as described in Paragraph 8.a., by the
number of shares available under the Stock Plan and
(b) allocating to each participant a percentage of
the amount so determined, which percentage shall
equal the Participant's Award divided by the total of
all Awards.
(2) The portion of the Award to be paid in cash will be
determined by subtracting from each Participant's
Award the amount to be paid to that Participant in
Restricted Stock under Paragraph 8.b.(1).
c. In the event that the condition specified in Paragraph 7.a.(4)
is achieved prior to the end of the Plan Period, all Awards attributable to
that achievement will be paid within 60 days following the end of the calendar
quarter in which such condition is achieved.
d. In the event that a Participant's employment or the Plan is
terminated or constructively terminated following a Change in Control of the
Company, as hereinafter defined, Awards shall be paid as specified in Section
11 hereof.
SECTION 9. RESTRICTIONS ON RESTRICTED STOCK
Restricted Stock issued under the Stock Plan pursuant to Section 8
hereof is issued subject to the provisions of Section 11 of the Stock Plan and
may not be sold, assigned, transferred, discounted, exchanged, pledged or
otherwise encumbered or disposed of until the Participant has completed the
following periods of continuous employment with the Company following (i) the
end of the Plan Period or (ii) in the case of Awards paid pursuant to Paragraph
8.c. hereof, the end of the calendar quarter in which the condition specified
in Paragraph 7.a.(4) is achieved:
<PAGE> 6
1996 Longterm Incentive Plan
Page 6
<TABLE>
<CAPTION>
Number of Years of Continuous
Employment Following (i) or Percent of Shares of Restricted Stock
(ii) Above No Longer Subject to Restriction
------------------------------ -------------------------------------
<S> <C>
Less than one year 0%
One year 50%
Two years 100%
</TABLE>
SECTION 10. PRORATION OF AWARDS
In the event an individual becomes or, by reason of death, total
disability, Retirement or redundancy, ceases to be a Participant during the
Plan Period, any Award granted to such Participant will be prorated for the
period of participation in the Plan and will be paid in accordance with the
provisions of Section 8 hereof. Awards due to Participants who die prior to
payment shall be paid to the beneficiary designated for Company-sponsored life
insurance.
SECTION 11. CHANGE IN CONTROL
For purposes of this Plan, a "Change in Control of the Company" shall
mean a change in control of a nature that would be required to be reported in
response to Item 1(a) of the Current Report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended ("Exchange Act") or would have been required to be so reported
but for the fact that such event had been "previously reported" as that term is
defined in Rule 12b-2 of Regulation 12B of the Exchange Act; provided that,
without limitation such a change in control shall be deemed to have occurred if
(a) any Person is or becomes the beneficial owner (as defined in rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities ordinarily (apart from rights accruing under special
circumstances) having the right to vote at election of directors ("Voting
Securities"), or (b) individuals who constitute the Board of Directors of the
Company on the date hereof (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least
three-quarters of the directors comprising the remaining members of the
Incumbent Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for
director, without objection to such nomination) shall be, for purposes of this
clause (b), considered as though such person were a member of the Incumbent
Board, or (c) a recapitalization of the Company occurs which results in either
a decrease by 33% or more in the aggregate percentage ownership of Voting
Securities held by Independent Shareholders (on a primary basis or on a fully
diluted basis after giving effect to the exercise of stock options and
warrants) or an increase in the aggregate percentage ownership of Voting
Securities held by non-Independent Shareholders (on a primary basis or on a
fully diluted basis after giving effect to the
<PAGE> 7
1996 Longterm Incentive Plan
Page 7
exercise of stock options and warrants) to greater than 50%. For purposes of
this paragraph, the term "Person" shall mean and include any individual,
corporation, partnership, group, association or other "person" as such term is
used in Section 14(d) of the Exchange Act, other than the Company, a subsidiary
of the Company or any employee benefit plan(s) sponsored or maintained by the
Company or any subsidiary thereof, and the term "Independent Shareholder" shall
mean any shareholder of the Company except any employee(s) or director(s) of
the Company or any employee benefit plan(s) sponsored or maintained by the
Company or any subsidiary thereof.
In the event that a Participant's employment with the Company is
terminated or constructively terminated or changed in any of the ways
contemplated by Section B, "Termination Following Change in Control," of the
Company's letter agreement with the Participant relating to Change in Control
of the Company, as such agreement may be amended from time to time, such
Participant shall immediately receive a lump-sum, cash Award in an amount equal
to:
a. his Base Salary multiplied by the sum of the maximum
percentages allowable for his position under each of Paragraphs 7.a. and 7.b.
hereof, multiplied by
b. one third (1/3) if the Change in Control occurs in the first
year of the Plan Period or two thirds (2/3) if the Change in Control occurs in
the second year of the Plan Period or one (1) if the Change in Control occurs
in the third year of the Plan Period, minus
c. any amount previously paid to the Participant under the
provisions of Paragraph 8.c. hereof.
SECTION 12. TERMINATION OF THE PLAN
The Plan may be terminated at any time. No termination of the Plan
shall affect the Company's obligation with respect to any benefits theretofore
accrued. In the event of Plan termination, the Plan Period shall end on the
effective date of the termination of the Plan.
<PAGE> 1
Exhibit 10.31
DATED THIS 16TH DAY OF OCTOBER 1995
BETWEEN
ANTAH DRILLING SDN. BHD.
AND
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED
(OFFSHORE BANKING UNIT, LABUAN)
***********************************
LOAN AGREEMENT
***********************************
SHEARN DELAMORE & CO.,
ADVOCATES & SOLICITORS,
NO. 2 BENTENG,
50050 KUALA LUMPUR.
AND AT
16TH FLOOR,
WISMA HAMZAH-KWONG HING,
NO. 1 LEBOH AMPANG,
50100 KUALA LUMPUR.
<PAGE> 2
THIS AGREEMENT is made the 16th day of October, 1995 Between
ANTAH DRILLING SDN. BHD. is a company incorporated in Malaysia with
its registered office at 9th Floor, Bangunan BNH, Off Jalan Semantan,
Damansara Heights; 50490 Kuala Lumpur (hereinafter called "the
Company") of the one part And THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED, a corporation constituted by the Hongkong and
Shanghai Bank Ordinance 1866 and continued by The Hongkong and
Shanghai Banking Corporation Limited Ordinance, Chapter 70 of the
Laws of Hong Kong and having its Off-Shore Banking Unit in Labuan at
4, Jalan Merdeka, 87007 Labuan, Malaysia (hereinafter called "the
Bank") of the other part.
ARTICLE I
Recitals
Section 1.01 The Company
The Company has among its objects:-
(a) To carry on any of the business of prospecting, exploring,
drilling, boring, mining, digging for any buying, selling and in
any other manner dealing with natural gas, oil, petroleum or
related substances.
(b) To render services to the oil industry and other industries as
suppliers, contractors, consultants, advisers, technicians and
in any other capacity.
(c) To carry on the trade or business of engineers, founders,
smiths, metal workers, machinists and manufacturers.
Section 1.02 Property
The Company is the beneficial owner of two (2) platform
drilling/workover rigs, namely Rig No. 488 and Rig No. 489 (formerly
known as Rig No. 450) more particularly described in Schedule "A"
annexed hereto (hereinafter collectively called "the Property" and
individually as Rig No. 488 and Rig No. 489 respectively).
Section 1.03 Existing Charges
(a) The Company has under a Memorandum of Charge dated the 13th day
of December, 1988 (hereinafter called "the First Charge")
executed a first fixed charge over the Property in favour of
Intairdril Ltd. of c/o Pool Company, 10375 Richmond, Houston,
Texas, United States of America (hereinafter called
"Intairdril").
<PAGE> 3
2
(b) The Company has, inter alia, pursuant to a loan agreement dated
the 28th day of April, 1995 and the debenture of the same date
(hereinafter called "the Second Charge") executed in favour of
the Bank a second fixed charge over the Property as security for
banking facilities granted by the Bank to the Company up to the
sum of United States Dollars Four million (USD4,000,000/-) for
principal together with interest thereon.
Section 1.04 Application for the Loan
Pursuant to the application made by the Company the Bank has
agreed to grant or extend to the Company a further loan of United
States Dollars Twenty-three million five hundred thousand
(USD23,500,000/-) (hereinafter called "the Loan") upon the security,
inter alia, of a charge over the Property and upon the terms and
conditions hereinafter set out.
Section 1.05 Consent of Intairdril
Intairdril has consented to the Company creating the charge
referred to in Section 1.04 hereof in favour of the Bank which shall
in point of security rank after the First Charge and the Second
Charge. The letter of consent of Intairdril dated the 10th day of
October, 1995 is attached hereto as Appendix 1.
NOW THIS AGREEMENT WITNESSETH as follows:-
ARTICLE II
Interpretation
Section 2.01 Definitions
(a) In this Agreement where the context so admits the following
words and expressions shall have the following meanings:-
<TABLE>
<CAPTION>
Words Meanings
----- --------
<S> <C>
"Advance" the principal amount of the drawing to be
made by the Company hereunder comprising
the Loan or as the context may require the
principal amount for the time being and
from time to time outstanding in respect of
such drawing.
</TABLE>
<PAGE> 4
3
<TABLE>
<S> <C>
"Assignment" the assignment to be executed by the
Company in favour of the Bank whereunder
the Company assigns to the Bank all its
rights to the payments from EAL under EAL
Contract.
"Availability Period" the period commencing from the date of
execution of this Agreement until the
30th day of April, 1996 during which
the Loan shall be made available for
drawdown by the Bank to the Company and
shall be deemed to include any
extension granted by the Bank at its
absolute discretion.
"USD Sibor" Singapore Interbank Offer Rate of 1, 3
or 6 months option.
"Bank" THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED, a corporation
constituted by the Hongkong and
Shanghai Bank Ordinance 1866 and
continued by The Hongkong and Shanghai
Banking Corporation Limited Ordinance,
Chapter 70 of the Laws of Hong Kong and
having its Off-Shore Banking Unit in
Labuan at 4, Jalan Merdeka, 87007
Labuan, Malaysia and includes persons
deriving title thereunder and its
successors-in-title and assigns.
"Bank Security collectively this Agreement, the
Documents" Debenture, the Assignment and such
other agreements executed pursuant to
this Agreement.
"Business Day" the day on which banks are open for
business in Kuala Lumpur.
"Company" ANTAH DRILLING SDN. BHD., a company
incorporated in Malaysia with its
registered office at 9th Floor,
Bangunan BNH, Off Jalan Semantan,
Damansara Heights, 50490 Kuala Lumpur
and includes persons deriving title
thereunder or its successors-in-title.
"Corporate Guarantee" the guarantee to be executed by ANTAH
HOLDINGS BERHAD referred to in Section
5.01 (h) hereof.
"Debenture" the debenture to be executed by the Company
in favour of the Bank creating a third
fixed charge over the Property as security
for the Loan and all other monies payable
by the Company to the Bank under the Bank
Security Documents
</TABLE>
<PAGE> 5
4
<TABLE>
<S> <C>
referred to in Section 6.01(a).
"Drawdown Notice" a notice of advance substantially in the
form set out in Schedule "B" hereof
duly completed and signed on behalf of the
Company.
"EAL" ESSO AUSTRALIA LTD., (A.C.N. 000 018
566) a company having its registered
office at 360 Elizabeth Street,
Melbourne, Victoria and includes
persons deriving title thereunder or
its successors-in-title.
"EAL Contract" Contract No. 00285866 to be entered
into between EAL of the one part and
the Company of the other part.
"First Charge" the Memorandum of Charge dated the 13th
day of December, 1988 executed by the
Company in favour of Intairdril Ltd.
over the Property.
"Second Charge" the debenture dated the 28th day of
April, 1995 executed by the Company in
favour of the Bank with the consent of
Intairdril creating a second charge
over the Property ranking after the
First Charge.
"Intairdril" INTAIRDRIL LTD., of c/o Pool Company, 10375
Richmond, Houston, Texas, United States of
America and includes persons deriving title
thereunder or its successors-in-title.
"Loan" banking facilities by way of a term
loan of United States Dollars Twenty-
three million five hundred thousand
(USD23,500,000/-) for principal to be
granted by the Bank to the Company
pursuant to the provisions of this
Agreement.
"Pool Company" Pool Company, 10375 Richmond Avenue,
Houston, Texas 77042 and includes
persons deriving title thereunder or its
successors-in-title.
"Prescribed Rate" the rate of interest applicable to the
Loan as stipulated in Section 7.02(b)
hereof and which expression shall
whenever the context so requires such
other rate as may at any time and from
time to time hereafter be substituted
</TABLE>
<PAGE> 6
5
<TABLE>
<S> <C>
or varied by the Bank.
"Property" collectively the two (2) platform
drilling/workover rigs namely Rig No.
488 and Rig No. 489 (formerly known as
Rig No. 450) and any replacement Rig
thereto more particularly described in
Schedule "A" annexed hereto.
"Ringgit Malaysia" and the lawful currency of Malaysia.
the abbreviation "RM"
"such other agreements" such other agreements executed or to be
executed by the Company relating to this
Agreement apart from the Debenture and the
Assignment.
</TABLE>
(b) Words importing the singular number includes the plural number.
(c) The headings and sub-headings used in this Agreement are inserted for
purposes of convenience only and shall not affect the construction of this
Agreement.
ARTICLE III
Representations and Warranties
Section 3.01 Representations and Warranties
The Company hereby represents and warrants to the Bank as follows:-
(a) that the Company is a company duly incorporated and validly existing under
the laws of Malaysia as a separate legal entity and has full power and
authority to own its assets and carry on business as it is now being
carried on;
(b) that the Company has the power to incur borrowings and or otherwise
utilise the Loan and to execute, deliver and perform the terms of the Bank
Security Documents and has taken all necessary corporate, shareholders,
creditors and other action to authorise the acceptance, execution,
delivery and performance of the Bank Security Documents;
(c) that the Company has obtained the consent of Intairdril to the execution
of the Bank Security Documents by the Company and the creation of a third
charge over the Property ranking in after the First Charge in its favour
and the Second Charge in favour of the Bank;
(d) that the Company is the beneficial owner and has title
<PAGE> 7
6
to the Property;
(e) that the Bank Security Documents constitute the legal, valid and binding
obligations of the Company in accordance with the terms contained therein;
(f) that the execution, delivery and performance of the Bank Security
Documents by the Company will not exceed the power granted to it by, or
violate the provisions of (1) any law or regulation or any order or decree
of any governmental authority, agency or court to which the Company is
subject or (2) its Memorandum and Articles of Association or other
undertaking or instrument to which the Company is a party or which is
binding upon it or any of its assets, and (3) will not result in the
creation or imposition of, or any obligation to create or impose, any
mortgage, lien, pledge or charge on the Property pursuant to the
provisions of any such other undertaking or instrument (other than the
existing charges in favour of Intairdril and the Bank respectively
referred to in Section 1.03 hereof);
(g) that all consents, approvals and authorisations of any relevant authority
which are required on the part of the Company for or in connection with
the acceptance, execution, delivery, performance legality or
enforceability of the Bank Security Documents have been obtained and are
in full force and any conditions contained therein or otherwise applying
thereto have been complied with;
(h) that the Company is not in default under any agreement to which it is a
party or by which it may be bound and no litigation, arbitration or
administrative proceedings are presently current or to the best of its
knowledge pending or to the best of its knowledge threatened which
default, litigation, arbitration or administrative proceedings, as the
case may be, might materially affect the solvency of the Company or might
impair the Company's ability to perform its obligations under the Bank
Security Documents;
(i) that none of its directors managers agents or guarantors nor any of their
respective spouses, parents or children are in the employment of the Bank
so as to result in the availment of the Loan by the Company hereunder
contravening Section 62 of the Banking and Financial Act 1989;
(j) that the Company has filed all tax returns which the Company is required
by law to file and has paid all taxes which are due and payable,
assessments fees and other governmental charges assessed against it or
upon any of its properties assets income or franchises or has provided
adequate reserves for any tax,
<PAGE> 8
7
assessment, fees or other governmental charges which payment is being
contested in good faith;
(k) that the Company is not in default howsoever under the First Charge or the
Second Charge nor in the payments or observance of any of its obligations
for borrowed monies; and
(1) that there are no winding up proceedings against the Company and the
Company has not commenced any action for voluntary winding-up of the
Company.
Section 3.02 Continuing nature of Warranties and Representations
The Company shall be deemed to represent and warrant to the Bank whenever
the Company shall request for any advances under the Loan (a) that the
representations and warranties contained in Section 3.01 are true and accurate
in all respects as if made on such date and (b) that no event of default, and
no event which with giving of notice or the passing of time would constitute an
event of default under this Agreement has occurred and is continuing.
Section 3.03 Truth and correctness of Representations and Warranties
The truth and correctness of all the matters stated in the representations
and warranties under Section 3.01 hereof shall form the basis of the Bank's
commitment to make or continue to make available the Loan to the Company. If
any such representations and warranties made shall at any time hereafter be
found to have been incorrect in any material respect when made then and in such
event and notwithstanding anything to the contrary contained herein or under
the Bank Security Documents, the Bank shall have the right at its absolute
discretion to review, suspend, recall or terminate the Loan or any part
thereof.
ARTICLE IV
Provisions Relating to Loan
Section 4.01 Loan
The Bank relying upon the representations and warranties set out in
Section 3.01 hereof and subject to the Conditions Precedent set out in Section
5.01 hereof having been duly satisfied to the satisfaction of the Bank hereby
confirms that it will grant to the Company the Loan and the Company hereby
accepts the Loan on the terms and conditions herein set out.
<PAGE> 9
8
Section 4.02 Purpose
The Loan shall be utilised by the Company to finance the re-fabrication
and mobilization costs of Rig No. 489 (formerly known as Rig No. 450) and the
acquisition of associated equipments for Rig No. 489.
ARTICLE V
Conditions Precedent
Section 5.01 Conditions Precedent
The obligation of the Bank to make the Loan available to the Company shall
be subject to the fulfilment in manner satisfactory to the Bank, of the
following conditions precedent:-
(a) the receipt by the Bank from the Company the approval of Bank Negara
Malaysia for the Company to avail the Loan from the Bank in United States
Dollars;
(b) the Bank is satisfied that as from the date when the Company first applied
for the Loan there has been no material alterations or changes in the
constitution condition business or other affairs of the Company which
could or might adversely affect the decision of the Bank to proceed with
the granting of the Loan or any part thereof;
(c) the Memorandum and Articles of Association of the Company shall be in form
and substance satisfactory to the Bank and there shall have been obtained,
or there shall have been made provision satisfactory to the Bank for
obtaining, all governmental, corporate, creditors', shareholders' or other
necessary licenses, approvals and consents for the borrowing hereunder and
or utilisation of the Loan by the Company, the carrying on the business of
the Company and the due execution delivery and performance of the Bank
Security Documents;
(d) the Bank shall have received from the Company the documents listed below:-
(i) a certified true copy of the Memorandum and Articles of Association
of the Company;
(ii) a certified true copy of the Company's Board of Directors' Resolution
authorising the borrowings and or utilisation of the Loan and
creation and execution of the Bank Security Documents;
(iii) a list setting out the full names and specimen signatures of the
officers of the Company who have been duly authorised to operate or
otherwise
<PAGE> 10
9
utilise the Loan;
(iv) a certified true copy of the Certificate of Incorporation of the
Company;
(e) receipt from Intairdril its written consent to the Company availing the
Loan on the terms of this Agreement and executing the Bank Security
Documents;
(f) the Bank shall have received from the Company the documents listed below:-
(i) a certified true copy of the Memorandum and Articles of Association
of Antah Holdings Berhad, a company incorporated in Malaysia with its
registered office at 9th Floor, Bangunan BNH, Off Jalan Semantan,
Damansara Heights, 50450 Kuala Lumpur (hereinafter called "Antah
Holdings") and Pool Company ;and
(ii) a certified true copy of the Board Resolution of Antah Holdings
authorising the execution of the Corporate Guarantee in the format
required by the Bank by a specifically named representative
whereunder Antah Holdings will guarantee all payments due from the
Company to the Bank under the Bank Security Documents in proportion
to its shareholding in the Company up to the principal limit of
USD11,985,000/- of the Loan;
(iii) a certified true copy of the Board Resolution of Pool Company
authorising the execution of the Agreement to Guarantee incorporating
the Guarantee in the format required by the Bank by a specifically
named representative whereunder Pool Company will guarantee all
payments due from the Company to the Bank under the Bank Security
Documents in proportion to its shareholding in the Company whether
held directly or indirectly up to the principal limit of
USD11,515,000/- of the Loan;
(g) the Bank Security Documents shall have been executed by the Company and
duly registered with such registries as the Bank may deem necessary or
expedient;
(h) the Corporate Guarantee referred to in (f) (ii) above shall have been duly
executed by Antah Holdings and stamped;
(i) the agreement made between Pool Company of the one part and the Bank of
the other part pertaining to the guarantee referred to in (f) (iii) above
shall have been duly executed and stamped; and
<PAGE> 11
10
(i) the Bank is satisfied that the EAL Contract covers the period for
refurbishment of Rig No. 489 (formerly known as Rig No. 450) and
incorporates provisions sufficient to compensate the Company for damages
arising from termination of the EAL Contract.
