<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
POOL ENERGY SERVICES COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
March 31, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of Pool
Energy Services Co. to be held on Thursday, May 1, 1997 at 10375 Richmond
Avenue, 2nd Floor, Houston, Texas, commencing at 10:00 a.m. Your Board of
Directors and management look forward to greeting personally those shareholders
able to attend.
This year, in addition to electing three directors and ratifying the
appointment of independent auditors, you are being asked to approve an
amendment to the Company's 1993 Employee Stock Incentive Plan to increase the
number of shares reserved for issuance thereunder. These matters are discussed
in greater detail in the accompanying proxy statement.
Your Board of Directors recommends a vote FOR the election of directors, FOR
the amendment to the 1993 Employee Stock Incentive Plan and FOR ratification of
independent auditors.
Regardless of the number of shares you own or whether you plan to attend, it is
important that your shares are represented and voted at the meeting. You are
requested to sign, date and mail the enclosed proxy promptly.
Your interest and participation in the affairs of the Company are most
appreciated.
Sincerely,
J. T. Jongebloed
Chairman, President and
Chief Executive Officer
<PAGE> 3
POOL ENERGY SERVICES CO.
10375 Richmond Avenue
Houston, Texas 77042
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 1, 1997
TO THE SHAREHOLDERS OF
POOL ENERGY SERVICES CO.: MARCH 31, 1997
The Annual Meeting of the Shareholders of Pool Energy Services Co.
(the "Company") will be held at 10375 Richmond Avenue, 2nd Floor, Houston,
Texas, on May 1, 1997, at 10:00 a.m., for the following purposes:
1. To elect three Class III directors, each for a term of three
years.
2. To approve a proposed amendment to the Company's 1993 Employee
Stock Incentive Plan to increase the number of shares of
Common Stock reserved for issuance under the Plan.
3. To ratify the appointment of Deloitte & Touche LLP as
independent auditors of the Company for the year 1997.
4. To transact such other business as may properly come before
the meeting.
Shareholders of record at the close of business on March 7, 1997 are
entitled to notice of and to vote at the meeting and any adjournment thereof.
All shareholders are cordially invited to attend the meeting.
By Order of the Board of Directors,
Geoffrey Arms
Corporate Secretary
================================================================================
YOUR VOTE IS IMPORTANT.
PLEASE SIGN, DATE AND RETURN THE ACCOMPANYING PROXY PROMPTLY.
================================================================================
<PAGE> 4
POOL ENERGY SERVICES CO.
10375 Richmond Avenue
Houston, Texas 77042
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 1, 1997
The following information is submitted concerning the enclosed form of
proxy and the matters to be acted upon under the authority thereof at the
Annual Meeting of Shareholders of the Company to be held at 10375 Richmond
Avenue, 2nd Floor, Houston, Texas, on the 1st day of May, 1997, at 10:00 a.m.,
or any adjournment thereof, pursuant to the Notice of Meeting. This Proxy
Statement and the enclosed form of proxy are first being sent to holders of the
Company's Common Stock on or about March 31, 1997.
INFORMATION CONCERNING PROXY
Proxies are being solicited on behalf of the Board of Directors of the
Company from holders of the Company's common stock, no par value ("Common
Stock"). Any proxy may be revoked by a shareholder at any time prior to the
exercise thereof by filing with the Corporate Secretary of the Company a
written revocation or a duly executed proxy bearing a later date. The proxy
shall be suspended if the shareholder is present at the meeting and elects to
vote in person.
All duly executed proxies will be voted in accordance with the
instructions given. Any duly executed proxies for which no instructions are
given (and which have not been revoked or suspended before they are voted) will
be voted FOR (1) the election of the three nominees for directors named below,
(2) approval of the proposed amendment to the Company's 1993 Employee Stock
Incentive Plan to increase the number of shares of Common Stock reserved for
issuance thereunder by 850,000 shares, and (3) ratification of the appointment
of Deloitte & Touche LLP as the Company's independent auditors for 1997. All
duly executed proxies also will be voted in accordance with the recommendation
of the Board of Directors as to any other matters which may properly come
before the meeting.
The cost of solicitation of proxies will be borne by the Company. In
addition to the use of the mail, employees of the Company, who will not receive
any additional compensation for their activities, may solicit proxies by
telephone or other means of communication. The Company has engaged D. F. King &
Co., Inc. to aid in the solicitation of proxies for which such firm will be
paid a fee of $5,000, plus out-of-pocket expenses. Upon request, the Company
will reimburse brokers, dealers, bankers, and trustees, or their nominees, for
reasonable expenses incurred by them in forwarding proxy material to beneficial
owners of shares of Common Stock.
1
<PAGE> 5
VOTING SECURITIES
The securities of the Company entitled to vote at the Annual Meeting
consist, as of March 7, 1997 (the "Record Date"), of 19,154,294 shares of
Common Stock. Each outstanding share of Common Stock entitles the holder to
one vote on each matter that comes before the meeting. Directors will be
elected by a plurality of the votes cast. All other matters to be considered
at the meeting will be decided by the affirmative vote of the holders of a
majority of the shares present or represented by proxy and entitled to vote at
the Annual Meeting. Only shareholders of record on the Record Date will be
entitled to vote at the meeting. The Articles of Incorporation of the Company
prohibit cumulative voting.
For purposes of a vote on any matter that requires for adoption the
affirmative vote of a majority of the shares present or represented by proxy
and entitled to vote at the Annual Meeting: (i) shares as to which the holder
abstains from voting effectively will constitute a "no" vote because such
shares nevertheless are considered present or represented by proxy at the
meeting, and (ii) shares held in "street name" by a broker or other nominee who
does not have discretionary voting authority to vote such shares on the
particular matter are not counted as shares entitled to vote on such matter
and, therefore, a "broker non-vote" will not affect the outcome of the voting.
1. ELECTION OF DIRECTORS
Pursuant to the Company's Bylaws, the Board of Directors is to consist
of at least two, but not more than ten directors, which number shall be
determined by the Board of Directors from time to time. The Board of Directors
currently consists of seven members. The Bylaws of the Company provide for
three classes of directors, designated as Class I, Class II and Class III. At
the expiration of the term of each class, the directors of that class are to be
elected for a term of three years and until their successors have been elected
and qualified. Class III directors are to be elected at the Annual Meeting, to
serve for terms expiring in the year 2000. Unless contrary instructions are
set forth in the proxy, the persons named in the proxy will vote all shares
represented by duly executed proxies for the election as directors of the three
nominees named below. Should any of the nominees named herein become unable or
unwilling to serve as a director, the persons acting under authority of the
proxies will vote for the election, in the nominee's stead, of such other
person as the Board of Directors shall nominate. The Board of Directors has no
reason to believe that any of the nominees will be unable or unwilling to serve
if elected.
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<PAGE> 6
NOMINEES FOR ELECTION AS DIRECTORS; CONTINUING DIRECTORS
The following table sets forth the name, age, and principal occupation
or employment during the past five years of each nominee for election as a
Class III director and of each continuing Class I and Class II director, as
well as certain other directorships held by each such person and his period of
service as a director of the Company.
<TABLE>
<CAPTION>
Director
Continuously
Since
CLASS III DIRECTOR NOMINEES ------------
<S> <C>
J. T. JONGEBLOED, 55. Mr. Jongebloed has been Chairman of the Company 1989
since 1994 and President and Chief Executive Officer since 1990. He
served as President and Chief Operating Officer from 1989 to 1990 and in
various executive positions with the Company since 1978.
