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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM.........TO........
COMMISSION FILE NO. 0-20310
SUPERIOR ENERGY SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 75-2379388
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1105 Peters Road
Harvey, LA 70058
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number: (504) 362-4321
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant at March 15, 2000 based on the closing price on Nasdaq
National Market on that date was $308,300,000.
The number of shares of the Registrant's common stock outstanding on March
15, 2000 was 59,926,289.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for its 2000 Annual
Meeting of Stockholders have been incorporated by reference into Part IV of
this Form 10-K.
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SUPERIOR ENERGY SERVICES, INC.
ANNUAL REPORT ON FORM 10-K FOR
THE FISCAL YEAR ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
PAGE
PART I
Items 1. & 2. Business and Properties 1
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 4A. Executive Officers of Registrant 9
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 10
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk 15
Item 8. Financial Statements and Supplementary Data 16
Item 9. Changes in and disagreements with Accountants on
Accounting and Financial Disclosure 35
PART III
Item 10. Directors and Executive Officers of the Registrant 35
Item 11. Executive Compensation 35
Item 12. Security Ownership of Certain Beneficial Owners and
Management 35
Item 13. Certain Relationships and Related Transactions 35
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 36
EXPLANATORY NOTE
On July 15, 1999, we acquired Cardinal Holding Corp. through its merger
with one of our wholly-owned subsidiaries. The merger was treated for
accounting purposes as if Superior was acquired by Cardinal in a purchase
business transaction. The purchase method of accounting required that we
carry forward Cardinal's net assets at their historical book value and
reflect Superior's net assets at their estimated fair value at the date of
the merger. Accordingly, all historical financial results presented in the
consolidated financial statements included in this Annual Report for
periods prior to July 15, 1999 reflect Cardinal's results on a stand-alone
basis. Cardinal's historical operating results were substantially
different than ours for the same period and reflected substantial non-cash
and extraordinary charges associated with a recapitalization and
refinancing. The results for the year ended December 31, 1999 reflect
twelve months of Cardinal's operations, five and one-half months of our
operations after the merger and two months of operations of Production
Management Companies, Inc., which we acquired effective November 1, 1999.
Consequently, analyzing prior period results to determine or estimate our
future operating potential will be difficult given the accounting treatment
of the Cardinal merger, our subsequent acquisition of Production Management
and the substantial non-cash and extraordinary charges Cardinal incurred
prior to the merger.
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PART I
ITEMS 1. & 2. BUSINESS AND PROPERTIES
GENERAL
We provide a broad range of specialized oilfield services and equipment to
oil and gas companies in the Gulf of Mexico and throughout the Gulf Coast
region. These services and equipment include:
* well services including plug and abandonment ("P&A") services, coiled
tubing services, well pumping and stimulation services, data
acquisition services, gas lift services and electric wireline services,
* mechanical wireline services,
* the rental of liftboats
* the rental of specialized oilfield equipment,
* environmental cleaning services,
* field management services, and
* the manufacture and sale of drilling instrumentation and oil spill
containment equipment.
Over the past few years, we have significantly expanded our geographic
scope of operations and the range of production related services we provide
through both internal growth and strategic acquisitions. In July 1999, we
completed the acquisition by merger of Cardinal Holding Corp., and in
November 1999, we completed the acquisition of Production Management
Companies, Inc., thereby making these companies two of our wholly-owned
subsidiaries. These acquisitions firmly established us as a market leader
in providing most offshore production related services using liftboats as
work platforms and allowed us to expand our scope of operations to include
offshore platform and property management services.
The decline in drilling and workover activity in the Gulf of Mexico
triggered by low oil prices that began in 1998 adversely affected our
results of operations for the fiscal year ended December 31, 1999. Our
operating results are directly tied to industry demand for our services,
most of which are performed in the Gulf of Mexico. While we have focused on
providing production related services where, historically, demand has
not been as volatile as for exploration related services, we expect our
operating results to be highly leveraged to industry activity levels in the
Gulf of Mexico. For additional industry segment information for the year
ended December 31, 1999, see note 13 to consolidated financial statements.
OPERATIONS
WELL SERVICES. We are the leading provider of P&A services in the Gulf of
Mexico. These services involve the acts of "plugging" and "abandoning" a
well that is no longer productive. We perform both permanent and temporary
P&A services. If a well is permanently plugged, the well will no longer
produce, and we will remove all evidence of the well's existence on the
surface or on the bottom of the sea. We can also plug a well temporarily
to enable the operator to come back at a later date and use the well again.
We construct all of our P&A equipment providing us the flexibility to build
equipment to satisfy market demand. Our custom-built, skid-mounted P&A
equipment is generally smaller than those used by many of our competitors.
This equipment allows us to complete the P&A process from the platform or
from liftboats rather than using a drilling rig ("rig-less P&A"). Rig-less
P&A offers a cost advantage over P&A methods that require a drilling rig,
and management believes that the large majority of the wells in the Gulf of
Mexico can be plugged and abandoned using the rig-less P&A method. In
delivering P&A services, we have combined both wireline and pumping
expertise, which traditionally have been provided separately. We believe
that this combined expertise gives us an advantage over many of our
competitors. The addition of our liftboat fleet through our acquisition of
Cardinal has further solidified this competitive advantage by providing us
with greater access to the liftboats used in the delivery of our P&A
services.
To a more limited extent, we also provide coiled tubing services, well
pumping and stimulation services, data acquisition services, gas lift
services and electric wireline services.
WIRELINE SERVICES. We are the leading provider of mechanical wireline
services in the Gulf of Mexico with approximately 200 offshore wireline
units, 20 land wireline units and 18 liftboats configured specifically for
wireline services. A wireline unit is a spooled wire that can be unwound
and lowered into a well carrying various types of tools. Wireline services
are used for a variety of purposes, such as:
* accessing a well to assist in data acquisition or logging activities,
* fishing tool operations to retrieve lost or broken equipment,
* pipe recovery, and
* remedial activities.
In addition, wireline services are an integral part of the P&A services
that we provide.
MARINE SERVICES. We have the largest and most diverse liftboat fleet in
the Gulf of Mexico. With our liftboat fleet, we are the leading provider
of liftboat rental services in the Gulf of Mexico. Our fleet contains 42
liftboats, 24 of which have leg lengths of 100 feet or more. We are
currently refurbishing a liftboat with 200 foot legs that was damaged in
September 1999 and also have another 200 foot liftboat under construction
that we expect to add to our fleet in the third quarter of 2000.
