SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (section) 240.14a-11(c) or (section)
240.14a-12
POOL ENERGY SERVICES CO.
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(Name of Registrant as Specified in Its Charter)
POOL ENERGY SERVICES CO.
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No filing fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11.
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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PRELIMINARY COPY -- SUBJECT TO COMPLETION
DATED NOVEMBER 30, 1998
[POOL ENERGY SERVICES CO. LETTERHEAD]
December __, 1998
Dear Shareholders:
We are writing to you about the continued takeover tactics by Nabors
Industries Inc. in its effort to buy Pool Energy Services Co at a bargain price.
Nabors has already started a creeping acquisition by purchasing over 10% of your
Company in the open market without paying any premium. Now Nabors is resorting
to another takeover tactic by calling a Special Meeting of shareholders of Pool.
At the Special Meeting, Nabors will propose that the shareholders adopt a
non-binding resolution recommending that Pool's Board arrange for the sale of
Pool and take all necessary actions to effect such sale, including, among other
things, entering into merger negotiations with Nabors and any other qualified
bidder offering a higher price per share than Nabors.
Nabors knows that even if the resolution passed, your Board of Directors is
not required to take any action whatsoever with respect to the sale of the
Company. Given this, it is clear that Nabors has called the Special Meeting as a
tactic designed to disrupt the Company and distract it from implementing its
strategic plan.
For the reasons set forth in this Proxy Statement, your Board believes that
the Nabors resolution is not in the best interests of the Company or its
shareholders, particularly at this time with depressed prices for oilfield
service companies. The Board recommends that you reject the Nabors resolution by
voting AGAINST such proposal on the enclosed GOLD proxy card.
Your Board asks you to consider carefully the matters discussed in the
accompanying proxy materials and our letter dated November 27, 1998 in
evaluating the Nabors resolution.
To vote your proxy in opposition to the Nabors resolution mark, sign, date
and return the enclosed GOLD proxy card as soon as possible. Please help us send
a strong message to Nabors to stop its disruptive takeover tactics. Your Board
unanimously believes Nabors is not acting in the best interests of all the Pool
shareholders. WE URGE YOU NOT TO SIGN ANY PROXY CARD YOU MAY RECEIVE FROM
NABORS.
We believe our Company's prospects are excellent and think that our
shareholders, not Nabors, should be the beneficiaries as our industry recovers.
It would not be prudent or responsible for our Board to let Nabors reap the
benefits that rightly belong to each of you. We appreciate your continued
support and interest in the affairs of the Company.
Sincerely,
/s/ J.T. Jongebloed
J.T. Jongebloed
Chairman, President
and Chief Executive Officer
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If you have any questions or need assistance in voting your GOLD
proxy card, please contact:
MACKENZIE
PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
CALL TOLL-FREE (800) 322-2885 OR (212) 929-5500 (COLLECT)
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PRELIMINARY COPY--SUBJECT TO COMPLETION, DATED NOVEMBER 30, 1998
[LOGO OF POOL] POOL ENERGY SERVICES CO.
10375 RICHMOND AVENUE
HOUSTON, TEXAS 77042
SPECIAL MEETING
OF THE SHAREHOLDERS OF
POOL ENERGY SERVICES CO.
TO BE HELD ON JANUARY 12, 1999
PROXY STATEMENT BY THE BOARD OF DIRECTORS OF
POOL ENERGY SERVICES CO.
*****
YOUR VOTE IS IMPORTANT
PLEASE MARK, SIGN, DATE AND RETURN THE GOLD PROXY CARD
IN THE ENCLOSED POSTAGE-PAID ENVELOPE
*****
This proxy statement ("Proxy Statement") and the accompanying GOLD proxy
card are being furnished by the Board of Directors of Pool Energy Services Co.,
a Texas corporation ("Pool" or the "Company"), to the shareholders of the
Company in connection with a solicitation of proxies by the Board of Directors
to be used at the Special Meeting of Shareholders of the Company scheduled to be
held at the offices of the Company, 10375 Richmond Avenue, Houston, Texas 77042,
on January 12, 1999 at 9:30 a.m., Houston, Texas time, and at any and all
adjournments, postponements or reschedulings thereof (the "Special Meeting").
The Special Meeting was called by Nabors Industries, Inc., a Delaware
corporation ("Nabors"), and one of its subsidiaries. THIS PROXY STATEMENT IS IN
OPPOSITION TO THE SOLICITATION OF PROXIES BY NABORS.
At the Special Meeting, Nabors intends to introduce a non-binding
resolution (the "Nabors Resolution") requesting that the Company take all
necessary action to arrange for the sale of the Company, including entering into
good faith merger negotiations with Nabors and any other qualified bidder
offering a higher price per share than Nabors, redeeming the common stock
purchase rights of the Company, and taking all actions to approve the sale of
the Company under the Texas Business Corporation Act ("TBCA"), including without
limitation Article 13.03 of the TBCA. See "Reasons for Opposing the Nabors
Resolution."
FOR THE REASONS SET FORTH IN THIS PROXY STATEMENT, THE BOARD OF DIRECTORS
OF THE COMPANY (THE "BOARD") BELIEVES THAT THE NABORS RESOLUTION IS NOT IN THE
BEST INTERESTS OF THE COMPANY OR ITS SHAREHOLDERS. THE BOARD RECOMMENDS THAT YOU
REJECT THE NABORS RESOLUTION BY VOTING THE GOLD PROXY CARD AGAINST SUCH
PROPOSAL.
WE ASK THAT YOU NOT RETURN THE NABORS BLUE PROXY CARD. Even if you
previously signed and returned a blue proxy card sent to you by Nabors, you have
every right to change your vote. You may revoke your previous proxy at any time
before it is exercised (i) by executing a proxy bearing a later date; (ii) by
filing with the Secretary of the Company an instrument revoking it before the
day of the Special Meeting; or (iii) by attending the Special Meeting and voting
in person. Please complete, sign, date and mail the enclosed GOLD proxy card in
the postage-paid envelope provided. EVERY SHARE COUNTS AND YOUR PROMPT ATTENTION
IS IMPORTANT. PLEASE RETURN THE GOLD PROXY CARD TODAY.
This Proxy Statement and the GOLD proxy card are first being furnished to
shareholders of the Company on or about ______, 1998.
IF YOUR SHARES ARE HELD IN THE NAME OF A BROKER, BANK OR NOMINEE, ONLY THE
BROKER, BANK OR NOMINEE CAN SIGN A PROXY CARD AND ONLY UPON RECEIPT OF YOUR
SPECIFIC INSTRUCTIONS TO DO SO. PLEASE CONTACT THE PERSON RESPONSIBLE FOR YOUR
ACCOUNT AND INSTRUCT HIM OR HER TO VOTE THE GOLD PROXY CARD ON YOUR BEHALF.
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WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE READ AND
CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY STATEMENT AND VOTE
AGAINST THE NABORS RESOLUTION BY COMPLETING, DATING AND SIGNING THE ACCOMPANYING
GOLD PROXY AND RETURNING IT PROMPTLY TO MACKENZIE PARTNERS, INC. IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
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If you have any questions or need assistance in voting your GOLD
proxy card, please contact:
MACKENZIE
PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
CALL TOLL-FREE (800) 322-2885 OR (212) 929-5500 (COLLECT)
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BACKGROUND
In late 1993, Nabors began acquiring shares of the common stock, no par
value per share of the Company (the "Common Stock"). In September 1993, Eugene
M. Isenberg, Chairman and Chief Executive Officer of Nabors, and two other
directors of Nabors had dinner with James T. Jongebloed and Ernest J. Spillard,
both executive officers of the Company. Nabors' representatives expressed an
interest in pursuing joint purchasing or other arrangements that could be of
mutual benefit. No specific proposals were discussed and no specific further
actions resulted from that meeting.
In early 1994, the Company developed a strategic plan (the "Strategic
Plan") designed to further strengthen its competitive position and market share
in the oilfield services industry in order to achieve growth in revenues,
earnings and EBITDA (earnings (loss) before interest, income taxes, depreciation
and amortization, and minority interest). Key components of the plan included:
(i) expanding opportunities in existing core market areas through acquisitions
that result in consolidation savings; (ii) upgrading and enhancing the
capabilities of the Company's existing fleet and building certain specialized
rigs and equipment to operate in markets with high levels of activity and strong
pricing fundamentals; (iii) entering new foreign markets that offer significant
development and production activity; and (iv) offering additional core services
and equipment that complement the Company's businesses in its existing field
locations. The Strategic Plan was adopted on May 5, 1994 when the closing price
of the Company's Common Stock was $7.25.
During April 1994, Mr. Isenberg telephoned Mr. Jongebloed to inquire
whether he had any interest in another dinner meeting to examine alternatives of
working together for the mutual benefit of each company's shareholders, but no
further discussions took place at that time. On May 26, 1994, Nabors reported
that it had acquired 867,500 shares of Common Stock (then constituting
approximately 6.4% of the outstanding shares). On June 8, 1994, the Company
announced that it had adopted its shareholder rights agreement. Later in the
summer of 1994, Mr. Isenberg and two other representatives of Nabors met with
Mr. Jongebloed and the Company's investment advisors to discuss whether the
Company had any interest in pursuing a merger, joint venture, or other
combination. Mr. Jongebloed indicated that the Company was of the opinion that
its shareholders would be better served by the implementation of the Strategic
Plan.