ARTICLE VI
SECURITY
Section 6.01 Security
The Company shall in addition to this Agreement do or cause the following
to be done simultaneously with the execution of this Agreement:-
(a) execute the Debenture over the Property as beneficial owner creating a
third fixed charge over the Property to secure the payment of all monies
and liabilities to be paid and intended to be hereby secured under the
Bank Security Documents (including all expenses and charges arising out of
or in connection with the acts or matters hereunder) and so that the
charge so created shall be a continuing security for its duration and
shall in point of security rank after the First Charge and the Second
Charge
(b) execute the Assignment in favour of the Bank in the form as required by
the Bank whereunder the Company shall assign to the Bank all its rights to
payments under the EAL Contract;
(c) cause Antah Holdings to execute a Corporate Guarantee in the form as
required by the Bank whereunder Antah Holdings irrevocably guarantees the
repayment of the sums due to the Bank from the Company under the Bank
Security Documents up to the principal sum of United States Dollars Eleven
million nine hundred and eighty five thousand (USD11,985,000/-) of the
Term Loan together with interest and costs;
(d) cause Pool Company to enter into an agreement with the Bank in the form as
required by the Bank whereunder Pool Company undertakes irrevocably to
guarantee the repayment of the sums due to the Bank from the Company under
the Bank Security Documents up to the principal sum of United States
Dollars Eleven million five hundred and fifteen thousand (USD11,515,000/-)
of the Term Loan together with interest and costs;
Section 6.02 Restriction against other charges
(a) The Company hereby declares that other than the First Charge created in
favour of Intairdril and the Second Charge
<PAGE> 12
11
created in favour of the Bank there is no mortgage charge debenture pledge lien
or other form of security upon the Property or assets secured by the Bank
Security Documents having priority rights or pari passu rights with the Bank
Security Documents.
(b) The Company shall not during the subsistence of the Bank Security
Documents without the prior consent in writing of the Bank execute any form of
charge mortgage debenture (whether fixed or floating) pledge or lien in respect
of any of the assets of the Company secured under the Bank Security Documents.
(c) The Bank Security Documents shall be without prejudice to any security
already given by the Company to the Bank or any security which may hereafter be
given to it by the Company whether the same be for securing repayment of the
principal amount and interest thereon or any part thereof or any other money
convenanted to be paid herein and whether such security is taken as additional
or collateral security or otherwise howsoever.
Section 6.03 Security to be Additional
The security created under the Bank Security Documents is in addition to
any other security or securities which the Bank may now or from time to time
hold or take from the Company.
Section 6.04 Procedure on notice of further charge
If the Company shall execute or create any further or subsequent mortgage
charge lien or incumbrance fixed or floating over or otherwise deal with any of
the Property secured under the Bank Security Documents or any part or parts
thereof in favour of any other person of which the Bank receives notice either
actual or constructive the Bank may on receiving such notice forthwith open a
new or separate account with the Company in the books of the Bank and if the
Bank does not in fact open such new or separate account the Bank shall
nevertheless be deemed to have done so at the time when the Bank received or
was deemed to have received such notice (hereinafter called "the time of
notice") and as from and after the time of notice all payments in account made
by the Company or by or on behalf of the Company to the Bank shall
(notwithstanding any legal or equitable rule of presumption to the contrary) be
placed or deemed to have been placed to the credit of the new or separate
account so opened or deemed to have been opened as aforesaid and be in
reduction of amounts owing and incurred by the Company to the Bank after the
time of notice and shall not go in reduction of the amount owing by the Company
to the Bank at the time of notice. PROVIDED ALWAYS that nothing in this
paragraph contained shall prejudice the security which the Bank otherwise would
have had under the Bank Security Documents for the payment of the monies costs
charges and expenses herein referred to notwithstanding that the same may
become due or owing or be incurred after the time of notice or be construed as
an admission by the Bank that the said subsequent mortgage charge
<PAGE> 13
12
lien or encumbrance is valid and affecting the security and PROVIDED ALWAYS
that nothing in this Clause contained shall be deemed to be a waiver of the
Bank's rights against the Company for breach of the covenant not to execute or
create any further mortgage charge pledge, lien or other incumbrance without
the prior written consent of the Bank. PROVIDED FURTHER this Clause shall not
apply to statutory liens created in the Company's ordinary course of business
and such liens are discharged within thirty (30) days after final adjudication.
Section 6.05 Upstamping of the Debenture
In the event the total monies and liabilities due and owing to the Bank
under the Bank Security Documents shall at any time exceed the principal limit
or the limit for which the security created shall for the time being stamped to
secure, the Bank shall be at liberty at any time to upstamp the security
created under the Debenture for the excess amount and such monies paid and
expended by the Bank shall be repayable on demand by the Company and until paid
be debited to the Company's loan or current account or a disbursement/suspense
account to be opened by the Bank for the purpose and shall be secured under the
Debenture in addition to the monies hereunder secured with the same priority
and with interest at the relevant applicable rate.
Section 6.06 Liens and other securities not affected
Nothing herein contained shall prejudice or affect any lien to which the
Bank is entitled or any other securities which the Bank may at any time or from
time to time hold for or on account of the monies secured under the Bank
Security Documents nor shall anything herein contained operate so as to merge
or otherwise prejudice or affect any bill note guarantee mortgage or other
security which the Bank may for the time being have for any money intended to
be hereby or otherwise secured or any right or remedy of the Bank under the
Bank Security Documents.
Section 6.07 Not to remove property
The Company shall not throughout the continuance of this security remove
the Property from where they are now or to which they may be hereafter removed
without the prior written consent of the Bank save and except in the ordinary
course of its business.
Section 6.08 Powers of Inspection of the Bank
The Company shall at all times permit the Bank or any person authorised by
the Bank to enter into any premises occupied by the Company to inspect all
books, records and documents of title at any other office, branch or place of
business or elsewhere by any authorities or persons so far as such books
records and documents of title relate to or affect the Property
<PAGE> 14
13
of the Company hereby charged, and to value the Property. Any expense incurred
by such authorised persons shall be borne by the Company.
Section 6.09 Transfer of Security
The Bank shall be at liberty at any time with the consent or concurrence
of and with notice to the Company transfer the benefit of the security under
the Bank Security Documents to any third person and the costs and expenses of
the Bank and the transferee of and incidental to such transfer shall be paid by
the Bank save and except that if such assignment or transfer is necessitated as
a result of a change in law or directions from Bank Negara Malaysia or other
relevant authorities (whether or not having the force of law) the costs and
expenses of the Bank and the assignee or transferee of and incidental to such
assignment or transfer shall be paid by the Company, and any recital or
statement in the document of transfer of the amount then due to the Bank under
and by virtue of the Bank Security Documents shall be conclusive and binding on
the Company saving manifest errors only.
ARTICLE VII
Drawdown of the Loan
Section 7.01 Drawdown of the Loan
(a) If:-
(1) all Conditions Precedent in Section 5.01 shall have been complied
with to the satisfaction of the Bank;
(2) not later than 12.00 noon three (3) Business Days prior to the
proposed date of drawdown the Bank shall have received from the
Company a duly completed Drawdown Notice requesting for an Advance;
(3) the Drawdown Notice has been received by the Bank from the Company
prior to the expiry of the Availability Period;
(4) the Advance requested for shall be for a sum not less than United
States Dollars Five hundred thousand (USD500,000/-) and in multiples
of United States Dollars One hundred thousand (USD100,000/-);
(5) the amount to be advanced is stated in the Drawdown Notice and
supported with the relevant certified invoices;
(6) all representations and warranties in Section
<PAGE> 15
14
3.01 would be correct in all respects if repeated on the proposed
drawdown date by reference to the circumstances then prevailing;
(7) no Event of Default has occurred and is continuing on or before the
proposed drawdown date or in the reasonable opinion of the Bank will
occur as a result of making the Advance;
(8) no extraordinary circumstances or change of law or other governmental
action has occurred which in the reasonable opinion of the Bank make
it improbable that the Company will be able to observe and perform
its covenants and obligations hereunder;
then, subject to the provisions of this Agreement, the Bank will make the
requested Advance to the Company.
(b) Drawdown Notice
A Drawdown Notice once received by the Bank is irrevocable and, subject to
the provisions of this Agreement shall be binding on the Company
accordingly.
Section 7.02 Interest
(a) Interest Periods
Interest shall be calculated and payable on the Advance by reference to
each interest period. The interest periods shall begin on the drawdown
date for the relevant interest period and shall be revised at the
commencement of each subsequent chosen interest period until the Loan is
repaid in full.
(b) Prescribed Rate
Until Rig No. 489 is delivered to and arrives in Australia he rate of
interest payable on the Advance for each interest period on 1, 3 or 6
months option shall be one per cent (1%) per annum above USD Sibor.
Thereafter the rate of interest payable for each interest period on 1, 3
or 6 months option shall be one per cent (1%) above USD Sibor divided by
0.90.
(c) Payment of Interest
The Company shall pay to the Bank in arrears monthly the unpaid interest
accrued on the Advance or the overdue sums referred to in (d) below to
which it relates at the Prescribed Rate.
(d) Default Interest
If default is made in the payment of any sum payable
<PAGE> 16
15
to the Bank under the Bank Security Documents when due as provided for in
the Bank Security Documents the Company shall pay interest on such overdue
amount from time to time outstanding for the period beginning on the due
date and ending on the date of its receipt by the Bank (both before and
after Judgment) interest at the rate per annum (as determined by the Bank)
equal to the sum of:-
(i) one per centum (1%); and
(ii) the Prescribed Rate.
(e) Variation of the Prescribed Rate
Notwithstanding the provisions relating to the Prescribed Rate and/or
overdue interest set out in (b) and (d) above payable in respect of the
Loan the Bank shall be entitled to vary at its discretion the Prescribed
Rate by giving to the Company at any time written notice of such intention
and the new rate of interest shall be payable as from the dates specified
in the said notice.
(f) Capitalisation of interest
(i) Subject to the provisions of (g) below the interest on any principal
money for the time being owing including capitalised interest shall
at the end of each interest period be capitalised and added for all
purposes to the principal sum then owing and shall thenceforth bear
interest at the Prescribed Rate and be secured and payable
accordingly whether before or after any court order or judgment or
demand for payment has been made on the Company and all the covenants
and conditions contained in or implied by these presents and all
rules of law or equity in relation to the said principal sum and
interest shall equally apply to such capitalised arrears of interest
and to interest on such arrears.
(ii) The right of the Bank to capitalised interest hereunder shall subsist
notwithstanding the issuance of a notice of demand by the Bank to the
Company and/or the cessation of the banker-customer relationship
between the Bank and the Company.
(g) Ascertaining Limits
For the purpose of ascertaining whether the limit of the principal sum
intended to be hereby secured has been exceeded or not, all accumulated
and capitalised interest shall be deemed to be interest and not principal
sum.
<PAGE> 17
16
ARTICLE VIII
Repayment
Section 8.01 Repayment
Subject to the Bank's right of repayment on demand the Company shall repay
the principal amount of the Loan to the Bank in the following manner:-
(a) United States Dollars Ten million two hundred thousand (USD10,200,000/-)
upon receipt of United States Dollars Ten million two hundred thousand
(USD10,200,000/-) mobilization fees from EAL which is to be credited to
the Company's account with the Bank or within sixty (60) days from the
date of Rig No. 489 (formerly known as Rig No. 450) is placed on the
platform in the Bass Straits in Australia or by the 31st day of August,
1996, whichever is the earlier;
(b) the balance by thirty-five (35) monthly instalments of United States
Dollars Three hundred and one thousand eight hundred and six
(USD301,806/-) each, the first of such instalment payment to commence one
(1) month of the date of repayment made under (a) above and a final 36th
instalment of United States Dollars Two million seven hundred and
thirty-six thousand seven hundred and ninety (USD2,736,790/-) comprising
of:-
(i) United States Dollars Three hundred and thirty- five thousand
(USD335,000/-) being demobilization fees to be received from EAL;
(ii) instalment of United States Dollars Three hundred and one thousand
seven hundred and ninety (USD301,790/-); and
(iii) United States Dollars Two million one hundred thousand
(USD2,100,000/-) being contingent expenditure.
All repayments will be firstly applied towards accrued but unpaid interest
and default interest and secondly towards the unpaid principal of the Loan
outstanding.
Section 8.02 Arrangement Fee
The Company shall pay to Hongkong Bank Malaysia Berhad, Kuala Lumpur Main
Office, No. 2 Leboh Ampang, 50100 Kuala Lumpur an arrangement fee of zero point
one per cent (0.1%) of the Loan amounting to United States Dollars Twenty-three
thousand five hundred (USD23,500/-).
<PAGE> 18
17
Section 8.03 Indemnity
In the event that the Bank is required to refund to EAL any
over-payment(s) paid to the Bank under the Assignment by reason of EAL having
erroneously made such over-payment(s), the Company hereby undertakes to
indemnify and keep indemnified the Bank against the total amount of such
refund(s) made by the Bank to EAL, and the Company shall upon demand being made
by the Bank forthwith pay to the Bank such total amount together with interest
thereon at the Prescribed Rate. And until demand as aforesaid is made, the
Company shall pay the said total amount with interest together with the total
outstanding amount of the Loan in monthly instalments in accordance with
Section 8.01 hereof.
Section 8.04 Prepayment
The Company shall be permitted to prepay the Advance in whole or in United
States Dollars One hundred thousand (USD100,000/-) or in multiples thereof on
any interest payment date PROVIDED THAT:-
(a) the Bank shall have received written notice of the intended prepayment at
least thirty (30) clear Business Days prior to the prepayment date; or
(b) the Bank shall have received zero point seven five per centum (0.75%) flat
on the amount to be prepaid.
And every amount prepaid shall not be available for redrawing thereafter
and shall be deemed to be prepayment and shall accordingly be applied in
reducing the repayment instalment under Section 8.01 above in inverse order of
maturity.
Section 8.05 Notice of Prepayment Irrevocable
Notice of intended Prepayment once having been given by the Company shall
be irrevocable and it shall be obligatory on the Company to make the prepayment
in accordance with such notice.
ARTICLE IX
Covenants
Section 9.01 Particular Covenants
The Company hereby covenants with the Bank that it will at all times
during the continuance of this Agreement:-
(a) carry on, conduct and operate its business now carried on by the Company
with due diligence and efficiency in accordance with sound and proper
financial, business
<PAGE> 19
18
and industrial standards and practices;
(b) keep full and particular accounts of the carrying on of its said
businesses and cause the same to be properly posted up to date and confirm
to the Bank within one hundred and twenty (120) days from the end of each
half year of each financial year copies of complete financial statements
of the Company certified by an officer of the Company in such form (always
in accordance with generally accepted accounting principles) as the Bank
may from time to time determine, and further, as soon as available, but in
any event within one hundred and eighty (180) days after the end of each
financial year of the Company, forward to the Bank two (2) copies of its
balance sheet, profit and loss account and report audited and certified by
a qualified independent auditor, stating accurately, in accordance with
generally accepted accounting principles or standards, the financial
condition of the Company;
(c) upon request by the Bank and in any case not later than one (1) calendar
month thereafter supply the Bank with statements in writing on its monthly
sales and receivables;
(d) give to the Bank or any officer thereof all information reasonably
required by the Bank in connection with the Company's said businesses and
render to the Bank statements thereof;
(e) punctually pay all rates fees and other charges payable by the Company in
respect of the Property in default whereof the Bank may in its absolute
discretion pay the same and all monies expended by the Bank together with
interest thereon at the Prescribed Rate from the date of such payments
shall on demand be repaid and until paid shall be debited to the Company's
account and shall be secured under the Bank Security Documents in addition
to the monies hereunder secured with the same priority and with interests
at the relevant applicable rate;
(f) keep the Property secured by the Bank Security Documents in good order and
condition;
(g) inform and keep informed the Bank of any legal proceedings litigations
claims (of a material nature) involving the Company and any of its
subsidiaries;
(h) forthwith inform the Bank of any change of auditors;
(i) keep in full force and effect all or any governmental approval
authorisation licence or permit of any nature whatsoever which may now or
hereafter be required under any written law decree or regulation relating
to
<PAGE> 20
19
the performance of its obligations under the Bank Security Documents;
(j) inform the Bank of any material change in its accounting policy;
(k) promptly inform the Bank of any potential change in its major
shareholders;
(1) promptly inform the Bank of any change in its directors;
(m) keep the Bank indemnified against all actions, suits, claims and expenses
which may be incurred, sustained on account of the non-payment of any
property tax, rates, charges, impositions or any part thereof or the
breach of or non-performance of the covenants, obligations and agreements
contained herein; and
(n) provide the Bank promptly true and correct copies of all monthly invoices
and any amendments thereto declared to EAL.
Section 9.02 Restrictive Covenants
The Company hereby covenants that during the continuance of this Agreement
it shall not without the consent of the Bank in writing first had and obtained
(such consent however shall not be unreasonably withheld):-
(a) add to delete vary or amend its Memorandum and Articles of Association in
any manner which would be inconsistent with the provisions of the Bank
Security Documents or change its financial year or the nature of its
present business or sell transfer or otherwise dispose of all or a
substantial part of its assets or undertake or permit any merger or
consolidating;
(b) incur, assume, guarantee or permit to exist any indebtedness for borrowed
monies except:-
(i) that indebtedness secured under the First Charge and the Second
Charge;
(ii) the principal sum hereunder;
(iii) existing guarantees and future guarantees in favour of the relevant
authorities for essential services; and
(iv) short term debts incurred in respect of money borrowed from licensed
banks or other financial institutions in the ordinary course of
business.
For the purpose of this paragraph, a short term
<PAGE> 21
2O
debt is deemed to be any debt payable on demand or maturing by its
terms within twelve (12) months after the date on which it was
originally incurred;
(v) debt to shareholders incurred for money borrowed to pay for materials
or services supplied to the Company or to service debts of the
Company;
(c) create or permit to exist any lien on any asset of the Company except any
tax or other statutory lien, provided that such lien shall be discharged
within thirty (30) days after final adjudication. For the purposes of this
paragraph the expression "lien" includes mortgages pledges charges
privileges and priorities of any kind and the expression "asset" includes
any revenues and property movable and immovable of any kind;
(d) make any alteration to the general nature of its business existing on the
date of this Agreement whether by acquisition or otherwise which would
constitute a substantial alteration to the business carried on at such
date by the Company;
(e) make any payment to its shareholders by way of dividend or distribution of
profits or return of capital howsoever;
(f) make any prepayment or repayment in respect of any debt for borrowed
moneys or loans advanced to the Company by its shareholders, third parties
or related companies as defined under Section 6 of the Companies Act 1965
PROVIDED ALWAYS this Clause shall not apply to advances made on behalf of
the Company by related companies for materials and services and PROVIDED
FURTHER that so long as the Company is not in default of any terms and
conditions under the Bank Security Documents and/or the Second Charge, the
Company may make repayments of outstanding sums to its shareholders;
(g) save as provided by any provisions herein decrease or in any way
whatsoever alter the authorised or issued capital of the Company whether
by varying the amount structure or value thereof or the rights attaching
thereto or convert any of its share capital into stock or by consolidating
dividing or sub-dividing all or any of its shares except that the Company
may increase its capital without the consent of the Bank on condition that
such increase shall not at any time contravene any laws, directives or
guidelines relating to loans or credit facilities granted to companies in
Malaysia;
(h) enter into any transaction with any person firm or
<PAGE> 22
21
company except in the ordinary course of business on ordinary commercial
terms and on the basis of arm's length arrangements;
(i) permit or suffer any material change in its control and ownership;
(j) enter into any partnership, profit-sharing or royalty agreement or other
similar agreement whereby the Company's income or profits are or might be
shared with any person(s), firm(s) or company or companies or enter into
any management contract or similar arrangement whereby its business or
operations are managed by any other person(s), firm(s) or company or
companies.
ARTICLE X
Events of Default
Section 10.01 Events of Default
All monies secured under the Bank Security Documents shall become
immediately repayable on demand being made by the Bank or without demand at the
discretion of the Bank in any of the following events:-
(a) if default is made in payment of any monies payable under the provisions
of the Bank Security Documents and payment of the same is not made within
ten (10) days of date of notice of such default being given to the
Company;
(b) if the Company shall without the consent in writing of the Bank stop
payment to creditors or if the Company ceases or threatens to cease to
carry on its business or be unable to pay its debts or disposes or
threatens to dispose off the whole or part of its assets or undertakings;
(c) if a receiver or other similar officer is appointed of the whole or part
of the Company's assets or undertakings or a distress or execution is
levied upon or issued against any of the property of the Company;
(d) if a petition is presented or an order is made or an effective resolution
is passed or analogous proceedings are taken for winding-up the Company
save for the purposes of an amalgamation, merger or reconstruction the
terms whereof have previously been approved by the Bank;
(e) if a Receiver and Manager of the Company's undertaking or property or any
part thereof is appointed;
<PAGE> 23
22
(f) other than the default set out under (a) above the Company commits a
breach of any covenant or stipulation herein contained and on its part to
be observed or performed and such breach is not rectified within thirty
(30) days of date of notice of such breach given to the Company;
(g) if any other indebtedness for borrowed monies of the Company becomes
capable in accordance with the relevant terms thereof of being declared
due prematurely by reason of a default by the Company or the Company fails
to make any payment in respect thereof on the due date for such payment or
if due on demand when demanded or the security for any such indebtedness
becomes enforceable;
(h) the Company's entry into any compromise composition or scheme of
arrangement with its creditors or any assignment for the benefit of
creditors;
(i) if any representation or warranty made in connection with the execution
and delivery of this Agreement or in connection with any request for
disbursement hereunder shall be found to have been incorrect or misleading
in any material aspect when made and shall continue to be incorrect or
misleading for a period of thirty (30) days after written notice thereof
shall have been given to the Company; and
(j) if any government or relevant authority shall have condemned,
nationalised, seized or otherwise expropriated all or any substantial part
of the property or other assets of the business or operation of the
Company or shall have taken any action for the winding-up of the Company
or any action that would prevent the Company or their officers from
carrying on the operation of their business or a substantial part thereof.