A liftboat is a self-propelled, self-elevating work platform with legs,
cranes and living accommodations. Upon arriving at its destination, the
liftboat hydraulically lowers its legs until they are positioned on the
ocean floor, and then jacks up until the work platform is sufficiently
above the water level. Once positioned, the stability, open deck area,
crane capacity, and relatively low cost of operation make liftboats ideal
work platforms for a wide range of offshore activity from platform
construction to P&A services. Each of our liftboats also have either one
or two cranes with lift capacity of up to 100 tons. In addition, the
capability to reposition at a work site or to move to another location
within a short time adds to their versatility. Liftboat services are
highly complementary to both wireline and P&A operations, as both require a
work platform. Liftboats are also frequently used when removing platforms
or performing workovers on wells.
RENTAL TOOLS. As a leading provider of rental tools in the Gulf Coast
region, we manufacture, sell and rent specialized equipment for use with
onshore and offshore oil and gas well drilling, completion, production and
workover activities. The drilling and operation of oil and gas wells
generally requires a variety of equipment. The equipment needed for a
particular well is in large part determined by the geological features of
the well area and the size of the well itself. As a result, operators and
drilling contractors often find it more economical to supplement their
inventories with rental tools instead of maintaining a complete inventory
of tools.
Through internal growth and acquisitions, we have increased the size of our
rental tool inventory and now have 16 locations that are located in all
major staging points for offshore oil and gas activities in Texas and
Louisiana. We also have a rental tool operation in Venezuela with a
limited inventory of rental tools for this market area.
ENVIRONMENTAL SERVICES. We provide a full range of environmental cleaning
services, including vessel pressure cleaning and safe vessel entry. In
addition to conventional tank and vessel pressure cleaning, we use our
patented technology for on-line/remote cleaning to pressure clean vessels
while under normal operation and flow. This patented technology offers
numerous benefits, including no confined space entry, the elimination of
production shut-in and the reduction of waste disposal costs. Other
environmental cleaning services we provide include:
* glycol system rehabilitation,
* naturally occurring radioactive material remediation and
decontamination at offsite locations,
* emergency site cleanup,
* bulk storage tank cleaning and demolition, and
* the rental of containers used in the disposal of waste products.
FIELD MANAGEMENT SERVICES. We also provide a comprehensive range of
platform and field management services to the onshore and offshore oil and
gas industry, including:
* property management,
* maintenance,
* supplemental personnel, and
* logistics services.
We provide, on a monthly contracting basis, all services required for the
daily mechanical operation and maintenance of offshore producing oil and
gas properties and platforms, including engineering services, operating
labor, transportation, tools and supplies, and technical supervision. We
currently provide such property management services to approximately 75
offshore facilities in the Gulf of Mexico. In addition, we provide
supplemental labor on both a short and long term basis to our customers.
OTHER SERVICES. We also provide other services, including the manufacture
and sale of drilling instrumentation and oil spill containment equipment.
We design, manufacture and sell specialized drilling rig instrumentation
and computerized electronic torque and pressure control equipment. Our
torque and pressure control equipment is used in drilling and workover
operations, as well as the manufacture of oilfield tubular goods. The
torque control equipment monitors the relationship between size, weight,
grade, rate of makeup, torque and penetration of tubular goods to ensure a
leak-free connection within the pipe manufacturer's specification. The
electronic pressure control equipment monitors and documents internal and
external pressure testing of tubular connections.
We also sell oil spill containment inflatable boom and ancillary
storage/deployment/retrieval equipment. Our inflatable boom utilizes
continuous single-point inflation technology with air feeder sleeves in
combination with mechanical check valves to permit continuous inflation of
the boom material. We sell, rent and license oil spill containment
technology to domestic and foreign oil companies, oil spill response
companies and cooperatives, the United States Coast Guard and to foreign
governments and their agencies.
CUSTOMERS
We derive a significant amount of revenue from a small number of major and
independent oil and gas companies. No single customer represented 10% or
more of our total revenue in 1999 or 1998. In 1997, one customer accounted
for approximately 11.2% of our total revenue, primarily in the marine and
wireline segments. Our inability to continue to perform services for a
number of our large existing customers, if not offset by sales to new or
existing customers, could have a material adverse effect on our business
and financial condition.
COMPETITION
We compete in highly competitive areas of the oilfield services industry.
The products and services of each of our principal operating segments are
sold in highly competitive markets, and our revenues and earnings can be
affected by the following factors:
* changes in competitive prices,
* fluctuations in the level of activity and major markets,
* an increased number of liftboats in the Gulf of Mexico
* general economic conditions, and
* governmental regulation.
We compete with the oil and gas industry's largest integrated oilfield
service providers. We believe that the principal competitive factors in
the market areas that we serve are price, product and service quality,
availability and technical proficiency.
Our operations may be adversely affected if our current competitors or new
market entrants introduce new products or services with better features,
performance, prices or other characteristics than our products and
services. Further, if additional liftboats enter the Gulf of Mexico market
area, it would increase the competition for that service. Competitive
pressures or other factors also may result in significant price competition
that could have a material adverse effect on our results of operations and
financial condition. Finally, competition among oilfield service and
equipment providers is also affected by each provider's reputation for
safety and quality. Although we believe that our reputation for safety and
quality service is good, you cannot be sure that we will be able to
maintain our competitive position.
POTENTIAL LIABILITIES AND INSURANCE
Our operations involve a high degree of operational risk, particularly of
personal injury and damage or loss of equipment. Failure or loss of our
equipment could result in property damages, personal injury, environmental
pollution and other damage for which we could be liable. Litigation
arising from the sinking of a liftboat or a catastrophic occurrence at a
location where our equipment and services are used may in the future result
in large claims for damages. We maintain insurance against risks that we
believe is consistent with industry standards and required by our
customers. Although we believe that our insurance protection is adequate,
and that we have not experienced a loss in excess of policy limits, you
cannot be sure that we will be able to maintain adequate insurance at rates
which we consider commercially reasonable, nor that such coverage will be
adequate to cover all claims that may arise.
GOVERNMENTAL REGULATION
Our business is significantly affected by the following:
* state and federal laws and other regulations relating to the oil and gas
industry,
* changes in such laws,
* changing administrative regulations, and
* the level of enforcement thereof.