Since the adoption of the Strategic Plan, the Company has implemented a
number of key initiatives. These include acquiring additional well-servicing
operations, principally in California, West Texas, and the Rocky Mountains;
acquiring full ownership of the operation in Alaska in which Pool had previously
been a minority partner; increasing the Company's participation in foreign
markets; and acquiring a company that operates a fleet of offshore support
vessels in the Gulf of Mexico. The Company also enhanced its rig fleet through,
among other things, the construction of new rigs and the major upgrading of
others. During this period, the Company's revenues, EBITDA and earnings
increased substantially, and the market price of the Common Stock reflected this
improved financial performance, peaking at over $40.00 per share on October 9,
1997.
Since October 1997, oil prices, which are the predominant driver of the
Company's business activity level, have declined more than 45%. Oil prices are
now at low levels not seen in over ten years. As a result, the prices for the
stocks of many oilfield services companies, including the Company, are
significantly depressed.
In the summer of 1998, after declining oil prices had begun to materially
affect the price of the Common Stock, Nabors approached an investment banker for
the Company regarding a possible combination of the Company and Nabors. Nabors
was told that the Company's management was not open to pursuing discussions at
that time, particularly in view of the then low market price for the Common
Stock.
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On October 12, 1998, Mr. Isenberg sent the following letter to the Board of
the Company (the "October 12th Letter"):
October 12, 1998
CONFIDENTIAL
The Board of Directors of
Pool Energy Services Co.
10375 Richmond Avenue
Houston, Texas 77042
Dear Mr. Jongebloed:
We recently raised with your outside advisor the potential benefits to
our respective stockholders, employees and customers of a combination of
our two companies. While you have informed us that you believe now is not
an appropriate time for a combination, we believe that the current
environment causes the combination to make eminent business sense for both
companies.
The strategic direction of both Pool and Nabors is complementary. Each
company operates drilling and workover platform rigs in the Gulf of Mexico
and internationally as well as land drilling operations in Alaska and
internationally, including Saudi Arabia. A combination of the two companies
can lead to economies of scale that offer the prospect of significant
purchasing, operating and other efficiencies. Nabors' offshore presence
would also offer significant opportunities for marketing Pool's Sea Mar
Fleet.
In times of uncertainty, stockholders, employees and customers will
benefit from a larger, stronger and better-capitalized company. I think
most industry observers would also agree with this premise. For this
reason, we propose putting our two companies together and believe that such
a combination is in the best interest of the stockholders of both
companies.
We would like to submit to your Board a merger proposal under which
Nabors would acquire all of the outstanding shares of Pool at a price of
$12.50 per share. This consideration would be payable at least 51% in stock
(to preserve tax free treatment) and the remainder in cash. This structure
offers those stockholders interested in retaining a long-term position the
prospect of participating in future upside prospects that are materially
enhanced as a result of the transaction and of growth with the benefit of
an over 50 percent premium. At the same time, stockholders electing cash
will recognize an immediate substantial premium over current market.
Your management team has clearly been a major contributor to the
Company's success. We believe that there will be continuing roles for key
management that will offer greater responsibilities and increased
opportunities in the context of a substantially larger company.
While we know your business well, our proposal is based on public
information. If you can demonstrate additional value, we would consider
offering a higher price.
Nabors' Board of Directors has unanimously approved our proposal. Our
financial advisors and bank lenders have assured us that financing is
available to meet all transaction requirements. Our legal advisors and we
have also carefully studied any potential antitrust issues raised by a
combination of our two companies, and we are confident that any necessary
approvals for the transaction can be obtained without any undue delay. Our
proposal is of course subject to negotiation of a definitive merger
agreement containing customary terms and conditions. We are prepared to
immediately commence negotiating a definitive acquisition agreement between
our companies and to consummate the agreement in an expeditious manner.
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My intent in sending this letter is to provide you with information
about our contemplated proposal and to express our desire to work together
with you to structure a transaction acceptable to your Board. We do not
believe this letter requires you to make any public disclosure and we do
not intend to make it public at this time. We would hope that at this point
you would be prepared immediately to commence discussions on a confidential
basis between us.
We would like to meet with you and your representatives to discuss our
proposal and to answer any questions that you may have. Please contact my
office (281-775-8077) to let me know when we can get together. We would
appreciate receiving your views as to our contemplated proposal no later
than October 23, 1998.
Sincerely,
/s/ Eugene M. Isenberg
Eugene M. Isenberg
Chairman and Chief Executive Officer
On October 12, 1998, Mr. Jongebloed shared the October 12th Letter with
other members of management, as well as with the Company's legal and financial
advisors. A meeting of the Board was held on October 19, 1998 to consider the
October 12th Letter. At that meeting, the Board, among other things, reviewed
the October 12th Letter, heard presentations as to fiduciary responsibilities of
the Board in considering acquisition proposals, such as the one set forth in the
October 12th Letter, and were advised as to the work that would need to be
performed by the Company's advisors to assist the Board in its consideration of
the proposal made by Nabors and the various alternatives available to the
Company.
At that time, the Board concluded that, given the values inherent in the
Company's business and the long-term strategies being implemented to improve
shareholder value, the Nabors proposal was not in the best interests of the
Company and its shareholders. In particular, the Board determined that the
Company's strategic initiatives as well as the long-term interests of the
Company and its shareholders would be best served by the continued independence
of the Company.
As a result, on October 26, 1998, Mr. Jongebloed sent the following letter
to Mr. Isenberg:
October 26, 1998
CONFIDENTIAL
Mr. Eugene M. Isenberg
Chairman and Chief Executive Officer
Nabors Industries, Inc.
515 West Greens Road, Suite 1200
Houston, Texas 77067-4525
Dear Mr. Isenberg:
My fellow directors and I have carefully considered your October 12,
1998 letter, and I have been instructed by our Board to tell you that we
are not interested in pursuing the discussions with your company suggested
in that letter. We want you to know that this decision is unanimous and
unequivocal.
As you may know, our Company is committed to the implementation of its
own strategic plan, which is designed to capitalize on opportunities for
the Company and to increase shareholder values over the long term. We
believe the results of these efforts to date have been impressive. But for
the current unexpected downturn in our industry, which is the worst in many
years, we believe our stock price would better reflect the efforts and
achievements of our Board and management.
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We regard your letter as an expression of confidence in our Company,
and we are happy that you share our views concerning our Company's
excellent prospects.
You and your company have our best wishes.
Yours very truly,
/s/ J.T. Jongebloed
J.T. Jongebloed
On October 28, 1998, Nabors sent the following letter to the Company (the
"October 28th Letter"):
October 28, 1998
CONFIDENTIAL
The Board of Directors of
Pool Energy Services Co.
10375 Richmond Avenue
Houston, Texas 77042
Dear Mr. Jongebloed:
On October 12, 1998, I wrote to you proposing a combination of Nabors
and Pool in which Nabors would acquire all of the outstanding shares of
Pool for consideration consisting of 51% Nabors stock and 49% cash, with an
implied value at that date of $12.50 per Pool share. This offer represented
a 77% premium to Pool's closing stock price of $7.06 per share on October
9, 1998, the last trading day prior to our proposal. On October 26, 1998,
we received a letter from you stating that Pool was not interested in
pursuing discussions with Nabors. In view of the superior value inherent in
our proposal, we were surprised that your Board of Directors could have
concluded unanimously and unequivocally not to discuss our proposal. Had
our proposal been accepted on October 12, your shareholders would have
received consideration with a blended value today of $14.72 based on the
ratios implied by our offer price of $12.50 and Nabors' closing price on
October 9 of $13.25. We continue to believe that a business combination
based on these values is in the best interests of Pool and its
shareholders.
In your letter, you refer to Pool's commitment to the implementation
of its own strategic plan, which is designed to increase shareholder value
over the long-term. We are convinced that this plan cannot outperform the
benefits of a combination of Pool and Nabors given the high fragmentation
of our industry, the economies of scale which will be realized through the
combination and the enhanced capital structure of the combined entities. As
a result, we believe that a combination of our companies will maximize the
long-term value to be realized by your shareholders.
Given the strong benefits of a combination of Pool and Nabors, we
encourage you to reevaluate our proposal to enter into a merger in which
Nabors would acquire all of the outstanding shares of Pool for
consideration equal to 0.481 Nabors shares and $6.125 in cash for each
outstanding Pool share. As stated above, this offer implies a value of
$14.72 per Pool share based on Nabors' closing stock price on October 27,
1998. In addition, as we indicated in our letter of October 12, our
proposal is based on public information and, if you can demonstrate
additional value, we would consider offering a higher price.
We are hopeful that Pool's management and Board of Directors want to
act in the best interests of the company's shareholders. We also firmly
believe that your shareholders would welcome our proposal, and we are
committed to affording them the opportunity to do so. Based on the
unusually high trading volume in Pool's shares subsequent to our October 12
letter, it is in both our interests to discuss this matter quickly. I will
call you tomorrow to discuss our proposal.
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Sincerely,
/s/ Eugene M. Isenberg
Eugene M. Isenberg
Chairman and Chief Executive Officer
Mr. Isenberg called Mr. Jongebloed on October 29, 1998, but Mr. Jongebloed
was unable to return the call that day. The next morning, October 30, 1998,
Nabors issued a press release setting forth, among other things, the text of all
prior correspondence and announcing the merger proposal.
