<PAGE> 1
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
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 and 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 outstanding of each of the issuer's classes of common
stock, as of March 31, 1997: Common Stock, no par value - 19,154,794 shares
===============================================================================
<PAGE> 2
PART I
ITEM 1. FINANCIAL STATEMENTS
POOL ENERGY SERVICES CO.
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
-------------------------------
1997 1996
------------- --------------
<S> <C> <C>
Revenues ....................................................................... $ 98,384 $ 81,682
Earnings Attributable to Unconsolidated Affiliates ............................. 1,004 658
------------- --------------
Total ................................................................. 99,388 82,340
------------- --------------
Costs and Expenses:
Operating expenses ........................................................ 74,716 63,581
Selling, general and administrative expenses .............................. 12,761 11,298
Depreciation and amortization ............................................. 5,703 4,253
------------- --------------
Total ................................................................. 93,180 79,132
------------- --------------
Other Income (Expense) - Net ................................................... 558 164
Interest Expense ............................................................... 785 645
------------- --------------
Income Before Income Taxes and Minority Interest ............................... 5,981 2,727
Income Tax Provision ........................................................... 2,272 1,304
Minority Interest in Loss of Consolidated Subsidiary ........................... (96) -
------------- --------------
Net Income ..................................................................... $ 3,805 $ 1,423
============= ==============
Earnings Per Share of Common Stock ............................................. $ .20 $ .10
============= ==============
Average Common Shares Outstanding .............................................. 19,140,119 14,074,006
============= ==============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE> 3
POOL ENERGY SERVICES CO.
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
-------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Operating Activities:
Net Income ................................................................ $ 3,805 $ 1,423
Noncash items included above:
Depreciation and amortization ......................................... 5,703 4,253
Deferred income taxes ................................................. 2,023 940
Undistributed earnings of unconsolidated affiliates ................... (963) (674)
Other - net ........................................................... (564) (102)
Payment for lease of manufacturing facility ............................... (537) (537)
Other - net ............................................................... (318) (258)
Net effect of changes in operating working capital ........................ (8,305) (4,427)
----------- -----------
Net Cash Flows Provided by Operating Activities .................. 844 618
----------- -----------
Investing Activities:
Property additions ........................................................ (6,999) (5,356)
Expenditures for acquisition, including acquisition costs ................. - (68)
Proceeds from disposition of property, plant and equipment ................ 947 276
Other - net ............................................................... 617 270
----------- -----------
Net Cash Flows Used for Investing Activities ..................... (5,435) (4,878)
----------- -----------
Financing Activities:
Proceeds from exercise of stock options ................................... 532 203
Payments for debt financing costs ......................................... (14) (196)
Proceeds from long-term debt .............................................. - 6,500
Principal payments on long-term debt ...................................... (2,525) (1,562)
----------- -----------
Net Cash Flows Provided by (Used for) Financing Activities ....... (2,007) 4,945
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents ........................... (6,598) 685
Cash and Cash Equivalents at January 1, ........................................ 21,837 5,492
----------- -----------
Cash and Cash Equivalents at March 31, ........................................ $ 15,239 $ 6,177
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 4
POOL ENERGY SERVICES CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1997 1996
---------- -----------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents .............................................. $ 15,239 $ 21,837
Restricted cash ........................................................ 185 183
Accounts and notes receivable (net of allowance for doubtful accounts of
$1,024 and $1,235) ................................................... 72,966 69,614
Inventories ............................................................ 15,644 14,726
Deferred income tax asset ............................................. 3,807 3,807
Other current assets ................................................... 10,011 4,213
--------- -----------
Total current assets ................................................. 117,852 114,380
Property, Plant and Equipment - Net ....................................... 190,430 189,125
Investment in and Noncurrent Receivables from Unconsolidated Affiliates ... 20,068 19,104
Goodwill, net ............................................................. 12,540 12,880
Noncurrent Deferred Income Tax Asset ..................................... 139 1,506