JAMES L. PAYNE, 60. Mr. Payne has been Chairman of the Board, President 1992
and Chief Executive Officer and a director of Santa Fe Energy Resources,
Inc. since 1990.
DONALD D. SYKORA, 66. Mr. Sykora currently serves in the Office of the 1989
Chairman of Houston Industries Incorporated. He was President and Chief
Operating Officer of Houston Industries from 1993 to 1995 and served as a
director of Houston Industries from 1982 to 1995. From 1982 to 1993 he
served as President and Chief Operating Officer of Houston Lighting &
Power Company. He is also a director of TransTexas Gas Corporation,
Powell Industries, Inc. and ARS Services, Inc.
CLASS I CONTINUING DIRECTORS -- [Terms Expiring in 1998]
WILLIAM H. MOBLEY, 55. Dr. Mobley is President and Managing Director of 1990
PDI Global Research Consortia, Ltd., an international management research
and consulting firm. He was previously a professor in the Graduate School
of Business at Texas A&M University from 1980 to 1996. From 1993 to 1994
he was Chancellor of the Texas A&M University System, and from 1988 to
1993 he was President of Texas A&M University. He is also a director of
Medici Medical Group, Inc.
</TABLE>
3
<PAGE> 7
<TABLE>
<S> <C>
JOSEPH R. MUSOLINO, 60. Mr. Musolino has been Vice Chairman of 1994
NationsBank of Texas, N.A. for more than the last five years. He also
serves as a director of Justin Industries, Inc. and of Paragon Group,
Inc.
CLASS II CONTINUING DIRECTORS - [Terms Expiring in 1999]
GARY D. NICHOLSON, 60. Mr. Nicholson is Chairman of the Board of 1996
Directors, President and Chief Executive Officer of Camco International
Inc. Mr. Nicholson joined Camco in October 1992 as Executive Vice
President and Chief Operating Officer, became President and Chief
Executive Officer on January 1, 1993 and Chairman of the Board of
Directors in October 1994. Mr. Nicholson was an independent consultant
from 1991 to 1992.
W. C. MCCORD, 68. Mr. McCord retired as Chairman and Chief Executive 1990
Officer of ENSERCH Corporation in 1993 and has been a director of that
company since 1970. From 1977 to 1991 he served as Chairman, President
and Chief Executive Officer of ENSERCH Corporation. Mr. McCord is also a
director of Lone Star Technologies, Inc. and Enserch Exploration, Inc.
</TABLE>
BOARD COMMITTEES
The Board of Directors has established the following standing
committees:
<TABLE>
<CAPTION>
Committee Current Members
- ---------------------- ------------------------------------------------------
<S> <C>
Audit/Finance Messrs. McCord (Chairman), Mobley and Musolino
Compensation Messrs. Sykora (Chairman), McCord, Nicholson and Payne
Directors' Nominating Messrs. Payne (Chairman), Sykora and Jongebloed
</TABLE>
The principal functions of the Audit/Finance Committee are to select a
firm of independent certified public accountants whose duty is to examine the
consolidated financial statements of the Company, to review the general scope of
services to be rendered by the independent public accountants, to review the
financial condition and results of operations of the Company and to make
inquiries as to the adequacy of the Company's financial and accounting controls.
The Compensation Committee reviews and approves, or recommends to the Board of
Directors, in those instances where Board approval is required, the compensation
of directors and of officers and certain other employees. It also administers
the Company's 1993 Employee Stock Incentive Plan and other plans included in
the Company's management incentive program. The function of the Directors'
Nominating Committee is to recommend nominees for election to the Board of
Directors. The Directors' Nominating Committee will consider one or more
persons recommended by a shareholder as nominees for election to the Board of
Directors if such shareholder submits the name of each such person in writing to
the committee, in care of the Corporate Secretary of the Company, together with
a full statement of such person's
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<PAGE> 8
qualifications and a written consent indicating his or her willingness to
serve. Any such submission must be received no later than the date specified
for submission of shareholder proposals in "Information Concerning Shareholder
Proposals" hereinbelow.
MEETINGS OF THE BOARD AND BOARD COMMITTEES
The Board of Directors met eight times during the year ended December
31, 1996, and the Audit/Finance, Directors' Nominating and Compensation
committees met three, one, and four times, respectively. During the year, no
incumbent director attended fewer than 75 percent of the total number of
meetings held by the Board and by all Board committees of which he was a
member.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company is currently
compensated by an annual cash retainer fee of $12,000 and an annual award of
1,000 shares of Common Stock, which shares are subject to a restriction period
of one year of continuing service during which they may not be sold or
transferred. Such directors also receive a fee of $1,000 for each Board or
Board committee meeting attended. If more than one meeting is held on the same
day, full payment is made for only one meeting and the fee for each additional
meeting attended that day is $800. In addition, a $2,000 per annum fee is paid
for service on a Board committee, with an additional $1,500 per annum paid to
the chairman of a Board committee. Directors who are employed by the Company
receive no additional compensation for service as members of the Board or any
committee of the Board. Under the Company's 1996 Directors' Stock Incentive
Plan (the "Plan"), each director who is not a full-time employee of the Company
automatically receives an initial grant of an option to purchase 8,000 shares of
Common Stock (the "Initial Option Grant") and receives an additional option for
4,000 shares of Common Stock (the "Annual Option Grant") on the date of each
Annual Meeting of Shareholders after the year in which the Initial Option Grant
occurred. The exercise price of the options is equal to the fair market value
per share on the date an option is granted. Each option granted under the Plan
becomes exercisable one year from the date of grant and expires ten years after
the date of the grant. If a participant's service as a director terminates by
reason of disability, death, the failure of the Board to nominate him for
reelection other than for "cause," as defined in the Plan, or his ineligibility
for reelection pursuant to the age limitation imposed by the Company's Bylaws,
his options may be exercised for up to one year after the date of the
disability, death or termination. If a director's service terminates because he
decides not to stand for reelection, or if he becomes a full-time employee, his
options may be exercised for up to three months after such event, and, if his
service terminates for any other reason, except for "cause," his options may be
exercised for up to five business days after such termination. In the event a
director's service terminates for "cause" his options will become immediately
null and void. Provision is made in the Plan for adjustments of options in
cases of mergers, stock splits and similar capital reorganizations and for
immediate vesting in the case of a change in control of the Company.
5
<PAGE> 9
Directors of the Company in office prior to May 1996 also hold options
previously granted pursuant to the 1991 Directors' Stock Option Plan which has
terms and conditions similar to those of the Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Except for Mr. McCord, no member of the Compensation Committee of the
Board of Directors of the Company (i) was, during 1996, an officer or employee
of the Company or any of its subsidiaries, or (ii) was formerly an officer of
the Company or any of its subsidiaries or had any relationships required to be
disclosed by the Company under the rules of the Securities and Exchange
Commission. Mr. McCord was formerly an officer of Pool Company and various
other subsidiaries of the Company.
COMPENSATION OF EXECUTIVE OFFICERS
The Company's executive compensation is administered by the Compensation
Committee.
COMPENSATION COMMITTEE REPORT
ON
EXECUTIVE COMPENSATION
The Compensation Committee reviews the Company's executive compensation
from time to time and determines the compensation of the Chief Executive
Officer and other executive officers of the Company.