On October 30, 1998, the Company sent the following letter to Nabors:
October 30, 1998
Mr. Eugene M. Isenberg
Chairman and Chief Executive Officer
Nabors Industries, Inc.
515 West Greens Road, Suite 1200
Houston, Texas 77067-4525
Dear Mr. Isenberg:
As I told you in my October 26 letter to you, our Board of Directors
carefully considered your October 12, 1998 letter and instructed me to tell
you that we are not interested in pursuing the discussions with your
company suggested in that letter. As I also said, this decision was
unanimous and unequivocal.
As you know, our Company is committed to the implementation of its own
strategic plan, which is designed to capitalize on opportunities for the
Company and to increase shareholder values over the long term. We believe
the results of these efforts to date have been impressive. But for the
current unexpected downturn in our industry, which is the worst in many
years, we believe our stock price would better reflect the efforts and
achievements of our Board and management.
It is not surprising that you share our views concerning our Company's
excellent prospects, but our shareholders -- not yours -- should be the
beneficiaries of our efforts as our industry recovers. It would not be
prudent or responsible for our Board to let others reap the benefits that
rightly belong to our shareholders.
Yours very truly,
/s/ J.T. Jongebloed
J.T. Jongebloed
Contrary to Nabors' assertions that management of Pool has refused to meet
with Nabors' representatives, representatives of Pool agreed to meet with Nabors
on or about November 13, 1998, to hear what Nabors had to say, on the assumption
that Nabors would agree to abandon its efforts to disqualify Pool's counsel on
what Pool perceived to be a trivial basis. Nabors refused to waive the
disqualification, and Pool was forced to engage new counsel.
On November 16, 1998, the Company engaged Morgan Stanley & Co. Incorporated
("Morgan Stanley") to assist the Company in, among other things, the evaluation
and further implementation of its growth strategies with the intent of
maximizing long-term shareholder value.
On November 17, 1998, a representative of Morgan Stanley advised a
representative of Nabors' investment banker that Morgan Stanley and Pool's new
counsel needed time to familiarize themselves with the Company before
considering scheduling any meeting between representatives of Nabors and the
Company.
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On November 23, 1998, Nabors filed preliminary proxy materials relating to
its request for a Special Meeting to consider the Nabors Resolution. Also on
that date, Nabors, together with one of its subsidiaries, requested that the
Company provide, among other things, copies of the Company's stockholder lists,
daily transfer lists, names of non-objecting beneficial owners, and all minutes
and other records of meetings and proceedings of the Board and each committee
thereof. The Company is currently evaluating these requests.
In response to Nabors' filing and a concurrent press release, the Company
issued the following press release:
HOUSTON, November 23, 1998 -- Pool Energy Services Co. (NASDAQ:PESC)
today acknowledged receipt of a notice by Nabors Industries, Inc. (ASE:NBR)
calling for a Special Meeting of Shareholders of the Company in January
1999 "to consider and vote upon a non-binding resolution...recommending the
sale of the Company." James Jongebloed, Chairman and Chief Executive
Officer of the Company, responded by saying: "This is another transparent
attempt by Nabors to pressure Pool's Board into approving a fire sale of
the Company when the oil industry is at a cyclical low and Pool is strongly
positioned to optimize value to shareholders as the industry recovers."
Pool said it is committed to the implementation of its own growth
strategies and the maximization of shareholder value. In this connection,
the Company announced that last week it had engaged Morgan Stanley Dean
Witter to assist it in the evaluation and further implementation of its
growth strategies with the intent of maximizing long term shareholder
value.
Pool Energy Services Co., headquartered in Houston, is a diversified
energy services company principally engaged in providing well-servicing,
workover and drilling services and related transportation services on land
and offshore in the U.S. and selected international markets.
The Board's position is very clear. On October 26, 1998, the Board
unanimously and unequivocally communicated its decision to Nabors that it was
not interested in pursuing the discussions that Nabors had suggested.
THE NABORS RESOLUTION
At the Special Meeting, Nabors has stated that it will propose that the
shareholders of the Company adopt the Nabors Resolution, which reads as follows:
RESOLVED, that the shareholders of Pool Energy Services Co. (the
"Company") strongly recommend that the Board of Directors of the Company
arrange for the sale of the Company and take all necessary actions to
effect such sale, including, without limitation, (i) entering into good
faith merger negotiations with Nabors Industries, Inc. ("Nabors") and any
other qualified bidder for the Company offering a higher price per share of
Company common stock than Nabors, (ii) redeeming the common stock purchase
rights of the Company granted pursuant to the Rights Agreement, dated as of
June 7, 1994, between the Company and the First National Bank of Boston and
(iii) taking all action to approve the sale of the Company under the Texas
Business Corporation Act (the "TBCA"), including, without limitation,
Article 13.03 of the TBCA; it being understood that this resolution is
admonitory only and that the Board of Directors of the Company must
exercise its business judgment in fulfillment of its fiduciary duties to
the shareholders of the Company.
REASONS FOR OPPOSING THE NABORS RESOLUTION
The Board believes that the Nabors Resolution represents nothing more than
a takeover tactic in its attempt to acquire the Company in a trough of the
business cycle for oilfield service companies when the market price of the
Common Stock does not, in the opinion of the Board, appropriately reflect the
inherent value of the Company. Oil prices are at low levels not seen in over ten
years. Consequently, rig
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counts in the U.S. are also at cyclical lows. The prices of many oilfield
service companies, including the Company's Common Stock, are therefore severely
depressed. Nabors has chosen this opportune time (from a buyer's perspective) to
put pressure on the Board to sell the Company.
Although Nabors' acquisition proposal does represent a premium over the
$11.813 closing price of the Common Stock on October 29, 1998 (the last trading
day immediately prior to Nabors' October 30, 1998 press release), the implied
value of Nabors' proposal as of that date is actually a discount of 48% from the
$27.675 closing price of the Common Stock on April 20, 1998 (which was the
highest closing price for the Common Stock thus far during 1998), less than
eight months ago. While between October 9, 1997 and October 9, 1998 (the last
trading day before Nabors' October 12th Letter) the closing price of the
Company's Common Stock fell 83% from $40.625 to $7.063, the closing price of
Nabors stock dropped 72% from $46.563 to $13.25.
POOL'S GROWTH STRATEGIES TO MAXIMIZE SHAREHOLDER VALUE
The Company developed its Strategic Plan to further strengthen its
competitive position and market share in the oilfield services industry in order
to achieve growth in revenues, EBITDA, and earnings. Key components of the
Strategic Plan included:
o pursuing expansion opportunities in existing core market areas through
acquisitions that result in consolidation cost savings;
o upgrading and enhancing the capabilities of the Company's existing
fleet and certain specialized rig equipment to operate in markets with
high levels of activity and strong pricing fundamentals;
o entering new foreign markets that offer significant development and
production activity; and
o offering additional services and equipment that complement the
Company's businesses in its existing locations.
The Company has made significant progress in the implementation of its
growth strategies. Between June 1, 1994 and September 30, 1998, the Company:
o acquired additional land well-servicing operations principally in
California, West Texas and the Rocky Mountains, including 289 rigs,
128 oilfield trucks, 430 fluid storage tanks, six brine and disposal
wells and seven coiled tubing units, at an aggregate cost of $74
million;
o acquired full ownership of the operations in Alaska in which the
Company had previously held a minority interest for $12 million;
o expanded and enhanced its rig fleet in Alaska, the Gulf of Mexico and
offshore California through constructing, upgrading and/or acquiring
three land drilling rigs, two platform drilling rigs, one jack-up
workover rig and one platform workover rig, at an aggregate cost of
$73 million;
o increased the participation of the Company and its affiliates in
foreign markets, including Australia, Argentina, Malaysia and Saudi
Arabia, through various acquisitions and other investments, at an
aggregate cost of $53 million; and
o acquired a company that operates a fleet of 23 offshore support
vessels in the Gulf of Mexico for $76 million in cash and 1.5 million
shares of Common Stock.
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The following tables confirm that the Company's growth strategies are
working, as evidenced by the growth in Pool's revenues, net income and EBITDA
for each of the four years ended December 31, 1997 and for the nine months ended
September 30, 1997 and 1998:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
---------------------------------------------------------- -------------------------
1994 1995 1996 1997 1997 1998
---------------- ----------- ----------- ----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Revenues .................. $ 229.2 $ 277.3 $ 348.6 $ 451.9 $ 326.8 $ 360.9
Net Income (Loss) ......... (12.7)(a) 3.1 9.6 26.7 18.1 20.4
EBITDA(b) ................. (7.1)(a) 21.9 38.4 71.6 50.2 73.9
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE INCREASE FROM PERIOD TO PERIOD
----------------------------------------------------------------------
SEPTEMBER 30, 1997
TO
1994 -- 1995 1995 -- 1996 1996 -- 1997 SEPTEMBER 30, 1998
-------------- -------------- -------------- -------------------
<S> <C> <C> <C> <C>
Revenues .................. 21.0% 25.7% 29.7% 10.4%
Net Income (Loss) ......... NA 207.8 176.7 12.6
EBITDA(b) ................. NA 75.1 86.5 47.4
</TABLE>
- ----------
(a) Includes a $23.6 million pre tax ($15.3 million after tax) provision for
leasehold impairment.