Noncurrent Receivables (net of allowance for doubtful accounts of $1,422
and $1,219) and Other Assets ........................................... 2,944 3,421
Noncurrent Restricted Cash ................................................ 756 801
---------- -----------
Total ................................................................ $ 344,729 $ 341,217
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt ...................................... $ 10,079 $ 10,627
Accounts payable ....................................................... 22,125 22,022
Other current liabilities .............................................. 34,580 34,095
---------- -----------
Total current liabilities ............................................ 66,784 66,744
Long-Term Debt ............................................................ 21,091 23,068
Deferred Income Taxes ..................................................... 4,235 4,199
Other Liabilities ......................................................... 46,946 46,036
Minority Interest ......................................................... 3,951 4,047
Shareholders' Equity :
Common stock, no par value:
40,000,000 shares authorized; 19,154,794 and 19,094,824 shares
issued and outstanding ............................................. 187,485 186,785
Retained earnings ...................................................... 15,356 11,551
Unearned compensation - restricted stock ............................... (797) (891)
Cumulative foreign currency translation adjustments .................... (322) (322)
---------- -----------
Total shareholders' equity ........................................... 201,722 197,123
---------- -----------
Total ................................................................ $ 344,729 $ 341,217
========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 5
POOL ENERGY SERVICES CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements included in this report
are unaudited but in the opinion of management include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial information for the periods indicated. All dollar
amounts in the tabulations in the notes to the financial statements are stated
in thousands unless otherwise indicated. Certain reclassifications have been
made in the 1996 financial statements to conform with the 1997 presentation.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted.
2. UNCONSOLIDATED AFFILIATES
The following table sets forth certain summarized financial information of
the Company's unconsolidated affiliates as derived from the unaudited condensed
financial statements of the affiliates.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
---------------------
1997 1996
--------- ------
<S> <C> <C>
Revenues:
Pool Arabia, Ltd. ........................ $ 8,584 $ 6,718
Antah Drilling Sdn. Bhd. ................. - (b) 1,048
Pool Santana, Limited .................... - (c) 960
Intairdril Oman L.L.C. ................... 65 265
--------- --------
Total .............................. $ 8,649 $ 8,991
========= ========
Gross Profit (a):
Pool Arabia, Ltd. ........................ $ 3,465 $ 2,346
Antah Drilling Sdn. Bhd. ................. - (b) 596
Pool Santana, Limited .................... - (c) 333
Intairdril Oman L.L.C. ................... 56 115
--------- --------
Total .............................. $ 3,521 $ 3,390
========= ========
Net Income (Loss):
Pool Arabia, Ltd. ........................ $ 448 $ (291)
Antah Drilling Sdn. Bhd. ................. - (b) 59
Pool Santana, Limited .................... - (c) 89
Intairdril Oman L.L.C. ................... (23) 36
--------- --------
Total .............................. $ 425 $ (107)
========= ========
</TABLE>
(a) Gross profit is computed as revenues less operating expenses (which
excludes depreciation and amortization and selling, general and
administrative expenses).
(b) In October 1996, the Company acquired the 51% interest that it did not
already own in Antah Drilling Sdn. Bhd. ("Antah Drilling"). Antah
Drilling's results have been included in the accompanying
financial statements since the date of such acquisition.
(c) In April 1996, the Company acquired the 51% interest that it did not
already own in Pool Santana, Limited, a Trinidad corporation, the assets
of which consisted primarily of a platform workover rig and related
equipment which were subsequently transferred to the Company's Gulf of
Mexico operation.
5
<PAGE> 6
POOL ENERGY SERVICES CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
Earnings attributable to unconsolidated affiliates is summarized below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------------
1997 1996
-------- ---------
<S> <C> <C>
The Company's portion of net income (loss) .................................. $ 217 $ (57)
Adjustment to reconcile differences between affiliates' bases and
Company's carrying value ............................................... 746 731
-------- ---------
Equity in income ............................................................ 963 674
Other income (expense) ...................................................... 41 (16)
-------- ---------
Total .................................................................. $ 1,004 $ 658
======== =========
</TABLE>
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
1996 ACQUISITIONS
Antah Drilling Acquisition. In October 1996, the Company acquired the 51%
interest that it did not already own in Antah Drilling and, in March 1997, such
entity's name was changed to Pool International (Malaysia) Sdn. Bhd. ("Pool
Malaysia"). Pool Malaysia's assets include Rig 489, a new state-of-the-art
2,000 horsepower offshore platform drilling rig, which commenced a three-year
contract for Esso Australia, Ltd. in Australia in August 1996, and an offshore
platform workover rig currently operating under a term contract in Malaysia.