The Company's overall policy with regard to executive compensation is to
provide a competitive total compensation package consistent with industry
practice that enables the Company to attract and retain key executives, and to
structure incentive compensation so as to focus executive attention and effort
on the fulfillment of the Company's financial objectives, and on the
appreciation of the value of the Company's stock.
The elements of the Company's compensation program for executive officers
are as follows:
BASE SALARY - Base salary levels are largely determined through
comparisons with compensation paid to executives of companies of similar size
and complexity as the Company within the industry. The Committee attempts to
ensure that such pay levels are competitive within a range that the Committee
considers to be reasonable and necessary. The Committee utilizes for this
purpose surveys and the assistance of outside consultants as well as market
information from other sources and takes into consideration the Company's
performance both in absolute terms and in comparison with other companies in
the industry. With respect to the compensation of officers other than the
Chief Executive Officer, the Committee gives strong
6
<PAGE> 10
consideration to the recommendations of the Chief Executive Officer which are
based as to each such executive officer largely on performance, longevity and
responsibilities.
ANNUAL INCENTIVE COMPENSATION - The Company's executive officers are
eligible to participate in management bonus plans established from time to
time, typically on an annual basis, which provide for bonus awards based on
attaining or exceeding specified financial and other performance objectives.
Under the bonus plan that was in effect for 1996, bonus awards were based on a
net earnings goal, an earnings before interest, income taxes,
depreciation/amortization and minority interest ("EBITD") goal and on a stock
performance goal. For certain executives, a safety performance goal was also
added. Provision was made for awards under such plan to be increased, in the
event performance goals were exceeded by specified amounts, to a maximum of
twice the amount that would be awarded for attaining the targeted performance
objectives. The plan also provided that, at the Committee's discretion, up to
50 percent of any bonuses payable for 1996 could be paid in Company stock, but
none of the 1996 bonuses were paid in Company stock, due in part to the fact
that there were insufficient shares remaining available in the Company's 1993
Employee Stock Incentive Plan to cover the bonus amounts earned.
LONGTERM INCENTIVE COMPENSATION - A longterm incentive compensation
program for senior executives was introduced in 1996. Under this program, a
three-year performance period plan is implemented annually, with awards
thereunder to be paid solely in restricted stock at the end of the performance
period (50 percent restricted for one year and 50 percent restricted for two
years). Entitlement to receive awards under such plan for 1996 was based 50
percent on cumulative EBITD performance and 50 percent on cumulative total
return to shareholders performance compared to a peer group of companies during
the performance period, with target award amounts based on percentages of
participants' annual salaries in effect at the beginning of the performance
period. The 1996 plan also provided for awards thereunder to be increased by
up to 50 percent in the event performance goals were exceeded by specified
amounts.
STOCK INCENTIVE PLAN - The Company has an Employee Stock Incentive
Plan (the "Stock Incentive Plan") pursuant to which executive officers and
other employees, from time to time, may be granted nonqualified options to
purchase Common Stock. The exercise price of all such stock options is equal
to the market price of the shares on the date the option is granted, and the
realization of any value is, therefore, totally dependent on future stock price
appreciation, which provides added incentive to work for the continued growth
and success of the Company. The Stock Incentive Plan also permits the
Committee to make awards to executive officers and other employees, in lieu of
cash compensation, of (i) Restricted Stock (shares of Common Stock that are
subject to such vesting requirements or other restrictions as the Committee
shall establish), and (ii) Bonus Stock (shares of Common Stock that are not
subject to vesting or other restrictions).
SAR/PHANTOM STOCK PLAN - The Company has established a plan (the
"SAR/Phantom Stock Plan"), although it has not yet made any awards thereunder,
pursuant to which executive
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<PAGE> 11
officers and other employees, from time to time, may be granted Stock
Appreciation Rights and/or Phantom Stock awards. A Stock Appreciation Right is
the right to receive, upon the exercise thereof, cash in an amount equal to the
excess, if any, of the fair market value of a share of the Company's Common
Stock on the date such right is exercised over the exercise price of such Stock
Appreciation Right. Phantom Stock Awards are rights to receive cash in an
amount equal to the fair market value of shares of Common Stock which vest over
a period of time or upon the occurrence of an event, as established by the
Committee. The SAR/Phantom Stock Plan is administered by the Committee, and
the Committee will determine eligibility and grant all awards thereunder.
Using the foregoing elements, the Committee seeks to deliver
competitive levels of compensation to executive officers and other key
personnel for the attainment of both short-term and longterm financial
objectives that the Committee believes will favorably influence the Company's
stock price over time. The Committee further believes that compensating
employees who have substantial responsibility for the management and growth of
the Company with Company stock, and providing such persons with opportunities
to benefit directly from increases in the value of Company stock, will also
help to align their interests more closely with those of other shareholders and
provide additional incentive to enhance the profitable growth of the Company.
1996 Compensation
The base salary level approved by the Committee in 1996 for Mr.
Jongebloed, as Chairman, President and Chief Executive Officer, was established
on the basis of (i) personal performance, (ii) Company performance, and (iii)
comparison with salaries for chief executive officers of several
well-recognized companies in the same industry as the Company, as reported by
an outside consultant, Hay Management Consultants ("Hay"). Such base salary
level amounted to a 7.7 percent increase over his previous base salary which
had been in effect for 13 months. Mr. Jongebloed's bonus compensation for 1996
was calculated and paid pursuant to the Company's 1996 Management Bonus Plan
and was based on the Company's attaining or exceeding (i) a goal based on net
income compared to budget, (ii) a goal based on EBITD performance compared to
budget and (iii) a goal based on stock performance compared to that of a peer
group of companies. The bonus earned was approximately 97.3 percent of the
maximum bonus attainable under the Plan and equaled 75.1 percent of Mr.
Jongebloed's 1996 salary.
The Committee approved base salary levels in 1996 for other executive
officers based on recommendations by the Chief Executive Officer and Hay's
recommendations. Bonuses for 1996 were paid to executive officers pursuant to
the terms of the Company's 1996 Management Bonus Plan and were based on the
Company's performance for the year. Each of the executive officers received a
bonus principally on the basis of attaining or exceeding net income, EBITD and
stock performance goals.
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<PAGE> 12
Stock option grants pursuant to the Stock Incentive Plan were made to
Mr. Jongebloed and each of the other executive officers in 1996, and such
persons were also designated to participate in the longterm incentive program.
The option grants were made principally on the basis of (i) Hay's
recommendations, which, in turn, were based on an assessment of competitive
practice, and (ii) each executive's degree of responsibility for the growth and
success of the Company. Opportunities for awards under the longterm incentive
program were determined as a function of the plan in effect for 1996, and are
contingent on the Company's attaining certain EBITD and total return to
shareholders performance during the remainder of the three-year performance
period. The structure of the longterm incentive program, and of the plan
adopted pursuant thereto for 1996, were also determined principally on the basis
of Hay's recommendations and each executive's degree of responsibility for the
growth and success of the Company. The longterm incentive award opportunity for
Mr. Jongebloed for 1996 ranges from zero up to an amount equal to 90 percent of
his annual base salary in effect at the beginning of 1996.
Compliance with Internal Revenue Code Section 162(m)
No formal policy has been adopted by the Company with respect to
qualifying compensation paid to its executive officers for an exemption from
the limitation on deductibility imposed by Section 162(m) of the Internal
Revenue Code. The Company anticipates that all compensation paid to its
executive officers during 1997 will qualify for deductibility because no
executive's compensation is expected to exceed the dollar limitations of such
provision.