(b) EBITDA means earnings (loss) before interest, income taxes, depreciation
and amortization and minority interest. The Company has included EBITDA
data because it is a measure commonly used in the oilfield service
industry. EBITDA is not a measure of financial performance determined under
generally accepted accounting principles, should not be considered as an
alternative to net income as a measure of performance or to cash flows as a
measure of liquidity, and is not necessarily comparable to similarly titled
measures of other companies.
Since the adoption of the Company's Strategic Plan on May 5, 1994, the
closing price of the Company's Common Stock rose from $7.25 to 40.625 on October
9, 1997, an increase of approximately 460%. Subsequently, the decrease in the
price of oil began to adversely affect the trading prices of the Common Stock as
well as the stocks of other oilfield service companies.
THE SHAREHOLDER RIGHTS PLAN
As part of the Nabors Resolution, Nabors proposes that the shareholders
vote to advise the Board that it should redeem the common stock purchase rights
(the "Rights") granted pursuant to the Rights Agreement dated as of June 7,
1994, between the Company and the First National Bank of Boston (the "Rights
Plan"). The Board believes such a redemption would not be in the best interests
of the shareholders or the Company.
The Rights Plan was designed to provide the Board with negotiating leverage
in dealing with a potential acquiror, to protect the Company from unfair
takeover tactics, and to prevent an acquiror from gaining control of the Company
without offering a fair price to all shareholders.
The Board believes that the Rights Plan was appropriately designed to
protect the shareholders from being forced to receive less than optimal value
for their shares of Common Stock. The Rights Plan was implemented to help
protect shareholders from acquisition proposals of the type being advanced by
Nabors. The Board therefore believes that redeeming the Rights Plan at present
is not in the best interests of the Company or its shareholders.
The Company's Board adopted the Rights Plan on June 7, 1994 and declared a
dividend of one Right for each outstanding share of the Company's Common Stock
to shareholders of record on June 23, 1994. The Rights will trade with the
Company's Common Stock until they become exercisable. The Rights will not be
exercisable until ten business days following a public announcement that a
person or group has
10
<PAGE>
acquired beneficial ownership 15% or more of the Company's Common Stock or until
ten business days after a person or group begins a tender offer that would
result in beneficial ownership of 15% of the Common Stock, subject to certain
extensions by the Board.
In the event that an acquiror becomes a 15% holder of the Company's Common
Stock, the Rights "flip in" and become rights to buy the Company's Common Stock
at a 50% discount, and Rights owned by that acquiror become void. In the event
that the Company is merged and its Common Stock is exchanged or converted, or if
50% or more of the Company's assets or earning power is sold or transferred, the
Rights "flip over" and entitle the holders to buy shares of the acquiror's
common stock at a 50% discount.
The Rights may be redeemed by the Company for $.01 per Right at any time
until ten business days following the first public announcement that an acquiror
has acquired the level of ownership that triggers the plan. The Rights expire on
June 6, 2004.
APPROVING THE SALE UNDER ARTICLE THIRTEEN OF THE TEXAS BUSINESS CORPORATION ACT
In the Nabors Resolution, Nabors also proposes that the shareholders vote
to advise the Board that it should take all actions to approve a sale of the
Company under the TBCA, including without limitation, Article 13.03 of the TBCA.
The Board believes that Article Thirteen of the TBCA provides the Company's
shareholders with important protections from takeover proposals that do not
result in the maximization of shareholder value. Consequently, the Board
believes that this portion of the Nabors Resolution is also not in the best
interests of the shareholders or the Company.
Prior to 1997, the TBCA, as it applied to public corporations, failed to
address adequately the protection afforded to shareholders of corporations
domiciled in Delaware and many other jurisdictions. Recognizing this, the Texas
Legislature adopted Article Thirteen of the TBCA which imposes a special voting
requirement for the approval of certain business combinations and related party
transactions between public corporations and affiliated shareholders. In
general, the law provides, subject to certain exceptions, for a three-year
moratorium on mergers and share exchanges between issuing public corporations
like the Company and their affiliated shareholders (i.e., persons who are, or
within the last three years have been the beneficial owner of more than 20% of
the corporation's then outstanding voting stock) and affiliates. More
particularly, such corporations are prohibited, directly or indirectly, from
entering into or engaging in a business combination with an affiliated
shareholder, or any affiliate or associate of the affiliated shareholder, during
the three-year period immediately following the date on which the shareholder
became an affiliated shareholder (the "share acquisition date") unless: (i) the
combination or the purchase or acquisition of shares is approved by the board of
directors of the corporation before the affiliated shareholder's share
acquisition date; or (ii) the combination is approved by the affirmative vote of
the holders of at least two-thirds of the outstanding voting shares of the
corporation not beneficially owned by the affiliated shareholder (or an
affiliate or associate of the affiliated shareholder), at a meeting of
shareholders (and not by written consent) duly called for that purpose not less
than six months after the affiliated shareholder's share acquisition date.
Article 13.06 also provides that in discharging their duties under the TBCA
or otherwise, the Company's directors, in considering the best interests of the
corporation, may consider the long-term as well as the short-term interests of
the corporation and its shareholders, including the possibility that those
interests may be best served by the continued independence of the corporation.
Article Thirteen ensures that the Board may consider long-term interests when
evaluating a takeover proposal. In addition, Article Thirteen does not preclude
the board of directors from taking other actions in accordance with law, nor
does the board of directors incur liability for elections made or not made under
its provisions.
INDEPENDENT BOARD
Other than Mr. Jongebloed, who also serves as Chairman, President and Chief
Executive Officer of the Company, the directors of the Company are outside,
independent directors whose compensation as directors is nominal in relation to
both their responsibilities and to the valuable services that they perform. To
the extent the directors own, or have rights to acquire, shares of Common Stock,
they share
11
<PAGE>
a common economic interest with the shareholders of Pool generally (other than
Nabors and its supporters). All of Pool's outside directors are both
"independent" and "disinterested" as defined in the TBCA. All of the directors
of the Company are seasoned executives who have proven track records and are
committed to maximizing values for all shareholders.
The Board has concluded that Nabors' proposal to acquire Pool on the terms
set forth in Nabors' published letters to the Board is not in the best interests
of all the Company's shareholders. The independent directors of the Company
believe that their recommendation against the Nabors' acquisition proposal
should be accorded more weight than Nabors' biased recommendation in support of
its proposal, as the Board is convinced that Nabors is primarily interested in
acquiring Pool at the lowest possible price.
CONSEQUENCES OF ADOPTION OF THE NABORS RESOLUTION
Since the Nabors Resolution is non-binding in nature, its adoption by the
shareholders of Pool will not obligate the Board to take any specific action in
response thereto. At the present time the Board does not intend to take any
specific action if the Nabors Resolution is approved, although the Board will
continue to pursue strategies to maximize shareholder value over the long term.
A vote for the Nabors Resolution, unlike a vote on a definitive merger proposal
approved by the Board, has no effect on the nature of a shareholder's investment
in the Company. Additionally, if only a majority of the outstanding shares of
Common Stock are present and voting at the Special Meeting, the Nabors
Resolution could be approved by the affirmative vote of the holders of only 25%
of the outstanding shares of Common Stock plus one share. Nabors already owns
approximately 42% of the shares required to achieve approval of the Nabors
Resolution under these circumstances. In contrast, Nabors only owns
approximately 17% of the minimum number of shares required to approve a
definitive merger agreement under Texas law.
CONCLUSION AND RECOMMENDATION
THE BOARD OF THE COMPANY RECOMMENDS A VOTE AGAINST THE NABORS RESOLUTION BY
MARKING, DATING, SIGNING AND RETURNING THE GOLD PROXY CARD.
THE SPECIAL MEETING
GENERAL
This Proxy Statement is furnished by the Board of the Company in opposition
to the solicitation of proxies by Nabors in connection with the Nabors
Resolution. Representatives of Nabors and one of its subsidiaries have scheduled
a Special Meeting of Shareholders of the Company to be held at the offices of
the Company, 10375 Richmond Avenue, Houston, Texas 77042 on January 12, 1999 at
9:30 a.m., local time.
PURPOSE
Nabors has stated that the purposes of the Special Meeting are to consider
and vote upon the Nabors Resolution and to transact such other business as may
properly come before the Special Meeting. The Board believes that under Texas
law and the Company's constituent corporate documents, only matters specifically
referred in the notice of a special meeting (other than routine administrative
matters) may be considered at the Special Meeting.
RECORD DATE; SHARES ENTITLED TO VOTE
Only holders of record of shares of Common Stock at the close of business
on __________, 1998 (the "Record Date") are entitled to notice of and to vote at
the Special Meeting and at any adjournment, postponement or rescheduling
thereof. On the Record Date, there were _________ shares of Common Stock
outstanding. Such shares of Common Stock will each be entitled to one vote,
exercisable in person or represented by properly executed proxy, on any matter
properly before the Special Meeting.
12
<PAGE>
QUORUM
The bylaws of the Company require the holders of a majority of the
outstanding shares of Common Stock to be present in person or represented by
properly executed proxy for any action to be taken at the Special Meeting, other
than an adjournment thereof. For purposes of determining whether this quorum
requirement is met, abstentions and broker non-votes received in connection with
properly signed and returned proxies will be counted as present.