ARTICLE XI
Remedies Of The Bank And Appointment of Receiver and/or
Manager
Section 11.01 Remedies of the Bank
At any time after the monies hereby secured shall have become repayable
under any of the provisions of Section 10.01 hereof and to the extent allowed
it under the Bank Security Documents:-
(a) the Bank may appoint in writing under the hand of any of its Managers,
Assistant Managers for the time being of the Kuala Lumpur Office any
competent person or persons not precluded under the provisions of Section
<PAGE> 24
23
182 of the Companies Act, to be the Receiver and/or Manager or Receivers
and/or Managers of the Property hereby charged and may in like manner from
time to time remove any Receiver and/or Manager or Receivers and/or
Managers so appointed and appoint another or others in his or their stead;
(b) the Bank or any person authorised by the Bank may enter into and upon any
premises where the Property is located without any notice and may take
possession and control of such premises and the Property hereby secured
and all properties books of account and documents relating to the Property
and assets hereby secured;
(c) the Bank shall be at liberty to give any notice which may be deemed
necessary by the Bank to any person or persons owing money to the Company
secured by the Bank Security Documents that all such monies be paid to the
Bank alone, and the Company hereby irrevocably appoints the Bank to be its
Attorney to sue for and take all appropriate legal proceedings to recover
such monies and to give a good receipt and discharge for the same and to
give such notices to the debtors of the Company and to take all necessary
steps to complete the assignment of such monies to the Bank as may be
necessary;
(d) the Bank may effect the sale of any of the Property of which it takes
possession under Section 11.01(b) hereof upon giving not less than seven
(7) days' notice of the intended sale to the Company in such manner as the
Bank shall think proper with liberty to buy and resell the same and the
Bank shall not be liable for any loss caused to the Company thereby and
the Company shall do all things necessary to enable the Bank to complete
any sale by the Bank of any part of the Property included in this
security. The Bank shall be liable only for loss caused by its wilful
default.
Section 11.02 Powers of Receiver and/or Manager
A Receiver and/or Manager or Receivers and/or Managers so appointed shall
be the agent of the Company and the Company shall be solely responsible for his
or their acts or defaults and for his or their remuneration. The Receiver
and/or Manager or Receivers and/or Managers shall be appointed for all purposes
and shall have power to the extent provided in the Bank Security Documents but
not exclusively:-
(a) to take possession of or collect and get in all or any of the Property
charged under the Debenture and for that purpose to take any proceedings
in the name of the Company or otherwise as may seem expedient;
<PAGE> 25
24
(b) to carry on manage or concur in carrying on and managing the business of
the Company or any part thereof in connection with the Property, and for
any of those purposes to raise or borrow any money that may be required
upon the security of the whole or any part of the Property hereby charged;
(c) to raise and borrow money on the security of any or all of the Company's
assets and property upon such terms as he or they shall think fit;
(d) to sell or concur in selling and to let or concur in letting and to accept
surrenders of leases of any of the Property charged to the Bank under the
Bank Security Documents. In exercising the power of sale hereby conferred
the Receiver and/or Manager or Receivers and/or Managers may sell at such
time and in such manner and at such price as he or they may in his or
their absolute discretion think fit and in exercising such discretion he
or they may have regard to the views and desires of the Bank. The Receiver
and/or Manager or Receivers and/or Managers shall not be accountable for
any loss or damage which may be alleged to have been suffered by the
Company by reason of the exercise of his or their discretion;
(e) to make any arrangement or compromise which he or they shall think
expedient bring take defend discontinue any actions suits or proceedings
whatsoever in relation to the Property charged under the Bank Security
Documents;
(f) to make calls conditionally or unconditionally on the members of the
Company in respect of its uncalled capital with such and the same powers
for the purpose of enforcing payment of any calls so made as are by the
Articles of Association of the Company conferred upon the directors of the
Company in respect of calls authorised to be made by them and in the names
of the directors or in the name of the Company and to the exclusion of the
directors' power in that behalf;
(g) to appoint managers agents officers servants and workmen for any of the
aforesaid purposes at such reasonable salaries and for such reasonable
periods as he or they may determine;
(h) to do all such other acts and things as may be considered to be incidental
or conducive to any of the matters or powers aforesaid and which he or
they may or can lawfully do as agent(s) of the Company.
Section 11.03 Application of Proceeds of Sale
The net profits of carrying on the said business and the net proceeds of
any sale shall be applied by the Receiver
<PAGE> 26
25
and/or Manager or Receivers and/or Managers as follows:-
Firstly, in payment of all costs, charges and expenses of and incidental
to the appointment of the Receiver and/or Manager or Receivers and/or
Managers and the exercise by him or them of all or any of the powers
aforesaid including reasonable remuneration of the Receiver and/or Manager
or Receivers and/or Managers;
Secondly, subject to the rights of Intairdril under the First Charge and
the Bank under the Second Charge in or towards payment to the Bank of all
interest accrued under the Third Charge, the Bank Security Documents and
remaining unpaid;
Thirdly, in or towards payment to the Bank of all principal and other
monies due to the Bank and intended to be secured under the Third Charge
and the Bank Security Documents Provided Always that if the Bank shall be
of the opinion that the security may prove deficient, payments may be made
to the Bank at the request of the Bank on account of principal before the
interest or the whole of the interest due has been paid but such
alteration in the order of payment shall not prejudice the rights of the
Bank to receive the full amount to which it would have been entitled if
the primary order of payment have been observed or any less amount which
the sum ultimately realised from the security may be sufficient to pay;
Lastly, any surplus shall be paid to the persons legally entitled thereto.
Save as aforesaid the Bank shall be under no liability to the Receiver
and/or Manager or Receivers and/ or Managers for his or their remuneration
costs, charges or expenses or otherwise.
Section 11.04 Deficiency in Proceeds of Sale
If the amount realised by the Bank on a sale of the Property under the
provisions of Section 11.02 hereof after deduction and payment from the
proceeds of such sale of all fees dues costs charges and expenses incidental
thereto is less than the amount due to the Bank under the Bank Security
Documents and whether at such sale the Bank is the purchaser of the Property or
otherwise the Company shall pay to the Bank the difference between the amount
due and the amount so realised and until payment will also pay interest on such
balance at the Prescribed Rate with monthly rests before as well as after any
Court order or judgment.
<PAGE> 27
26
Section 11.05 Right to Sell
The Bank may at any time after the monies hereby secured shall have become
payable effect the sale of the Property of which it takes possession under the
provisions of Section 11.01(b) hereof upon giving not less than seven (7) days'
notice of the intended sale to the Company in such manner as the Bank shall
think proper with liberty to buy and resell the same and the Bank shall not be
liable for any loss caused to the Company thereby and the Company shall do all
things necessary to enable the Bank to complete any sale by the Bank of any
part of the Property. The Bank shall be liable only for loss caused by its
wilful default.
ARTICLE XII
Simultaneous Action
Section 12.01 Simultaneous Action
The remedies available to the Bank hereunder upon default which is
continuing by the Company if so enforced by the Bank shall be without prejudice
to any other remedy or remedies available to the Bank by virtue of law or any
other security arrangement or agreement between the Bank and the Company or any
third party or parties and the Bank shall be entitled to take all necessary
actions including but not limited to the simultaneous commencement of
action/actions to obtain judgment and/or to proceed with the simultaneous
enforcement of one or more security including the security hereunder.
ARTICLE XIII
Section 13.01 Power of Attorney
The Company shall simultaneously with the execution of this Agreement
execute a Power of Attorney in favour of the Bank, any and every Receiver
and/or Manager or Receivers and/or Managers as aforesaid and its or his/their
substitute or substitutes and any of its or his/their attorney or attorneys to
be the Company's Attorney jointly and every one of them severally and in the
Company's name and on the Company's behalf and as its act and deed to execute,
sign, seal and deliver and otherwise perfect any deed assurance agreement
instrument or act which may be required or may be deemed proper for any of the
purposes set out hereunder and the Debenture and with power for such attorney
or attorneys to appoint or remove any substitute or substitutes. Such Power of
Attorney to be irrevocable until payment and discharge of the Loan, interest
thereon and any other moneys payable under the Bank's Security Documents.
<PAGE> 28
27
ARTICLE XIV
Insurance
Section 14.01 Insurance
The Company shall at all times throughout the duration of the Bank
Security Documents keep the Property in good order and condition and insured by
the Company at its expense in its name for such value which shall not be less
than the net book value of the Property, (at all material times), against loss
or damage by fire, lightning, tempest, flood, malicious acts and against such
other risks as the Bank may from time to time think expedient and which risks
are normal and customary in respect of the Property with an insurance company
or companies acceptable to the Bank and shall arrange with such insurance
company to have the interests of the Bank as mortgagees/chargees of the
Property to be duly endorsed on such policy or policies of insurance. If
default is made by the Company in effecting maintaining or renewing any such
insurance as aforesaid it shall be lawful for but not obligatory upon the Bank
at the cost and expense of the Company to effect maintain or renew any such
insurance as the Bank may think fit and any sum if expended by the Bank
together with interest thereon at the Prescribed Rate from the date of such
payment by the Bank shall be recovered from the Company and shall be repaid on
demand being made by the Bank.
Section 14.02 Restriction Against Additional Insurance
Apart from the insurance required to be effected by the Company pursuant
to Section 14.01 hereof the Company shall not except with the consent in
writing of the Bank effect or maintain any insurance in respect of the
Property.
Section 14.03 Premium receipts
The Company shall provide the Bank with documentary evidence satisfactory
to the Bank pertaining to all insurance policies required to be effected by the
Company pursuant to Section 14.01 hereof and the receipts of payment of premium
in respect of the same paid by the Company and will when required deliver and
produce to the Bank or cause to be produced or delivered to the Bank or to such
persons as it may direct the policy of such insurance effected by the Company.
Section 14.04 Application of insurance monies
Any monies received on any insurance of the Property secured under the
Debenture shall be applied in or towards making good the loss or damage in
respect of which the money is received or receivable unless there is a total or
constructive total damage to the Property in which event the monies received or
receivable shall at the Bank's option be utilised by the Bank in
<PAGE> 29
28
or towards the discharge of the monies secured hereunder or towards the repair
of the Property. The Company shall hold any monies received on such insurance
in trust for the Bank and the Bank shall upon payment by the Company to the
Bank of such monies held on trust give a good discharge for the same.
Section l4.05 Workmen's Compensation Insurance
The Company shall take out and maintain for such amount and with such
insurance company as shall be approved by the Bank (which approval shall not be
unreasonably withheld) in respect of Workmen's Compensation Insurance for all
employees of the Company or alternatively comply with any law for the time
being related to the establishment of social security scheme or benefits for
employees.
ARTICLE XV
Section 15.01 Expenses and Stamp Duty
Irrespective of whether the Company has requested for the Advance, the
Company shall pay the following:-
(a) Initial Expenses
On demand, all costs and expenses (including legal fees on a solicitor and
client basis) incurred by the Bank in connection with the preparation,
negotiation or entry into of the Bank Security Documents and/or any
subsequent amendment of or waiver in respect of the same;
(b) Enforcement Expenses
On demand, all costs and expenses (including legal fees on a solicitor and
client basis) incurred by the Bank in protecting or enforcing any rights
under the Bank Security Documents and/or any amendment of or waiver
thereof; and
(c) Stamp Duty
Promptly, and in any case before any penalty becomes payable, any stamp,
documentary, registration or similar tax payable in connection with the
entry into, performance, enforcement or admissibility in evidence of the
Bank Security Documents and/or any such amendment or waiver, and shall
indemnify the Bank against any liability with respect to or resulting from
any delay in paying or omitting to pay any such tax payable.
<PAGE> 30
29
ARTICLE XVI
Section 16.01 Payments
(a) Currency and Place of Payments
All payments to be made hereunder, whether in respect of principal,
interest, fees or any other item, by the Company shall be made in full,
without any deduction or withholding (whether in respect of set-off,
counter-claim, duties, taxes, charges or otherwise whatsoever) unless the
deduction or withholding is made mandatory by law in particular the
Australian withholding tax of ten per cent (10%) of interest paid after
delivery of Rig No. 489 to Australia, in immediately available funds in
United States Dollars not later than 12.00 noon on the date on which the
relevant payment is due hereunder and such payments for the account of the
Bank shall be made to such account or accounts as the Bank shall designate
in writing to the Company from time to time.
(b) Non-Business Days
Whenever any payment hereunder shall be due on a day which is not a
Business Day, such payment shall be made on, and interest shall be payable
to, the next succeeding Business Day, unless the succeeding Business Day
shall fall in the succeeding calendar month, in which event such payment
shall be made on the preceding Business Day, and any relevant interest
period shall be adjusted accordingly.
Section 16.02 Change in Law and Other Circumstances
(a) Where the Bank determines that any new law or regulation or official
directive of a competent authority or any change in any existing law or
regulation or official directive shall, or if any authority responsible
for administering any such law or regulation or official directive
maintains that such law or regulation or official directive shall:-
(i) subject the Bank to any tax, levy, impost, duty, charge or fee (other
than income tax or any other tax computed on or by reference to the
profits or overall net income of the Bank) or deduction or
withholding on or from any payment due or owing from the Company
under the Bank Security Documents; or
(ii) change the basis of taxation of the Bank on any payment due or owing
from the Company under the Bank Security Documents (except with
respect to income tax or any other tax computed on or by reference to
the profits or overall net income of
<PAGE> 31
30
the Bank); or
(iii) impose, modify or deem applicable any reserve, deposit or similar
requirement against or against any class of or change in or in the
amount of, any assets or liabilities of the Bank; or
(iv) impose on the Bank any other condition regarding the Bank Security
Documents, the Loan or any part thereof; or
if the Bank complies with any direction or request (whether or not having
the force of law) from any appropriate fiscal or monetary authority, and
in consequence of any such event mentioned above:-
(I) the costs to the Bank of or consequent on making the Loan available
or funding or maintaining the Loan is increased; or
(II) the amount of principal or interest or other sums receivable by the
Bank from the Company is decreased; or
(III) the Bank makes any payment or foregoes any interest or other return
on or calculated by reference to the gross amount of any sum received
by it from the Company hereunder;
then and in any such case (provided that in each such case the Bank
considers such increase, decrease, payment or foregoing of interest or
other return to be material, having regard to the requirement of the Bank
to be compensated for any erosion of its margin or profit attributable to
the Loan or any part thereof or attributable to its inability to employ
funds which would but for the happening of such event have been receivable
in respect of the Loan or any part thereof at the time when the same would
have been so receivable or attributable to the necessity of liquidating or
employing deposits to effect or maintain the Loan) the Bank shall notify
the Company of the happening of such event and the Company shall forthwith
on demand made by the Bank pay to the Bank such amounts as, with effect
from the date on which the Company is notified, would compensate the Bank
for such increase in cost or for such decrease or for such payment or
foregone interest or other return. Without prejudice to the foregoing, the
Company shall be at liberty on any Business Day thereafter on giving not
less than thirty (30) Business Days' notice to the Bank to prepay to the
Bank on the date of expiration of such notice.
(b) A claim or demand made under the preceding sub-clause may be made before
or after the end of a period to
<PAGE> 32
31
which such claim or demand relates and before or after any prepayment of
part of the Loan. An increased cost, reduced amount, payment or foregoing
of interest or other return shall be an increased cost, reduced amount,
payment or foregoing of interest or other return, respectively, for the
purpose of the preceding sub-clause notwithstanding that the payment or
quantification thereof does not or cannot be made until after the expiry
of the relevant period to which it may relate.
(c) The certificate of the Bank as to the amount of such increased cost,
reduced amount, payment or foregoing of interest or other return, or any
other matters referred to in this Section shall set out the basis and
calculation thereof and shall be binding on the Company, save for manifest
error.
Section 16.03 Set Off
The Company hereby agrees and irrevocably authorises the Bank that the
Bank may at any time without notice after an event of default which is
continuing or in making demand notwithstanding any settlement of account or
other matter whatsoever combine or consolidate all or any then existing
accounts including accounts in the name of the Bank (whether current deposit
loan or of any other nature whatsoever whether subject to notice or not and
whether in Malaysian Ringgit or in any other currency) of the Company alone or
jointly with others wheresoever situate and set off or transfer any sum
standing to the credit of any one or more such accounts in or towards
satisfaction of any monies owing or obligations or liabilities of the Company
to the Bank whether such liabilities be present future actual contingent
primary collateral several or joint. When such combination set-off or transfer
requires the conversion of one currency into another such conversion shall be
calculated at the then prevailing spot rate of exchange of the Bank (as
conclusively determined by the Bank save for manifest error) for purchasing the
currency in which the monies obligations or liabilities were due owing or
incurred with the existing currency so converted.
Section 16.04 All Payments Received To Be Payment In Gross
All monies received by the Bank from the Company capable of being applied
in reduction of the monies hereby secured under the Bank Security Documents
shall be regarded for all purposes as payment in gross and if a receiving order
shall be made against the Company or an order be made or an effective
resolution be passed for the winding-up of the Company the Bank may prove for
the whole of the monies then owing and no monies received under such proof
shall be considered as received in respect of the Bank Security Documents but
the full amount owing shall be payable until the Bank has received from all
sources one
<PAGE> 33
32
hundred per cent (100%) of the ultimate balance owing and remaining due and
unpaid to the Bank by the Company. If the amount ultimately received by the
Bank exceeds the balance owing to the Bank the excess only over such balance
shall be repaid to the Company on whose account the same shall have received by
the Bank.
Section 16.05 Modification and indulgence
The Bank may at any time and without in any way affecting the security
created under the Bank Security Documents:-
(a) deal with exchange release or modify or abstain from perfecting or
enforcing any securities or other guarantees or rights which the Bank may
now or hereafter have from or against the Company or any other person;
(b) accept payment of the monies due or becoming due under the Bank Security
Documents by such increased or decreased instalments as shall from time to
time be agreed to by the Bank or to agree to suspend payments in reduction
of the principal or to give time for the payment of monies due or becoming
due hereunder or to grant such indulgences from time to time in the
absolute discretion of the Bank.
Section 16.06 Suspense Account And Appropriation of Payments
(a) Any money received hereunder may be placed and kept to the credit of a
suspense account for so long as the Bank thinks fit without any obligation
in the meantime to apply the same or any part thereof in or towards
discharge of any money or liabilities due or incurred by the Company to
it. Notwithstanding any such payment in the event of any proceedings in or
analogous to bankruptcy liquidation composition or arrangement the Bank
may prove for and agree to accept any dividend or composition in respect
of the whole or any part of such money and liabilities in the same manner
as if the Bank Security Documents had not been created.
(b) In addition to the foregoing provision and notwithstanding the other
express provisions of the Bank Security Documents, the Company hereby
irrevocably disable themselves when making payments to the Bank from
appropriating such payments toward the Loan or any of the general banking
facilities given by the Bank and hereby further waives the effect of the
provision of Section 60 of the Contracts Act 1950 or any amendment or
reenactments thereof and unreservedly gives the right of appropriation of
all payments made
<PAGE> 34
33
by them at all times to the Bank under the Bank Security Documents.
Section 16.07 Demand
Any demand hereunder shall be made by a notice in writing and be signed by
the Attorney, Manager, Assistant Manager, or other Officer of the Bank on
behalf of the Bank or by any solicitor or firm of solicitors acting for the
Bank and such notice shall be deemed to have been sufficiently served on the
Company or liquidator as the case may be if it is left at the address of the
Company specified herein or sent by registered letter to such address and if
sent by registered letter it shall be deemed to be given three (3) days after
posting thereof.
Section 16.08 Certificate conclusive
A certificate signed by any officer of the Bank as to the monies or
liability for the time being due or owing or incurred to the Bank from the
Company shall be accepted by the Company as conclusive evidence (save for
manifest error) that the balance or amount thereby appearing is due or owing to
the Bank from the Company.
Section 16.09 Review of Loan
The Loan is subject to such periodic reviews as the Bank may in its
absolute discretion decide and in any event in July, 1996.
Section 16.10 Bank's Right To Disclose
The Company hereby irrevocably authorises the Bank to disclose any
information relating to the accounts of the Loan, the Company's default in
payment to any parties liable to settle such of the Company's indebtedness, and
to the providers of other security now held or to be held by the Bank and to
any credit bureau or government agencies established or to be established by
Bank Negara Malaysia or the Association of Banks of Malaysia.
Section 16.11 Waiver
No failure to exercise nor any delay in exercising on the part of the Bank
of any right or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right or remedy prevent any further or
other exercise thereof or the exercise of any other right or remedy. The rights
and remedies herein provided are cumulative and not exclusive of any other
rights or remedies provided by law.
<PAGE> 35
34
Section 16.12 Amendment
No amendment modification termination or waiver of any provisions of the
Bank Security Documents nor consent to any department by the Company therefrom
shall be effective unless the same shall be in writing and signed or executed
by the Bank and then any such waiver or consent shall be effected only in the
specific instance and for the specific purpose for which it was given. No
notice to or demand on the Company in any case shall entitle the Company to any
other or further notice or demand in similar or other circumstances.
Section 16.13 Severability
In case one or more of the provisions contained in this Agreement should
prove to be invalid, illegal or unenforceable in any respect, the validity and
enforceability of the remaining provisions contained herein shall not in any
way be affected or impaired thereby.
Section 16.14 Reconstruction of the Bank and or the Company
The security liabilities and or obligations created by the Bank Security
Documents shall continue to be valid and binding for all purposes whatsoever
notwithstanding any change by amalgamation reconstruction or otherwise which
may be made in the constitution of the Bank and similarly the security
liabilities and or obligations created by the Bank Security Documents shall
continue to be valid and binding for all purposes whatsoever notwithstanding
any change by amalgamation reconstruction or otherwise howsoever in the
constitution of the Company and it is expressly declared that no change of any
sort whatsoever in relation to or affecting the Company shall in any way affect
the security liabilities and or obligations created under the Bank Security
Documents in relation to any transaction whatsoever whether past present or
future.