Argentina Acquisition. In August 1996, the Company acquired 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.
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 Well Service Co. ("Western Oil") in the Williston Basin.
RESULTS OF OPERATIONS - QUARTERS ENDED MARCH 31, 1997 AND 1996
The Company had net income of $3.8 million for the first quarter of 1997,
compared to $1.4 million for the first quarter of 1996. The average price of
crude oil was approximately 16% higher in the first quarter of 1997 than in the
first quarter of 1996, and average domestic natural gas prices decreased
approximately 10% comparing the same periods. Results from the Company's
domestic operations improved primarily due to (i) increased production services
activity in Texas and increased rig activity in the Austin Chalk and lower Gulf
coast areas of Texas and in southern California, (ii) increased activity and
rates for the Company's jackup rigs in the Gulf of Mexico, (iii) inclusion of
results from the land well-servicing rigs acquired in June 1996 from Western
Oil and (iv) the operation of Rig 18, a previously idle platform drilling rig,
which was refurbished and placed in service in the Gulf of Mexico for Shell
Offshore in September 1996. The Company's domestic onshore operation reported
rig hours 4% higher in the first quarter of 1997 than in the corresponding
quarter of 1996. The Company's offshore operation in the Gulf of Mexico
experienced rig utilization of 65% in the first quarter of 1997, compared to
66% during the corresponding period of 1996; however, average rig rates were
31% higher in the 1997 period. Net income from the Company's international
operations increased primarily due to the operation of Rig 489, the new
offshore platform rig in Australia, higher rig activity by its unconsolidated
affiliate in Saudi Arabia and increased rig activity in Oman.
Revenues. Revenues were $98.4 million in the first quarter of 1997, a 20%
increase over revenues of $81.7 million in the first quarter of 1996. This
increase was attributable to (i) the inclusion of revenues from the two
offshore rigs owned by Pool Malaysia, (ii) higher production services activity
in Texas and higher domestic land well-servicing activity in the Austin Chalk
and lower Gulf coast areas of Texas and in southern California, (iii) the
inclusion of revenues from the Argentina rigs owned by PIASA, (iv) increased
activity and rates for the Company's jackup rigs in the Gulf of Mexico, (v)
inclusion of revenues from the land well-servicing rigs acquired in June 1996
from Western Oil, (vi) higher rig activity in Oman and (vii) the operation of
Rig 18 in the Gulf of Mexico. These revenue increases were offset partly by
lower revenues from operations in Alaska and Ecuador caused by decreased land
rig activity. Domestic onshore well-servicing and production services revenues
increased $7.1 million or 13% in the first quarter of 1997 from the
corresponding quarter of 1996. Domestic onshore well-servicing rig utilization
was 55% in the first quarter of 1997, compared to 53% in the first quarter of
1996. Domestic onshore well-servicing rig hours increased from approximately
279,000 in the first quarter of 1996 to 291,000 in the first quarter of 1997.
Gulf of Mexico offshore workover and drilling revenues increased $3.6
7
<PAGE> 8
million or 29%, international operations revenues increased $8.8 million or
115%, and Alaska operations revenues decreased $2.8 million or 31%.
Earnings Attributable to Unconsolidated Affiliates. Earnings attributable
to unconsolidated affiliates were $1.0 million in the first quarter of 1997
compared to $0.7 million in the first quarter of 1996. Earnings attributable to
Pool Arabia, Ltd., the Company's Saudi Arabia affiliate, increased $0.6 million
from the first quarter of 1996 partly as a result of higher rig utilization
during the first quarter of 1997. Earnings from Antah Drilling (now Pool
Malaysia) 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 $93.2 million in
the first quarter of 1997, an 18% increase compared to costs and expenses of
$79.1 million in the corresponding quarter of 1996. The increase was due to (i)
the inclusion of costs and expenses related to the two offshore platform rigs
owned by Pool Malaysia, the 20 land rigs in Argentina owned by PIASA and the 23
land well-servicing rigs acquired from Western Oil, all of which were acquired
after the first quarter of 1996, (ii) increased domestic onshore rig and
production services activity, (iii) the operation of Rig 18 and increased
jackup rig activity in the Gulf of Mexico and (iv) increased rig activity in
Oman. The increase was partly offset by decreased costs and expenses in Alaska
and Ecuador due to lower land rig activity in the first quarter of 1997.