COMPENSATION COMMITTEE
D.D. Sykora, Chairman
W.C. McCord
G.D. Nicholson
J.L. Payne
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<PAGE> 13
SUMMARY COMPENSATION TABLE
The following table sets forth information relating to the
compensation paid to the Chief Executive Officer and to each of the other four
persons who were the most highly compensated executive officers of the Company
in 1996, for services rendered in all capacities to the Company for the years
ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
LONGTERM COMPENSATION
-------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------- ---------------------- -------
SHARES
OTHER RESTRICTED UNDERLYING
ANNUAL STOCK STOCK LTIP ALL OTHER
SALARY BONUS COMPENSATION(1) AWARDS OPTIONS PAYOUTS COMPENSATION(2)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- --------------------------- ---- ------ ------- --------------- ---------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. T. Jongebloed 1996 404,423 303,615 -- -0- 60,779 -0- 250
Chairman, President and 1995 376,961 47,250 -- -0- 40,890 -0- 250
Chief Executive Officer 1994 360,000 78,750 -- -0- 23,000 -0- 250
W. J Myers 1996 238,846 123,117 -- -0- 24,416 -0- 250
Group Vice President-- 1995 230,654 12,657 -- -0- 20,000 -0- 250
U.S. Operations 1994 225,000 28,126 -- -0- 10,000 -0- 250
E. J. Spillard 1996 195,068 111,234 -- -0- 19,792 -0- 250
Senior Vice President, 1995 185,937 16,875 -- -0- 20,000 -0- 250
Finance 1994 180,000 28,126 -- -0- 10,000 -0- 250
R. G. Hale 1996 185,846 105,608 -- -0- 18,909 -0- 250
Group Vice President-- 1995 177,653 29,563 -- -0- 20,000 -0- 250
International Operations 1994 172,000 32,250 -- -0- 10,000 -0- 250
G. G. Arms 1996 140,808 66,178 -- -0- 10,597 -0- 250
Vice President and 1995 133,392 12,188 -- -0- 15,000 -0- 250
General Counsel; 1994 130,000 16,250 -- -0- 8,000 -0- 250
Corporate Secretary
</TABLE>
- -----------------------------
(1) Perquisites and other personal benefits paid in each year to each of the
persons listed in the compensation table above did not exceed the lesser
of $50,000 or ten percent of such individual's total salary and bonus.
(2) Reflects the amount contributed by the Company to each individual's 401(k)
Plan account in such year.
OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION EXERCISES IN 1996 AND YEAR-END OPTION VALUES
The following table sets forth information with respect to stock option
exercises during 1996, and unexercised stock options held, as of the end of
1996, by the persons named in the Summary Compensation Table above:
<TABLE>
<CAPTION>
NUMBER OF
SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT 12-31-96 AT 12-31-96
SHARES ACQUIRED VALUE (#) ($)
ON EXERCISE REALIZED -------------------------- --------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. T. Jongebloed 1,000 2,375 156,832 102,947 996,424 637,947
W. J Myers 81,868 398,169 7,500 44,416 87,500 277,892
E. J. Spillard -0- -- 85,228 39,792 526,794 251,304
R. G. Hale 71,255 471,744 2,500 38,909 22,500 246,227
G. G. Arms -0- -- 51,005 25,847 296,245 165,496
</TABLE>
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<PAGE> 14
OPTION GRANT TABLE
OPTION GRANTS IN 1996
The following table sets forth information with respect to stock options
granted during 1996 to the persons named in the Summary Compensation Table
above:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
% OF TOTAL RATES OF STOCK PRICE
NUMBER OF OPTIONS APPRECIATION FOR OPTION
SHARES UNDERLYING GRANTED TO EXERCISE TERM (5)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------------
NAME GRANTED(1)(2)(3) 1996 ($/SH)(4) DATE 5% 10%
- ----------------- ---------------- ------------ --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
J. T. Jongebloed 60,779 24.7 9.625 2/23/06 $ 367,895 $ 932,350
W. J Myers 24,416 9.9 9.625 2/23/06 147,790 374,541
E. J. Spillard 19,792 8.1 9.625 2/23/06 119,801 303,609
R. G. Hale 18,909 7.7 9.625 2/23/06 114,456 290,064
G. G. Arms 10,597 4.3 9.625 2/23/06 64,144 162,558
TOTAL 134,493 54.7 $ 814,086 $ 2,063,122
All Shareholders (6) N/A N/A N/A N/A $85,201,168 $215,923,663
Named Executives' Gain as N/A N/A N/A N/A 0.96% 0.96%
% of all Shareholders' Gain
</TABLE>
- ------------------------------
(1) Options granted in 1996 are exercisable beginning 12 months after the
grant date, with 25 percent of the award
becoming exercisable at that time and an additional 25 percent of the
award becoming exercisable on each of the next three succeeding
anniversary dates. Vesting may be accelerated by a change in control of
the Company.
(2) The Compensation Committee and/or the Board of Directors retains
discretion, subject to plan limits, to modify the terms of outstanding
options.
(3) The options were granted for a term of ten years, subject to earlier
termination in certain events related to termination of employment.
(4) The exercise price and any tax withholding obligation arising in
connection with exercise may be satisfied by the option holder's
surrender of already-owned shares or by offsetting a portion of the shares
issuable upon exercise, subject to certain limitations.
(5) The dollar amounts under these columns are the result of calculations at
the five percent and ten percent rates required by SEC regulations and
therefore are not intended to forecast possible future appreciation, if
any, of the Company's stock price.
(6) Potential shareholder gain is calculated assuming all outstanding shares
were purchased at a price equal to the market price of the Common Stock
($9 5/8 per share) on February 23, 1996, the date of the 1996 option
grants.
11
<PAGE> 15
LONGTERM INCENTIVE PLAN
AWARDS FOR 1996
The following table sets forth information with respect to the
potential awards of Common Stock under the Company's 1996 Longterm Incentive
Plan to the persons named in the Summary Compensation Table. The receipt of
the shares indicated will depend on the Company's performance compared to
specified goals during the performance period commencing January 1, 1996 and
ending December 31, 1998.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
-------------------------------
NUMBER OF PERFORMANCE THRESHOLD TARGET MAXIMUM
NAME SHARES PERIOD (#) (#) (#)
---- --------- ----------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
J. T. Jongebloed 24,632 3 years 12,316 24,632 36,948
W. J Myers 9,895 3 years 4,947 9,895 14,842
E. J. Spillard 8,021 3 years 4,010 8,021 12,031
R. G. Hale 7,663 3 years 3,831 7,663 11,494
G. G. Arms 3,579 3 years 1,789 3,579 5,368
</TABLE>
Under the 1996 Longterm Incentive Plan, a target award of shares is
established for each participant based on a percentage of the individual's
salary in effect at the beginning of the three-year performance period. A
payout under the Plan will depend on the extent to which the established
performance criteria are satisfied. Under the 1996 Plan, awards are based 50
percent on EBITD performance and 50 percent on total return to shareholders
compared to a peer group of companies. All awards are to be paid in Common
Stock, to the extent sufficient shares are available under the Company's 1993
Employee Stock Incentive Plan, and otherwise are to be paid in cash. Shares
received under the Plan are restricted so that, except under certain
circumstances, (i) if the executive's employment terminates within one year
after the shares are earned, 100% of the shares are forfeited, and (ii) if the
executive's employment terminates between one and two years after the award is
earned, 50% of the shares are forfeited. Target payouts are equal to specified
percentages of participants' annual base salaries in effect at the beginning of
the performance period, as follows: 60 percent for Mr. Jongebloed, 40 percent
for Messrs. Myers, Spillard and Hale, and 25 percent for Mr. Arms. Threshold
payouts are one-half of the target payouts and maximum payouts are 150 percent
of the target payouts. Threshold payouts are made if performance falls within
a certain range below that which is necessary to earn the target award.