Section 16.15 Applicable Law
This Agreement shall be governed by and construed in accordance with the
laws of Malaysia but in enforcing this instrument, the Bank shall be at liberty
to initiate and take actions or proceedings against the Company in Malaysia
and/or elsewhere as the Bank may deem fit and the parties hereto agree that
where any actions or proceedings are initiated and taken in Malaysia they shall
submit to the non-exclusive jurisdiction of the Courts of Malaysia in all
matters connected with the obligations and liabilities of the parties hereto
under or arising out of this instrument and the service of any writ of summons
or any legal process in respect of any such action or proceeding may be
effected on the Company and/or the Bank by forwarding a copy of the writ of
summons statement of claim or other legal process by prepaid registered post to
their last
<PAGE> 36
35
known respective addresses.
Section 16.16 Successors bound
This Agreement shall be binding upon and endure to the benefit of the Bank
and its successors in title and assigns and the Company and its
successors-in-title.
ARTICLE XVII
Discharge of the Property
Section 17.01 Release
The Company shall be entitled, at any time upon full repayment of all sums
due to the Bank under the Bank Security Documents, to obtain at its entire cost
and expense discharge and release of the assets secured under the Bank Security
Documents and in such event the Bank shall at the request of the Company
execute all such discharge or release documents in respect of the Bank Security
Documents.
ARTICLE XVIII
Notices & Stamping
Section 18.01 Notices
(a) All notices and other communications to the parties hereto shall be made
in writing but unless otherwise specified may be made:-
(i) by personal delivery;
(ii) by post, postage prepaid;
(iii) by cable; and
(iv) by telex,
addressed to the respective parties hereto at the addresses specified
below or at such other address of which such party shall have notified the
party giving such notice. Provided that all notices shall be made by the
Company only by personal delivery or by post. Any period to be calculated
hereunder from the date of receipt of any notice after which an act is
authorised or required shall include the date of receipt of such notice
but exclude the date of the authorised or required act (in each case in
the locale where the recipient of such notice is domiciled). In addition,
for purposes of computing any grace period hereunder, references to any
given number of Business Day or days
<PAGE> 37
36
shall be computed by reference to the specified period of time in
Malaysia. For the purpose of this Section the term "Business Day" shall
mean any day (other than a Saturday) on which banks are open for business.
For the Bank:
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED
Address for Notices: 4 Jalan Merdeka,
87007 Labuan,
Malaysia.
Telex Number:
Answerback:
For the Company:
ANTAH DRILLING SDN. BHD.,
Address for Notices: Admin. Building, Block C
Third Floor, Door No. 21
Kemaman Supply Base
Terengganu
West Malaysia
Telephone Number: 60/9/863-1600
Facsimile Number: 60/9/863-1624
Copy to: Antah Drilling Sdn. Bhd.
332 Regian Street
Victoria, Australia
Telephone Number: 61/51/432011
Facsimile Number: 61/51/442417
(b) Any notice or other communication from the Company to the Bank shall be
irrevocable and shall not be effective until received by the Bank. Any
notice or other communication from the Bank to any person under this
Agreement shall be deemed to have been received:-
(i) if by personal delivery, when delivered;
(ii) if by post, forty-eight (48) hours after posting, postage prepaid;
<PAGE> 38
37
(iii) if by cable, twenty-four (24) hours after despatch; and
(iv) if by telex, when transmitted,
addressed to such person or persons in the manner provided for in
Section 18.01(a) hereof.
Section 18.02 Principal and Collateral Instruments
It is hereby agreed and declared by and between the parties hereto that
for the purpose of Section 4(3) and Item 27 of the First Schedule to the Stamp
Act 1949, this Agreement, the Debenture and the Assignment are instruments
employed in one transaction to secure the payment of a principal amount of up
to United States Dollars Twenty-three million five hundred thousand
(USD23,500,000/-) and that for the purposes of Section 4(3) and Item 27 of the
First Schedule to the Stamp Act, 1949, this Agreement shall be deemed to be the
principal instrument, the Debenture and the Assignment shall be deemed to be
the subsidiary instrument.
AS WITNESS the Common Seal of the Company was hereunto affixed and the
Attorney for the Bank has hereunto set his hand.
The Common Seal of ANTAH )
DRILLING SDN. BHD. was )
hereunto affixed in the )
presence of:- )
/s/ YAM TUNKU IMRAN IBNI TUANKU JA'AFAR /s/MISNI ARYANI MUHAMAD
--------------------------------------- -----------------------
Director Director/Secretary
SIGNED by Yeong Toong Fatt )
the Attorney for and on )
behalf THE HONGKONG AND )
SHANGHAI BANKING CORPORATION ) /s/Yeong Toong Fatt
LIMITED in the presence of:-
AILEEN CHEW PENG LI
Advocate & Solicitor,
No. 2. Bentleng,
Kuala Lumpur.
This is the last of the execution page of the Loan Agreement made between
Antah Drilling Sdn. Bhd. as the Company of the one part and The Hongkong And
Shanghai Banking Corporation Limited as the Bank of the other part.
<PAGE> 39
SCHEDULE "A"
The Property
Description of Rig
[Antah Drilling Sdn. Bhd. Rig No. 448
(replaced by Rig No. 488)]
Description of Rig
(Antah Drilling Sdn. Bhd. Rig No. 489
(formerly known as Rig No. 450)
which includes the replacement Rig
howsoever numbered after up-grading and modification)
One (1) Pool Self-Contained Platform Rig Featuring National 1320 UE Drawworks
Powered by 2 ea. GE-752 Electric Motors, with Elmago Brake and Disc Brakes;
Dreco 1000 K Net Hookload Mast 152 ft. High;
2 ea Gardner Denver PZ-11 Mud Pumps ea. Powered by 2 ea. GE-752 Electric
Motors;
Oilwell B - 37 1/2" Rotary Table Independently Driven by GE - 752 Electric
Motor;
Ross Hill SCR Controlled Power System Consisting of 5 ea. Caterpillar D-399
Diesel Engines w/Kato 6P6-2700 Generators;
Bulk Storage for 3000 C.F. Cement, 2000 C.F. Barite, with Piping System to
Load, Store or Transfer Bulk Materials;
17,000 ft. 5 1/2" Drill String w/5" Hevi-Wate Pipe, 8" and 6 1/2" Drill Collars
Including all Sub and X-overs;
Varco TDS-4S Top Drive Retractable System with PH-85 Pipe Handler;
EMSCO 500 Ton Travelling Block Assembly;
Varco Star-2 Racking System;
Varco AR3200 Iron Roughneck;
Varco HC-26 Hydraulic Catheads;
M.D. Totco Drillers Cabin for Driller, Assistant Driller and Pipe Mite Operator
to Include DAQ Processing unit. Spectrum 1000, Visulogger, VIP plus Data
Logging Module, Total Block Control System;
<PAGE> 40
2
Varco PDM (Pipe Mite) Assembly;
Varco COnveyor;
Mud Process Equipment Include Three (3) Thule Shale Shakers, Desanders,
Desilter, Mud Gas Separator and Flow Trend Polymer Jet Shear Unit;
1500 bbl. Mud System;
Closed Circuit Colored T.V. Monitor System;
Vetco Gray KFDJ Fixed Diverter System;
Shaffer 13 5/8" 5000 psi B.O.P. System to Include One (1) Annular and Three (3)
Single RAM Preventers and 15 Sets of RAM;
Shaffer B.O.P. Control System.
<PAGE> 41
SCHEDULE "B"
FORM OF DRAWDOWN NOTICE
To:
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED
4, Jalan Merdeka,
87007 Labuan,
Malaysia.
Dear Sirs,
Loan Agreement dated 199
Drawdown Notice
-------------------------------------
We refer to the Loan Agreement dated [ ] 19 ("the Agreement") between (i)
ANTAH DRILLING SDN. BHD. and (ii) THE HONGKONG AND SHANGHAI BANKING CORPORATION
LIMITED.
We hereby give you notice that we wish to request an Advance to be made to
us under the Agreement on the day of 19 of an amount of United States
Dollars
(USD ) pursuant to Section 7.01 of the Agreement.
We request you to remit the Advance to us at [specify name and address of
bank and the account number].
We further represent and warrant to you that:-
(a) the representations and warranties set out in Section 3.01 of the
Agreement are true and accurate as at the date hereof;
(b) no Event of Default as defined in the Agreement has occurred which is
continuing and no event has occurred which with the giving of notice
and/or lapse of time and/or a determination made under Section 7.01
of the Agreement would constitute an Event of Default; and
<PAGE> 42
2
c) the making of the Advance hereby requested will not give rise to any
such event as is referred to in paragraph (b) above nor will it cause
any of the representations and warranties stated in Section 3.01 of
the Agreement to become untrue or incorrect as if such
representations and warranties were made on the date of such Advance
and there is not, so far as we are aware, any reason why we will not
be permitted to make any payment required under the Agreement.
Yours faithfully,
----------------------------------
Duly authorised Signatory/Attorney
for and on behalf of
ANTAH DRILLING SDN. BHD.
<PAGE> 43
APPENDIX 1
[INTAIRDRIL LOGO] INTAIRDRIL LTD
C/O POOL COMPANY
PO BOX 4271 (77210)
10375 RICHMOND AVENUE
HOUSTON TEXAS 77042
U.S.A.
TELEPHONE (713) 954-3000
TELEX 775-957
October 10, 1995
The Hongkong and Shanghai Banking
Corporation Limited
Offshore Banking Unit Labuan
4 Jalan Merdeka
87007 Labuan
MALAYSIA
RE: A Debenture to be created over two (2) oil rigs owned by Antah
Drilling Sdn. Bhd., namely Rig 488 (which replaces Rig 448) and Rig
489 (which replaces Rig 450) together with all equipment, spare and
replacement parts thereto, to be executed in your favor ranking after
the Charge in favor of Intairdril Ltd. dated the 13th day of December
1988
Dear Sirs:
We, Intairdril Ltd., c/o Pool Company, 10375 Richmond Avenue, Houston, Texas,
HEREBY CONFIRM our consent as First Chargee to the creation of a third Charge
by way of a Debenture in your favor (herein "the Debenture") over the
above-mentioned properties ranking after our Charge over same dated the 13th
day of December 1988.
Our consent hereto has been given on the basis that any foreclosure action to
be taken by you under the Debenture will be subject to your having given notice
to us by facsimile or certified courier to the following address:
Intairdril Ltd.
c/o Pool Company
10375 Richmond Avenue
Houston, Texas 77042
Attention: Group Vice President - International Operations
Copy To: Treasurer
Facsimile: 713/954-3244
Very truly yours,
INTAIRDRIL LTD.
By: /s/ J.T. JONGEBLOED
--------------------------------
Title: Chairman and President
-----------------------------
<PAGE> 44
The Hongkong and Shanghai Banking
Corporation Limited
October 10, 1995
Page 2
Accepted and Agreed to this
16th day of October,1995.
THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED
By: /s/ YEONG TOONG FATT
------------------------------------
Title: General Manager Corporate Banking
------------------------------------
<PAGE> 45
DATED THIS 14TH DAY OF DECEMBER, 1995
BETWEEN
ANTAH DRILLING SDN. BHD.
AND
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED
(OFFSHORE BANKING UNIT, LABUAN)
***********************************
ASSIGNMENT
***********************************
MESSRS. SHEARN DELAMORE & CO.,
SHEARN DELAMORE & CO.,
ADVOCATES & SOLICITORS,
NO. 2 BENTENG,
50050 KUALA LUMPUR.
AND AT
16TH FLOOR,
WISMA HAMZAH-KWONG HING,
NO. 1 LEBOH AMPANG,
50100 KUALA LUMPUR.
<PAGE> 46
AN ASSIGNMENT made the 14th day of December, 1995 Between ANTAH DRILLING
SDN. BHD. is a company incorporated in Malaysia with its registered office at
9th Floor, Bangunan BNH, Off Jalan Semantan, Damansara Heights, 50490 Kuala
Lumpur (hereinafter called "the Assignor") of the one part And THE HONGKONG
AND SHANGHAI BANKING CORPORATION LIMITED, a corporation constituted by the
Hongkong and Shanghai Bank Ordinance 1866 and continued by The Hongkong and
Shanghai Banking Corporation Limited Ordinance, Chapter 70 of the Laws of Hong
Kong and having its Off-Shore Banking Unit in Labuan at 4, Jalan Merdeka, 87007
Labuan, Malaysia (hereinafter called "the Assignee").
WHEREAS:-
A. Under a Contract No. 00285866 dated the 30th day of November, 1995
(hereinafter called "the said Contract") made between the Assignor of the one
part and ESSO AUSTRALIA LTD., (A.C.N. 000 018 566) a company having its
registered office at 360 Elizabeth Street, Melbourne, Victoria (hereinafter
called "EAL") of the other part, the Assignor has agreed to carry out and
complete the works more particularly set out in the said Contract for the
consideration payable by EAL to the Assignor in accordance with the said
Contract.
B. The Assignee has at the request of the Assignor granted to the Assignor a
term loan of United States Dollars Twenty-three million five hundred thousand
(USD23,500,000/-) upon the security and on the terms and conditions as set out
in the Loan Agreement dated the 16th day of October, 1995 made between the
Assignor of the one part and the Assignee of the other part (hereinafter called
"the Loan Agreement").
C. It is a term of the Loan Agreement that the Assignor shall assign, by way
of collateral security for the Term Loan all the monies due and payable by EAL
to the Assignor under the said Contract and the right to such monies.
NOW THIS ASSIGNMENT WITNESSETH as follows:-
1. In consideration of the Assignee granting to the Assignor the Term Loan
the Assignor Hereby Assigns to the Assignee, all the Assignor's right title and
interest in the contract monies payable to the Assignor under the said Contract
together with the power to the Assignee to sue for, recover the same, TO HOLD
the same to the Assignee absolutely subject to the proviso for redemption
hereinafter contained.
2. Upon repayment to the Assignee of the Term Loan in full together with
interest thereon and all whatsoever monies payable by the Assignor to the
Assignee under the provisions of the Loan Agreement and hereunder, the Assignor
shall be entitled at its
<PAGE> 47
2
own cost and expense (including the cost of the solicitors acting for the
Assignee) to obtain a reassignment by way of discharge of this Assignment, such
reassignment and discharge to be in such form as the Assignee and the Assignor
agree.
3. Upon receipt of any payment from EAL, the Assignee shall credit such
payment to the account of the Assignor kept with the Assignee in accordance
with the terms of the Loan Agreement.
4. The Assignor hereby irrevocably appoints the Assignee and the manager for
the time being of the branch of the Assignee or other person(s) deriving title
under it and its substitutes jointly and severally to be the attorney or
attorneys for the Assignor and in the name of the Assignor or otherwise and on
behalf of the Assignor to do any of the acts and things following:-
(a) to demand sue for and receive all payments as and when they become
due to the Assignor from EAL under the said Contract and to give good
receipts and valid discharges for the same;
(b) to execute in its name or otherwise all such documents and
instruments as may be deemed necessary or expedient by the
attorney(s) for the purpose of giving full effect of the assignment
hereunder;
(c) to substitute or appoint one or more attorneys for all or any of the
purposes aforesaid;
And whatsoever the said attorney or attorneys or any of them shall lawfully do
or cause to be done by virtue of this Power of Attorney and the Assignor hereby
agrees to ratify and confirm the same. Provided Always that the Assignee hereby
agrees not to take any action against EAL in accordance with Clause 4(a) hereof
in the event that No Event of Default (as defined in the Loan Agreement) has
occurred and is continuing.
5. It is hereby agreed between the Assignor and the Assignee that any such
receipt issued by the Assignee to EAL in respect of payments received from EAL
shall be a sufficient discharge to EAL as to the amount for which such receipt
is issued.
6. The Assignor hereby undertakes to the Assignee that:-
(i) it will forthwith on the execution of this Assignment give to EAL a
notice of this Assignment substantially in the form of Schedule I (or
in such other form as the Assignee may
<PAGE> 48
3
require) and shall further irrevocably direct EAL further to pay all
payments in United States Dollars as and when they become due under
the said Contract to the Assignee;
(ii) it will not do or omit to do or suffer or permit anything to be done
which might cause the said Contract to be or become, in any respect,
invalid, void or voidable;
(iii) it will send a copy of all notices material to the Assignee pursuant
to the provisions of this Assignment received or given by it under
the said Contract forthwith to the Assignee;
(iv) it will not, except with the prior consent in writing of the
Assignee:-
(a) agree to any variation of the said Contract that reduces the
amount of the contract monies assigned hereunder and/or which
affects adversely the Assignee's interest and/or rights in any
way whatsoever, or
(b) exercise any rights or powers of termination under the said
Contract
unless and until requested to do so by the Assignee, whereupon the
Assignor agrees that it will do so;
(v) it will do or permit to be done each and every act or thing which the
Assignee may from time to time reasonably require to be done for the
purpose of enforcing the rights of Assignee under the said Contract
and this Assignment and will allow its name to be used as and when
required by the Assignee for that purpose.
7. The Assignor hereby irrevocably authorises the Assignee at such time or
times to such extent and in such manner as the Assignee shall in its absolute
discretion deem fit and upon notice to the Assignor to deduct from payments
received from EAL under the said Contract and pay into the account of the
Assignor with the Assignee such sums as may from time to time be due and owing
by the Assignor to the Assignee under the Loan Agreement. The Assignee shall be
entitled at its sole and absolute discretion, in the absence of manifest error,
to appropriate such sums so deducted towards repayment of the sums outstanding
under the Loan Agreement or any part thereof in such order of priority as
provided for in the Loan Agreement.
8. It is hereby expressly agreed and declared by the parties hereto that:-
<PAGE> 49
4
(i) the Assignee's rights hereunder are restricted to the right to
receive payments from EAL under the said Contract and the
Assignee shall in no way be involved in any dispute arising out
of the said Contract which it is hereby agreed shall be entirely
between the Assignor and EAL.
(ii) notwithstanding the assignment hereinbefore contained the
Assignor shall duly observe and perform all the covenants and
stipulations as contained in the said Contract which the
Assignor shall have entered into or shall from time to time
hereafter enter into with EAL and on the part of the Assignor to
be observed and performed and the Assignor shall at all times
hereafter save harmless and keep the Assignee indemnified
against any demands actions proceedings claims damages penalties
costs and expenses which may be brought or made against or
incurred by the Assignee by reason of or on account of the
failure on the part of the Assignee to observe and perform any
of the covenants and stipulations on its part to be observed and
performed as contained in the said Contract.
9. All notices required to be served under the Assignment shall be in writing
and shall be sufficiently served on the Assignor if left at or sent by ordinary
mail to the address specified in the Loan Agreement or such address as the
Assignor may notify the Assignee in writing and in the latter, service shall be
deemed to have been effected 48 hours after posting of the notice,
notwithstanding that it be delivered or returned undelivered and in proving
such service it shall be sufficient to prove that the notice was properly
addressed and posted.
10. The breach of any terms or covenants of this Assignment shall constitute
an event of default under the terms of the Loan Agreement and the Assignee
shall be entitled to proceed in accordance with the terms of the Loan Agreement
under Events of Default.
11. The Assignee shall not be under any obligation to the Assignor or any other
person or party to demand or take or continue any action or steps to recover
any of the monies hereby assigned and shall not be under any obligation to the
Assignor by reason of the Assignee having abstained from taking or continuing
any such action or steps.
12. Subject to Section 10.01 of the Loan Agreement, the Assignee shall be
entitled on behalf of the Assignor to enter into any settlement or arrangement
or accept any composition or grant any waiver or time in relation to the monies
hereby assigned without the concurrence of the Assignor but notice of
<PAGE> 50
5
the same shall be given to the Assignor. Such settlement or arrangement or
composition or waiver or granting of time shall be binding on the Assignor.
13. (A) This security shall not be considered or satisfied by any conditional
payment or satisfaction of the whole or any of sum or sums of money owing or by
any payment made to be held in suspense but shall be a continuing security and
shall extend to cover all or any sum or sums of money which shall for the time
being or from time to time be due and owing by the Assignor to the Assignee
under the Loan Agreement and any other security documents executed hereafter or
from time to time executed to secure the Term Loan.
(B) The security created by this Assignment shall not be discharged or
affected by:-
(i) any time, indulgence, waiver or consent at any time given to the
Assignor or any other person;
(ii) any amendment to the Loan Agreement or any other security,
guarantee or indemnity;
(iii) the making or absence of any demand on the Assignor or any
other person for payment;
(iv) the enforcement or absence of enforcement of any of the charges
under the Loan Agreement or any other security, guarantee or
indemnity;
(v) the release of any security, guarantee or indemnity;
(vi) the winding-up, amalgamation, reconstruction or reorganisation
of the Assignor or any other person;
(vii) the illegality, invalidity or unenforceability of or any defect
in any provision in the any of the Loan Agreement or any other
security, guarantee or indemnity or any of the obligations of
any of the parties thereunder; or
(vii) any other matter or thing whatsoever.
14. The Assignor shall be liable to pay all fees and expenses in connection
with or incidental to this Assignment including the Assignee's solicitors' fees
[on a solicitor and client basis] in connection with the preparation stamping
registration execution and perfection of this Assignment and the documents
related thereto. If the Term Loan or any part thereof or any of the monies
hereby assigned shall be required to be recovered through any process of law or
if the Term Loan or any part thereof or any of the monies hereby assigned shall
be placed
<PAGE> 51
6
in the hands of the solicitors for collection, the Assignor shall pay (in
addition to the monies then due and payable under the Charges) the Assignee's
solicitors' fees (on a solicitor and client basis and any other fees and
expenses incurred in respect of such collection).
15. The Assignor hereby declares that there is no mortgage charge or assignment
on the contract monies hereby assigned having priority to or ranking pari passu
with this instrument, and:-
(i) the Assignor shall not during the subsistence of this Assignment
without the consent in writing of the Assignee execute any form of
charge mortgage assignment (whether fixed or floating), pledge or
lien in respect of the contract monies hereby assigned;
(ii) this Assignment shall be without prejudice to any security already
given by the Assignee to the Assignor or any security which may
hereafter be given to the Assignee for securing repayment of the
monies outstanding under the Loan Agreement, interest thereon or any
part thereof or any other money hereby secured and whether such
security is taken as additional or collateral security or otherwise
howsoever.