Other Income - Net. Other income - net was $0.4 million higher in the
first quarter of 1997 than in the corresponding quarter of 1996 due to
increased gains on dispositions of equipment and increased interest income
earned on temporary cash investments.
Interest Expense. Interest expense was $0.1 million higher in the first
quarter of 1997 than in the corresponding quarter of 1996 primarily due to
interest expense on the term loans assumed in the Antah Drilling acquisition,
partially offset by a reduction in interest expense due to the scheduled
principal payments made on the Company's other debt.
Income Taxes. The Company recorded income tax expense of $2.3 million
(which included $2.0 million of deferred taxes) on income before income taxes
and minority interest of $6.0 million in the first quarter of 1997, compared to
income tax expense of $1.3 million (which included $0.9 million of deferred
taxes) on income before income taxes of $2.7 million in the first quarter of
1996. The increase in income tax expense in the first quarter of 1997 compared
to the first quarter of 1996 was primarily due to stronger operating results in
the first quarter of 1997, which includes results from acquisitions that
occurred after the first quarter of 1996. The Company's interim period tax
expense is determined by utilizing the aggregate of estimated annual effective
tax rates for each of the Company's domestic and foreign entities.
FINANCIAL CONDITION AND LIQUIDITY
Cash Flows. The Company had cash and cash equivalents of $15.2 million at
March 31, 1997 compared to $21.8 million at December 31, 1996. Working capital
was $51.1 million and $47.6 million at March 31, 1997 and December 31, 1996,
respectively. The Company used a net $5.4 million for investing activities in
the first quarter of 1997, primarily for capital expenditures of $7.0 million,
offset partly by $0.9 million of proceeds from dispositions of equipment. The
Company used a net $4.9 million for investing activities in the first quarter
of 1996, primarily for capital expenditures of $5.4 million, offset partly by
$0.3 million of proceeds from dispositions of equipment.
Credit Facilities and Long-Term Debt. The Company has available a
syndicated bank revolving line of credit to finance temporary working capital
requirements and to support the issuance of letters of credit. The maximum
availability is the lesser of (i) $40 million, or (ii) a calculated amount
based upon a percentage of domestic receivables meeting certain criteria. At
March 31, 1997, the maximum availability was $38.1 million, of which
8
<PAGE> 9
none had been drawn in cash and $12.3 million was being utilized to support the
issuance of letters of credit primarily related to insurance obligations.
During the first quarter of 1997, the Company made scheduled principal
payments of $2.5 million on long-term debt, compared to $1.6 million in the
corresponding quarter of 1996.
Capital Expenditures. The Company anticipates that 1997 capital
expenditures for improvements and upgrades to its existing rig fleet will be
approximately $32 million. It is anticipated that these expenditures will be
financed chiefly though 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.
Proposed Acquisition. In April 1997, the Company signed a nonbinding
letter of intent to acquire all the outstanding capital stock of D A & S Oil
Well Servicing, Incorporated ("D A & S"), a privately-owned corporation, for
consideration of approximately $10.2 million. D A & S owns a fleet of 37
well-servicing rigs, which operate from yards in Hobbs and Eunice, New Mexico
and Andrews, Texas. Consummation of such acquisition is subject to a number of
conditions, including the negotiation of definitive agreements, and there is no
assurance that the transaction will be consummated.
OTHER MATTERS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
which establishes new standards for computing and presenting earnings per
share. This statement is effective for financial statements issued for periods
ending after December 15, 1997; earlier application is not permitted. However,
if this statement had been applied in the first quarter of 1997, there would
have been no effect on the Company's computation of earnings per share.