We cannot predict the level of enforcement of existing laws and regulations
or how such laws and regulations may be interpreted by enforcement agencies
or court rulings in the future. We also can not predict whether additional
laws and regulations will be adopted, or the effect such changes may have
on us, our businesses or our financial condition.
Federal and state laws require owners of non-producing wells to plug the
well and remove all exposed piping and rigging before the well is
permanently abandoned. The timing and need for P&A services for wells
situated on the federal outer continental shelf are regulated by the
Minerals Management Service (United States Department of the Interior).
The Minerals Management Service generally requires wells to be permanently
plugged and abandoned within one year of lease expiration. State
regulatory agencies similarly regulate P&A services within state coastal
waters. State regulatory timeframes for P&A can be as long as one year for
wells in Texas coastal waters or as short as 90 days after the drilling or
production operations cease in Louisiana coastal waters. The Minerals
Management Service and state regulatory agencies routinely grant extensions
of time for P&A requirements when a well has future leasehold potential or
when it is consistent with prudent operating practices, economic
considerations or other special circumstances. You cannot be sure that a
decrease in the level of industry compliance with or enforcement of
such laws and regulations in the future would not adversely affect the
demand for our services and products. In addition, the demand for our
services from the oil and gas industry is affected by changes in pertinent
laws and regulations. The adoption of new laws and regulations curtailing
drilling for oil and gas in our areas of operations for economic,
environmental or other policy reasons could also adversely affect our
operations by limiting demand for our services.
Certain of our employees who perform services on offshore platforms and
vessels are covered by the provisions of the Jones Act, the Death on the
High Seas Act and general maritime law. These laws operate to make the
liability limits established under state workers' compensation laws
inapplicable to these employees. Instead, these employees or their
representatives are permitted to pursue actions against us for damages for
job related injuries, with generally no limitations on our potential
liability.
Our operations also subject us to compliance with certain federal and state
pollution control and environmental protection laws and regulations. We
believe that our present operations substantially comply with these laws
and regulations and that such compliance has had no material adverse effect
upon our operations to date. Sanctions for noncompliance may include the
following:
* revocation of permits,
* corrective action orders,
* administrative or civil penalties, and
* criminal prosecution.
Certain environmental laws provide for joint and several strict liabilities
for remediation of spills and other releases of hazardous substances. In
addition, companies may be subject to claims alleging personal injury or
property damage as a result of alleged exposure to hazardous substances.
Finally, some environmental statutes impose strict liability, which could
render us liable for environmental damage without regard to our negligence
or fault. You cannot be sure that environmental laws will not, in the
future, materially adversely affect our operations and financial condition.
EMPLOYEES
As of March 15, 2000, we had approximately 1,730 employees. None of our
employees are represented by a union or covered by a collective bargaining
agreement. We believe that our relations with our employees are good.
FACILITIES
Our principal operating facilities are located in Harvey, Louisiana on a 14
acre tract. We support the operations conducted by our liftboats from a
3.5 acre maintenance and office facility in New Iberia, Louisiana located
on the intracoastal waterway that provides access to the Gulf. We also own
certain facilities and lease other office, service and assembly facilities
under various operating leases, including 16 facilities located in Texas
and Louisiana to support our rental tool operations. We believe that all
of our leases are at competitive or market rates and do not anticipate any
difficulty in leasing suitable additional space upon expiration of our
current lease terms.
INTELLECTUAL PROPERTY
We use several patented items in our operations, which management believes
are important but are not indispensable to our operations. Although we
anticipate seeking patent protection when possible, we rely to a greater
extent on the technical expertise and know-how of our personnel to maintain
our competitive position.
CAUTIONARY STATEMENTS
Certain statements made in this Annual Report that are not historical facts
are "forward-looking statements." Such forward-looking statements may
include, without limitation, statements that relate to:
* statements regarding our business strategy, plans and objectives;
* statements expressing our beliefs and expectations regarding
future demand for our products and services and other events and
conditions that may influence the oilfield services market and
our performance in the future; and
* statements concerning our future expansion plans, including our
anticipated level of capital expenditures for, and the nature and
scheduling of, purchases or manufacture of rental tool equipment,
wireline or P&A equipment, and liftboats.
Also, you can generally identify forward-looking statements by such
terminology as "may," "will," "expect," "believe," "anticipate," "project,"
"estimate" or similar expressions. Such statements are based on certain
assumptions and analyses made by our management in light of its experience
and its perception of historical trends, current conditions, expected
future developments and other factors it believes to be appropriate. We
caution you that such statements are only predictions and not guarantees of
future performance and that actual results, developments and business
decisions may differ from those envisioned by the forward-looking
statements.
All phases of our operations are subject to a number of uncertainties,
risks and other influences, many of which are beyond our control. Any one
of such influences, or a combination, could materially affect the accuracy
of the forward-looking statements and the projections on which the
statements are based. Some important factors that could cause actual
results to differ materially from the anticipated results or other
expectations expressed in our forward-looking statements include the
following:
WE ARE SUBJECT TO THE CYCLICAL INFLUENCES OF THE OIL AND GAS INDUSTRY.
Our business depends in large part on the level of oilfield activity in the
Gulf of Mexico and along the Gulf Coast. The level of oil field activity
is affected in turn by the willingness of oil and gas companies to make
expenditures for the exploration, production and development of oil and
natural gas. The purchases of the products and services we provide are, to
a substantial extent, deferrable in the event oil and gas companies reduce
capital expenditures. Therefore, the willingness of our customers to make
expenditures is critical to our operations. The levels of such capital
expenditures are influenced by:
* oil and gas prices and industry perceptions of future prices,
* the cost of exploring for, producing and delivering oil and gas,
* the ability of oil and gas companies to generate capital,
* the sale and expiration dates of leases in the United States,
* the discovery rate of new oil and gas reserves, and
* local and international political and economic conditions.
Although the production and development sectors of the oil and gas industry
are less immediately affected by changing prices, and, as a result, less
volatile than the exploration sector, producers generally react to
declining oil and gas prices by reducing expenditures. This has, in the
past, and may, in the future, adversely affect our business. We are unable
to predict future oil and gas prices or the level of oil and gas industry
activity. A prolonged low level of activity in the oil and gas industry
will adversely affect the demand for our products and services and our
financial condition and results of operations.