Maximum payments are made if performance exceeds by a specified amount that
which is necessary to earn the target award.
RETIREMENT PLAN. The Company has a defined benefit retirement
plan for its employees with different benefit formulas for salaried and hourly
employees. The normal monthly retirement benefit payable at age 65, or later
if employment continues beyond age 65, for salaried employees is equal to one
percent of the monthly average of the participant's highest rate of base
compensation determined as of each January 1 of any five consecutive years
during the ten consecutive years preceding retirement, plus 0.6 percent of the
excess of compensation
12
<PAGE> 16
as so determined over the monthly average of the maximum taxable wage base used
to calculate old-age benefits under the Federal Social Security Act for the 35
years ending with the year in which the participant will attain his normal
retirement age under the Federal Social Security Act, multiplied by years and
fractions thereof of credited service after May 1, 1990, up to 35 years. The
plan provides for actuarially reduced benefits for early retirement. Although
the normal form of benefit for married participants is a joint and 50 percent
survivor annuity and, for unmarried participants, a life only annuity, the plan
permits other forms of benefit payment. At December 31, 1996, credited service
under the plan for Messrs. Jongebloed, Myers, Spillard, Hale and Arms was 6.67
years each, and the highest average annual compensation recognized by the plan
for each of them was $150,000, $150,000, $149,000, $149,000, and $126,600,
respectively.
The table below illustrates the amount of annual pension benefit
payable under the plan on a straight life annuity basis beginning at age 65 to
a person in a specified average salary and years of service classification
using, for all years, the 1996 maximum taxable wage base used to calculate
old-age benefits under the Federal Social Security Act:*
<TABLE>
<CAPTION>
Years of Service
-------------------------------------------------------
Remuneration 15 20 25 30 35
- ------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$100,000 . . . . . . . . . . . . . $18,357 $24,476 $30,595 $36,714 $42,833
125,000 . . . . . . . . . . . . . 24,357 32,476 40,595 48,714 56,833
150,000 . . . . . . . . . . . . . 30,357 40,476 50,595 60,714 70,833
175,000 . . . . . . . . . . . . 30,357 40,476 50,595 60,714 70,833
200,000 . . . . . . . . . . . . . 30,357 40,476 50,595 60,714 70,833
225,000 . . . . . . . . . . . . . 30,357 40,476 50,595 60,714 70,833
250,000 . . . . . . . . . . . . 30,357 40,476 50,595 60,714 70,833
300,000 . . . . . . . . . . . . . 30,357 40,476 50,595 60,714 70,833
400,000 . . . . . . . . . . . . . 30,357 40,476 50,595 60,714 70,833
500,000 . . . . . . . . . . . . . 30,357 40,476 50,595 60,174 70,833
</TABLE>
- ---------------------------
*In accordance with the applicable provisions of the Internal Revenue Code of
1986, annual compensation above $150,000 is disregarded in calculating
benefits, and the benefits payable under the plan are limited to $120,000
annually. Both limits are subject to adjustment by the Secretary of the
Treasury to reflect cost-of-living increases and are included in the above
table.
SUPPLEMENTARY EXECUTIVE RETIREMENT PLANS. The Company has two
nonqualified supplementary executive retirement plans which provide retirement
benefits for certain senior executives, one of which plans was implemented in
1993 and the other in 1996. The 1993 plan provides benefits equal to two
percent of the average of the participant's salary and annual bonus
compensation for each of the five years for which such compensation was highest
out of the last ten consecutive years of employment, multiplied by years of
credited service of employment with the Company, Pool Company and ENSERCH
Corporation, up to 35 years, minus (i) social security benefits and (ii)
retirement benefits payable to the participant pursuant to, or resulting from
his participation in, any other qualified defined benefit plans of the Company,
Pool Company or ENSERCH Corporation. The 1996 plan provides benefits equal to
two and one-half percent of the average of the participant's salary and annual
bonus compensation for each of the
13
<PAGE> 17
five years for which such compensation was highest out of the last ten
consecutive years of employment, multiplied by years of credited service of
employment with the Company, Pool Company and ENSERCH Corporation, up to 24
years, minus (i) retirement benefits payable to the participant pursuant to, or
resulting from his participation in, any other qualified defined benefit plans
of the Company, Pool Company or ENSERCH Corporation and (ii) benefits payable
pursuant to the 1993 plan. The benefit thus determined is payable in an
actuarial equivalent lump sum amount. Messrs. Jongebloed, Myers, Spillard,
Hale and Arms are eligible for benefits under such plans. At December 31,
1996, credited service under these plans for Messrs. Jongebloed, Myers,
Spillard, Hale and Arms was 18.3, 8.9, 17.0, 25.1 and 21.2 years, respectively,
and the highest average annual compensation recognized by the plans for each of
them was $478,401, $272,044, $221,470, $216,948 and $159,015, respectively.
The table below illustrates the amount of annual pension benefit that
would be payable under the supplementary plans on a straight life annuity basis
beginning at age 65 to a person in a specified average salary and years of
service classification using for all years the maximum Social Security primary
insurance amounts for a worker retired at age 65 in 1996 and estimated
retirement benefits payable under the Company's current qualified defined
benefit retirement plan:*
<TABLE>
<CAPTION>
Years of Service
--------------------------------------------------------
Remuneration 15 20 25 30 35
- ------------ -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
$100,000 . . . . . . . . . . . . . $ 0 $ 0 $ 3,493 $ 7,374 $ 11,255
125,000 . . . . . . . . . . . . . 0 1,612 5,993 10,374 14,755
150,000 . . . . . . . . . . . . . 0 3,612 8,493 13,374 18,255
175,000 . . . . . . . . . . . . . 6,231 13,612 20,993 28,374 35,755
200,000 . . . . . . . . . . . . . 13,731 23,612 33,493 43,374 53,255
225,000 . . . . . . . . . . . . . 21,231 33,612 45,993 58,374 70,755
250,000 . . . . . . . . . . . . . 28,731 43,612 58,493 73,374 88,255
300,000 . . . . . . . . . . . . . 43,731 63,612 83,493 103,374 123,255
400,000 . . . . . . . . . . . . . 73,731 103,612 133,493 163,374 193,255
500,000 . . . . . . . . . . . . . 103,731 143,612 183,493 223,374 263,255
600,000 . . . . . . . . . . . . . 133,731 183,612 233,493 283,374 333,255
</TABLE>
- -----------------
*The annual benefits shown in the table have been reduced by the amount of any
retirement benefits payable pursuant to other qualified defined benefit plans
of the Company and other required offset items, except for any benefits payable
under any applicable ENSERCH Corporation retirement plan (see text above).