9
<PAGE> 10
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 1, 1997 the Company held its Annual Meeting of Shareholders. At
such meeting the following matters were voted upon:
(i) The following persons were elected to serve as directors of the
Company, each for a term of three years or until a successor is elected and
qualified:
<TABLE>
<CAPTION>
VOTES VOTES
FOR WITHHELD
---------- ---------
<S> <C> <C>
J.T. Jongebloed 17,584,632 135,678
James L. Payne 17,585,228 135,082
Donald D. Sykora 17,580,907 139,403
</TABLE>
(ii) A proposal to amend the Company's 1993 Employee Stock Incentive Plan
in order to increase the shares reserved for issuance thereunder by 850,000
shares was approved. Such proposal received 13,764,844 affirmative votes,
3,750,961 negative votes, and there were 20,163 abstentions and 184,342 broker
non-votes.
(iii) A proposal to ratify the appointment of Deloitte and Touche LLP as
independent auditors of the Company for the year 1997 was approved. Such
proposal received 17,639,867 affirmative votes, 70,169 negative votes, and
there were 10,274 abstentions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NO. DOCUMENT
- ----------- --------
10.1(*) - Pool Energy Services Co. 1997 Longterm Incentive Plan
10.2(*) - Pool Company 1996 Supplementary Executive Retirement Plan
27(*) - Financial Data Schedule
- ---------------
(*) Filed herewith
(b) Reports on Form 8-K - There were no reports on Form 8-K filed during the
quarter ended March 31, 1997.
10
<PAGE> 11
SIGNATURES
Pursuant to the requirements 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.
POOL ENERGY SERVICES CO.
(Registrant)
MAY 13, 1997 /s/ E. J. SPILLARD
--------------------------- -----------------------------------
(Date) E. J. Spillard
Senior Vice President, Finance
(principal financial officer)
MAY 13, 1997 /s/ B. G. GORDON
--------------------------- -----------------------------------
(Date) B. G. Gordon
Controller
(principal accounting officer)
11
<PAGE> 12
POOL ENERGY SERVICES CO.
INDEX TO EXHIBITS
EXHIBIT NO. DOCUMENT
10.1(*) - Pool Energy Services Co. 1997 Longterm Incentive Plan
10.2(*) - Pool Company 1996 Supplementary Executive Retirement Plan
27(*) - Financial Data Schedule
- --------
(*) Filed herewith
12
<PAGE> 1
EXHIBIT 10.1
POOL ENERGY SERVICES CO.
1997 LONGTERM INCENTIVE PLAN
SECTION 1. NAME
The name of the plan is the Pool Energy Services Co. 1997 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, 1997 and ending December 31, 1999 (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.
<PAGE> 2
1997 Longterm Incentive Plan
Page 2
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.
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), Depreciation and Amortization and Minority Interest for the Plan
Period as reflected in the audited financial statements of the Company.
h. "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. Participants shall include the Company's Chairman, President and Chief
Executive Officer ("CEO"); Group Vice Presidents ("GVP"); Senior Vice
President, Finance ("CFO"); Vice President & General Counsel ("VPGC"); and Vice
President, Human Resources ("VPHR").
i. "Peer Group" means 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. 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.
j. "Restricted Stock" means Restricted Stock as defined in the
Pool Energy Services Co. 1993 Employee Stock Incentive Plan (the "Stock Plan").
k. "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.
l. "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 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.
<PAGE> 3
1997 Longterm Incentive Plan
Page 3
m. "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 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 Paragraph
4.l. hereof.
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
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. The Compensation Committee may increase or decrease the amount of an
Award payable to any Participant when in the judgment of the Compensation
Committee the Award otherwise payable would be excessive or inadequate in view
of the Participant's contribution to achieving the purpose 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 Compensation Committee may amend or, subject to
the provisions of Sections 11 and 12 hereof, terminate the Plan at any time.
The determinations of the Compensation Committee on the matters referred to in
this Section 6 shall be final and conclusive.