WE ARE VULNERABLE TO THE POTENTIAL DIFFICULTIES ASSOCIATED WITH RAPID
EXPANSION.
We have grown rapidly over the last several years through internal growth
and acquisitions of other companies. Our future success depends on our
ability to manage the rapid growth that we have experienced, and this will
demand increased responsibility from our management personnel. The
following factors could present difficulties to us:
* the lack of sufficient executive-level personnel;
* the increased administrative burdens; and
* the increased logistical problems common with large, expansive
operations.
If we do not manage these potential difficulties successfully, our
operating results could be adversely affected. The historical financial
information herein is not necessarily indicative of the results that would
have been achieved had we been operated on a fully integrated basis or the
results that may be realized in the future.
OUR INABILITY TO CONTROL THE INHERENT RISKS OF ACQUIRING BUSINESSES COULD
ADVERSELY AFFECT OUR OPERATIONS.
Acquisitions have been and may continue to be a key element of our business
strategy. We cannot assure you that we will be able to identify and
acquire acceptable acquisition candidates on terms favorable to us in the
future. We may be required to incur substantial indebtedness to finance
future acquisitions and also may issue equity securities in connection with
such acquisitions. Such additional debt service requirements may impose a
significant burden on our results of operations and financial condition.
The issuance of additional equity securities could result in significant
dilution to our stockholders. We cannot assure you that we will be able to
successfully consolidate the operations and assets of any acquired business
with our own business. Acquisitions may not perform as expected when the
acquisition was made and may be dilutive to our overall operating results.
In addition, our management may not be able to effectively manage our
increased size or operate a new line of business
WE ARE SUSCEPTIBLE TO ADVERSE WEATHER CONDITIONS IN THE GULF OF MEXICO.
Our operations are directly affected by the seasonal differences in weather
patterns in the Gulf of Mexico. These differences may result in increased
operations in the spring, summer and fall periods and a decrease in the
winter months. The seasonality of oil and gas industry activity as a whole
in the Gulf Coast region also affects our operations and sales of
equipment. Weather conditions generally result in higher drilling activity
in the spring, summer and fall months with the lowest activity in winter
months. The rainy weather, hurricanes and other storms prevalent in the
Gulf of Mexico and along the Gulf Coast throughout the year may also affect
our operations. Accordingly, our operating results may vary from quarter
to quarter, depending on factors outside of our control. As a result, full
year results are not likely to be a direct multiple of any particular
quarter or combination of quarters.
WE DEPEND ON SIGNIFICANT CUSTOMERS.
We derive a significant amount of our revenue from a small number of major
and independent oil and gas companies. Our inability to continue to
perform services for a number of our large existing customers, if not
offset by sales to new or other existing customers, could have a material
adverse effect on our business and operations.
OUR INDUSTRY IS HIGHLY COMPETITIVE.
We compete in highly competitive areas of the oil field services industry.
The products and services of each of our principal industry segments are
sold in highly competitive markets, and our revenues and earnings may be
affected by the following factors:
* changes in competitive prices;
* fluctuations in the level of activity and major markets;
* an increased number of liftboats in the Gulf of Mexico;
* general economic conditions; and
* governmental regulation.
We compete with the oil and gas industry's largest integrated oil field
services providers. We believe that the principal competitive factors in
the market areas that we serve are price, product and service quality,
availability and technical proficiency.
Our operations may be adversely affected if our current competitors or new
market entrants introduce new products or services with better features,
performance, prices or other characteristics than our products and
services. Further, additional liftboat capacity in the Gulf of Mexico
would increase competition for that service. Competitive pressures or
other factors also may result in significant price competition that could
have a material adverse effect on our results of operations and financial
condition. Finally, competition among oil field service and equipment
providers is also affected by each provider's reputation for safety and
quality. Although we believe that our reputation for safety and quality
service is good, you cannot be sure that we will be able to maintain our
competitive position.
THE DANGERS INHERENT IN OUR OPERATIONS AND THE POTENTIAL LIMITS ON
INSURANCE COVERAGE COULD EXPOSE US TO POTENTIALLY SIGNIFICANT LIABILITY
COSTS.
Our operations involve the use of liftboats, heavy equipment and exposure
to inherent risks, including equipment failure, blowouts, explosions and
fire. In addition, our liftboats are subject to operating risks such as
catastrophic marine disaster, adverse weather conditions, mechanical
failure, collisions, oil and hazardous substance spills and navigation
errors. The occurrence of any of these events could result in our
liability for personal injury and property damage, pollution or other
environmental hazards, loss of production or loss of equipment. In
addition, certain of our employees who perform services on offshore
platforms and vessels are covered by provisions of the Jones Act, the Death
on the High Seas Act and general maritime law. These laws make the
liability limits established by state workers' compensation laws
inapplicable to these employees and instead permit them or their
representatives to pursue actions against us for damages for job-related
injuries. In such actions, there is generally no limitation on our
potential liability.
Any litigation arising from a catastrophic occurrence involving our
services or equipment could result in large claims for damages. The
frequency and severity of such incidents affect our operating costs,
insurability and relationships with customers, employees and regulators.
Any increase in the frequency or severity of such incidents, or the general
level of compensation awards with respect to such incidents, could affect
our ability to obtain projects from oil and gas companies or insurance.
This could have a material adverse effect on us. We maintain what we
believe is prudent insurance protection. You cannot be sure that we will be
able to maintain adequate insurance in the future at rates we consider
reasonable or that our insurance coverage will be adequate to cover future
claims that may arise.
THE NATURE OF OUR INDUSTRY SUBJECTS US TO COMPLIANCE WITH REGULATORY AND
ENVIRONMENTAL LAWS.
Our business is significantly affected by state and federal laws and other
regulations relating to the oil and gas industry and by changes in such
laws and the level of enforcement of such laws. We are unable to predict
the level of enforcement of existing laws and regulations, how such laws
and regulations may be interpreted by enforcement agencies or court
rulings, or whether additional laws and regulations will be adopted. We
are also unable to predict the effect that any such events may have on us,
our business, or our financial condition.