POOL COMPANY RETIREMENT PLAN. Pool Company had two retirement plans
which were merged into the ENSERCH Corporation Retirement and Death Benefit
Program prior to the Company's acquisition of Pool Company. One of such plans
was a defined benefit plan for salaried employees that provided for a fixed
benefit upon retirement at age 65. Participants who were employees of the
Company ceased to accrue further benefits thereunder on the completion of the
Company's acquisition of Pool Company. Pursuant to the terms of such plan,
Messrs. Jongebloed, Myers, and Spillard are entitled to annuity payments of
$19,635, $3,299, and $12,226, respectively, per annum for life commencing upon
normal retirement at age 65. Messrs. Hale and Arms were not participants in
such plan.
14
<PAGE> 18
CHANGE IN CONTROL AGREEMENTS
Messrs. Jongebloed, Myers, Spillard, Hale and Arms each have entered
into change in control agreements with the Company that set forth certain
benefits that the Company will provide to such officers in the event their
employment is terminated subsequent to a "change in control" of the Company, as
defined in the agreements. Such agreements continue in effect until terminated
by the Company upon specified notice and continue for three years following a
change in control of the Company. The agreements each provide that if the
officer is terminated or if the officer elects to terminate employment under
certain circumstances defined as "good reason" within three years following a
change in control of the Company, the officer shall be entitled to a lump sum
severance payment equal to (i) three times the officer's annual base salary (but
not in excess of the aggregate base salary that could be earned up to the
officer's normal retirement date), (ii) an amount equal to the largest bonus
paid to him during the preceding three years, prorated for the current year, and
(iii) the value over the exercise price of unexercised stock options. In
addition, the officer shall be entitled to a three-year continuation of certain
employee benefits, two additional years of service credit under the Company's
retirement program, and reimbursement of certain legal fees, expenses, and any
applicable excise taxes.
15
<PAGE> 19
Comparison of Five Year Cumulative Total Return*
Among Pool Energy Services Co.,
A Peer Group Index and Standard & Poor's 500 Index**
[Performance Graph appears here. Plot points are listed below]
<TABLE>
<CAPTION>
YEARS ENDING
----------------------------------------------
COMPANY NAME/INDEX DEC.92 DEC.93 DEC.94 DEC.95 DEC.96
- ------------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Pool Energy Services Co. 104.08 124.49 110.20 155.10 251.02
S&P 500 Index 107.62 118.46 120.03 165.13 203.05
Peer Group 106.04 134.89 120.76 191.34 342.35
</TABLE>
Assumes $100 invested on December 31, 1991 in Pool Energy Services Co. Common
Stock, the Standard & Poor's 500 Index and a peer group consisting of the
following ten companies: Atwood Oceanics, Inc., Baker Hughes Incorporated,
ENSCO International Incorporated, Global Marine Inc., Noble Drilling
Corporation, Parker Drilling Company, Pride Petroleum Services, Inc., Rowan
Companies, Inc., Tuboscope Vetco International Corporation, and Weatherford
Enterra Inc. Peer group returns have been weighted according to market
capitalization.
* Total Return Assumes Reinvestment of Dividends
**Fiscal Year Ending December 31
16
<PAGE> 20
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the
number of shares of Common Stock owned beneficially as of December 31, 1996 by
each person known to the Company to own more than five percent of the
outstanding shares of Common Stock, and as of March 7, 1997 by (i) each
director of the Company, (ii) each executive officer listed in the Summary
Compensation Table, and (iii) all directors and executive officers of the
Company as a group. No shares of any other class of equity securities are
outstanding.
<TABLE>
<CAPTION>
Beneficial Ownership
------------------------------
Percent
Name of Beneficial Owner Shares of Total
------------------------ --------------- --------
<S> <C> <C>
Brinson Holdings, Inc., Brinson Trust Company, Brinson Partners, Inc.,
SBC Holding (USA), Inc. and Swiss Bank Corporation . . . . . . . . . . . . 1,125,901(1)(3) 5.9%
George D. Bjurman & Associates, George Andrew Bjurman and
Owen Thomas Barry III . . . . . . . . . . . . . . . . . . . . . . . . . . . 957,955(2) 5.0%
J. T. Jongebloed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188,813(4) *
W. C. McCord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,745(5)(6) *
William H. Mobley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,200(5) *
Joseph R. Musolino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,000(7) *
Gary D. Nicholson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,020(8) *
James L. Payne . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000(9) *
Donald D. Sykora . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,000(5) *
G. G. Arms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,900(10) *
R. G. Hale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,727(11) *
W. J Myers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,156(12) *
E. J. Spillard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,813(13) *
All directors and executive officers as a group (12 persons) . . . . . . . . 504,313(14) 2.6%
</TABLE>
- ------------------------------
*Less than 1%
(1) Brinson Holdings, Inc. ("BHI") is the parent company of Brinson Partners,
Inc. ("BPI,") which is a registered investment adviser. BPI is the parent
company of Brinson Trust Company ("BTC"), a bank. All three companies are
located at 209 South LaSalle, Chicago, IL. The shares listed consist of
416,472 owned by BTC and 304,128 owned by BPI. BHI may be deemed to be
the beneficial owner of all such shares through its ownership of BPI and
BTC.
(2) George D. Bjurman & Associates ("GDBA") is an investment advisor
registered under Section 203 of the Investment Adviser's Act of 1940.
George Andrew Bjurman and Owen Thomas Berry III may, as a result of their
ownership in and positions with GDBA, be deemed to be indirect beneficial
owners of the equity securities held by GDBA. Both individuals disclaim
beneficial ownership of said securities. The business address for GDBA
and Messrs. Bjurman and Berry is 10100 Santa Monica Boulevard, Suite 1200,
Los Angeles, CA 90067.
(3) Based upon the most recent amended Schedule 13G delivered to the Company
by such person.
(4) Includes 182,250 shares which may be acquired through the exercise of
stock options that are currently exercisable or will become exercisable
within 60 days after March 7, 1997.
(5) Includes 17,000 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within
60 days after March 7, 1997.
(6) Includes 40,000 shares held by Mr. McCord's wife; Mr. McCord disclaims
beneficial ownership of such shares.
(7) Includes 11,000 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within
60 days after March 7, 1997.
(8) Includes 8,000 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within
60 days after March 7, 1997.
(9) Includes 15,000 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within
60 days after March 7, 1997.
(10) Includes 57,404 shares which may be acquired through the exercise of
stock options that are currently exercisable or will become exercisable
within 60 days after March 7, 1997.
(11) Includes 5,007 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within
60 days after March 7, 1997.
17
<PAGE> 21
(12) Includes 11,104 shares which may be acquired through the exercise of
stock options that are currently exercisable or will become exercisable
within 60 days after March 7, 1997.
(13) Includes 95,176 shares which may be acquired through the exercise of
stock options that are currently exercisable or will become exercisable
within 60 days after March 7, 1997.
(14) Includes 449,775 shares which may be acquired through the exercise of
stock options that are currently exercisable or will become exercisable
within 60 days after March 7, 1997.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and officers, and persons who own more than 10 percent of a
registered class of the Company's equity securities (collectively, the
"Reporting Persons"), to file with the Securities and Exchange Commission
initial reports of beneficial ownership and reports of changes in beneficial
ownership of Common Stock and other equity securities of the Company. To the
Company's best knowledge, all of the reports required to be filed by the
Reporting Persons under Section 16(a) during or in respect of the year 1996
were filed on a timely basis.