<PAGE> 4
1997 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 $129.68
million
(2) EBITD is $129.68 15% 10% 6.25%
million
(3) EBITD is $135.95 30% 20% 12.50%
million
(4) EBITD is $149.11 45% 30% 18.75%
million
</TABLE>
If EBITD falls between two of the above levels, 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>
6 or less None None None
7, 8, 9, 10,
11, 12, or 13 30% 20% 12.50%
14 or more 45% 30% 18.75%
</TABLE>
<PAGE> 5
1997 Longterm Incentive Plan
Page 5
SECTION 8. PAYMENT OF AWARDS
a. Except as provided in Paragraphs c. and d. of this Section 8,
a Participant's Award shall be paid, no later than the March 15th first
following the close of the Plan Period, 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 by dividing the dollar amount of the Award
calculated under Section 7 hereof by the Fair Market Value of a share of the
Company's common stock, where such Fair Market Value is equal to the average of
the closing prices of the Company's common 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 system
specified in Paragraph 4.l hereof.
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 of a share
of the Company's common stock, 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 an individual, by reason of death, total
disability, Retirement or redundancy, ceases to be a Participant during the
Plan Period, any Award granted to such Participant shall be paid as specified
in Paragraph 10.b.
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.
e. Awards due to Participants who die prior to payment shall be
paid to the beneficiary designated for Company-sponsored life insurance, or, if
no such beneficiary is specified, to the Participant's estate.
<PAGE> 6
1997 Longterm Incentive Plan
Page 6
SECTION 9. RESTRICTIONS ON RESTRICTED STOCK
a. 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, except as provided in Paragraph b. of this Section 9, 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 immediately following the end
of the Plan Period:
<TABLE>
<CAPTION>
Number of Years of Continuous
Employment Immediately Following Percent of Shares of Restricted Stock
End of Plan Period No Longer Subject to Restriction
-------------------------------- -------------------------------------
<S> <C>
Less than one year 0%
One year 50%
Two years 100%
</TABLE>
b. In the event that a Participant's employment with the Company
is terminated at any time prior to the expiration of two years following the
end of the Plan Period by reason of death, total disability, Retirement or
redundancy, any restrictions to which Restricted Stock awarded to such
Participant under the Plan would otherwise be subject at the date of such
termination shall cease to exist as of the date of such termination.
SECTION 10. PRORATION OF AWARDS
a. In the event that an individual becomes 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.
b. In the event that a Participant's employment with the Company
is terminated by reason of death, total disability, Retirement or redundancy at
any time 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 no later
than the March 15th first following the close of the Plan Period.
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
<PAGE> 7
1997 Longterm Incentive Plan
Page 7
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 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 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.
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 10.2
POOL COMPANY 1996
SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN
EFFECTIVE DECEMBER 5, 1996
<PAGE> 2
Table of Contents
<TABLE>
<S> <C> <C>
ARTICLE I- Purpose, Definitions and Construction
1.1 Purpose of the Plan 1
1.2 Definitions 1
1.3 Construction 3
ARTICLE II- Source of Funds
2.1 Source of Funds 4
2.2 Trust Requirements 4
2.3 Status of Participants 4
ARTICLE III- Benefits Under the Plan
3.1 Retirement Benefit 5
3.2 Minimum Late Retirement Benefit 5
3.3 Benefit at Termination of Employment 5
3.4 Benefit Upon Termination of the Plan 6
3.5 Pre-Retirement Death Benefit 6
3.6 Forfeiture 6
3.7 Time of Payment 6
ARTICLE IV- Change in Control
4.1 Benefit Entitlement 7
4.2 Benefit Upon Termination 7
Following Change in Control
4.3 Definition of Change in Control 8
4.4 Cause 9
4.5 Good Reason 10
4.6 Successor's Binding Agreement 11
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
5.6 1993 Plan Continues in Effect 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. 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. 1997 Senior Executive 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 original hire date of 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. Credited service shall include,
without limitation, a Participant's employment with ENSERCH Corporation and/or
its subsidiaries that preceded his or her employment with the Employer.
(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: December 5, 1996
(g) Eligible Employee: A person who, on or after the Effective
Date, (i) is a Participant in the 1993 Plan; or (ii) is designated by the
Compensation Committee of the PESCO Board of Directors (the "Committee") as
eligible to participate in the Plan; or (iii) is employed by the Employer in a
position designated by the Committee as eligible to participate in the Plan.
Each such person shall be a member 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.