Federal and state laws that require owners of non-producing wells to plug
the well and remove all exposed piping and rigging before the well is
permanently abandoned significantly affect the demand for our plug and
abandonment services. A decrease in the level of enforcement of such laws
and regulations in the future would adversely affect the demand for our
services and products. In addition, demand for our services is affected by
changing taxes, price controls and other laws and regulations relating to
the oil and gas industry generally. The adoption of laws and regulations
curtailing exploration and development drilling for oil and gas in our
areas of operations for economic, environmental or other policy reasons
could also adversely affect our operations by limiting demand for our
services.
We also have potential environmental liabilities with respect to our
offshore and onshore operations, including our environmental cleaning
services. Certain environmental laws provide for joint and several
liabilities for remediation of spills and releases of hazardous substances.
These environmental statutes may impose liability without regard to
negligence or fault. In addition, we may be subject to claims alleging
personal injury or property damage as a result of alleged exposure to
hazardous substances. We believe that our present operations substantially
comply with applicable federal and state pollution control and
environmental protection laws and regulations. We also believe that
compliance with such laws has had no material adverse effect on our
operations to date. However, such environmental laws are changed
frequently. Sanctions for noncompliance may include revocation of permits,
corrective action orders, administrative or civil penalties and criminal
prosecution. We are unable to predict whether environmental laws will in
the future materially adversely affect our operations and financial
condition.
ITEM 3. LEGAL PROCEEDINGS
We are a party to various routine legal proceedings primarily involving
commercial claims, workers' compensation claims and claims for personal
injury under the General Maritime Laws of the United States and the Jones
Act. We insure against these risks to the extent deemed prudent by our
management, but no assurance can be given that the nature and amount of
such insurance will in every case fully indemnify us against liabilities
arising out of pending and future legal proceedings related to our business
activities. While the outcome of these lawsuits, legal proceedings and
claims cannot be predicted with certainty, our management believes that the
outcome of all such proceedings, even if determined adversely, would not
have a material adverse effect on our business or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 4A. EXECUTIVE OFFICERS OF REGISTRANT
The following table sets forth certain information about our executive
officers.
<TABLE>
<CAPTION>
NAME AND AGE POSITION
------------ --------
<S> <C>
Terence E. Hall, 54.......... Chairman of the Board, Chief Executive Officer, President
Kenneth Blanchard, 50........ Vice President
Charles Funderburg, 45....... Vice President
Robert S. Taylor, 45......... Chief Financial Officer
James A. Holleman, 42........ Vice President
Dale L. Mitchell, 37......... Vice President
</TABLE>
TERENCE E. HALL has served as our Chairman of the Board, Chief Executive
Officer, President and Director since December 1995. Since 1989 he also
served as President and Chief Executive Officer of the following wholly-
owned subsidiaries of Superior: Superior Well Service, Inc. and Connection
Technology, Ltd.
KENNETH BLANCHARD has served as one of our Vice Presidents since December
1995. Prior to this, he served as Vice President of Connection Technology,
Ltd.
CHARLES FUNDERBURG has served as one of our Vice Presidents since December
1995. Prior to this, he served as Vice President of Superior Well Service,
Inc.
ROBERT S. TAYLOR has served as our Chief Financial Officer since January
1996. From May 1994 to January 1996, he served as Chief Financial Officer
of Kenneth Gordon (New Orleans), Ltd., an apparel manufacturer. From
November 1989 to May 1994, he served as Chief Financial Officer of Plywood
Panels, Inc. Prior thereto, Mr. Taylor served as controller for Plywood
Panels, Inc. and Corporate Accounting Manager of D.H. Holmes Company, Ltd.,
a department store chain.
JAMES A. HOLLEMAN has served as a Vice President since July 1999. From
1994 until July 1999, he served as Chief Operating Officer of Cardinal and
has been active in Cardinal's business since 1981. Prior thereto, he was
employed by Reading and Bates in Houston, Texas and Industrial Lift Trucks,
Inc. in Lafayette, Louisiana.
DALE L. MITCHELL has served as a Vice President since July 1999. From 1998
until July 1999, he served as Vice President of Marine Services of
Cardinal. Prior to 1998, he served in numerous operational and managerial
roles within Cardinal's Marine Services division.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is traded on the Nasdaq National Market under the symbol
"SESI." The following table sets forth the high and low bid prices per
share of the Common Stock as reported by the Nasdaq National Market for
each fiscal quarter during the past two fiscal years.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1998
First Quarter $ 10.50 $ 7.00
Second Quarter 12.00 4.78
Third Quarter 5.75 2.88
Fourth Quarter 4.56 2.44
1999
First Quarter $ 3.97 $ 2.00
Second Quarter 5.75 2.75
Third Quarter 7.50 4.88
Fourth Quarter 7.06 5.25
2000
First Quarter (through March 15, 2000) $ 8.98 $ 6.00
</TABLE>
As of March 15, 2000, there were 59,926,289 shares of Common Stock
outstanding, which were held by approximately 165 record holders.
We intend to retain all of the cash our business generates to meet our
working capital requirements and fund future growth. We do not plan to pay
cash dividends on our common stock in the foreseeable future. In addition,
our credit facility prevents us from paying dividends or making other
distributions to our stockholders.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below for each of the past five
fiscal years should be read together with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the
Consolidated Financial Statements and Notes to Consolidated Financial
Statements included elsewhere in this Annual Report. All amounts in the
table below are in thousands, except per share data.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues $ 113,076 (1) $ 82,223 (2) $ 63,412 $ 48,128 $ 28,798
Income from operations 10,016 15,558 15,285 8,348 2,717
Income (loss) before extraordinary
losses (2,034) 1,203 4,321 2,894 333
Extraordinary losses, net (4,514)(3) (10,885)(4) - - (1,335)(5)
Net income (loss) (6,548) (9,682) 4,321 2,894 (1,002)
Net income (loss) before
extraordinary losses per share:
Basic (0.11) 0.06 0.21 0.14 0.02
Diluted (0.11) 0.06 0.20 0.13 0.02
Net income (loss) per share:
Basic (0.25) (1.27) 0.21 0.14 (0.05)
Diluted (0.25) (1.27) 0.20 0.13 (0.05)
Total assets 282,255 107,961 62,387 43,928 40,402
Long-term debt, less current portion 117,459 120,210 31,297 26,200 28,002
</TABLE>
(1) On July 15, 1999, we acquired Cardinal through a merger by issuing
30,239,568 shares of our common stock. Because Cardinal's shareholders
held 51% of our outstanding common stock immediately after the merger,
among other factors, the merger has been accounted for as a reverse
acquisition which has resulted in the adjustment of our net assets
existing at the time of the merger to their estimated fair value as
required by the rules of purchase accounting. Our operating results
have been included from July 15, 1999.