16. Time shall be of the essence of this instrument and no failure or delay on
the part of the Assignee in exercising nor any omission to exercise any right
power privilege or remedy accruing to the Assignee under this instrument upon
any default on the part of the Assignor shall impair any such right power
privilege or remedy or be construed as a waiver thereof or any acquiescence in
such default nor shall any waiver or action by the Assignee in respect of any
default or any acquiescence in any such default affect or impair any right
power privilege or remedy of the Assignee in respect of any other or subsequent
default.
17. It is hereby agreed that any admission or acknowledgment in writing by the
Assignor or any authorised person(s) on behalf of the Assignor or a statement
of account showing the indebtedness of the Assignor in relation to the Loan
duly certified by an authorised officer of the Assignee shall (save and except
for any manifest error) be binding and conclusive against the Assignor and its
successors-in-title.
18. The security liabilities and/or obligations created by this instrument
shall continue to be valid and binding for all purposes whatsoever
notwithstanding any change by amalgamation reconstruction or otherwise which
may be made in the constitution of the Assignee and similarly the security
liabilities and or
<PAGE> 52
7
obligations created by this instrument shall continue to be valid and binding
for all purposes whatsoever notwithstanding any change by amalgamation
reconstruction or otherwise howsoever in the constitution of the Assignor and
it is expressly declared that no change of any sort whatsoever in relation to
or affecting the Assignor shall in any way affect the security liabilities and
or obligations created hereunder in relation to any transaction whether past
present or future.
19. This Assignment shall be governed by and construed in accordance with the
laws of Malaysia but in enforcing this instrument, the Assignee shall be at
liberty to initiate and take action or proceedings or otherwise against the
Assignor in Malaysia and/or elsewhere as the Assignee may deem fit and the
parties hereto hereby agree that where any actions or proceedings are initiated
and taken in Malaysia they shall submit to the nonexclusive jurisdiction of the
Courts of Malaysia in all matters connected with the obligations and
liabilities of the parties hereto under or arising out of this instrument and
the service of any writ of summons or any legal process in respect of any such
action or proceeding may be effected on the Assignor and/or the Assignee by
forwarding a copy of the writ of summons statement of claim or other legal
process by prepaid registered post to their respective addresses as indicated
herein.
20. Any term condition stipulation provision covenant or undertaking of this
instrument which is illegal prohibited or unenforceable in any jurisdiction
shall as to such jurisdiction be ineffective to the extent of such illegality,
voidness, prohibition or unenforceability without invalidating the remaining
provisions hereof and any such illegality voidness prohibition or
unenforceability in any jurisdiction shall not invalidate or render illegal
void or unenforceable any such term condition stipulation provision covenant or
undertaking in any other jurisdiction.
21. It is hereby agreed and declared that this Assignment is collateral to the
Loan Agreement and the Debenture created by the Assignor pursuant thereto to
secure the repayment by the Assignor to the Assignee the principal of the Term
Loan and interest thereon and for the purpose of Section 4(3) and Item 27(b) of
the First Schedule to the Stamp Act, 1949, the Assignment shall be deemed to be
the collateral instrument.
22. This Assignment shall be binding upon and enure for the benefit of the
successors-in-title and permitted assigns of the Assignor and the
successors-in-title and assigns of the Assignee.
<PAGE> 53
8
23. All costs and incidental to this Assignment shall be borne and paid for by
the Assignor.
IN WITNESS WHEREOF the parties hereto have hereunto set their hands and
seal the day and year first above written.
The Common Seal of ANTAH )
DRILLING SDN. BHD. was )
hereunto affixed in the )
presence of:- )
/s/ YAM TUNKU IMRAN IBNI TUNAKU JA'AFAR /s/ MISNI ARYANI MUHAMAD
- --------------------------------------- ------------------------
Director Director/Secretary
SIGNED by Yeong Toong Fatt )
the Attorney for and on )
behalf THE HONGKONG AND ) /s/ YEONG TOONG FATT
SHANGHAI BANKING CORPORATION )
LIMITED) in the presence of:- )
/s/ AILEEN CHEW PENG LI
-----------------------
AILEEN CHEW PENG LI
Advocate & Solicitor,
No. 2. Benteng,
Kuala Lumpur.
<PAGE> 54
9
I, AILEEN CHEW PENG LI an Advocate and Solicitor of the High Court in
Malaya practising at Kuala Lumpur, Malaysia hereby certify that on this 14th
day of December 1995 the Common Seal of ANTAH DRILLING SDN. BHD. was duly
affixed to the within written instrument in my presence in accordance with the
regulations of the said Company.
Witness my hand.
/s/ Aileen Chew Peng LI
-----------------------
Advocate & Solicitor.
AILEEN CHEW PENG LI
Advocate & Soilcitor,
No. 2, Benteng,
Kuala Lumpur.
<PAGE> 55
10
FORM OF NOTICE OF ASSIGNMENT
(Letterhead of Assignor)
To:
Esso Australia Ltd.,
(A.C.N. 000 018 566)
360 Elizabeth Street
Melbourne
Victoria
AUSTRALIA
Sir/Madam
NOTICE OF ASSIGNMENT
Contract Agreement No.
dated the day of
made between Esso Australia Ltd. and
Antah Drilling Sdn. Bhd. (herein "the Contract")
We hereby give you notice that by an Assignment dated the day
of 1995 made by us in favour of THE HONGKONG AND
SHANGHAI BANKING CORPORATION LIMITED of 4, Jalan Merdeka, 87007 Labuan,
Malaysia (herein "the Bank") we have assigned absolutely to the Bank all our
rights, title and interest in all sums payable to us under the Contract.
You are hereby directed to pay all such sum of moneys pursuant to the
Contract as and when they become payable to the Bank to the account of the
Borrower with the Bank as more particularly set out below:-
<TABLE>
<CAPTION>
USD Payments Australian Dollars Payments
------------ ---------------------------
<S> <C>
</TABLE>
The Bank is authorised to accept all such moneys on our behalf and the
acknowledgement of receipt of the Bank for such moneys paid to the Bank shall
be a full and sufficient discharge to you for such payments.
We shall remain liable to perform our obligations under the Contract and
the Bank does not assume any obligation to perform the obligations imposed on
us under the Contract.
Please acknowledge to the Bank the receipt of this notice in the form of
the acknowledgement attached on the enclosed copies of this notice and deliver
one copy to us and the other copy to the Bank.
Yours faithfully,
<PAGE> 56
11
FORM OF ACKNOWLEDGEMENT
(Letterhead of Esso Australia Ltd.)
To:
The Hongkong And Shanghai Banking Corporation Limited
4, Jalan Merdeka
87007 Labuan
Malaysia
[Date]
Dear Sir,
Re: Notice of Assignment from Antah Drilling Sdn. Bhd.
Contract Agreement No.
dated the day of
made between Esso Australia Ltd. and
Antah Drilling Sdn. Bhd. (herein "the Contract")
We hereby acknowledge notice of assignment dated the day of 199
in your favour from Antah Drilling Sdn. Bhd. in respect of the Contract.
In compliance therewith we hereby undertake to remit all moneys due to
Antah Drilling Sdn. Bhd. as and when they become payable under the Contract for
the credit of Antah Drilling Sdn. Bhd. at the specified account in your Notice
of Assignment. We confirm that we shall comply with the directions given by you
to us in your capacity as assignee of the proceeds of the Contract provided
such instructions are in accordance with the provisions of the Contract.
Yours faithfully,
---------------------------
Authorised Signatory
ESSO AUSTRALA LTD.
<PAGE> 57
DATED THIS 16TH DAY OF OCTOBER, 1995
BETWEEN
ANTAH DRILLING SDN. BHD.
AND
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED
(OFFSHORE BANKING UNIT, LABUAN)
***********************************
DEBENTURE
***********************************
SHEARN DELAMORE & CO.,
ADVOCATES & SOLICITORS,
NO. 2 BENTENG,
50050 KUALA LUMPUR.
AND AT
16TH FLOOR,
WISMA HAMZAH-KWONG HING,
NO. 1 LEBOH AMPANG,
50100 KUALA LUMPUR.
<PAGE> 58
D E B E N T U R E
Issued pursuant to Clause 3 (v) of the Company's Memorandum of Association and
Article 59(c) of the Company's Articles of Association and a Resolution of the
Board of Directors passed on the 8th day of August, 1995.
THIS DEED OF DEBENTURE is made the 16th day of October, 1995.
WHEREAS: -
A. ANTAH DRILLING SDN. BHD. is a company incorporated in Malaysia with
its registered office at 9th Floor, Bangunan BNH, Off Jalan Semantan, Damansara
Heights, 50490 Kuala Lumpur (hereinafter called "the Company").
B. The Company is the beneficial owner of two (2) platform drilling/workover
Rigs namely Rig 488 and Rig 489 (formerly known as Rig No. 450) more
particularly described in Schedule A attached hereto together with all
ancillary equipment, spare and replacement parts thereto (hereinafter
collectively called "the Property").
C. The Property is presently charged to:-
(i) Intairdril Ltd. of c/o Pool Company, 10375 Richmond, Houston, Texas,
United States of America, (hereinafter called "Intairdril") under a
memorandum of charge dated the 13th day of December, 1988
(hereinafter called "the First Charge");
(ii) the Company has, inter alia, pursuant to a loan agreement dated the
28th day of April, 1995 and the debenture of the same date
(hereinafter called "the Second Charge") executed in favour of THE
HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED, a corporation
constituted by the Hongkong and Shanghai Bank Ordinance 1866 and
continued by The Hongkong and Shanghai Banking Corporation Limited
Ordinance, Chapter 70 of the Laws of Hong Kong and having its
Off-Shore Banking Unit in Labuan at 4, Jalan Merdeka, 87007 Labuan,
Malaysia (hereinafter called "the Bank") a second fixed charge over
the Property as security for banking facilities granted by the Bank
to the Company up to the sum of United States Dollars Four million
(USD4,000,000/-) for principal together with interest thereon.
<PAGE> 59
2
D. The Company has applied to the Bank and the Bank has agreed to grant or
extend to the Company an additional loan of United States Dollars Twenty-three
million five hundred thousand (USD23,500,000/-) (hereinafter called "the Loan")
upon the terms and conditions set out in the loan agreement of even date made
between the Bank of the one part and the Company of the other part (hereinafter
called "the Loan Agreement") and upon the security, inter alia, of this
Debenture.
NOW THIS DEBENTURE WITNESSETH as follows:-
1. DEFINITIONS AND INTERPRETATION
In this Debenture unless the context otherwise requires the definitions
contained in the Loan Agreement shall apply hereto mutatis mutandis as if the
same were incorporated herein.
2. COVENANT TO PAY
In consideration of the Bank agreeing to make available to the Company the
Loan on the terms and subject to the conditions contained in the Loan
Agreement, the Company hereby covenants with the Bank that the Company shall
pay to the Bank in accordance with the terms of the Loan Agreement all moneys
due or to become due to the Bank under or in connection with the Bank Security
Documents and shall duly properly and punctually discharge all its obligations
and liabilities thereunder.
3. SECURITY
3.1 Charge
For the consideration aforesaid the Company as beneficial owner HEREBY
CHARGES the Property as a continuing security for the payment of all moneys and
liabilities whatsoever agreed to be paid under the Bank Security Documents or
intended to be hereby secured (including all fees, charges, costs and expenses
arising out of or in connection with the provisions of this Debenture) by way
of a third fixed charge.
3.2 Consent and Ranking of Priorities
It is hereby agreed and declared with the express consent of Intairdril
(which consent is annexed hereto) that this Charge shall rank in point of
security after the First Charge created by the Company in favour of Intairdril
and the Second Charge created by the Company in favour of the Bank.
<PAGE> 60
3
3.3 Restriction against other charges
(a) The Company hereby declares that, other than the First Charge and the
Second Charge which rank in point of security prior to the Charge created under
this Debenture, there is no mortgage charge debenture pledge lien or other form
of security upon the Property secured by this Debenture having priority rights
or pari passu rights with this Debenture.
(b) The Company shall not during the subsistence of the Bank Security
Documents without the prior consent in writing of the Bank execute any form of
charge mortgage debenture (whether fixed or floating) pledge or lien in respect
of the assets of the Company secured under the Bank Security Documents.
(c) This Debenture shall be without prejudice to any security already
given by the Company to the Bank or any security which may hereafter be given
to it by the Company whether the same be for securing repayment of the
principal amount and interest thereon or any part thereof or any other money
convenanted to be paid herein and whether such security is taken as additional
or collateral security or otherwise howsoever.
3.4 Continuing Security
The security granted under this Debenture is expressly intended to be and
shall be a continuing security for all moneys whatsoever now or hereafter from
time to time owing to the Bank by the Company under the Bank Security Documents
whether alone or jointly and severally with another or others and whether as
principal or surety notwithstanding that the Company may at any time or times
cease to be indebted to the Bank for any period or periods and notwithstanding
that the account or accounts of the Company with the Bank may from any cause
whatsoever cease to be a current account or accounts and notwithstanding any
settlement of account or accounts or otherwise.
4. BANK'S SECURITY DOCUMENTS
The Company hereby covenants with the Bank that it will duly, punctually
and properly observe and perform all the terms covenants and conditions on its
part to be observed and performed under the Bank's Security Documents.
5. SECURITY ENFORCEABLE WITHOUT RESTRICTIONS
It is hereby agreed between the parties hereto that (to the extent that
the same be excluded by mutual agreement) any restriction on enforcement by the
Bank of the charge hereby created and any requirement of prior notice imposed
by the laws of Malaysia shall not apply to this Debenture and that the monies
hereby secured shall become immediately payable and the power of sale shall
become immediately exercisable upon the due service of any notice by the Bank
on the Company pursuant to Section
<PAGE> 61
4
10.01 of the Loan Agreement declaring that the principal of and the interest
relating to the Loan and all other sums payable under the Bank Security
Documents in respect of the Loan are immediately due and payable.
6. RIGHTS ON DEFAULT
At any time after the principal moneys interest and other moneys hereby
secured shall have become payable under Section 10.01 of the Loan Agreement the
Bank shall be entitled to exercise all or any of the following powers:-
(i) the Bank or any person authorised by the Bank to enter into or upon
any land or premises where the Property and assets as are secured
under the Bank Security Documents are without any notice and may take
possession and control of such land and premises (to the extent
permitted by law) and the Property and assets secured under the Bank
Security Documents and all books of account and documents relating to
the same.
(ii) the Bank may at its discretion be at liberty to give any notice which
may be deemed necessary by it to any person or persons owing money to
the Company that all such moneys be paid to the Bank alone and the
Company hereby irrevocably appoints the General Manager and or
Manager and or any officer of the Bank to be its attorney to demand
sue for and recover and take all appropriate legal proceedings to
recover such moneys and to give a good receipt for the same and to
give such notices to the debtors of the Company and take all
necessary steps to complete the assignment of such moneys to the Bank
as may be necessary.
(iii) The Manager and or Assistant Manager and or any officer of the Bank
may appoint any competent person or persons not precluded under the
provisions of Section 182 of the Companies Act, 1965 to be Receiver
and or Manager or Receivers and or Managers of the properties and
assets hereby charged and may in like manner from time to time remove
any Receiver and or Manager or Receivers and or Managers so appointed
and appoint another or others in his or their stead.
(iv) the Bank may effect the sale of any of the properties and assets
charged under the Bank Security Documents or otherwise deal therewith
upon giving not less than seven (7) days notice of such intended sale
to the Company in such manner as the Bank shall think proper with
liberty in the case of a sale or dealing to buy and resell the same
and the Bank shall not be liable for any loss caused to the Company
thereby
<PAGE> 62
5
other than loss caused by the Bank's wilful default and the Company
shall do all things necessary to enable the Bank to complete the sale
by the Bank of any of the Company's properties included in the Bank
Security Documents.
7. POWERS OF RECEIVER AND MANAGER
A Receiver and/or Manager or Receivers and/or Managers so appointed shall
be the agent of the Company and the Company shall be solely responsible for his
or their acts or defaults and for his or their remuneration. The Receiver
and/or Manager or Receivers and/or Managers shall be appointed for all purposes
and shall have power but not exclusively:-
(i) to take possession of or collect and get in all or any of the
Property hereby charged and for that purpose to take any proceedings
in the name of the Company or otherwise as may seem expedient;
(ii) to carry on manage or concur in carrying on and managing the business
of the Company or any part thereof in connection with the Property,
and for any of those purposes to raise or borrow any money that may
be required upon the security of the whole or any part of the
Property hereby charged;
(iii) to raise and borrow money on the security of any or all of the
Company's assets and property charged under the Bank Security
Documents upon such terms as he or they shall think fit;
(iv) to sell or concur in selling and to let or concur in letting and to
accept surrenders of leases of any of the Property charged to the
Bank under the Bank Security Documents. In exercising the power of
sale hereby conferred the Receiver and/or Manager or Receivers and/or
Managers may sell at such time and in such manner and at such price
as he or they may in his or their absolute discretion think fit and
in exercising such discretion he or they may have regard to the views
and desires of the Bank. The Receiver and/or Manager or Receivers
and/or Managers shall not be accountable for any loss or damage which
may be alleged to have been suffered by the Company by reason of the
exercise of his or their discretion;
(v) to make any arrangement or compromise which he or they shall think
expedient bring take defend discontinue any actions suits or
proceedings whatsoever in relation to the Property charged under the
Bank Security Documents;
<PAGE> 63
6
(vi) to make calls conditionally or unconditionally on the members of the
Company in respect of its uncalled capital with such and the same
powers for the purpose of enforcing payment of any calls so made as
are by the Articles of Association of the Company conferred upon the
directors of the Company in respect of calls authorised to be made by
them and in the names of the directors or in the name of the Company
and to the exclusion of the directors' power in that behalf;
(vii) to appoint managers agents officers servants and workmen for any of
the aforesaid purposes at such reasonable salaries and for such
reasonable periods as he or they may determine;
(viii) to do all such other acts and things as may be considered to be
incidental or conducive to any of the matters or powers aforesaid and
which he or they may or can lawfully do as agent(s) of the Company.
8. APPOINTMENT OF RECEIVER AND MANAGER AS ATTORNEY
Subject to Clause 6 hereof, the Company hereby irrevocably appoints
any and every Receiver and Manager or Receivers and Managers appointed as
aforesaid and his or their substitute or substitutes the attorney or attorneys
of the Borrower, where more than one jointly and severally and on its behalf
and as its acts and deeds to execute sign seal and deliver and otherwise
perfect any deed assurance agreement instrument or act which may be required or
may be deemed proper for any of the purposes set out in Clause 7 hereof and
with power for such attorney or attorneys to appoint or remove any substitute
or substitutes.
9. APPOINTMENT OF BANK AS ATTORNEY
9.1 Subject to Clause 6 hereof, the Company hereby irrevocably appoints the
Bank its servant agent or any person nominated by the Bank under the hand of
the Manager Sub-Manager or other officer for the time being of the Bank to be
the attorney and in its name and on its behalf and as its acts and deeds or
otherwise to sign seal deliver and otherwise perfect any legal or other
mortgage charge assignment transfer agreement deed assurance instrument or act
and to bring take defend prosecute compromise submit to arbitration and/or
discontinue any action suit or proceeding whatsoever which may be required or
may be deemed proper or expedient for the full exercise of all or any of the
powers hereby conferred on the Bank or the Receiver and Manager or Receivers
and Managers and also for the purpose of enforcement or realisation of the
security created herein.
9.2 The Company declares that any and all such acts done
<PAGE> 64
7
deeds instruments and documents executed on behalf of the Company by the Bank
as aforesaid by virtue of the provisions hereof shall be as good valid and
effectual to all intent and purposes whatsoever as if the same has been duly
and properly done and executed by the Company itself and the Company hereby
undertakes to ratify and confirm all such acts done and deeds instruments and
documents executed by virtue of the authority and power hereby conferred.
10. PROCEEDS OF SALE
10.01 The net profits of carrying on the said business and the net proceeds
of any sale shall be applied by the Receiver and/or Manager or Receivers and/or
Managers as follows:-
Firstly, in payment of all costs, charges and expenses of and
incidental to the appointment of the Receiver and/or Manager or
Receivers and/or Managers and the exercise by him or them of all or
any of the powers aforesaid including reasonable remuneration of the
Receiver and/or Manager or Receivers and/or Managers;
Secondly, subject to the rights of Intairdril under the First Charge
and the Bank under the Second Charge in or towards payment to the Bank
of all interest accrued under the Bank Security Documents and
remaining unpaid;
Thirdly, in or towards payment to the Bank of all principal and other
monies due to the Bank and intended to be secured under the Bank
Security Documents Provided Always that if the Bank shall be of the
opinion that the security may prove deficient, payments may be made to
the Bank at the request of the Bank on account of principal before the
interest or the whole of the interest due has been paid but such
alteration in the order of payment shall not prejudice the rights of
the Bank to receive the full amount to which it would have been
entitled if the primary order of payment have been observed or any less
amount which the sum ultimately realised from the security may be
sufficient to pay;
Lastly, any surplus shall be paid to the persons legally entitled
thereto,
Save as aforesaid the Bank shall be under no liability to the Receiver
and/or Manager or Receivers and/ or Managers for his or their remuneration
costs, charges or expenses or otherwise.