REQUIRED VOTE
While broker-non votes (which are voted on at least one matter) will be
counted as present at the Special Meeting for quorum purposes, such votes will
not be counted in determining the total number of shares entitled to vote on the
Nabors Resolution at the Special Meeting, assuming a quorum is present. Under
such circumstances, broker non-votes will have the practical effect of reducing
the number of affirmative votes that Nabors must solicit in order to secure
majority approval of the Nabors Resolution at the Special Meeting. Abstentions
will be considered present at the Special Meeting for quorum purposes and will
be counted for purposes of determining the total number of shares entitled to
vote on the Nabors Resolution. Accordingly, abstentions will have the same
effect as a vote against the Nabors Resolution. Your broker, bank or nominee,
cannot vote your shares without receipt of your specific instructions to do so.
Please contact the person responsible for your account and instruct him or her
to vote the GOLD proxy card on your behalf.
RECOMMENDATION OF THE BOARD
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, SHAREHOLDERS SHOULD
READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY STATEMENT
AND ANY RELATED MATERIAL SENT TO YOU BY THE BOARD AND VOTE "AGAINST" THE NABORS
RESOLUTION BY COMPLETING, DATING AND SIGNING THE ACCOMPANYING GOLD PROXY CARD
AND RETURNING IT PROMPTLY TO MACKENZIE PARTNERS, INC. IN THE ENCLOSED
POSTAGE-PAID ENVELOPE OR INSTRUCTING YOUR BROKER TO EXECUTE THE GOLD PROXY CARD
ON YOUR BEHALF.
REVOCABILITY OF PROXIES
Unless you attend the Special Meeting and vote your shares in person, only
your latest dated properly executed proxy for the Special Meeting will count at
the Special Meeting. Any proxy given pursuant to the solicitation by either
Nabors or the Board also may be revoked by (i) filing with the Secretary of the
Company, before the taking of the vote at the Special Meeting, a written notice
of revocation bearing a later date than the date of the proxy or any later-dated
proxy relating to the same shares, or (ii) attending the Special Meeting and
voting your shares in person. Attendance at the Special Meeting will not in and
of itself constitute a revocation of a proxy. THE BOARD URGES YOU TO REVOKE ANY
BLUE PROXY CARD THAT YOU HAVE DELIVERED TO NABORS OR ITS AGENTS.
OTHER INFORMATION REGARDING PROXIES
All shares of Common Stock represented by properly executed proxies
received prior to or at the Special Meeting, and not duly and timely revoked,
will be voted in accordance with the instructions indicated on such proxies. If
no instructions are indicated on a properly executed returned GOLD proxy card,
such proxies will be voted AGAINST the Nabors Resolution. A properly executed
proxy marked "ABSTAIN," although counted for purposes of determining whether
there is a quorum for purposes of determining the aggregate voting power and the
number of shares represented at the Special Meeting, will not be voted.
The Board believes that the Nabors Resolution is the only substantive
matter that may be acted upon at the Special Meeting. If, however, other matters
are properly brought before the Special Meeting, including among other things, a
motion to adjourn the meeting to another time and/or place (including, without
limitation, for the purpose of soliciting additional proxies), the persons
appointed as proxies will have discretion to vote or act thereon according to
their judgment. If the Special Meeting is postponed or adjourned for any reason,
at any subsequent reconvening of the Special Meeting all proxies will be
13
<PAGE>
voted on such matters in the same manner as such proxies would have been voted
at the original convening of the Special Meeting (except for any proxies that
have theretofore effectively been revoked or withdrawn), notwithstanding that
such proxies may have been effectively voted in the same or any other manner at
a previous meeting.
DISSENTERS' RIGHTS
Shareholders will not be entitled to dissenters' rights under the TBCA with
respect to the proposal to adopt the Nabors Resolution.
ADDITIONAL INFORMATION REGARDING POOL AND ITS DIRECTORS AND OFFICERS
POOL
The Company, headquartered in Houston, is a diversified energy services
company principally engaged in providing well-servicing, workover and drilling
services and related transportation services on land and offshore in the U.S.
and selected international markets.
As of September 30, 1998, the Company's worldwide rig fleet included 786
land well-servicing/workover rigs, 29 land drilling rigs and 27 offshore rigs
(14 platform workover rigs, 6 platform drilling rigs and 7 jack-up rigs). In the
United States, the Company operates in several oil and natural gas producing
states, with specific concentration onshore in Texas, California, Alaska,
Oklahoma, New Mexico and North Dakota, and offshore in the Gulf of Mexico. The
Company also owns or leases and operates 364 fluid hauling trucks, 1,149 fluid
storage tanks, 14 salt water disposal wells and other auxiliary equipment in its
domestic onshore operations and 23 offshore support vessels in the Gulf of
Mexico.
Internationally, the Company has a substantial presence in Saudi Arabia
where it is one of the largest providers of drilling and workover services and
has been providing such services for over 20 years. Other international markets
where the Company has an established presence include Argentina, Australia,
Ecuador, Guatemala, Malaysia, Oman and Pakistan.
The Company files annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange Commission
("Commission"). You may read and copy any reports or other reports, statements
or other information that the Company files at the Commission's public reference
rooms which are located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices located at:
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and Seven World Trade Center, 13th Floor, New York, New York 10048.
Additionally, copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Copies of such material may also be accessed through the
Commission's Internet web site at http://www.sec.gov. The Company's Common Stock
is listed on The Nasdaq Stock Market.
DIRECTORS
The following paragraphs set forth the name, age, and principal occupation
or employment during the past five years of each director of the Company, as
well as certain other directorships held by each such person and his period of
service as a director of the Company.
Mr. Dennis R. Hendrix, 58, has been a director of the Company since
September 1998. Mr. Hendrix served as Chief Executive Officer of PanEnergy
Corp. from 1990 to 1995 and served as its Chairman from 1990 until 1997, when
the company was merged with Duke Power to form Duke Energy Corporation. Mr.
Hendrix serves as a director of Allied Waste Industries, Inc., Duke Energy
Corporation, Newfield Exploration Company, Chase Bank of Texas and National
Power, P.L.C. Mr. Hendrix's term as a director will expire in the year 1999.
14
<PAGE>
Mr. J.T. Jongebloed, 57, has served as a director since 1989 and currently
serves as a member of the Directors' Nominating Committee. Mr. Jongebloed has
served as Chairman since 1994 and President and Chief Executive Officer of the
Company since 1990. He served as President and Chief Operating Officer from 1989
to 1990 and in various executive positions with the Company since 1978. Mr.
Jongebloed's term as a director will expire in the year 2000.
Mr. John F. Lauletta, 53, has been a director of the Company since August
1998 and currently serves as a member of the Compensation Committee. Mr.
Lauletta has served as President and Chief Executive Officer of Tuboscope, Inc.
since 1996. Prior to that time, Mr. Lauletta served as President and Chief
Executive Officer of Drexel Oil Field Services, Inc. Mr. Lauletta's term as a
director will expire in the year 1999.
Dr. William H. Mobley, 57, has been a director of the Company since 1990
and currently serves as a member of the Audit/Finance Committee. Dr. Mobley is
President and Managing Director of 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. Dr. Mobley's term as a director will
expire in the year 2001.
Mr. Joseph R. Musolino, 62, has served as a director of the Company since
1994 and currently serves as Chairman of the Audit/Finance Committee. Mr.
Musolino has been Vice Chairman of NationsBank of Texas, N.A. for more than the
last five years. He also serves as a director of Justin Industries, Inc. Mr.
Musolino's term as a director will expire in the year 2001.
Mr. James L. Payne, 61, has served as a director since 1992. Mr. Payne
serves as Chairman of both the Compensation Committee and the Directors'
Nominating Committee. Mr. Payne has been Chairman of the Board, Chief Executive
Officer and a director of Santa Fe Energy Resources, Inc. since 1990. He was
President of Santa Fe Energy Resources, Inc. from 1990 to 1998. Mr. Payne's term
as a director will expire in the year 2000.
EXECUTIVE OFFICERS
The following table sets forth the names, ages and offices held by the
executive officers of the Company as of the and of the Company's last fiscal
year and as of the date hereof:
<TABLE>
<CAPTION>
NAME AND AGE OFFICE
- -------------------------------- -------------------------------------------------
<S> <C>
James T. Jongebloed (57) Chairman, President and Chief Executive Officer
William J. Myers (62) Group Vice President -- U.S. Operations
Ronald G. Hale (49) Group Vice President -- International Operations
Ernest J. Spillard (59) Senior Vice President, Finance
Geoffrey Arms (55) Vice President and General Counsel; Corporate
Secretary
Louis E. Dupre (52) Vice President, Human Resources
</TABLE>
Each of the foregoing persons has been an executive officer or employee of the
Company for more than the last five years.
OTHER INFORMATION
Certain information concerning the identity of and beneficial ownership of
Common Stock by the directors and executive and other corporate officers of the
Company, the beneficial owners of more than 5% of the outstanding Common Stock,
and certain compensatory and other relationships between the Company and its
directors and executive officers is set forth on Annex A hereto. Except as
otherwise disclosed herein, to the best knowledge of the Company, no director or
executive officer or associate of any such person has a substantial interest in
the matter to be acted upon at the Special Meeting.
15
<PAGE>
SOLICITATION OF PROXIES
In addition to the use of the mail, facsimile, telephone, telegraph,
advertisements and in person communications, arrangements will be made with
banks, brokerage houses and other custodians, nominees and fiduciaries to
forward proxy materials to the beneficial owners of Common Stock, and the
Company will, upon request, reimburse them for their reasonable expenses. Proxy
solicitations may be made by directors and officers of the Company, none of whom
will receive additional compensation for such solicitation.