Effective November 1, 1999, we acquired Production Management Companies,
Inc. for $3.0 million in cash and 610,000 shares of our common stock.
Additional payments, if any, of up to $11 million will be based upon a
multiple of Production Management's future earnings before interest,
taxes, depreciation and amortization. The acquisition was accounted for
as a purchase, and Production Management's operating results have been
included from November 1, 1999.
(2) In 1998, Cardinal acquired all of the outstanding stock of three
companies for an aggregate purchase price of $24.1 million with a
combination of cash and stock as consideration for the acquisitions.
Each of these acquisitions was accounted for using the purchase method
and the results of operations of the acquired companies have been
included from their respective acquisition dates.
(3) The repayment of our combined indebtedness in July 1999 in connection
with the Cardinal acquisition resulted in an extraordinary loss of $4.5
million, net of a $2.1 million income tax benefit, which included the
premium on Cardinal's subordinated debt and the write-off of all
unamortized debt acquisition costs.
(4) In February, 1998, Cardinal completed a recapitalization and
refinancing which was funded through senior secured debt, subordinated
debt and equity investments. As a result of the recapitalization,
Cardinal recorded an increase in equity of $57.5 million from the
issuance of Class A common stock and Class C preferred stock; incurred
$7.1 million of costs associated with the debt acquisition and reduction
to net proceeds from the issuance of stock; recorded a reduction in
equity of $114.8 million from the redemption of Class A common stock and
Class C preferred stock; and recorded an extraordinary loss of $10.9
million for the estimated value of warrants of $10.5 million and
unamortized debt acquisition costs of $379,000 (net of $214,000 income
tax benefit).
(5) In October 1995, Cardinal refinanced various debt instruments and
recorded an extraordinary loss of $1.3 million, net of a $0.8 million
income tax benefit, which included a prepayment premium and the write-
off of debt acquisition costs and interest rate cap agreement costs.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
our consolidated financial statements included elsewhere in this Annual
Report. The following information contains forward-looking statements,
which are subject to risks and uncertainties. Should one or more of these
risks or uncertainties materialize, our actual results may differ from
those expressed or implied by the forward-looking statements. See
"Cautionary Statements."
ACQUISITION OF CARDINAL HOLDING CORP.
On July 15, 1999, we acquired Cardinal Holding Corp. through its merger
with one of our wholly-owned subsidiaries. The merger was treated for
accounting purposes as if we were acquired by Cardinal in a purchase
business transaction. The purchase method of accounting required that we
carry forward Cardinal's net assets at their historical book value and
reflect our net assets at their estimated fair value at the date of the
merger. Accordingly, all historical financial information presented in the
consolidated financial statements included in this Annual Report for
periods prior to July 15, 1999 reflect Cardinal's results on a stand-alone
basis. Cardinal's historical operating results were substantially
different than ours for the same periods and reflected substantial non-cash
and extraordinary charges associated with a recapitalization and
refinancing. Our 1999 results reflect twelve months of Cardinal's
operations, five and one-half months of our operations after the merger and
two months of operations of Production Management Companies, Inc., which we
acquired effective November 1, 1999. Consequently, analyzing prior period
results to determine or estimate our future operating potential will be
difficult given the accounting treatment of the Cardinal merger, our
subsequent acquisition of Production Management and the substantial non-
cash and extraordinary charges Cardinal incurred prior to the merger.
OVERVIEW
We provide a broad range of specialized oilfield services and equipment to
oil and gas companies in the Gulf of Mexico and throughout the Gulf Coast
region. These services and equipment include:
* well services including P&A services, coiled tubing services, well
pumping and stimulation services, data acquisition services, gas lift
services and electric wireline services,
* mechanical wireline services,
* the rental of liftboats
* the rental of specialized oilfield equipment,
* environmental cleaning services,
* field management services, and
* the manufacture and sale of drilling instrumentation and oil spill
containment equipment.
Over the past few years, we have significantly expanded the geographic
scope of our operations and the range of production related services that
we provide through both internal growth and strategic acquisitions. In
July 1999, we completed the Cardinal acquisition, and in November 1999, we
completed the Production Management acquisition thereby making these
companies two of our wholly-owned subsidiaries. These acquisitions firmly
established us as a market leader in providing most offshore production
related services using liftboats as work platforms and allowed us to expand
our scope of operations to include offshore platform and property
management services.
The decline in drilling and workover activity in the Gulf of Mexico
triggered by low oil prices that began in 1998 adversely affected our 1999
results of operations. Our operating results are directly tied to industry
demand for our services, most of which are performed in the Gulf of
Mexico. While we have focused on providing production related services
where, historically, demand has not been as volatile as for exploration
related services, we expect our operating results to be highly leveraged to
industry activity levels in the Gulf of Mexico. For additional industry
segment information for 1999, see note 13 to our consolidated financial
statements.
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31,
1999 AND 1998.
Our 1999 revenues were $113.1 million compared to $82.2 million for 1998.
Due to the accounting treatment required for the Cardinal acquisition, our
1999 operating results reflected twelve months of Cardinal's operations,
five and one-half months of our operations after the merger and two months
of operations of Production Management. 1998 reflects only Cardinal's
operations on a stand-alone basis. Even though we had increased revenues
in 1999, we experienced decreased demand in 1999 in all of our operating
segments as a result of low industry activity levels.
As demand for our services decreased in 1999 compared to 1998, our gross
margins decreased to 40.4% in 1999 from 46.6% in 1998. Our decreased gross
margin percentage is primarily due to our marine segment acquired in the
Cardinal acquisition. Since our marine segment's cost of services are
primarily fixed in nature, our gross margin percentage may vary
substantially due to changes in day rates and utilization of our liftboats.
Our rental tool segment contributed our highest gross margin percentage in
1999 and partially offset the decrease on a comparative basis since
Cardinal did not have a rental tool segment. Our wireline segment also
experienced a decline in gross margin percentage in 1999 compared to 1998.
Our field management segment, which was acquired in the Production
Management acquisition, contributed our lowest gross margin percentage. Of
all of our production related services, the field management segment is
expected to produce the lowest gross margin percentage since its largest
cost of sales component is providing contract labor.