2. APPROVAL OF INCREASE IN SHARES RESERVED FOR ISSUANCE UNDER THE 1993
EMPLOYEE STOCK INCENTIVE PLAN
Shareholders will be asked at the Annual Meeting to approve an
amendment to the Company's 1993 Employee Stock Incentive Plan (the "Plan") to
increase the number of shares of Common Stock reserved for issuance thereunder
by 850,000 shares. The Plan originally provided for the issuance of up to
600,000 shares of Common Stock. Of this amount, only about 5,000 shares
currently remain available. The Board of Directors believes it necessary to
reserve an additional 850,000 shares for issuance under the Plan in order to
continue the Plan's purpose, as described below. (The number of shares
reserved for issuance under the Plan is subject to adjustment in certain
events, such as stock splits or recapitalizations.)
PURPOSE. The purpose of the Plan is to assist the Company and its
affiliates in attracting and retaining, as officers and key employees, persons
of training, experience and ability and to furnish additional incentive to such
persons by encouraging them to become owners of shares of the Company's Common
Stock. The Board of Directors believes that this purpose will be furthered
through the granting to key, full-time employees and officers of the Company
and its affiliates of (i) options to purchase shares of Common Stock
("Options"), (ii) awards of shares of Common Stock which are subject to vesting
requirements or other restrictions ("Restricted Stock") and (iii) awards of
shares of Common Stock which are not subject to vesting requirements or other
restrictions ("Bonus Stock"). All options granted under the Plan are
nonqualified options, i.e., options that do not constitute Incentive Stock
Options within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"). Grants of Options and awards of Restricted Stock and
Bonus Stock are collectively referred to herein as "Awards."
ADMINISTRATION. The Plan is administered by the Compensation
Committee of the Board of Directors (the "Committee"), which must consist
solely of "non-employee directors" within the meaning of Rule 16b-3 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Subject to
the terms and conditions of the Plan, the Committee has sole authority to
select employees who are to be granted Awards under the Plan, the number of
shares to be issued pursuant to such Awards and the terms of each Award. In
making such determinations, the Committee may consider the office or position
held by the employee, the employee's degree of
18
<PAGE> 22
responsibility for and contribution to the growth and success of the Company,
the employee's length of service, promotion potential and any other factors
that the Committee may consider relevant.
OPTIONS. The Committee has the authority to grant Options in such form
as it may from time to time approve, provided, however, that no Option may be
exercised sooner than six months after the date of grant nor later than ten
years after the date of grant. Options become 100 percent vested and are
exercisable immediately in full upon a Change in Control of the Company, and
upon death, disability or retirement of the optionee. A Change in Control under
the Plan means, generally, the acquisition by a person or entity of 30 percent
or more of the Company's outstanding Common Stock, certain reorganizations,
mergers or consolidations of the Company or a change in the composition of a
majority of the Board of Directors within a two-year period.
To exercise an Option granted under the Plan, the optionee must
deliver to the Company payment in full for the shares being purchased; payment
is to be in cash or, if the Company approves, may be made through delivery to
the Company of shares of Common Stock that have been owned by the optionee for
more than six months. Optionees do not have any rights as shareholders of the
Company with respect to shares that are subject to an Option until such time as
the Option has been exercised and the optionee shall have become the holder of
record of such shares.
The exercise price of each Option granted under the Plan must be at
least the market value of the Common Stock on the date of grant, determined in
accordance with the Plan. On March 7, 1997, the closing price for the Common
Stock as quoted on the NASDAQ Stock Market was $14 5/16 per share.
The Plan provides that Options will terminate at the time the
optionee's employment is terminated if the termination occurs for cause or for
conflict of interest. If the optionee's employment is terminated by reason of
his death or disability, then the Option will terminate at the end of one year
thereafter. If the optionee's employment is terminated because of retirement,
then the Option will terminate at the end of five years after the optionee's
retirement commences. If the optionee's employment is terminated for any
reason other than those set forth above, the right to exercise any Option will
terminate 90 days thereafter. However, in no event would an Option be
exercisable beyond ten years from the date of the grant.
RESTRICTED STOCK. The Plan provides that Restricted Stock may be
awarded by the Committee, in lieu of cash compensation, to key employees and
officers of the Company and its affiliates. Restricted Stock may not be sold,
assigned, transferred, discounted, exchanged, pledged or otherwise encumbered
or disposed of until the terms and conditions set by the Committee have been
satisfied, which terms and conditions may include, among other things, the
providing of services for a specified time or the achievement of specified
goals. The recipient of a Restricted Stock award is considered to be the
record owner of such shares and has the right
19
<PAGE> 23
to vote such shares, but any dividends or other distributions made or paid with
respect to such shares are accrued and are paid only after the restrictions are
removed. All restrictions on shares of Restricted Stock are canceled in the
event of a Change in Control. Restricted Stock awards may be increased in
value by up to 15 percent over the amount of cash compensation being replaced
to compensate for the fact that such stock does not have immediately realizable
value.
The Plan gives the Committee the authority to cancel all or any
portion of any outstanding restrictions prior to the expiration of such
restrictions with respect to any or all of the shares of Restricted Stock
awarded to a person under the Plan on such terms and conditions as the
Committee may deem appropriate.
If a person to whom Restricted Stock has been awarded ceases to be
employed by at least one of the employers in the group of employers consisting
of the Company and its affiliates, for any reason, any Restricted Stock
remaining subject to restrictions is thereupon forfeited by the person;
provided, however, if the cessation is due to the person's death, disability,
or retirement, the Committee may, in its sole and absolute discretion, deem
that the terms and conditions have been met for all or part of such remaining
portion.
BONUS STOCK. The Committee may, from time to time and subject to the
provisions of the Plan, grant shares of Bonus Stock, in lieu of cash
compensation, to key employees and officers of the Company and its affiliates.
Bonus Stock is fully earned on the date it is awarded and is not, therefore,
subject to vesting requirements or other restrictions except as may be imposed
by law.
AMENDMENT OR TERMINATION OF THE PLAN. The Board of Directors in its
discretion may amend, suspend or terminate the Plan, provided, however, that
any amendment that would (i) increase the aggregate number of shares of Common
Stock to be awarded under the Plan (other than as prescribed in the Plan for
changes in capitalization as described above), (ii) change the manner of
determining the exercise price of Options, (iii) change the class of persons
eligible to receive Awards, or (iv) materially increase the benefits accruing
to participants under the Plan may not be made without shareholders' approval,
unless, in the opinion of counsel to the Company, such approval is not required
in order for the Plan to continue to satisfy the requirements of Rule 16b-3
under the Exchange Act.
The Committee has 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 construe the Plan; (c) to make all
determinations necessary or advisable for administering the Plan; (d) to
determine the terms and provisions of, and to construe the agreements relating
to, awards of Options and Restricted Stock (which need not be identical),
including provisions defining or otherwise relating to (i) the term and the
period or periods and extent of exercisability of Options, (ii) the
restrictions applicable to Restricted Stock awards, (iii) the effect of
termination of employment upon Awards, and (iv) the effect of approved leaves
of absence (consistent with any applicable regulations of the Internal Revenue
Service) upon Awards; and
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(e) subject to the provisions of the Plan, to accelerate, for any reason,
regardless of whether the applicable agreement so provides, the time of
exercisability of Options that have been previously granted or the time of the
lapsing of restrictions on Restricted Stock.