The Company has retained MacKenzie Partners, Inc. for solicitation and
advisory services in connection with this solicitation by the Board, and has
recently engaged Morgan Stanley as its financial advisor to assist the Company
with the review and further implementation of the Company's growth strategies
and to assist the Company in evaluating the unsolicited acquisition proposal by
Nabors.
The cost of soliciting proxies on behalf of the Board for use at the
Special Meeting is being borne by the Company. The Company estimates that the
total expenditures in connection with the solicitation (including the fees and
expenses of its attorneys, public relations advisors, investment advisors, and
proxy solicitors, and advertising, printing, mailing, travel and other costs,
but excluding salaries and wages of officers and employees) will be
approximately $ , of which approximately $ has been spent to date. The Company
has also agreed to indemnify some of its advisors from certain liabilities.
CERTAIN FORWARD LOOKING INFORMATION
Portions of this Proxy Statement include statements regarding future
financial performance and results of operations and other statements that are
not historical facts but are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended ("Exchange Act"). Statements to the
effect that the Company, the Board or management "anticipates," "believes,"
"estimates," "expects," "predicts," or "projects" a particular result or course
of events, or that such result or course of events "should" occur, and similar
expressions, are also intended to identify forward-looking statements. Such
statements are subject to numerous risks, uncertainties and assumptions,
including but not limited to uncertainties relating to industry and market
conditions, prices of crude oil and natural gas, foreign exchange and currency
fluctuations, political instability in foreign jurisdictions, the ability of the
Company to integrate newly acquired operations and other factors discussed in
this Proxy Statement and in the Company's other filings with the Commission.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those stated.
SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 of the Rules and Regulations promulgated under the
Exchange Act, shareholders may present proper proposals for inclusion in the
Company's Proxy Statement and for consideration at the next annual meeting of
its shareholders by submitting such proposals to the Company in a timely manner.
In order to be included for the 1999 annual meeting, shareholder proposals must
have been received by the Company no later than December 1, 1998, and must
otherwise have complied with all applicable legal requirements. Shareholder
proposals received after such time will be considered untimely and will not be
considered for inclusion in the Company's Proxy Statement at the 1999 annual
meeting of shareholders.
BY ORDER OF THE BOARD OF DIRECTORS OF
POOL ENERGY SERVICES CO.
16
<PAGE>
ANNEX A
OWNERSHIP OF COMMON STOCK
AND
OTHER INFORMATION
OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of Common Stock. Except as otherwise noted, the information set forth
below concerning the beneficial ownership of Common Stock by (a) each director,
(b) each executive and other corporate officer and (c) each person known to the
Company to be the beneficial owner of more than 5% of the Company Common Stock
is as of October 31, 1998. A total of 21,043,898 shares of Common Stock were
outstanding as of October 31, 1998.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP
- -------------------------------------------------- -----------------------------------------
SHARES PERCENT OF TOTAL
--------------------- -----------------
<S> <C> <C>
Nabors Industries, Inc. .......................... 2,209,500(e) 10.5
Alton Anthony Gonsoulin, Jr. ..................... 2,000,000(f) 9.5
J.T. Jongebloed (b)(c) ........................... 181,110.203(g) (a)
William H. Mobley (b) ............................ 20,200(h) (a)
Joseph R. Musolino (b) ........................... 14,000(i) (a)
James L. Payne (b) ............................... 13,000(j) (a)
Dennis R. Hendrix (b) ............................ 10,000 (a)
John F. Lauletta (b) ............................. -0-
William J. Myers (c) ............................. 50,008.210(k) (a)
Ronald G. Hale (c) ............................... 22,333.337(l) (a)
Ernest J. Spillard (c) ........................... 99,394.681(m) (a)
Louis E. Dupre' (c) .............................. 12,251.087(n) (a)
Geoffrey Arms (c) ................................ 53,714.295(o) (a)
David C. Oatman (d) .............................. 2,662(p) (a)
Richard A. Johannsen (d) ......................... 11,874(q) (a)
Beth G. Gordon (d) ............................... 812(r) (a)
All directors and officers as a group (14 persons)
(b) (c) (d) .................................... 491,359.813(s) 2.3
</TABLE>
- ----------
(a) Less than 1%.
(b) Director with sole voting and disputive power over all shares owned or
acquirable upon exercise of options as described in other footnotes to this
table.
(c) Executive officer with sole voting and disputive power over all shares
owned or acquirable upon exercise of options as described in other
footnotes to this table.
(d) Other corporate officer with sole voting and disputive power over all
shares owned or acquirable upon exercise of options as described in other
footnotes to this table.
(e) Based upon an amended Schedule 13D filed on November 20, 1998; power to
dispose and vote shared with a wholly owned subsidiary.
(f) Based upon an amended Schedule 13D filed on September 18, 1998; 461,539 of
such shars are owned by a wholly owned corporate affiliate; 769,231 of such
shares are held in escrow to fund indemnity obligations to the Company
through March 31, 2000; the escrowed shares must be voted as directed by
the Board through March 31, 2000.
(g) Includes 166,723 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within 60
days after October 31, 1998.
(h) Includes 16,000 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within 60
days after October 31, 1998.
A-1
<PAGE>
(i) Includes 10,000 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within 60
days after October 31, 1998.
(j) 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 October 31, 1998.
(k) Includes 22,437 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within 60
days after October 31, 1998.
(l) Includes 12,505 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within 60
days after October 31, 1998.
(m) Includes 90,457 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within 60
days after October 31, 1998.
(n) Includes 9,668 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within 60
days after October 31, 1998.
(o) Includes 45,804 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within 60
days after October 31, 1998.
(p) Includes 2,562 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within 60
days after October 31, 1998.
(q) Includes 3,937 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within 60
days after October 31, 1998.
(r) Includes 812 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within 60
days after October 31, 1998.
(s) Includes 388,905 shares which may be acquired through the exercise of stock
options that are currently exercisable or will become exercisable within 60
days after October 31, 1998.
OTHER INFORMATION
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 grant of
1,000 shares of Common Stock. The shares of Common Stock may not be sold or
transferred by the director for a period of one year after the grant and are
subject to forfeiture if the director resigns as director prior to completion of
the one year period. 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, however, 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 "1996 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
upon being elected or appointed to the Board for the first time (the "Initial
Option Grant") and receives an additional option to purchase 4,000 shares of
Common Stock on the date of each Annual Meeting of Shareholders after the year
in which the Initial Option Grant occurred (the "Annual Option Grant"). The
exercise price of the options is equal to the fair market value per share of
Common Stock on the date an option is granted. Each option granted under the
1996 Plan becomes exercisable generally 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 1996 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
A-2
<PAGE>
termination. In the event a director's service terminates for "cause" his
options will become immediately null and void. Provision is made in the 1996
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.
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 the terms and conditions of the 1996 Plan.
INDEMNITY ARRANGEMENTS
The Company's Bylaws obligate the Company to indemnify any person who is or
was a director, officer, employee or agent of the Company to the fullest extent
that a corporation may or is required to grant indemnification to a director
under the TBCA. The Company's Articles of Incorporation, as amended, further
provide that a director of the Company shall not be liable to the Company or its
shareholders for monetary damages for any act or omission in such director's
capacity as a director of the Company, in each case to the fullest extent
permitted by Texas law.
On October 19, 1998, the Board approved a form of indemnity agreement
pursuant to which the Company will contractually agree to indemnify directors
against liabilities arising from their serving as directors and to advance the
expenses of defending against such liabilities. This agreement, which is
designed to implement the indemnification provisions of Texas law to the maximum
practicable extent, sets forth, among other things, the standards of conduct
required to receive indemnification, the methods of securing approval for
indemnity payments and the procedural requirements necessary to secure the
advancement of expenses.
COMPENSATION OF EXECUTIVE OFFICERS
The Company's executive compensation is administered by the Compensation
Committee of the Board. The following report appeared in the Company's Proxy
Statement dated April 2, 1998, for its 1998 annual meeting of shareholders:
COMPENSATION COMMITTEE REPORT
ON
EXECUTIVE COMPENSATION
This report of the Compensation Committee ("Committee") sets forth the
Company's policy with respect to executive officer compensation and describes
the basis for 1997 compensation determinations made by the Committee with
respect to the Chief Executive Officer and other executive officers of the
Company.
COMPENSATION PHILOSOPHY
The Company's philosophy with regard to executive compensation is to:
o Provide a competitive total compensation package consistent with
industry practice that enables the Company to attract and retain key
executives.
o 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.
COMPENSATION PROGRAM ELEMENTS
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
A-3
<PAGE>
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 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 1997, bonus awards were based on a net
earnings goal, an EBITD(1) goal and on return to shareholders in comparison with
a peer group of companies. 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. Actual awards were subject to decreases or increases on the basis of
the Committee's evaluation of the Company's and/or the executive's performance,
although no such discretionary action was taken. The plan also provided that, at
the Committee's discretion, up to 50 percent of any bonuses payable for 1997
could be paid in Company stock, and the Committee directed that 25 percent of
the 1997 bonuses would be paid in shares of restricted stock (restricted for a
period of one year of continuing service after receipt, except for earlier
retirement, death, disability or change in control). The amounts paid in stock
were, under the terms of the plan, increased by 15 percent.