Depreciation and amortization increased to $12.6 million in 1999 from $6.5
million in 1998. Most of the increase resulted from the larger asset base
following the merger and the Production Management acquisition.
Depreciation also increased as a result of our $9.2 million of capital
expenditures in 1999 and Cardinal's 1998 acquisitions.
General and administrative expenses increased to $23.1 million in 1999 from
$16.2 million in 1998. The increase is the result of Cardinal's expenses
for twelve months, our expenses for five and one-half months and Production
Management for two months.
In July 1999, in connection with the Cardinal acquisition, we refinanced
our combined debt, which resulted in an extraordinary charge of $4.5
million, net of income taxes of $2.1 million. The majority of the
extraordinary charge was non-cash in nature. During 1998, Cardinal
incurred extraordinary charges of $10.9 million, net of income taxes of
$0.2 million, in connection with a recapitalization and refinancing. These
charges were also mostly of a non-cash nature.
We recorded a 1999 net loss before extraordinary charges of $2.0 million,
or $0.11 loss per diluted share. After extraordinary charges, we recorded
a net loss of $6.5 million, or $0.25 loss per diluted share, as compared to
a net loss of $9.7 million, or $1.27 loss per diluted share, for 1998.
COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998
AND 1997
The results of operations for the years ended December 31, 1998 and 1997
were prior to our acquisition of Cardinal and, accordingly, reflect
Cardinal's results on a stand-alone basis. We do not believe Cardinal's
historical operating results under different management are relevant other
than to demonstrate the operating leverage associated with our marine
segment.
In 1998, Cardinal's operating results began to be impacted by the decline
in industry activity levels in the Gulf as a result of the decline in oil
and gas prices. The 1998 third quarter was impacted by a nearly continuous
series of storms and hurricanes that significantly curtailed activity in
September 1998.
Revenues for 1998 were $82.2 million as compared to $63.4 million for 1997.
Approximately 60% of the increase was due to the additional products and
services Cardinal began providing in 1998, including coiled tubing
services, pumping and stimulation services and two additional 200 foot
liftboats. The remaining 40% was the result of acquisitions made during
1998.
The 1998 gross margin was 46.6% compared to 47.2% for 1997. Most of the
decrease in gross margin was related to slightly higher labor costs
associated with Cardinal's acquisitions and new services.
Depreciation and amortization expenses increased to $6.5 million in 1998
from $4.2 million in 1997. Most of the increase resulted from the larger
asset base that resulted from Cardinal's 1998 acquisitions as well as from
1998 capital expenditures of $19.0 million, primarily for marine vessels.
General and administrative expenses were $16.2 million for 1998 as compared
to $10.4 million for 1997. This increase was due to the acquisitions
Cardinal made in 1998, additional sales expenses associated with an
expanded marketing program, an increase in employee benefits and a one time
stock award to management which was recorded as compensation expense.
Interest expense increased 142% to $13.2 million for 1998 compared to $5.5
million for 1997. This increase resulted from Cardinal's higher debt
levels following a recapitalization and refinancing.
Other expenses for 1997 represent consulting fees that were paid to
Cardinal's previous owner prior to the recapitalization.
In 1998, Cardinal completed a recapitalization and refinancing which
resulted in an extraordinary charge of $10.9 million, net of income taxes
of $0.2 million, which included the unamortized estimated value of stock
warrants that were redeemed for $10.5 million and unamortized financing
costs of $0.4 million.
LIQUIDITY AND CAPITAL RESOURCES
Our primary liquidity needs are for working capital, acquisitions, capital
expenditures and debt service. Our primary sources of liquidity are cash
flow from operations and borrowings under our revolving credit facility.
Our 1999 net cash provided by operating activities was $14.5 million as
compared to $3.6 million for 1998. The increase was due principally to the
merger with Cardinal and acquisition of Production Management Companies,
Inc.
Our working capital at December 31, 1999 was $25.2 million. We had cash
and cash equivalents of $8.0 million at December 31, 1999. In December
1999, we received a $6.6 million insurance settlement that we will use to
refurbish our liftboat that was damaged in September 1999.
We have a term loan and revolving credit facility that was implemented in
July 1999 to provide $110 million term loan to refinance our long-term
debt after the Cardinal acquisition, provide a $20 million revolving credit
facility and $22 million that we can use to pay additional contingent
consideration from our prior acquisitions. We amended the credit facility
in November 1999 to increase the term loan by $10 million to refinance
Production Management's existing indebtedness and to pay the cash portion
of the acquisition price. Under the credit facility, the term loan requires
quarterly principal installments that commenced December 31, 1999 in the
amount of $519,000 and then increasing up to an aggregate of approximately
$1.6 million a quarter until 2006 when $92 million will be due and payable.
The credit facility bears interest at a LIBOR rate plus margins that depend
on our leverage ratio. As of March 1, 2000, the amount outstanding under
the term loan was $119.5 million and there were no borrowings outstanding
under the revolving credit facility. At December 31, 1999, the weighted
average interest rate on the credit facility was 9.28%. Indebtedness under
the credit facility is secured by substantially all of our assets,
including the pledge of the stock of our subsidiaries. The credit facility
contains customary events of default and requires that we maintain debt
coverage and leverage ratios. It also limits our ability to make capital
expenditures, pay dividends or make other distributions, make acquisitions,
make changes to our capital structure, create liens or incur additional
indebtedness.
In November 1999, we acquired Production Management Companies, Inc. for
$3.0 million in cash and 610,000 shares of our common stock. Up to $11.0
million will be potentially payable in the future based upon a multiple of
four times Production Management's average earnings before interest, taxes,
depreciation, amortization less certain other adjustments. If the overall
current industry activity levels continue, the additional consideration
actually paid will be materially less than the maximum consideration.
In 1999, we made capital expenditures of $9.2 million primarily to further
expand our rental tool equipment. Other capital expenditures included
electric wireline skids, plug and abandonment equipment and capital
improvements to our liftboats.
In September of 1999, one of our two hundred foot class liftboats was
damaged in the Gulf of Mexico. In late December 1999, we received a $6.6
million insurance settlement for the damage, which is expected to pay for
the vessel's refurbishment.
We have identified capital projects that will require approximately $25
million for 2000. We believe that cash generated from our operations and
availability under our revolving credit facility will provide sufficient
funds for our identified capital projects and working capital requirements.