10.02 Deficiency in Proceeds of Sale
If the amount realised by the Bank on a sale of the Property under the
provisions of Section 10.01 hereof after deduction and payment from the
proceeds of such sale of all fees
<PAGE> 65
8
dues costs charges and expenses incidental thereto is less than the amount due
to the Bank under the Bank Security Documents and whether at such sale the Bank
is the purchaser of the Property or otherwise the Company shall pay to the Bank
the difference between the amount due and the amount so realised and until
payment will also pay interest on such balance at the Prescribed Rate before as
well as after any Court order or judgment.
11. INSURANCE
11.01 Insurance
The Company shall at all times throughout the duration of the Bank
Security Documents keep the Property in good order and condition and insured by
the Company at its expense in its name for such value which shall not be less
than the net book value of the Property, (at all material times), against loss
or damage by fire, lightning, tempest, flood, malicious acts and against such
other risks as the Bank may from time to time think expedient and which risks
are normal and customary in respect of the Property with an insurance company
or companies acceptable to the Bank and shall arrange with such insurance
company to have the interests of the Bank as mortgagees/chargees of the
Property to be duly endorsed on such policy or policies of insurance. If
default is made by the Company in effecting maintaining or renewing any such
insurance as aforesaid it shall be lawful for but not obligatory upon the Bank
at the cost and expense of the Company to effect maintain or renew any such
insurance as the Bank may think fit and any sum if expended by the Bank
together with interest thereon at the Prescribed Rate from the date of such
payment by the Bank shall be recovered from the Company and shall be repaid on
demand being made by the Bank.
11.02 Restriction Against Additional Insurance
Apart from the insurance required to be effected by the Company
pursuant to Section 11.01 hereof the Company shall not except with the consent
in writing of the Bank effect or maintain any insurance in respect of the
Property.
11.03 Premium receipts
The Company shall provide the Bank with documentary evidence
satisfactory to the Bank pertaining to all insurance policies required to be
effected by the Company pursuant to Section 11.01 hereof and the receipts of
payment of premium in respect of the same paid by the Company and will when
required deliver and produce to the Bank or cause to be produced or delivered
to the Bank or to such persons as it may direct the policy of such insurance
effected by the Company.
<PAGE> 66
9
11.04 Application of insurance monies
Any monies received on any insurance of the Property secured under
this Debenture shall be applied in or towards making good the loss or damage in
respect of which the money is received or receivable unless there is a total or
constructive total damage to the Property in which event the monies received or
receivable shall at the Bank's option be utilised by the Bank in or towards the
discharge of the monies secured hereunder or towards the repair of the
Property. The Company shall hold any monies received on such insurance in trust
for the Bank and the Bank may receive and give a good discharge for any such
monies.
11.05 Workmen's Compensation Insurance
The Company shall take out and maintain for such amount and with such
insurance company as shall be approved by the Bank (which approval shall not be
unreasonably withheld) in respect of Workmen's Compensation Insurance for all
employees of the Company or alternatively comply with any law for the time
being related to the establishment of social security scheme or benefits for
employees.
12. APPOINTMENT OF RECEIVER AND MANAGER NOT AFFECTING OTHER POWERS
The powers of appointment of a Receiver and/or Manager or Receivers
and/or Managers hereunder shall be in addition to and not to the prejudice of
any statutory and other powers (whether of sale, receiving rents, distraining
for rents or otherwise) of the Bank or otherwise and so that such powers shall
be and remain exercisable by the Bank in respect of any of the property or
assets comprised in the Bank Security Documents and of which no appointment of
a Receiver and/or Manager or Receivers and/or Managers by the Bank shall from
time to time be subsisting and that notwithstanding that an appointment under
the provisions hereof shall have subsisted and been withdrawn in respect of
that property or assets or shall be subsisting in respect of any other property
hereby charged.
13. NO ENQUIRY BY THIRD PARTY
Any person dealing with the Bank or the Receiver and/or Manager or
Receivers and/or Managers shall not be concerned to enquire whether any event
has happened upon which any of the powers contained in these presents are or
may be exercisable by the Bank or the Receiver and/or Manager or Receivers
and/or Managers or otherwise as to the propriety or regularity of any exercise
thereof or of any act purporting or intended to be an exercise thereof or
whether any money remains owing upon the Bank Security Documents.
<PAGE> 67
10
14. THE BANK NOT ANSWERABLE FOR LOSS
The Bank shall not be answerable for any involuntary loss happening in
or about the exercise or execution of the powers or trusts which may be vested
in the Bank by virtue of this Debenture or by law for the time being in force.
15. LAW
This Debenture shall be governed and construed in all respect in
accordance with the laws of Malaysia.
16. INCORPORATION OF LOAN AGREEMENT PROVISIONS
All the provisions of the Loan Agreement shall be deemed to be
incorporated into and form part of this Debenture (whether such provisions are
repeated herein or not) subject to such alterations or variations where
necessary to make the provisions of this Debenture consistent with the
provisions of the Loan Agreement and in the event of any conflict or
discrepancy between the provisions of the Loan Agreement and any of the
provisions of this Debenture, the provisions of the Loan Agreement shall
prevail.
17. PRINCIPAL AND COLLATERAL INSTRUMENTS
It is hereby agreed and declared by and between the parties hereto
that for the purpose of Section 4(3) and Item 27 of the First Schedule to the
Stamp Act, 1949, this Debenture, the Loan Agreement are instruments employed in
one transaction to secure the payment of a principal amount of up to United
States Dollars Twenty-three million five hundred thousand (USD23,500,000/-) and
that for the purposes of Section 4(3) and Item 27 of the First Schedule to the
Stamp Act 1949, the Loan Agreement shall be deemed to be the principal
instrument and this Debenture shall be deemed to be the subsidiary instrument
and collateral security.
AS WITNESS the Common Seal of the Company was hereunto affixed and the
Attorney for the Bank has hereunto set his hand.
The Common Seal of ANTAH )
DRILLING SDN. BHD. was )
hereunto affixed in the )
presence of:- )
/s/YAM TUNKU IMRAN IBNI TUNANKU JA'AFAR /s/MISNI ARYANI MUHAMAD
- --------------------------------------- -----------------------
Director Director/Secretary
<PAGE> 68
11
Signed by Yeong Toong Fatt )
the Attorney for and on )
behalf of THE HONGKONG AND )
SHANGHAI BANKING CORPORATION ) /s/YEONG TOONG FATT
LIMITED in the presence of:- )
/s/ AILEEN CHEW PENG LI
-----------------------
AILEEN CHEW PENG LI
Advocate & Solicitor,
No. 2, Benteng,
Kuala Lumpur.
I, AILEEN CHEW PENG LI an Advocate and Solicitor of the High Court in
Malaya practising at Kuala Lumpur, Malaysia hereby certify that on this 16th
day of October 1995 the Common Seal of ANTAH DRILLING SDN. BHD. was duly
affixed to the within written instrument in my presence in accordance with the
regulations of the said Company.
Witness my hand.
/s/ AILEEN CHEW PENG LI
Advocate & Solicitor.
AILEEN CHEW PENG LI
Advocate & Solicitor,
No. 2, Benteng,
Kuala Lumpur,
This is the last of the execution page of the Debenture made between
Antah Drilling Sdn. Bhd. as the Company of the one part and The Hongkong And
Shanghai Banking Corporation Limited as the Bank of the other part.
<PAGE> 69
12
SCHEDULE "A"
The Property
Description of Rig
(Antah Drilling Sdn. Bhd. Rig No. 448
(replaced by Rig No. 488))
Description of Rig
(Antah Drilling Sdn. Bhd. Rig No. 489
(formerly known as Rig No. 450)
which includes the replacement Rig
howsoever numbered after up-grading and modification)
One (1) Pool Self-Contained Platform Rig Featuring National 1320 UE Drawworks
Powered by 2 ea. GE-752 Electric Motors, with Elmago Brake and Disc Brakes;
Dreco 1000 K Net Hookload Mast 152 ft. High;
2 ea Gardner Denver PZ-11 Mud Pumps ea. Powered by 2 ea. GE-752 Electric
Motors;
Oilwell B - 37 1/2" Rotary Table Independently Driven by GE - 752 Electric
Motor;
Ross Hill SCR Controlled Power System Consisting of 5 ea. Caterpillar D-399
Diesel Engines w/Kato 6P6-2700 Generators;
Bulk Storage for 3000 C.F. Cement, 2000 C.F. Barite, with Piping System to
Load, Store or Transfer Bulk Materials;
17,000 ft. 5 1/2" Drill String w/5" Hevi-Wate Pipe, 8" and 6 1/2" Drill Collars
Including all Sub and X-overs;
Varco TDS-4S Top Drive Retractable System with PH-85 Pipe Handler;
EMSCO 500 Ton Travelling Block Assembly;
Varco Star-2 Racking System;
Varco AR3200 Iron Roughneck;
Varco HC-26 Hydraulic Catheads;
M.D. Totco Drillers Cabin for Driller, Assistant Driller and Pipe Mite Operator
to Include DAQ Processing unit. Spectrum 1000, Visulogger, VIP plus Data
Logging Module, Total Block Control System;
<PAGE> 70
13
Varco PDM (Pipe Mite) Assembly;
Varco Conveyor;
Mud Process Equipment Include Three (3) Thule Shale Shakers, Desanders,
Desilter, Mud Gas Separator and Flow Trend Polymer Jet Shear Unit;
1500 bbl. Mud System;
Closed Circuit Colored T.V. Monitor System;
Vetco Gray KFDJ Fixed Diverter System;
Shaffer 13 5/8" 5000 psi B.O.P. System to Include One (1) Annular and Three (3)
Single RAM Preventers and 15 Sets of RAM;
Shaffer B.0.P. Control System.
<PAGE> 71
[INTAIRDRIL LOGO]
APPENDIX 1
INTAIRDRIL LTD
C/O POOL COMPANY
P.O. BOX 4271 [77210]
10375 RICHMOND AVENUE
HOUSTON, TEXAS 77042
U.S.A.
TELEPHONE: [713} 954-3000
TELEX 775-957
October 10, 1995
The Hongkong and Shanghai Banking
Corporation Limited
Offshore Banking Unit Labuan
4 Jalan Merdeka
87007 Labuan
MALAYSIA
RE: A Debenture to be created over two (2) oil rigs owned by
Antah Drilling Sdn. Bhd., namely Rig 488 (which replaces
Rig 448) and Rig 489 (which replaces Rig 450) together with
all equipment, spare and replacement parts thereto, to be
executed in your favor ranking after the Charge in favor of
Intairdril Ltd. dated the 13th day of December 1988
Dear Sirs:
We, Intairdril Ltd., c/o Pool Company, 10375 Richmond Avenue, Houston, Texas,
HEREBY CONFIRM our consent as First Chargee to the creation of a third Charge
by way of a Debenture in your favor (herein "the Debenture") over the
above-mentioned properties ranking after our Charge over same dated the 13th
day of December 1988.
Our consent hereto has been given on the basis that any foreclosure action to
be taken by you under the Debenture will be subject to your having given notice
to us by facsimile or certified courier to the following address:
Intairdril Ltd.
c/o Pool Company
10375 Richmond Avenue
Houston, Texas 77042
Attention: Group Vice President - International Operations
Copy To: Treasurer
Facsimile: 713/954-3244
Very truly yours,
INTAIRDRIL LTD.
By: /s/ J.T. JONGEBLOED
----------------------------
Title: CHAIRMAN AND PRESIDENT
----------------------------
<PAGE> 1
EXHIBIT 10.31.1
DATED THIS 1ST DAY OF DECEMBER,1996
BETWEEN
ANTAH DRILLING SDN. BHD. (Company No. 6831-D)
As Borrower
AND
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED
(OFF-SHORE BANKING UNIT, LABUAN) (Licence No. 910004C)
As Lender
***************************************
SUPPLEMENTAL AGREEMENT
(for principal sum of USD12,971,430.53)
****************************************
SHEARN DELAMORE & CO.,
ADVOCATES & SOLICITORS,
NO. 2, BENTENG,
50050 KUALA LUMPUR
AND AT
16TH FLOOR,
WISMA HAMZAH-KWONG HING,
NO.1 LEBOH AMPANG,
50100 KUALA LUMPUR
<PAGE> 2
THIS SUPPLEMENTAL AGREEMENT is made the 1st day of December, 1996
BETWEEN:-
(1) ANTAH DRILLING SDN. BHD. (Company No. 6831-D) a company
incorporated in Malaysia with its registered office at 9th Floor,
Bangunan BNH, Off Jalan Semantan, Damansara Heights, 50490 Kuala
Lumpur (hereinafter called "the Borrower") of the one part;
AND
(2) THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED, (Licence
No. 910004C) a corporation constituted by the Hongkong and
Shanghai Bank Ordinance 1866 and continued by The Hongkong and
Shanghai Banking Corporation Limited Ordinance, Chapter 70 of the
Laws of Hong Kong and having its Off-Shore Banking Unit in Labuan
at Level 11(D), Main Office, Tower Financial Park, Labuan, Jalan
Merdeka, 87000 Wilayah Persekutuan, Labuan, Malaysia (hereinafter
called "the Bank") of the other part.
WHEREAS:-
---------
1. By a Loan Agreement dated the 16th day of October, 1995
(hereinafter called "the Loan Agreement") made between the Bank
of the one part and the Borrower of the other part, the Bank
agreed to grant to the Borrower banking facilities up to the
principal sum of United States Dollars Twenty three million five
hundred thousand (USD23,500,000/-) (hereinafter called "the
Loan").
2. As security for the Loan the Borrower executed in favour of the
Bank the following:-
(a) the Loan Agreement;
(b) a Debenture dated the 16th day of October, 1995 creating a third
fixed charge (hereinafter called "the Third Charge") over the
Borrower's two (2) platform drilling/workover Rigs namely Rig 450
and Rig 488 (a replacement of Rig 448) more particularly
described in Schedule A attached to the said Debenture together
with all ancillary equipment, spare and replacement parts thereto
(hereinafter collectively called "the Property");
(c) an Assignment dated the 14th day of December, 1995 over the
Borrower's rights to payment under Contract No. 00285866 dated
the 30th day of November, 1995 made between ESSO AUSTRALIA LTD.,
of the one part and the Borrower of the other part (hereinafter
called "the Assignment");
(d) a Corporate Guarantee executed by Antah Holdings Berhad dated the
16th day of October, 1995
<PAGE> 3
2
(hereinafter called "the Corporate Guarantee");
(e) an Agreement to Guarantee executed by Pool Company dated the 16th
day of October, 1995 (hereinafter called "the Agreement to
Guarantee");
(hereinafter collectively called "the Security Documents").
3. The sum outstanding under the Loan as of the date of this Agreement
amounts to United States Dollars Twelve million nine hundred and seventy one
thousand four hundred and thirty and sen fifty three (USD12,971,430.53)
(hereinafter called "the Outstanding Loan").
4. At the request of the Borrower the Bank has agreed to revise the
security arrangements only in respect of the Loan in the terms set out in this
Supplemental Agreement.
5. This Agreement is supplemental to the Loan Agreement. NOW THIS
SUPPLEMENTAL AGREEMENT WITNESSETH as follows:-
REVISION OF SECURITY
--------------------
1) In consideration of the covenants and the mutual benefits to be
derived therefrom by the parties hereto, the Bank hereby agrees
at the request of the Borrower to revise the security
arrangements in respect of the Loan under the Loan Agreement in
the manner hereinafter set out.
2) RELEASE OF ANTAH HOLDINGS BERHAD FROM THE CORPORATE GUARANTEE AND
SUBSTITUTION WITH POOL COMPANY'S CORPORATE GUARANTEE
It is hereby agreed between the parties hereto that Antah
Holdings Berhad as Corporate Guarantor under the Corporate
Guarantee shall be released from its guarantee thereunder upon
execution by Pool Company a Corporate Guarantee in the format
annexed hereto (hereinafter called "the Guarantee") in favour of
the Bank guaranteeing the repayment to the Bank of the
Outstanding Loan of the principal sum of United States Dollars
Twelve million nine hundred and seventy one thousand four hundred
and thirty and sen fifty three (USD12,971,430.53) together with
interest thereon and all other moneys due to the Bank from the
Borrower under the Loan Agreement. Upon execution of the
Guarantee, the Agreement to Guarantee shall be deemed terminated
and be of no further force or effect. The Outstanding Loan shall
as from the date of execution of the Guarantee be secured by:-
(a) the Guarantee;
<PAGE> 4
3
(b) the Third Charge; and
(c) the Assignment.
INTERPRETATION
--------------
3) Except where the context otherwise requires, or unless this
Supplemental Agreement otherwise provides words and expressions
defined in the Loan Agreement when used or referred to in this
Supplemental Agreement shall have the same meaning as that
provided for in the Loan Agreement. In the event of conflict
between the provisions of the Loan Agreement and this
Supplemental Agreement the provisions of this Supplemental
Agreement shall prevail for the purpose of enforcement and
application hereof:-
"the Loan" The sum of United States Dollars Twelve
million nine hundred and seventy one
thousand four hundred and thirty and sen
fifty three (USD12,971,430.53) being the
Outstanding Loan.
"Guarantee" The guarantee executed by Pool Company in
favour of the Bank guaranteeing the
Outstanding Loan together with interest
thereon and all other moneys due to the Bank
from the Borrower in the format annexed
hereto.
"Letter of Offer" The Letter of Offer dated the 26th day of
October, 1996 addressed to the Borrower
setting out the terms and conditions of the
revised security arrangements, a copy of
which is annexed hereto.
"Security Documents" collectively the Loan Agreement, this
Supplemental Agreement, the Third Charge,
the Assignment and the Guarantee.
AMENDMENTS TO THE LOAN AGREEMENT
--------------------------------
4) All references to the words "this Agreement" in the Loan
Agreement shall be substituted with the words "this Agreement
and/or the Supplemental Agreement dated the 1st day of December,
1996." All references to the Agreement to Guarantee shall be
deleted and be no longer applicable.
<PAGE> 5
4
FURTHER CONDITIONS PRECEDENT
----------------------------
5) The obligation hereunder of the Bank in connection with the revised
facility is subject to the fulfilment in the manner satisfactory to the Bank of
the following conditions:-
(a) A certified true copy of the Borrower's Board of Directors'
Resolution authorising the acceptance of the revised facilities
and the execution of all documents pursuant thereto in accordance
with its Memorandum and Articles of Association;
(b) A certified true copy of the Guarantor's Board of Directors'
Resolution authorising the execution of the Guarantee in
accordance with its Memorandum and Articles of Association;
(c) This Agreement and the Guarantee shall have been executed and
stamped.
FURTHER PROVISIONS RELATING TO THE LOAN
---------------------------------------
6) Letter of Offer
---------------
It is hereby expressly agreed by the parties hereto that all the terms
and conditions in the Bank's Letter of Offer dated the 26th day of
October, 1996 with respect to the Security Documents shall be deemed
incorporated herein.
PRINCIPAL DOCUMENTS REMAIN IN FORCE
-----------------------------------
7) Save and except for the variations herein contained and any
consequential amendments as may be necessary, all the terms and
conditions of the Security Documents shall continue to be in full force
and effect.
CONTINUING SECURITY
-------------------
8) The Borrower and Pool Company hereby declare and agree that the
respective security afforded by them to the Bank pursuant to the
Security Documents and hereunder shall continue to be a continuing
security for and as the case may be, be charged in the manner specified
therein with the payment to the Bank of the Outstanding Loan, interest
thereon, fees and all other sums and costs, charges and expenses
covenanted to be paid by the Borrower under the Loan Agreement and this
Supplemental Agreement.
DECLARATION
-----------
9) IT IS HEREBY AGREED AND DECLARED that this Agreement is supplemental to
the Loan Agreement.
IN WITNESS WHEREOF the parties hereto have hereunto set
<PAGE> 6
5
their seal and hand the day and year first above written.
The Borrower
------------
ANTAH DRILLING SDN. BHD. (Company No. 6831-D)
Address for Notices: Admin. Building, Block C,
Third Floor, Door No. 21,
Kemaman Supply Base,
Terengganu
West Malaysia.
Telephone Number: 60-9-983-1600
Facsimile Number: 60-9-983-1624
The Common Seal of )
ANTAH DRILLING SDN. )
BHD. (Company No. 6831-D) )
was hereunto affixed in )
the presence of:- )
/s/ CHARLES R. ARNOLD /s/ YAM TUNKU IMRAN IBNI TUANKU JA'AFAR
--------------------- ----------------------------------------
Director Director/Secretary
The Bank
--------
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED
(Licence No. 910004C)
Address for Notices: 4, Jalan Merdeka,
87007 Labuan,
Malaysia.
Telex Number: 85014
Answerback: HSBLBU MA
Facsimile Number: 087-417169
SIGNED by )
for and on behalf of )
THE HONGKONG AND SHANGHAI )
BANKING CORPORATION ) /s/ YEONG TOONG FATT
LIMITED (Licence No. )
910004C) in the presence )
of:- )
This is the execution page of the Supplemental Agreement made
between Antah Drilling Sdn. Bhd. (Company No. 6831-D) as Borrower of the
one part and The Hongkong And Shanghai Banking Corporation Limited,
(Licence No. 910004C) as the Bank of the other part.
<PAGE> 7
DATED THIS 1ST DAY OF DECEMBER 1996
BETWEEN
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED
(OFFSHORE BANKING UNIT, LABUAN) (Licence No. 910004C)
AND
POOL COMPANY
*************************************
GUARANTEE
(for principal sum of USD12,971,430.53)
*************************************
MESSRS. SHEARN DELAMORE & CO.,
SHEARN DELAMORE & CO.,
ADVOCATES & SOLICITORS,
NO. 2 BENTENG,
50050 KUALA LUMPUR.
AND AT
16TH FLOOR,
WISMA HAMZAH-KWONG HING,
NO. 1 LEBOH AMPANG,
50100 KUALA LUMPUR.
<PAGE> 8
THIS AGREEMENT is made the 1st day of December, 1996, between THE
HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED, (Licence No. 910004C) a
corporation constituted by the Hongkong and Shanghai Bank Ordinance 1866 and
continued by The Hongkong and Shanghai Banking Corporation Limited Ordinance,
Chapter 70 of the Laws of Hong Kong and having its Off-Shore Banking Unit in
Labuan at Level 11(D), Main Office, Tower Financial Park, Labuan, Jalan
Merdeka, 87000 Wilayah Persekutuan, Labuan, Malaysia (hereinafter referred to
as "the Bank") of the one part and POOL COMPANY of 10375 Richmond Avenue,
Houston, Texas 77042, United States of America (hereinafter referred to as "the
Guarantor") of the other part.