LONG TERM INCENTIVE COMPENSATION -- Executive officers also participated in
a long term incentive compensation plan. In 1997, award opportunities were
established for each executive officer under which awards will be made based on
performance over a three-year period. The awards, if earned, will be paid solely
in restricted stock (50 percent thereof restricted for one year and 50 percent
restricted for two years of continuing service after receipt, except for earlier
retirement, death, disability or change in control). Entitlement to receive
awards is based 50 percent on cumulative EBITD performance and 50 percent on
cumulative total return to shareholders performance compared to a peer group of
companies over the three-year period. Target awards are set at a percentage of
each recipient's annual salary in effect at the beginning of the performance
period. The target awards will be increased by up to 50 percent in the event
performance goals are 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
Company Common Stock. The exercise price of all such stock options is 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.
This is intended to provide 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 a plan (the "SAR/Phantom Stock
Plan") pursuant to which executive 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 of the fair market value of a share of the
Company's Common Stock on the date of exercise over the base price of the Stock
Appreciation Right. A Phantom Stock award represents the right to receive cash
in an amount equal to the fair market value of a corresponding number of shares
of Common Stock, which vests over a period of time or upon the occurrence of an
event (including without limitation, a change in control) as established by the
Committee, without any payment to the Company by the participant (except to the
extent otherwise required by law). The SAR/Phantom Stock Plan is administered by
the Committee, and the Committee determines eligibility and grants all awards
thereunder.
- ----------
(1) EBITD is earnings before interest, income taxes, depreciation/amortization
and minority interest.
A-4
<PAGE>
The SAR/Phantom Stock Plan was established effective January 1, 1997, and
no awards of Stock Appreciation Rights or Phantom Stock have yet been made
thereunder.
The Committee's overall objective in structuring incentive compensation for
executive officers and other key personnel is to deliver competitive levels of
compensation for the attainment by the Company of short-term and long-term
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 align their interests more closely with those of other shareholders
and provide additional incentive to enhance the profitable growth of the
Company.
1997 COMPENSATION
The base salary level approved by the Committee in 1997 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 9.5 percent
increase over his previous base salary which had been in effect for the previous
12 months. Mr. Jongebloed's bonus compensation for 1997 was calculated and paid
pursuant to the Company's 1997 Management Bonus Plan and was based on the
Company's attaining or exceeding goals based on (i) net income compared to
budget, (ii) EBITD performance compared to budget and (iii) return to
shareholders compared to that of a peer group of companies. The bonus earned was
the maximum bonus attainable under the Plan.
The Committee approved base salary levels in 1997 for other executive
officers based on recommendations by the Chief Executive Officer and Hay's
recommendations. Bonuses for 1997 were paid to executive officers pursuant to
the terms of the Company's 1997 Management Bonus Plan and were determined
totally on the Company's financial performance for the year. Each of the
executive officers received a bonus on the basis of the Company's attaining or
exceeding the net income, EBITD and return to shareholders goals mentioned
above. These bonuses were on average approximately 96 percent of the maximum
bonuses attainable under the Plan.
Stock option grants pursuant to the Stock Incentive Plan were made to Mr.
Jongebloed and other executive officers in 1997, as reflected in the Option
Grants Table, on the basis of Hay's recommendations, each executive's personal
performance and the desire to link Company performance to compensation.
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
A-5
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning 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 1997 for
services rendered in all capacities to the Company for the years ended December
31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------------- ------------------------
AWARDS
------------------------
SHARES
OTHER RESTRICTED UNDERLYING
ANNUAL STOCK STOCK ALL OTHER
SALARY BONUS(1) COMPENSATION(2) AWARDS OPTIONS COMPENSATION(1)(3)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($)
- ----------------------------------- ------ --------- ---------- ----------------- ------------ ----------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. T. Jongebloed ................ 1997 437,461 336,000 -- --0- 50,000 12,850
Chairman, President and ....... 1996 404,423 303,615 -- --0- 60,779 250
Chief Executive Officer ....... 1995 376,961 47,250 -- --0- 40,890 250
W. J Myers ...................... 1997 248,723 116,640 -- 190,875 19,000 4,624
Group Vice President -- ....... 1996 238,846 123,117 -- --0- 24,416 250
U.S. Operations ............... 1995 230,654 12,657 -- --0- 20,000 250
E. J. Spillard .................. 1997 207,154 120,000 -- --0- 16,000 4,750
Senior Vice President, ........ 1996 195,068 111,234 -- --0- 19,792 250
Finance ....................... 1995 185,937 16,875 -- --0- 20,000 250
R. G. Hale ...................... 1997 194,769 114,000 -- --0- 15,000 4,525
Group Vice President- ......... 1996 185,846 105,608 -- --0- 18,909 250
International Operations ...... 1995 177,653 29,563 -- --0- 20,000 250
G. G. Arms ...................... 1997 150,291 73,000 -- --0- 9,000 2,988
Vice President and ............ 1996 140,808 66,178 -- --0- 10,597 250
General Counsel; .............. 1995 133,392 12,188 -- --0- 15,000 250
Corporate Secretary
</TABLE>
- ----------
(1) Seventy-five percent of the bonus for 1997 was paid in cash and the
remainder in restricted shares of Common Stock, the number of which was
determined by dividing 25 percent of the bonus amount by the share price at
the award date and, in accordance with provisions of the bonus plan,
increasing that result by 15 percent. The value at the award date of the 15
percent increase is included in the amount shown in the "All Other
Compensation" column.
(2) Perquisites and other personal benefits paid in each year to each of the
named executive officers did not exceed the lesser of $50,000 or 10 percent
of such individual's total salary and bonus.
(3) Includes the amount contributed by the Company to each individual's 401(k)
Plan account in such year as well as, for 1997, the amount described in
note (1).
A-6
<PAGE>
OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION EXERCISES IN 1997 AND YEAR-END OPTION VALUES
The following table sets forth information with respect to stock option
exercises during 1997, and unexercised stock options held, as of the end of
1997, by the persons named in the Summary Compensation Table:
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT 12-31-97 OPTIONS AT 12-31-97
SHARES ACQUIRED VALUE (#) ($) -
ON EXERCISE REALIZED ------------------------------- ---------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ----------------- ----------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
J. T. Jongebloed ......... 69,110 1,407,818 118,889 121,780 1,646,391 1,374,391
W. J Myers ............... 23,604 295,742 2,500 49,812 31,563 570,252
E. J. Spillard ........... 25,000 415,625 72,676 43,344 977,393 500,219
R. G. Hale ............... 14,720 188,110 7 41,682 88 483,111
G. G. Arms ............... 25,000 502,500 34,404 26,448 458,567 310,282
</TABLE>
- ----------
(1) Value realized is the excess of the current market value at the date of
exercise minus the exercise price.
OPTION GRANT TABLE
OPTION GRANTS IN 1997
The following table sets forth information with respect to stock options
granted during 1997 to the persons named in the Summary Compensation Table:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK PRICE
NUMBER OF OPTIONS APPRECIATION
SHARES UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(5)
OPTIONS GRANTED EMPLOYEES IN PRICE EXPIRATION -----------------------------------
NAME (1)(2)(3) 1997 ($/SH)(4) DATE 5% 10%
- ----------------------------- ------------------- -------------- ----------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. T. Jongebloed ............ 50,000 29.21% 13.50 5/1/07 $ 424,500 $ 1,075,800
W. J Myers .................. 19,000 11.10% 13.50 5/1/07 161,310 408,804
E. J. Spillard .............. 16,000 9.35% 13.50 5/1/07 135,840 344,256
R. G. Hale .................. 15,000 8.76% 13.50 5/1/07 127,350 322,740
G. G. Arms .................. 9,000 5.26% 13.50 5/1/07 76,410 193,644
Total ...................... 109,000 63.67% $ 925,410 $ 2,345,244
All Shareholders(6) ......... N/A N/A N/A N/A $ 165,121,552 $ 418,463,522
Named Executives' Gain as
% of all Shareholders'
Gain ....................... N/A N/A N/A N/A 0.56% 0.56%
</TABLE>
- ----------
(1) All options granted in 1997 become exercisable in equal annual increments
of 33 1/3 percent commencing on the first anniversary of the award. Vesting
may be accelerated, however, in the event of a change in control of the
Company.
(2) The Compensation Committee and/or the Board retains discretion, subject to
plan limits, to modify the terms of outstanding options.
(3) The options have a term of ten years, but are subject to earlier expiration
in certain events related to termination of employment.
(4) The exercise price and any related tax withholding obligations arising in
connection with exercise may be satisfied by the optionholder'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 shown in these columns are the result of computation
required by the Commission's regulations, and are not intended to forecast
future appreciation, if any, of the Stock price of the Common Stock.
(6) Potential shareholder gain is included for comparison purposes and is
calculated assuming all outstanding shares were purchased at a price equal
to the market price of the Common Stock ($13.50 per share) on May 1, 1997,
the date of the 1997 option grants.
A-7
<PAGE>
LONG-TERM INCENTIVE PLAN
AWARDED FOR 1997
The following table sets forth information with respect to the potential
awards of Common Stock under the Company's 1997 Long-Term 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, 1997 and ending December 31,
1999.