(h) Employer: Pool Company, a corporation organized and existing
under the laws of the State of Texas, and any subsidiaries or affiliates
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) 1993 Plan: The Supplementary Executive Retirement Plan of
Pool Company, effective as of January 1, 1993, as amended or restated from time
to time
(l) Normal Retirement Age: Age 65
(m) Normal Retirement Date: The first day of the calendar month
immediately following the calendar month in which the Participant attains his
Normal Retirement Age.
(n) Participant: An Eligible Employee.
(o) PESCO: Pool Energy Services Co., a corporation organized and
existing under the laws of the State of Texas.
-2-
<PAGE> 5
(p) Plan: This Pool Company 1996 Supplementary Executive
Retirement Plan, as amended from time to time.
(q) Plan Year: The twelve-month period beginning on January 1 and
ending on December 31 each year.
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 or subtract from the terms
of the Plan.
-3-
<PAGE> 6
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.
-4-
<PAGE> 7
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 2-1/2% of Final Average Compensation multiplied by the
years, and fractions thereof, of Credited Service up to 24 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 benefit payable under the 1993 Plan at Normal, Early,
or Late Retirement, as applicable.
If the Actuarially Equivalent lump sum value of (a) less (b) less (c)
less (d) as defined in this Paragraph 3.1 is less than zero, then the benefit
to be paid to the Participant pursuant to this Plan shall be zero.
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:
-5-
<PAGE> 8
(a) is 2-1/2% of Final Average Compensation multiplied by the
years, and fractions thereof, of Credited Service as of the date of
determination up to 24 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 benefit accrued as of the date of determination under
the 1993 Plan, payable at Normal Retirement Date.
If the value of (a) less (b) less (c) less (d) as defined in this
Paragraph 3.3 is less than zero, then the benefit to be paid to the Participant
pursuant to this Plan shall be zero.
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.
-6-
<PAGE> 9
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
a 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 2-1/2% of Final Average Compensation multiplied by the
years, and fractions thereof, of Credited Service up to 24 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);
-7-
<PAGE> 10
(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 age); and
(iv) is the benefit accrued as of the date of
determination under the 1993 Plan, payable at Normal
Retirement Date (or age 55, if payable to the Participant
under such plan at such age).
If the value of (i) less (ii) less (iii) less (iv) as defined in this
Paragraph 4.2(a) is less than zero, then the benefit to be paid to the
Participant pursuant to this Plan shall be zero.
(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 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 1(a) of
the Current Report on Form 8-K, as in
-8-
<PAGE> 11
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"),
(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
-9-
<PAGE> 12
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 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 this 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;
-10-
<PAGE> 13
(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;
(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 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 or 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 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.
-11-
<PAGE> 14
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.
-12-
<PAGE> 15
ARTICLE V
MISCELLANEOUS
5.1 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.
5.6 1993 Plan Continues in Effect
This Plan does not in any way amend or supersede the 1993 Plan; the
1993 Plan remains in full force and effect.
-13-
<PAGE> 16
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the foregoing
instrument comprising the Pool Company 1996 Supplementary Executive Retirement
Plan, Pool Company has caused its seal to be affixed hereto and these presents
to be duly executed in its name and behalf by its proper officers thereunto
authorized this 12th day of May, 1997.
ATTEST: POOL COMPANY
/s/ G.G. ARMS /s/ J.T. JONGEBLOED
___________________________________ ________________________________
G.G. Arms J.T. Jongebloed
Corporate Secretary President
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 15,239
<SECURITIES> 0
<RECEIVABLES> 66,575
<ALLOWANCES> 1,024
<INVENTORY> 15,644
<CURRENT-ASSETS> 117,852
<PP&E> 286,451
<DEPRECIATION> 96,021
<TOTAL-ASSETS> 344,729
<CURRENT-LIABILITIES> 66,784
<BONDS> 21,091
0
0
<COMMON> 187,485
<OTHER-SE> 14,237
<TOTAL-LIABILITY-AND-EQUITY> 344,729
<SALES> 0
<TOTAL-REVENUES> 98,384
<CGS> 0
<TOTAL-COSTS> 74,716
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 45
<INTEREST-EXPENSE> 785
<INCOME-PRETAX> 5,981
<INCOME-TAX> 2,272
<INCOME-CONTINUING> 3,805
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,805
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