(A) WHEREAS ANTAH DRILLING SDN. BHD. (Company No. 6831-D) is a company
incorporated in Malaysia with its registered office at 9th Floor, Bangunan BNH,
Off Jalan Semantan, Damansara Heights, 50490 Kuala Lumpur (hereinafter referred
to as "the Company").
(B) AND WHEREAS the Bank has agreed at the request of the Company and
the Guarantor to grant and make available to the Company banking facilities by
way of a Loan up to the limit of United States Dollars Twenty three million
five hundred thousand (USD23,500,000/-) (hereinafter referred to as "the Term
Loan") for principal only upon the terms and conditions set out in the Loan
Agreement dated the 16th day of October, 1995 (hereinafter referred to as "the
Loan Agreement") upon the security, inter alia, of an Agreement to Guarantee
executed by the Guarantor (hereinafter referred to as "the Agreement to
Guarantee") and a corporate guarantee executed by Antah Holdings Berhad in
favour of the Bank (hereinafter referred to as "the Corporate Guarantor").
(C) AND WHEREAS pursuant to the request made by the Guarantor, Antah
Holdings Berhad and the Company, the Bank has agreed to release Antah Holdings
Berhad from the Corporate Guarantee on condition that the Guarantor executes
this Guarantee for the repayment of the Term Loan up to the principal limit of
United States Dollars Twelve million nine hundred and seventy one thousand four
hundred and thirty and sen fifty three (USD12,971,430.53) being the sum as of
this date outstanding under the Loan Agreement together with interest thereon
and all other monies due to the Bank from the Company under the Loan Agreement.
(D) AND WHEREAS this Guarantee is given for good consideration and
pursuant to the Agreement to Guarantee.
NOW THIS AGREEMENT WITNESSETH AND IT IS HEREBY AGREED as follows:
1. DEFINITIONS
1.1 In this Agreement unless the context otherwise requires:
1.1.1 "the Bank" means THE HONGKONG AND SHANGHAI BANKING CORPORATION
LIMITED (Licence No. 910004C) and includes its
successors-in-title and assigns and persons deriving title
thereunder;
1.1.2 "Company" means ANTAH DRILLING SDN. BHD. (Company No. 6831-D )
and includes its successors-in-title and assigns and persons
deriving title thereunder;
1.1.3 "the Letter of Offer" means collectively the letter of offer
dated the 5th day of August, 1995 and the letter of offer dated
the 26th day of
<PAGE> 9
2
October, 1996;
1.1.4 "the Term Loan" means the term loan up to the limit of United
States Dollars Twenty three million five hundred thousand
(USD23,500,000/-) for principal only granted and made available
by the Bank to the Company pursuant to the Letter of Offer and on
the terms and conditions set out in the Loan Agreement as defined
herein.
1.1.5 "Loan Agreement" means the agreement dated the 16th day of
October, 1995 and the Supplemental Agreement dated the 1st day of
December, 1996 made between the Company of the one part and the
Bank of the other part.
1.1.6 "this Guarantee" means this Guarantee;
1.1.7 "Principal Sum" means the aggregate amount outstanding under the
Term Loan due from the Company to the Bank pursuant to the Loan
Agreement and for the time being from time to time and at any
time due and payable by the Company to the Bank and includes each
and every part thereof;
1.1.8 The expression "the HSBC Group" shall include HSBC Holding plc,
subsidiary companies and associates ("associates" being defined
to include companies in which HSBC Holding plc controls 20% or
more of the voting power) their assigns and all persons deriving
title under them.
1. 2 The headings in this Agreement are inserted for convenience only
and shall not be taken, read and construed as essential parts of this
Agreement. All references to provisions of statutes include such provisions as
amended, re-certified or re-enacted. Words importing the masculine gender shall
include the feminine and neuter genders and vice versa. Words importing the
singular number shall include the plural number and vice versa.
2. GUARANTEE AND INDEMNITY
-----------------------
Pursuant to the obligations of the Guarantor under the Agreement
to Guarantee and in further consideration of the Bank at the request of the
Guarantor agreeing to release Antah Holdings Berhad from its obligations under
the Corporate Guarantee the Guarantor HEREBY IRREVOCABLY AND UNCONDITIONALLY
AGREES WITH AND UNDERTAKES AND GUARANTEES the Bank and its successors-in-title
and assigns and each of them that it will pay upon an event of default by the
Company, which is continuing, or in the event the Contract No. 00285866 dated
the 30th day of November, 1995 made between ESSO AUSTRALIA LTD. and the
Borrower is terminated howsoever prior to the full repayment of the Loan and
all outstanding due to the Bank on demand as principal debtor and not merely as
surety the following:-
2.1 all sums lent to or advanced for the benefit of the Company by
the Bank as principal pursuant to upon or under the Term Loan or
remaining due and owing by the Company from time to time and at
any time pursuant to upon and under the Term Loan up to the
principal sum of United States Dollars Twelve million nine
hundred and seventy one thousand four hundred and thirty and sen
fifty three (USD12,971,430.53);
<PAGE> 10
3
2.2 interest due and owing from time to time and at any time, by the
Company on the Principal sum of United States Dollars Twelve
million nine hundred and seventy one thousand four hundred and
thirty and sen fifty three (USD12,971,430.53) (as well after as
before judgment) calculated at such rate as prescribed in the
Loan Agreement as varied by the Bank from time to time;
2.3 all costs charges damages and expenses which the Bank may incur
in the preparation of this Agreement or enforcing or seeking to
obtain payment of all or any part of the monies hereby guaranteed
or any part thereof or any breach or non-performance or non-
observance by the Company, of the obligations terms covenants and
agreements to be performed or observed by the Company in respect
of the Term Loan under the Loan Agreement and the security
documents executed by the Company in favour of the Bank pursuant
to the Loan Agreement.
AND the Guarantor HEREBY UNDERTAKES to indemnify the Bank of all
losses and expenses including legal costs on a full indemnity basis charges and
damages incurred or suffered by the Bank inconsequence of any failure by the
Company to pay any monies due and payable under the Loan Agreement as aforesaid
or resulting from any breach, non-performance or non-observance by the Company
of the obligations, terms, covenants and agreements to be performed or observed
by the Company in respect of the Term Loan.
3. GUARANTOR'S COVENANTS
The Guarantor hereby irrevocably and unconditionally agrees,
undertakes and covenants with the Bank and its successors-in-title and assigns
and each of them as follows:-
3.1 that its guarantee and indemnity herein shall not in any way be
discharged, diminished or affected by the granting of time or
indulgence to the Company or the effecting of any compromise
between the Bank and the Company or any agreement between the
Bank and the Company not to sue the Company;
3.2 that its liability under its guarantee and indemnity herein shall
subsist even if the Bank has a legal right to claim against the
Company and/or any other surety and/or against any security the
Bank may now or at any time hereafter or from time to time have
from or against the Company or any other person for any sums,
loss or damage or whether or not the Bank has availed itself of
its legal remedies against the Company and/or any other surety
and/or against any security as aforesaid;
3.3 all sums payable by the Guarantor under its guarantee and
indemnity herein shall be paid in full without set-off, counter-
claim, condition or qualification of any nature whatsoever;
3.4 that its liability under its guarantee and indemnity herein shall
not be affected by the Bank granting any relaxation, forbearance
or indulgence to the Guarantor;
3.5 that the Bank may, at any time or times, at its absolute
discretion, without discharging, impairing or affecting the
liability of the
<PAGE> 11
4
Guarantor under its guarantee and indemnity herein and without
giving any notice whatsoever to the Guarantor and without
obtaining the assent of the Guarantor, vary, add to, or alter the
obligations undertaken by the Company;
3.6 that its guarantee and indemnity herein shall be in addition to
any other guarantee and/or other security held by the Bank in
respect of the repayment of the monies and liabilities from time
to time at any time due and owing by the Company to the Bank in
respect of the Term Loan and the due performance and observance
by the Company of the terms, provisions, covenants, agreements
and obligations on the part of the Company to be performed and
observed in respect of or under the Term Loan and whether such
guarantee and/or other security shall be given to the Bank by the
Guarantor or otherwise and no renewal, variation, exchange,
release, modification of or other dealing with or forbearance
from perfecting or enforcing any such other guarantee and/or
other security by the Bank shall affect the liability of the
Guarantor under its guarantee and indemnity herein and whether or
not the Guarantor shall have notice of or given its assent to
such renewal, variation, exchange, release, modification of or
other dealing with or forbearance from perfecting or enforcing
such other guarantee and/or other security;
3.7 that its guarantee and indemnity herein shall be binding as a
continuing guarantee on the Guarantor and on its successor-in-
title for all purposes and no change whatsoever in the
constitution of the Bank whether by amalgamation, reconstruction
or otherwise shall affect or impair the liability of the
Guarantor under its guarantee and indemnity herein;
3.8 that all sums of monies not recovered or recoverable from the
Guarantor on the basis of a guarantee whether by reason of any
legal limitation, disability or incapacity on or of the company
or any other fact and circumstance and, whether know to the Bank
or not, shall nevertheless be recoverable from the Guarantor as
principal debtor in respect thereof and shall be repaid by the
Guarantor upon demand on the Guarantor made by the Bank or on
behalf of the Bank subject always to its liability hereunder;
3.9 that any accounts settled or stated by or between the Bank and
the Company or admitted by or on behalf of the Company and duly
certified by one of the officers of the Bank may be adduced by
the Bank and shall in that case be accepted by the Guarantor as
conclusive evidence that the balance or amount thereby appearing
is due from the Company to the Bank and payable on demand to the
Bank by the Guarantor save for manifest error;
3.10 that should the Company become insolvent or if an order is made
or legislation or an effective resolution passed for winding up
or a receiver is appointed for the debenture or debenture
stockholders of the Company, the Bank may prove in the winding up
of the Company for the whole amount owing or remaining due and
unpaid to the Bank and no money or dividend received by the Bank
shall be treated as received in respect of the Guarantor's
guarantee and indemnity herein but the full amount hereby
guaranteed shall be payable by the Guarantor until the Bank shall
have received from all
<PAGE> 12
5
sources one hundred per cent (100%) of the ultimate balance owing
and remaining due and unpaid to the Bank by the Company;
3. 11 that if the Bank has received such ultimate balance in full, any
claim on any part to any excess or any securities remaining in
the Bank's hand shall be a matter of adjustment between the Bank
and the Guarantor and any other person or persons laying claim
thereto;
3.12 that all payments received by the Bank from the Company or from
its liquidators or otherwise shall be taken and applied by the
Bank as payments in gross and the right of the Guarantor to be
subrogated to the Bank in respect thereto shall not arise until
the Bank shall have received the full amount of all claims of the
Bank against the Company;
3.13 that other than the debentures dated the 28th day of April, 1995
and the 16th day of October, 1995, over Rig No. 488 and Rig No.
489 (formerly known as Rig No. 450) executed by the Company in
favour of the Bank, the Guarantor has not taken and shall not
without prior consent of the Bank in writing take, directly or
indirectly in respect of the liability undertaken pursuant to the
guarantee and indemnity herein by the Guarantor on behalf of the
Company any counter security, whether involving a charge on any
property whatsoever of the Company or otherwise, whereby the
Guarantor or any person or persons claiming through the Guarantor
would, or might, on the insolvency or liquidation of the Company
and to the prejudice of the Bank, increase the proof in such
insolvency or liquidation or diminish the property distributable
among the creditors of the Company and, as regards any such
counter security taken by the Guarantor with consent of the Bank
as aforesaid, the same shall be a security to the Bank for the
fulfilment of the Guarantor's obligation under its guarantee and
indemnity herein;
3.14 that the Bank shall, so long as any money remain owing under the
guarantee and indemnity herein, have a lien therefor on all money
now or hereafter standing to the credit of the Guarantor with the
Bank, whether on current or other account. The Bank shall further
be entitled (as well before as after demand hereunder) to set-off
any credit balance in any of the Guarantor's accounts with the
Bank (whether current deposit loan or of any other nature and
whether subject to notice or not) the liability to the Bank
hereunder and the Guarantor irrevocably authorises the Bank until
this Guarantee is released and/or discharged that the Bank may at
any time without notice after an event of default which is
continuing by the Company or in making demand debit combine or
consolidate all or any of the Guarantor's then existing
account(s) whatsoever whether subject to notice or not and
whether in United States Dollars or in any other currency in any
of the Bank's branches wheresoever situated and set-off of
transfer any sums standing to the credit of any one or more
accounts in or towards satisfaction of the Guarantor's
liabilities hereunder whether they be present future actual
contingent primary or collateral. Where such set-off combination
or transfer requires the conversion of one currency into another
such conversion shall be calculated at the Bank's spot buying
rate of exchange (as conclusively determined by the Bank save for
manifest error) for purchasing the currency for which the
Guarantor is liable with the
<PAGE> 13
6
existing currency so converted;
3.15 that the certificate by an officer of the Bank as to the money
and liabilities for the time being due or incurred from or by the
Company to the Bank shall be conclusive evidence save for
manifest error in any legal proceedings against the Guarantor;
3.16 that any sums or security paid or given to the Bank by or on
behalf of the Company and/or the Guarantor shall not constitute a
valid settlement or discharge of the liability hereunder or the
Guarantor under this Guarantee and indemnity herein or any part
thereof if the payment of such sums or the giving of such
security shall be avoided or reduced under the provisions of any
law relating to insolvency or liquidation for the time being in
force and the Bank shall be entitled to claim against the
Guarantor in the case of avoidance, the full amount or value of
the aforesaid sums or security and, in the case of reduction, the
amount or value by which the aforesaid sums or security shall be
reduced;
3.17 (a) that this Guarantee shall not be considered as satisfied by any
intermediate payment or satisfaction of the whole or any part of
any sum or sums of money owing as aforesaid but shall be
continuing security and shall extend to cover any sum or sums of
money which shall for the time being constitute the balance due
for the Company to the Bank upon any such account or accounts as
herein mentioned.
(b) that the Guarantor's obligations under this Guarantee shall not
in any manner be discharged except by complete performance
thereof and until all sums due from the Company under the Term
Loan shall have been paid in full and no sum remains payable in
respect of or in connection with the Term Loan under the Loan
Agreement and security documents executed by the Company pursuant
thereto.
3.18 that the Bank shall be entitled to recover from the Guarantor all
sums payable by the Guarantor hereunder without first availing
itself of its legal remedies against the Company and/or any other
surety and/or against any security the Bank may now or at any
time hereafter or from time to time have from or against the
Company or any other person;
3.19 that the monies received by the Bank from the Guarantor or the
Company or any other person or persons liable to pay the same may
be applied by the Bank to any account or items of account or to
any transaction to which the same may be applicable;
3.20 that although the Guarantor's ultimate liability hereunder cannot
exceed the limit mentioned in the Guarantee, yet this Guarantee
shall be construed and take effect as a guarantee of the whole
and every part of the Term Loan and interest owing and to become
owing and accordingly the Guarantor is not to be entitled as
against the Bank to any right of proof in the bankruptcy or
insolvency of the Company or other right of a surety discharging
its liability in respect of the principal debt unless and until
the whole of the principal sum, interest and other sums
outstanding under the Term Loan pursuant to the Loan Agreement
shall have first been completely discharged and satisfied. And
further for the purpose
<PAGE> 14
7
of enabling the Bank to sue the Company or prove against its
estate for the whole of the money owing as aforesaid or to
preserve intact the liability of any other part the Bank may at
any time place and keep for such time as the Bank may think
prudent any money received recovered and realised hereunder to
and at a separate or suspense account to the credit either of the
Guarantor or of any such person or persons or transaction if any
as the Bank shall think fit without any intermediate obligation
on the Bank's part to apply the same or any part thereof in or
towards the discharge of the money owing as aforesaid or any
intermediate right on the Guarantor's part to sue the Company or
prove against its estate in competition with or so as to diminish
any dividend or other advantage that would or might come to the
Bank or to treat the liability of the Company as diminished;
3.21 that any notice demand or request required or permitted to be
given or made under the guarantee and indemnity herein shall be
in writing and shall be sufficiently made or given to the
Guarantor if left by hand or sent by telegram telex or registered
post addressed to the Guarantor at its address above written or
its last know place of business or residence or at such other
addresses as the Guarantor shall notify in writing to the Bank
and shall in the case of a notice demand or request sent by
telegram telex or registered post be deemed to have been served
on and duly received by the Guarantor at the time when the same
would in the ordinary course of transmission or post be received;
3.22 that all costs and disbursements of and incidental to the
guarantee and indemnity herein and the collection of any money
due or to become due hereunder including the Bank's legal costs
(including fees on a solicitor-client basis) on a full indemnity
basis shall be borne by the Guarantor.
4. RESTRICTION AGAINST TRANSFER OF SHARES IN THE COMPANY
-----------------------------------------------------
The Guarantor being the beneficial owner of seventy per cent
(70%) of the issued share capital in the Company hereby undertakes not to
effect any change in the shares held by it during the period this Guarantee
shall be in force without the prior written consent of the Bank.
5. LAW AND JURISDICTION
--------------------
This Guarantee shall be governed by, and construed in accordance
with the laws of Malaysia.
(B) In relation to any legal action or proceedings arising out of or
in connection with this Guarantee ("Proceedings"), each of the Guarantor
irrevocably submits to the jurisdiction of the courts of Malaysia, and waives
any objection to Proceeding in any such court on the grounds of venue or on the
grounds that the Proceedings have been brought in an inconvenient forum.
(C) That submission shall not affect the right of the Bank to take
Proceedings in any other jurisdiction nor shall the taking of Proceedings in
any jurisdiction preclude the bank from taking Proceedings in any other
jurisdiction.
<PAGE> 15
8
(D) Pursuant to Clause 5(B) the Guarantor irrevocable appoints Messrs
Cheang & Ariff, Advocated & Solicitor, of 39 court, 39, Jalan Yap Kwan Seng,
50450 Kuala Lumpur to receive, for in and on its behalf, services of process in
any Proceedings in Malaysia. Such service shall be deemed completed on delivery
to the process agent (whether or not it is forwarded to and received by Pool
Company). If for any reason the process agent ceases to be able to act as such
or no longer has an address in Malaysia, Pool Company irrevocably agrees to
appoint a substitute process agent acceptable to the Bank, and to deliver to
the Bank a copy of the new agent's acceptance of that appointment, within
fourteen (14) days of such acceptance.
7. TIME
----
Time wherever mentioned shall be of the essence of this Agreement.
8. SUCCESSORS BOUND
----------------
(a) This Guarantee shall be binding upon the successor-in-title of the
Guarantor.
(b) This Guarantee which is provided to the Bank will remain valid
to any successor-in-title or assignee including any Malaysian incorporated
company to which the Bank's Malaysian operations may from time to time
be transferred to the extent of any debt or liability outstanding now
and in the future under the Term Loan or in respect of which this
Guarantee is given whether the Term loan is now or in the future
provided by the Bank, its successors-in-title or assignee or any other
party on the Bank's behalf notwithstanding that the party receiving the
Guarantee is not also the provider of the Term Loan.
IN WITNESS WHEREOF the parties hereto have hereunto set their
hands the day and year first above written.
SIGNED by )
The Attorney for and on behalf THE )
HONGKONG AND SHANGHAI BANKING ) /s/ YEONG TOONG FATT
CORPORATION LIMITED (Licence No. )
910004C in the presence of:- )
SIGNED by )
for and on behalf of POOL COMPANY ) /s/ R.G. HALE
in the presence of:- )
<PAGE> 1
EXHIBIT 10.32
POOL ENERGY SERVICES CO. 1997 SENIOR EXECUTIVE BONUS PLAN
1. Plan Period
The Plan shall be effective for the calendar year 1997 (the "Plan
Period") subject to early termination in accordance with Paragraph 8
hereof.
2. Purpose
The purposes of the Plan are to provide additional motivations to
management:
a. to cause the financial performance of Pool Energy Services Co.
(the "Company") to be equal to or better than budget;
b. to cause the Stock Performance of the Company to exceed that
of comparable companies; and
c. to cause the achievement of safety goals.
3. Eligibility and Participation
Subject to the provisions of Paragraphs 7 and 8 hereof, the period of
an individual's participation in the Plan shall be concurrent with the
period of his full-time employment in a position which is designated
herein or has been designated by the Compensation Committee of the
Board of Directors of the Company (the "Compensation Committee") as a
Participating Position. Full-time employee incumbents of
Participating Positions shall be Plan participants ("Participants").
Participating positions shall include the Company's President ("CEO");
Senior Vice President, Finance ("CFO"); Group Vice Presidents ("GVP");
Vice President and General Counsel ("VPGC"); and Vice President, Human
Resources ("VPHR").
4. Administration
The Plan shall be administered by the Compensation Committee, which
may amend or, subject to the provisions of Paragraph 8 hereof,
terminate the Plan at any time. The Compensation Committee shall
interpret Plan provisions, and such interpretations shall be
conclusive. The Compensation Committee may increase or decrease the
amount of a bonus award payable to any Participant when in the
judgment of the Compensation Committee the bonus award otherwise
payable would be excessive or inadequate in view of the Participant's
contribution to achieving the purpose of the Plan.