<TABLE>
<CAPTION>
1997 PLAN
ESTIMATED FUTURE PAYOUT
---------------------------------
NUMBER OF PERFORMANCE THRESHOLD TARGET MAXIMUM
NAME SHARES PERIOD (#) (#) (#)
- -------------------------- ----------- ------------ ----------- -------- --------
<S> <C> <C> <C> <C> <C>
J. T. Jongebloed ......... 17,155 3 years 4,289 17,155 25,733
W. J Myers ............... 6,617 3 years 1,654 6,617 9,926
E. J. Spillard ........... 5,446 3 years 1,362 5,446 8,169
R. G. Hale ............... 5,174 3 years 1,294 5,174 7,761
G. G. Arms ............... 2,485 3 years 621 2,485 3,728
</TABLE>
Under the plan, a target award of shares was established for each
participant based on a percentage of the individual's salary in effect at the
beginning of the applicable three-year performance period. A payout under the
plan will depend on the extent to which the established performance criteria are
satisfied. Target awards are based 50 percent on earnings before interest, taxes
and depreciation performance and 50 percent on total return to shareholders as
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 will be restricted so that, (i) if the executive's
employment terminates within one year after the shares are earned, 100 percent
of the shares would be forfeited, and (ii) if the executive's employment
terminates between one and two years after the award is earned, 50 percent of
the shares would be forfeited except in the event of termination of the
executive's employment due to retirement, death, total disability, redundancy or
change in control. 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-fourth
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 payouts.
RETIRMENT BENEFITS AND CHANGE IN CONTROL ARRANGEMENTS
RETIREMENT PLAN. The Company has a defined benefit retirement plan for its
employees with different benefit formulas for salaried and hourly employees (the
"Qualified Retirement Plan"). The normal monthly retirement benefit payable at
age 65, or later if employment continues beyond age 65, for salaried employees
is equal to 1 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 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 Qualified Retirement 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 Qualified Retirement Plan
permits other forms of benefit payment. At December 31, 1997, credited service
under the plan for Messrs. Jongebloed, Myers, Spillard, Hale and Arms was 7.67
years each, and the highest average annual compensation recognized by the plan
for each of them was $152,000, $152,000, $152,000, $152,000, and $132,800,
respectively.
A-8
<PAGE>
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 ......... $ 18,114 $ 24,152 $ 30,190 $ 36,228 $ 42,266
125,000 ......... 24,114 32,152 40,190 48,228 56,266
150,000 ......... 30,114 40,152 50,190 60,228 70,266
175,000 ......... 32,514 43,352 54,190 65,028 75,866
200,000 ......... 32,514 43,352 54,190 65,028 75,866
225,000 ......... 32,514 43,352 54,190 65,028 75,866
250,000 ......... 32,514 43,352 54,190 65,028 75,866
300,000 ......... 32,514 43,352 54,190 65,028 75,866
400,000 ......... 32,514 43,352 54,190 65,028 75,866
500,000 ......... 32,514 43,352 54,190 65,028 75,866
</TABLE>
- ----------
* In accordance with the applicable provisions of the Internal Revenue Code
of 1986, as amended, annual compensation above $160,000 is disregarded in
calculating benefits, and the benefits payable under the Qualified
Retirement Plan are limited to $125,000 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 2 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, including the
Qualified Retirement Plan. The 1996 plan provides benefits equal to 2 1/2
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 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, including the
Qualified Retirement Plan, 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, 1997, credited service under these
plans for Messrs. Jongebloed, Myers, Spillard, Hale and Arms was 19.3, 9.9,
18.0, 26.1 and 22.2 years, respectively, and the highest average annual
compensation recognized by the plans for each of them was $570,617, $303,472,
$255,501, $246,852 and $179,449, respectively.
A-9
<PAGE>
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 $ 3,706 $ 7,668 $ 11,630
125,000 ......... 0 1,744 6,206 10,668 15,130
150,000 ......... 0 3,744 8,706 13,668 18,630
175,000 ......... 3,882 10,544 17,206 23,868 30,530
200,000 ......... 11,382 20,544 29,706 38,868 48,030
225,000 ......... 18,882 30,544 42,206 53,868 65,530
250,000 ......... 26,382 40,544 54,706 68,868 83,030
300,000 ......... 41,382 60,544 79,706 98,868 118,030
400,000 ......... 71,382 100,544 129,706 158,868 188,030
500,000 ......... 101,382 140,544 179,706 218,868 258,030
600,000 ......... 131,382 180,544 229,706 278,868 328,030
700,000 ......... 161,382 220,544 279,706 338,868 398,030
</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, but does not reflect
the offset which will be made for any benefits payable under any applicable
ENSERCH Corporation retirement plan (see text above).
POOL COMPANY RETIREMENT PLAN. Prior to the Company's acquisition of Pool
Company, Pool Company had a defined benefit retirement plan (which was merged
into the ENSERCH Corporation Retirement and Death Benefit Program) that provided
for a fixed benefit for salaried employees 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.
Payments under this plan are offsets under the supplemental executive retirement
plans discussed above. 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.
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 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 for three years
following a change in control of the Company unless terminated by the Company
prior to a change of control. The agreements each provide that if the officer's
employment 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 will 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 will 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.
A-10
<PAGE>
IMPORTANT
Your vote is important, no matter how many or how few shares of Common
Stock you may own. We urge you to vote AGAINST the adoption of the Nabors
Resolution by:
1. MARKING the enclosed GOLD proxy card,
2. SIGNING the enclosed GOLD proxy card,
3. DATING the enclosed GOLD proxy card, and
4. MAILING the enclosed GOLD proxy card TODAY in the envelope provided
(no postage is required if mailing in the United States).
IF ANY SHARES OF COMMON STOCK ARE HELD FOR YOUR ACCOUNT IN THE NAME OF A
BROKERAGE FIRM, BANK, BANK NOMINEE OR OTHER INSTITUTION, ONLY SUCH INSTITUTION
CAN VOTE YOUR SHARES AND ONLY UPON RECEIPT OF YOUR SPECIFIC INSTRUCTIONS.
ACCORDINGLY, PLEASE CONTACT THE PERSON RESPONSIBLE FOR YOUR ACCOUNT AND INSTRUCT
THAT PERSON TO EXECUTE THE GOLD PROXY CARDS REPRESENTING YOUR SHARES. YOUR BOARD
ASKS YOU TO CONFIRM IN WRITING YOUR INSTRUCTIONS TO MACKENZIE PARTNERS, INC. AT
THE ADDRESS PROVIDED BELOW SO THAT YOUR BOARD WILL BE AWARE OF ALL INSTRUCTIONS
GIVEN AND CAN ATTEMPT TO ENSURE THAT SUCH INSTRUCTIONS ARE FOLLOWED.
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If you have any questions or need assistance in voting your GOLD
proxy card, please contact:
MACKENZIE
PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
CALL TOLL-FREE (800) 322-2885 OR (212) 929-5500 (COLLECT)
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A-11
<PAGE>
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PRELIMINARY COPY -- SUBJECT TO COMPLETION
DATED NOVEMBER 30, 1998
[FORM OF PROXY CARD -- GOLD]
POOL ENERGY SERVICES CO.
SPECIAL MEETING OF SHAREHOLDERS
*******
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS IN
OPPOSITION TO PROXIES SOLICITED BY NABORS INDUSTRIES, INC.
*******
The undersigned hereby constitutes, appoints and authorizes J.T. Jongebloed
and James L. Payne, and each of them severally, as the true and lawful
attorneys, agents and proxies of the undersigned, with full power of
substitution and resubstitution, to represent and to vote all shares of common
stock, no par value, of Pool Energy Services Co. (the "Company") held of record
by the undersigned on ____________, 1998 at the Special Meeting of Shareholders
to be held at the offices of the Company, located at 10375 Richmond Avenue,
Houston, Texas 77042, at 9:30 a.m., local time, on January 12, 1999, and at any
adjournment(s) thereof, in accordance with the instructions noted below, and
with discretionary authority with respect to such other matters, not known or
determined at the time of solicitation of this Proxy, as may properly come
before said meeting or any adjournment(s) thereof. Receipt of the Proxy
Statement dated December __, 1998 from the Board of Directors, ("Proxy
Statement"), is hereby acknowledged.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE VOTED IN
ACCORDANCE WITH THE SHAREHOLDER'S SPECIFICATION HEREON. IN THE ABSENCE OF SUCH
SPECIFICATION, THE PROXY WILL BE VOTED "AGAINST" THE PROPOSAL SET OUT BELOW.
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1. To consider and vote upon the Nabors Resolution set forth in the Proxy
Statement. A VOTE "AGAINST" THE NABORS RESOLUTION IS RECOMMENDED.
[ ] AGAINST [ ] FOR [ ] ABSTAIN
2. In their discretion, the aforementioned attorneys and proxies are
authorized to vote upon such other matters as may properly come before the
Special Meeting or any adjournment or adjournments thereof.
DATED:___________________ , 199___
------------------------------------------
Signature of Shareholder
------------------------------------------
Title or Authority
------------------------------------------
Signature of Shareholder (if held jointly)
* Please sign as name appears. Joint
owners each should sign. When signing
as attorney, trustee, administrator,
executor, etc., please indicate your
full title as such. If signor is a
corporation, please give full
corporate name by duly authorized
officer. If a partnership, please
sign in partnership name by
authorized person.
PLEASE DATE, SIGN AND MAIL YOUR PROXY PROMPTLY.
PLEASE DO NOT FOLD THIS PROXY.
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