WITHHOLDING FOR TAXES. No issuance of Common Stock pursuant to an
Option exercise or an award of Restricted Stock or Bonus Stock may be made
until appropriate arrangements satisfactory to the Company have been made for
the payment of any tax amounts (federal, state, local or other) that may be
required to be withheld or paid by the Company with respect thereto. Such
arrangements may, at the discretion of the Committee, include allowing holder
of the Award to tender to the Company shares of Common Stock owned by such
holder, or to request the Company to withhold a portion of the Common Stock
being acquired pursuant to the Award.
FEDERAL INCOME TAXES. Summarized below are the material federal
income tax consequences of the Plan, based on applicable provisions of the
federal income tax laws and regulations as currently in effect. As a general
rule, no income will be recognized by grantees of Restricted Stock or by
optionees upon the grant of either. Upon the removal of the restrictions with
respect to Restricted Stock, a grantee will generally recognize ordinary income
equal to the fair market value of the shares of Common Stock when the
restrictions lapse. However, a grantee may elect within 30 days of the grant
of the Restricted Stock to treat the grant, rather than the lapse of the
restrictions, as the taxable event. In this case, the grantee will recognize
ordinary income equal to the fair market value of the shares of the Restricted
Stock (determined without regard to the restrictions) when the Restricted Stock
is granted. The receipt of Bonus Stock will, in general, be immediately
taxable to the grantee as income in an amount equal to the fair market value of
the shares received. Upon the exercise of an Option, the optionee will be
treated as receiving taxable income in an amount equal to the excess of the
fair market value of the shares at the time of exercise over the exercise price
paid for the shares. Upon a subsequent disposition of the shares received
under an Award, any difference between the optionee's or grantee's basis and
the amount realized on the disposition would be eligible for treatment as
longterm capital gain or loss if the shares were held for more than twelve
months and were capital assets in the hands of the optionee or grantee.
The Company generally will be entitled to a tax deduction in the same
amount as, and at the same time as, the optionee or grantee recognizes income,
provided the Company makes the proper federal employment tax withholding. In
addition, in order to be deductible, the compensation must be ordinary and
necessary, must be "reasonable" and must not exceed the deductible compensation
limits under Section 162(m) of the Code.
OUTSTANDING AWARDS. There are approximately 70 persons currently
considered to be key employees who are eligible to receive Awards under the
Plan. As of March 7, 1997, 64,000 shares of Restricted Stock and Options to
purchase a total of 517,909 shares of Common Stock had been granted to
employees and were outstanding pursuant to the Plan. No shares of Bonus Stock
have been issued. Any Awards to be made in the future will be at the
discretion of the Committee and, therefore, are not currently determinable.
The table entitled "Option Exercises
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and Year-End Value Table" hereinabove sets forth the holdings of the executive
officers named in the Summary Compensation Table under the Plan and its
predecessor, the 1990 Employee Stock Option Plan.
Approval of the proposed amendment to the Plan requires the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock present or represented by proxy and entitled to vote at the Annual
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
INCREASE IN SHARES RESERVED FOR ISSUANCE UNDER THE 1993 EMPLOYEE STOCK
INCENTIVE PLAN.
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Audit/Finance Committee of the Board of Directors has appointed
Deloitte & Touche LLP as independent certified public accountants to audit and
express an opinion on the Company's financial statements for the year ending
December 31, 1997. Deloitte & Touche LLP has served as the Company's
independent auditors since 1988. Ratification of the appointment of Deloitte &
Touche LLP requires the affirmative vote of the holders of a majority of the
shares present or represented by proxy and entitled to vote at the Annual
Meeting.
A representative of Deloitte & Touche LLP will attend the Annual
Meeting and will have the opportunity to make a statement if he desires to do
so and to respond to appropriate questions.
In the event the shareholders fail to ratify the appointment of
Deloitte & Touche LLP as the Company's independent auditors, it is not
anticipated that Deloitte & Touche LLP would be replaced in 1997. Such lack of
approval would, however, be considered by the Audit/Finance Committee in
selecting the Company's independent auditors for 1998.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS.
4. OTHER MATTERS WHICH MAY COME BEFORE THE ANNUAL MEETING
The Company knows of no matters other than those stated above which
are to be brought before the Annual Meeting. However, if any other matters do
properly come before the Annual Meeting, it is intended that the persons named
in a duly executed proxy will vote all of the shares of Common Stock
represented by such proxy in accordance with their best judgment with respect
to any such matter.
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INFORMATION CONCERNING SHAREHOLDER PROPOSALS
A shareholder intending to present a proposal at the 1998 Annual
Meeting of Shareholders scheduled to be held on May 7, 1998 and who desires
that such proposal be included in the Company's Proxy Statement and form of
proxy card relating to the meeting, must deliver such proposal, along with any
supporting statement, in writing, to the Corporate Secretary at the Company's
principal offices no later than November 26, 1997.
A copy of the Annual Report for 1996 is being mailed to shareholders
with this Proxy Statement. The Annual Report is not to be regarded as proxy
soliciting material or a communication by means of which any solicitation is to
be made.
Whether or not you intend to be present at this meeting, you are urged
to execute and return promptly the enclosed form of proxy. If you are present
at the meeting and wish to vote your stock in person, you may do so.
By Order of the Board of Directors,
Geoffrey Arms
Corporate Secretary
DATED: March 31, 1997
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[ ] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
RECEIPT OF THE NOTICE OF MEETING AND PROXY STATEMENT IS HEREBY ACKNOWLEDGED.
THE UNDERSIGNED HEREBY REVOKES ANY PROXIES HERETOFORE GIVEN AND DIRECTS
SAID ATTORNEYS TO ACT OR VOTE AS FOLLOWS:
1. ELECTION OF DIRECTORS
NOMINEES: J.T. Jongebloed, James L. Payne, Donald D. Sykora
FOR WITHHELD MARK HERE IF YOU PLAN [ ]
[ ] [ ] TO ATTEND THE MEETING
[ ] ______________________________________ MARK HERE FOR ADDRESS [ ]
For all nominees except as noted above CHANGE AND NOTE BELOW
2. AMENDMENT TO 1993 EMPLOYEE STOCK INCENTIVE PLAN TO INCREASE THE NUMBER
OF SHARES OF THE COMPANY'S COMMON STOCK RESERVED FOR ISSUANCE
THEREUNDER.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS
INDEPENDENT AUDITORS FOR THE YEAR 1997.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS AND WILL BE VOTED IN
ACCORDANCE WITH THE SHAREHOLDER'S
SPECIFICATIONS HEREON. IN THE ABSENCE
OF SUCH SPECIFICATION, THIS PROXY WILL
BE VOTED IN FAVOR OF EACH NOMINEE FOR
DIRECTORS, "FOR" APPROVAL OF THE
INCREASE IN THE SHARES OF THE COMPANY'S
COMMON STOCK RESERVED FOR ISSUANCE UNDER
THE 1993 EMPLOYEE STOCK INCENTIVE PLAN
AND "FOR" THE PROPOSAL TO RATIFY THE
APPOINTMENT OF DELOITTE & TOUCHE LLP.
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Joint owners must EACH sign. Please sign
EXACTLY as your name(s) appear(s) on
this card. When signing as an attorney,
trustee, executor, administrator,
guardian or corporate officer, please
give your FULL TITLE.
Signature: ___________________________________ Date: ________________________
Signature: ___________________________________ Date: ________________________