<PAGE> 2
Senior Executive
Page 2
5. Calculation of Benefits
a. For purposes of the calculation of bonus awards hereunder the
following definitions shall apply:
<TABLE>
<CAPTION>
Term Definition
---- ----------
<S> <C>
AEBITD * Actual earnings before interest expense, income tax provision
(credit), depreciation, amortization, and minority interest
of the Company for the Plan Period.
ANI * Actual Net Income of the Company for the Plan Period.
ANI (Division) * Actual Net Income of an Operating Division for the Plan
Period.
BEBITD Budgeted earnings before interest expense, income tax
provision (credit), depreciation, amortization, and minority
interest of the Company for the Plan Period as reflected in
the Company's 1997 budget.
BNI Budgeted Net Income of the Company for 1997, as reflected in
the approved 1997 budget for the Company.
BNI (Division) Budgeted Net Income for an Operating Division for 1997, as
reflected in the Company's 1997 budget for that Operating
Division.
</TABLE>
________________________
* AEBITD, ANI and ANI (Division) shall include an accrued amount
for bonus awards to be paid under the Plan.
<PAGE> 3
Senior Executive
Page 3
<TABLE>
<CAPTION>
Term Definition
---- ----------
<S> <C>
Base Salary The base salary of a Participant, as specified in the
personnel and payroll records of the employing subsidiary of
the Company on the date the employee becomes a Participant.
For employees who are promoted, or otherwise transferred,
from one Participating Position to another after January 1,
1997, Base Salary for each period of service in a
Participating Position shall be the base salary for the
Participant as specified in the personnel and payroll records
of the employing subsidiary of the Company on the date the
employee assumed each such position or January 1, 1997,
whichever is later.
Dividends The total of dividends per share of common stock paid during
the Plan Period.
Operating Division Either of the following: U.S. Operations or International
Operations.
The ANI (Division), BNI (Division), SP, and SG applicable to
a GVP shall be that of the Operating Division for which the
individual as functional responsibility.
Peer Group Baker Hughes Incorporated; BJ Services Company; Daniel
Industries, Inc.; Dresser Industries, Inc.; Global Marine
Inc.; Halliburton Company; Helmerich & Payne, Inc.; McDermott
International, Inc.; Nabors Industries, Inc.; Parker Drilling
Company; Petroleum Geo-Services A/S; Production Operators
Corporation; Rowan Companies, Inc.; Schlumberger Ltd.; Smith
International, Inc.; Sonat Offshore Drilling, Inc.;
Tidewater, Inc.; Varco International, Inc.; Weatherford
Enterra, Inc.; Western Atlas Inc.; and the Company.
</TABLE>
<PAGE> 4
Senior Executive
Page 4
<TABLE>
<CAPTION>
Term Definition
---- ----------
<S> <C>
Safety Goals ("SG") (1) For domestic operations: The targeted frequency in the
Plan Period of OSHA Recordable Incidents ("ORI") as defined
by the Occupational Safety and Health Act of 1970, for an
Operating Division as approved by the CEO.
(2) For international operations: The targeted frequency in
the Plan Period of lost-time incidents ("LTI"), as approved
by the CEO.
Safety Performance ("SP") (1) For domestic operations: The actual frequency in the
Plan Period of ORI reported for an Operating Division in
the Pool Energy Services Co. Management Report for the Plan
Period.
(2) For international operations: The actual frequency in
the Plan Period of LTI as reported for an Operating Division
in the Pool Energy Services Co. Management Report for the
Plan Period.
Stock Appreciation The change over the Plan Period in the value of a share of
common stock measured as the difference between (1) the
average of the closing prices of the stock on the twenty
trading days ended on the last trading day preceding the Plan
Period and (2) the average of the closing prices of the stock
on the twenty trading days ending on the last trading day in
the Plan Period, all such closing prices as reported on the
principal securities exchange on which such stock is listed
or admitted to trading, or if a stock is not listed or
admitted to trading on any such exchange but is traded
over-the-counter and reported on the National Association of
Securities Dealers, Inc. Automated Quotation System
("NASDAQ") or any similar system then in use, then as reported
on that system.
</TABLE>
<PAGE> 5
Senior Executive
Page 5
<TABLE>
<CAPTION>
Term Definition
---- ----------
<S> <C>
Stock Performance The sum of Dividends and Stock Appreciation divided by the
value of a share of common stock at the beginning of the Plan
Period, such value to be based on the average of the closing
prices of the stock on the twenty trading days ended on the
last trading day preceding the Plan Period, with all such
closing prices as reported on the securities exchange or
over-the-counter systems specified in the preceding
paragraph.
</TABLE>
b. Subject to the limitations and restrictions specified in Paragraph
5.h. below, each Participant will be awarded a bonus equal to his or
her Base Salary multiplied by the sum of the applicable percentages
calculated under:
(a) Paragraph 5.c.,
(b) Paragraph 5.d. or 5.e. as applicable,
(c) Paragraph 5.f., and
(d) Paragraph 5.g. if applicable.
c. Stock Performance
-----------------
<TABLE>
<CAPTION>
Condition Applicable Percentage
--------- ---------------------
CFO/ VPGC/
CEO GVP VPHR
--- ---- ----
<S> <C> <C> <C> <C>
(1) The Stock Performance of the
Company exceeds the Stock Per-
formance of six or less of the
companies in the Peer Group None None None
(2) The Stock Performance of the
Company exceeds the Stock Per-
formance of 7, 8, 9, 10, 11, 12
or 13 of the companies in the
Peer Group 10.0% 7.5% 6.25%
</TABLE>
<PAGE> 6
Senior Executive
Page 6
Stock Performance (continued)
<TABLE>
<CAPTION>
VPGC/
CEO CFO VPHR
--- --- ----
<S> <C> <C> <C> <C>
(3) The Stock Performance of
the Company exceeds the
Stock Performance of 14
or more of the companies 20.0% 15% 12.5%
in the Peer Group.
</TABLE>
d. BNI Achievement Applicable to Staff Participants
<TABLE>
<CAPTION>
Condition Applicable Percentage
--------- ---------------------
<S> <C> <C> <C> <C>
VPGC/
CEO CFO VPHR
--- --- ----
(1) ANI is equal to 100% 15% 11.25% 9.375%
of BNI.
(2) ANI is at least equal The percentage specified in 5.d.(1) above reduced
to 90% but less than by:
100% of BNI. VPGC/
CEO CFO VPHR
--- --- ----
37.5-(37.5xANI/BNI) 28.125-(28.125xANI/BNI) 23.4375-(23.4375xANI/BNI)
(3) ANI is more than The percentage specified in 5.d.(1) above increased
100% of BNI. by:
VPGC/
CEO CFO VPHR
--- --- ----
ANI-BNI ANI-BNI ANI-BNI
------- X 75 ------- X 56.25 ------- X 46.875
BNI BNI BNI
</TABLE>
e. BNI Achievement Applicable to GVPs
<TABLE>
<CAPTION>
Condition Applicable Percentage
--------- ----------------------
<S> <C> <C>
(1) ANI is equal to 100% of BNI and 4.125%
ANI (Division) is at least equal
to BNI (Division).
</TABLE>
<PAGE> 7
Senior Executive
Page 7
<TABLE>
<S> <C> <C>
(2) ANI is at least 90% but The percentage specified in 5.e.(1) above
less than 100% of BNI, and reduced by:
ANI (Division) is at least
equal to BNI (Division). 10.3125-(10.3125xANI/BNI)
(3) ANI is more than 100% of BNI, The percentage specified in 5.e.(1) above
and ANI (Division) is at least increased by:
equal to BNI (Division).
ANI-BNI
------- X 20.625
BNI
(4) ANI (Division) is equal to BNI 4.125%
(Division).
(5) ANI (Division) is at least 90% The percentage specified in 5.e.(4) above
but less than 100% of BNI reduced by:
(Division).
10.3125-[10.3125xANI (Division)/BNI
(Division)]
(6) ANI (Division) is more than 100% The percentage specified in 5.e.(4) above
of BNI (Division). increased by:
ANI (Division)-BNI (Division)
----------------------------- X 20.625
BNI (Division)
</TABLE>
f. BEBITD Achievement
<TABLE>
<CAPTION>
Condition Applicable Percentage
---------- ----------------------
VPGC/
CEO CFO GVP VPHR
----- ----- ----- ----
<S> <C> <C> <C> <C> <C>
(1) AEBITD is equal to 100% 15% 11.25% 8.25% 9.375%
of BEBITD
</TABLE>
<PAGE> 8
Senior Executive
Page 8
EBITD (continued)
<TABLE>
<S> <C> <C>
(2) AEBITD is at least equal The percentage specified in 5.f.(1) above reduced
to 90% but less than by:
100% of BEBITD
CEO
-----------------------------------------
37.5-(37.5xAEBITD/BEBITD)
CFO
-----------------------------------------
28.125-(28.125xAEBITD/BEBITD)
GVP
----------------------------------------
20.625-(20.625xAEBITD/BEBITD)
VPGC/
VPHR
------------------------------------------
23.4375-(23.4375xAEBITD/BEBITD)
(3) AEBITD is more than The percentage specified in 5.f.(1) above increased
100% of BEBITD. by:
CEO
-------------------
AEBITD-BEBITD
------------------- x 75
BEBITD
CFO
-------------------
AEBITD-BEBITD
------------------- x 56.25
BEBITD
GVP
-------------------
AEBITD-BEBITD
------------------- x 41.25
BEBITD
VPGC/
VPHR
-------------------
AEBITD-BEBITD
------------------- x 46.875
BEBITD
</TABLE>
<PAGE> 9
Senior Executive
Page 9
<TABLE>
<CAPTION>
g. Safety Achievement Applicable to GVPs
-------------------------------------
Condition Applicable Percentage
---------- ----------------------
<S> <C>
(1) SP is equal to SG. 6.0%
(2) SP is less than SG. The percentage specified in 5.g.(1) above
increased by:
24-(24xSP/SG)
(3) SP is greater than SG. None
</TABLE>
h. Restrictions and Limitations
The maximum bonus payable to any Participant shall be a
percentage of Base Salary which is 80% for the CEO, 60% for
the CFO and GVP and 50% for the VPGC and VPHR. In addition,
the maximum bonus payable for exceeding the BNI, BEBITD or SG
target in the Plan is limited to twice the amount that would
be payable for achieving that target. Bonus amounts
calculated in accordance with the applicable provisions of
Paragraphs 5.c., 5.d., 5.e., 5.f., and 5.g. hereof will be
reduced as necessary so as not to exceed the limitations of
this Paragraph 5.h.
6. Payment of Bonus Awards
A Participant's bonus award shall be paid in a single payment, less
applicable withholding taxes, no later than March 15, 1998, provided,
however, that at the discretion of the Compensation Committee, payment
may be in cash or in a combination of cash and shares of common stock
of the Company. In the event of the latter, not less than 50% of the
bonus award due will be paid in cash and the remainder (the
"Remainder") will be paid in Restricted Stock or Bonus Stock under the
provisions of the Pool Energy Services Co. 1993 Employee Stock
Incentive Plan (the "Stock Plan"). The number of shares so awarded
will be determined on the basis of the Fair Market Value, as defined
in the Stock Plan, on the final trading day of the Plan Period, or
such other date as the Compensation Committee shall determine, and
will be a number of shares, the aggregate Fair Market Value of which
equals 115% of the Remainder.
7. Termination of Employment
In the event of a Participant's becoming employed in, terminated (with
or without cause) from, reassigned to or reassigned from a
Participating Position during the Plan Period, any bonus award shall
be prorated for the portion of the Plan Period he was employed in the
Participating Position, and such prorated amount shall be paid when
due except that
<PAGE> 10
Senior Executive
Page 10
no bonus award whatsoever shall be payable to Participants whose
employment is terminated during the Plan Period for reasons other than
death, total disability, retirement or redundancy. Bonus awards due
to Participants who die during the Plan Period shall be paid to the
beneficiary designated by the Participant for Company sponsored life
insurance.
8. Termination of Plan
The Plan may be terminated at any time. No termination of the Plan
shall affect the Company's obligation with respect to any bonus
theretofore accrued. In the event of Plan termination the Plan Period
shall end on the effective date of the termination of the Plan.
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES*
I. MAJORITY OWNED SUBSIDIARIES**
<TABLE>
<CAPTION>
STATE OR COUNTRY OF
INCORPORATION OR
NAME OF COMPANY ORGANIZATION
--------------- -------------------
<S> <C>
Pool Energy Holding, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Pool Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Texas
Pool International Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cayman Islands
PTX, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Texas
Pool Houston #1, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Texas
Pool Alaska, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Texas
Pool California Energy Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . California
Pool International, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Texas
Pool Arabia, Ltd. (51% ownership interest) . . . . . . . . . . . . . . . . . . . . . Saudi Arabia
Pool International Argentina S.A. (51% ownership interest) . . . . . . . . . . . . . Argentina
International Sea Drilling Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . Cayman Islands
Antah Drilling Sdn. Bhd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Malaysia
</TABLE>
_________
* Certain subsidiaries and affiliates which would not individually or in
the aggregate constitute a significant subsidiary have been omitted.
** Ownership is 100% unless otherwise indicated.
<PAGE> 1
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-03159, Registration Statement No. 33- 37229 and Registration Statement No.
33-42194 of Pool Energy Services Co., each on Form S-8, of our reports dated
February 21, 1997, for Pool Energy Services Co. and January 31, 1997 for Pool
Arabia, Ltd. appearing in this Annual Report on Form 10-K of Pool Energy
Services Co. for the year ended December 31, 1996.
DELOITTE & TOUCHE LLP
Houston, Texas
March 12, 1997
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
WHEREAS, Pool Energy Services Co., a Texas corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as amended (the
"Act"), an Annual Report on Form 10-K for the year ended December 31, 1996,
with such amendment or amendments thereto in each case as may be necessary or
appropriate, together with any and all exhibits and other documents having
relation to said Annual Report (the "Annual Report");
NOW, THEREFORE, the undersigned, in his capacity as a Director of the
Company, does hereby appoint J. T. Jongebloed and E. J. Spillard, and each of
them severally, his true and lawful attorney or attorneys with power to act
with or without the other and with full power of substitution and
resubstitution, to execute in his name, place and stead in his capacity as a
Director of the Company said Annual Report and any and all amendments thereto
and all instruments necessary or incidental in connection therewith and to file
the same with the Commission. Each of said attorneys shall have full power and
authority to do and perform in the name and on behalf of the undersigned in the
aforesaid capacity every act whatsoever necessary or desirable to be done in
the premises as fully and to all intents and purposes as the undersigned might
or could do in person, the undersigned hereby ratifying and approving the acts
of said attorneys and each of them pursuant to this Power of Attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 28th day of February, 1997.
/s/ W. C. McCORD
------------------------
W. C. McCord
<PAGE> 2
POWER OF ATTORNEY
WHEREAS, Pool Energy Services Co., a Texas corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as amended (the
"Act"), an Annual Report on Form 10-K for the year ended December 31, 1996,
with such amendment or amendments thereto in each case as may be necessary or
appropriate, together with any and all exhibits and other documents having
relation to said Annual Report (the "Annual Report");
NOW, THEREFORE, the undersigned, in his capacity as a Director of the
Company, does hereby appoint J. T. Jongebloed and E. J. Spillard, and each of
them severally, his true and lawful attorney or attorneys with power to act
with or without the other and with full power of substitution and
resubstitution, to execute in his name, place and stead in his capacity as a
Director of the Company said Annual Report and any and all amendments thereto
and all instruments necessary or incidental in connection therewith and to file
the same with the Commission. Each of said attorneys shall have full power and
authority to do and perform in the name and on behalf of the undersigned in the
aforesaid capacity every act whatsoever necessary or desirable to be done in
the premises as fully and to all intents and purposes as the undersigned might
or could do in person, the undersigned hereby ratifying and approving the acts
of said attorneys and each of them pursuant to this Power of Attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 28th day of February, 1997.
/s/ WILLIAM H. MOBLEY
------------------------------
William H. Mobley
<PAGE> 3
POWER OF ATTORNEY
WHEREAS, Pool Energy Services Co., a Texas corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as amended (the
"Act"), an Annual Report on Form 10-K for the year ended December 31, 1996 with
such amendment or amendments thereto in each case as may be necessary or
appropriate, together with any and all exhibits and other documents having
relation to said Annual Report (the "Annual Report");
NOW, THEREFORE, the undersigned, in his capacity as a Director of the
Company, does hereby appoint J. T. Jongebloed and E. J. Spillard, and each of
them severally, his true and lawful attorney or attorneys with power to act
with or without the other and with full power of substitution and
resubstitution, to execute in his name, place and stead in his capacity as a
Director of the Company said Annual Report and any and all amendments thereto
and all instruments necessary or incidental in connection therewith and to file
the same with the Commission. Each of said attorneys shall have full power and
authority to do and perform in the name and on behalf of the undersigned in the
aforesaid capacity every act whatsoever necessary or desirable to be done in
the premises as fully and to all intents and purposes as the undersigned might
or could do in person, the undersigned hereby ratifying and approving the acts
of said attorneys and each of them pursuant to this Power of Attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 28th day of February, 1997.
/s/ JOSEPH R. MUSOLINO
----------------------------
Joseph R. Musolino
<PAGE> 4
POWER OF ATTORNEY
WHEREAS, Pool Energy Services Co., a Texas corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as amended (the
"Act"), an Annual Report on Form 10-K for the year ended December 31, 1996,
with such amendment or amendments thereto in each case as may be necessary or
appropriate, together with any and all exhibits and other documents having
relation to said Annual Report (the "Annual Report");
NOW, THEREFORE, the undersigned, in his capacity as a Director of the
Company, does hereby appoint J. T. Jongebloed and E. J. Spillard, and each of
them severally, his true and lawful attorney or attorneys with power to act
with or without the other and with full power of substitution and
resubstitution, to execute in his name, place and stead in his capacity as a
Director of the Company said Annual Report and any and all amendments thereto
and all instruments necessary or incidental in connection therewith and to file
the same with the Commission. Each of said attorneys shall have full power and
authority to do and perform in the name and on behalf of the undersigned in the
aforesaid capacity every act whatsoever necessary or desirable to be done in
the premises as fully and to all intents and purposes as the undersigned might
or could do in person, the undersigned hereby ratifying and approving the acts
of said attorneys and each of them pursuant to this Power of Attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 28th day of February, 1997.
/s/ JAMES L. PAYNE
------------------------
James L. Payne
<PAGE> 5
POWER OF ATTORNEY
WHEREAS, Pool Energy Services Co., a Texas corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as amended (the
"Act"), an Annual Report on Form 10-K for the year ended December 31, 1996,
with such amendment or amendments thereto in each case as may be necessary or
appropriate, together with any and all exhibits and other documents having
relation to said Annual Report (the "Annual Report");
NOW, THEREFORE, the undersigned, in his capacity as a Director of the
Company, does hereby appoint J. T. Jongebloed and E. J. Spillard, and each of
them severally, his true and lawful attorney or attorneys with power to act
with or without the other and with full power of substitution and
resubstitution, to execute in his name, place and stead in his capacity as a
Director of the Company said Annual Report and any and all amendments thereto
and all instruments necessary or incidental in connection therewith and to file
the same with the Commission. Each of said attorneys shall have full power and
authority to do and perform in the name and on behalf of the undersigned in the
aforesaid capacity every act whatsoever necessary or desirable to be done in
the premises as fully and to all intents and purposes as the undersigned might
or could do in person, the undersigned hereby ratifying and approving the acts
of said attorneys and each of them pursuant to this Power of Attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 28th day of February, 1997.
/s/ DONALD D. SYKORA
---------------------------
Donald D. Sykora
<PAGE> 6
POWER OF ATTORNEY
WHEREAS, Pool Energy Services Co., a Texas corporation (the
"Company"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as amended (the
"Act"), an Annual Report on Form 10-K for the year ended December 31, 1996,
with such amendment or amendments thereto in each case as may be necessary or
appropriate, together with any and all exhibits and other documents having
relation to said Annual Report (the "Annual Report");
NOW, THEREFORE, the undersigned, in his capacity as a Director of the
Company, does hereby appoint J. T. Jongebloed and E. J. Spillard, and each of
them severally, his true and lawful attorney or attorneys with power to act
with or without the other and with full power of substitution and
resubstitution, to execute in his name, place and stead in his capacity as a
Director of the Company said Annual Report and any and all amendments thereto
and all instruments necessary or incidental in connection therewith and to file
the same with the Commission. Each of said attorneys shall have full power and
authority to do and perform in the name and on behalf of the undersigned in the
aforesaid capacity every act whatsoever necessary or desirable to be done in
the premises as fully and to all intents and purposes as the undersigned might
or could do in person, the undersigned hereby ratifying and approving the acts
of said attorneys and each of them pursuant to this Power of Attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 11th day of March, 1997.
/s/ GARY D. NICHOLSON
-----------------------------
Gary D. Nicholson
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 21,837
<SECURITIES> 0
<RECEIVABLES> 64,279
<ALLOWANCES> 1,235
<INVENTORY> 14,726
<CURRENT-ASSETS> 114,380
<PP&E> 280,602
<DEPRECIATION> 91,477
<TOTAL-ASSETS> 341,217
<CURRENT-LIABILITIES> 66,744
<BONDS> 23,068
0
0
<COMMON> 186,785
<OTHER-SE> 10,338
<TOTAL-LIABILITY-AND-EQUITY> 341,217
<SALES> 0
<TOTAL-REVENUES> 348,558
<CGS> 0
<TOTAL-COSTS> 267,692
<OTHER-EXPENSES> 33
<LOSS-PROVISION> (551)
<INTEREST-EXPENSE> 2,793
<INCOME-PRETAX> 17,061
<INCOME-TAX> 7,524
<INCOME-CONTINUING> 9,640
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,640
<EPS-PRIMARY> .58
<EPS-DILUTED> .58
</TABLE>