We expect to pay approximately $21.4 million in the fourth quarter of 2000
for additional consideration related to our 1997 acquisitions. The
consideration will be capitalized as additional purchase price of the
acquired companies, and we expect to use the $22 million portion of the
credit facility, which was designed to fund these payments.
We significantly increased our financial leverage in 1999 with the Cardinal
and Production Management acquisitions. In 2000, if market conditions
improve, we will consider issuing equity to reduce our financial leverage.
We intend to continue implementing our acquisition strategy to increase our
scope of services. Depending on the size of any future acquisitions, we
may also require additional equity or debt financing in excess of amounts
available under our revolving credit facility.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (FAS) No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. FAS No. 133, as amended, is effective
for all fiscal quarters of fiscal years beginning after June 15, 2000 and
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and
for hedging activities. FAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes
in the fair value of derivatives are to be recorded each period in current
earnings or other comprehensive income, depending on whether a derivative
is designated as part of a hedge transaction and, if it is, the type of
hedge transaction. Earlier application of the provisions of the Statement
is encouraged and is permitted as of the beginning of any fiscal quarter
that begins after the issuance of the Statement. We have not yet assessed
the financial impact of adopting this statement.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk associated with interest rates. We make
limited use of derivative financial instruments to manage risks associated
with existing or anticipated transactions. We do not hold derivatives for
trading purposes or use derivatives with leveraged or complex features.
Derivative instruments are traded with creditworthy major financial
institutions.
At December 31, 1999, we were a party to interest rate swaps with notional
amounts totaling $46.2 million that were designed to convert a similar
amount of variable-rate debt to fixed rates. The swaps mature in March
2001 and October 2002, and the weighted average fixed interest rate is
5.81%. At December 31, 1999, the interest rate to be received by us
averaged 5.2%. We consider these swaps to be a hedge against potentially
higher future interest rates. As described in Note 10 to the consolidated
financial statements, we would have recognized a gain of an estimated
$350,000 had we terminated these agreements at December 31, 1999.
At December 31, 1999, $73.3 million of our long-term debt had variable
interest rates. Based on debt outstanding at December 31, 1999, a 10%
increase or (decrease) in variable interest rates would increase or
(decrease) our interest expense inclusive of swaps in the year 2000 by
approximately $0.9 million or $(0.8) million.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Superior Energy Services, Inc.:
We have audited the consolidated balance sheet of Superior Energy Services,
Inc. and subsidiaries as of December 31, 1999, and the related consolidated
statements of operations, changes in stockholders' equity (deficit) and
cash flows for the year then ended. In connection with our audit of the
consolidated financial statements, we also have audited the accompanying
financial statement schedule, "Valuation and Qualifying Accounts," for the
year ended December 31, 1999. These consolidated financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Superior Energy Services, Inc. and subsidiaries as of December 31, 1999,
and the results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles. Also,
in our opinion, the related financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
KPMG LLP
New Orleans, Louisiana
February 25, 2000
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Superior Energy Services, Inc.:
We have audited the accompanying consolidated balance sheet of Superior
Energy Services, Inc. and subsidiaries (formerly Cardinal Holding Corp.) as
of December 31, 1998, and the related consolidated statements of
operations, changes in stockholders' equity (deficit) and cash flows for
each of the two years in the period ended December 31, 1998. Our audits
also included the financial statement schedule listed in the Index 14(a).
These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of
Superior Energy Services, Inc. and subsidiaries at December 31, 1998,
and the consolidated results of their operations and their cash flows for
each of the two years in the period ended December 31, 1998, in conformity
with accounting principles generally accepted in the United States. Also,
in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.
Ernst & Young LLP
New Orleans, Louisiana
March 2, 1999
<PAGE>
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1999 and 1998
(in thousands, except share data)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,018 $ 421
Accounts receivable - net of allowance for doubtful
accounts of $2,892 in 1999 and $868 in 1998 41,878 21,591
Income tax receivable 224 151
Deferred tax asset 1,437 481
Prepaid insurance and other 4,565 3,383
---------- ----------
Total current assets 56,122 26,027
---------- ----------
Property, plant and equipment - net 134,723 60,328
Goodwill - net of accumulated amortization of
$1,706 in 1999 and $226 in 1998 78,641 17,163
Note receivable 8,898 -
Other assets - net of accumulated amortization of
$675 in 1999 and $774 in 1998 3,871 4,443
---------- ----------
Total assets $ 282,255 $ 107,961
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 9,196 $ 6,069
Accrued expenses 15,473 5,089
Current maturities of long-term debt 2,579 7,096
Notes payable 3,669 4,440
---------- ----------
Total current liabilities 30,917 22,694
---------- ----------
Deferred income taxes 12,392 4,997
Long-term debt 117,459 102,280
Subordinated debt - 17,930
Stockholders' equity (deficit):
Preferred stock of $.01 par value. Authorized,
5,000,000 shares; none issued - -
Preferred stock, Class C - 2
Common stock of $.001 par value. Authorized,
125,000,000 shares; issued and outstanding 59,810,789
at December 31, 1999 60 5
Additional paid-in capital 248,934 79,682
Accumulated deficit (127,507) (119,629)
---------- ----------
Total stockholders' equity (deficit) 121,487 (39,940)
---------- ----------
Total liabilities and stockholders' equity (deficit) $ 282,255 $ 107,961
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Years Ended December 31, 1999, 1998 and 1997
(in thousands, except per share data)
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenues $ 113,076 $ 82,223 $ 63,412
---------- ---------- ----------
Costs and expenses:
Cost of services 67,364 43,938 33,482
Depreciation and amortization 12,625 6,522 4,207
General and administrative 23,071 16,205 10,438
---------- ---------- ----------
Total costs and expenses 103,060 66,665 48,127
---------- ---------- ----------
Income from operations 10,016 15,558 15,285
Other income (expense):
Interest expense (12,969) (13,206) (5,464)
Interest income 308 - -
Other - - (1,150)
---------- ---------- ----------
Income (loss) before income taxes and
extraordinary losses (2,645) 2,352 8,671
Income taxes (611) 1,149 4,350
---------- ---------- ----------
Income (loss) before extraordinary losses (2,034) 1,203 4,321
Extraordinary losses, net of income tax benefit
of $2,124 in 1999 and $214 in 1998 (4,514) (10,885) -
---------- ---------- ----------
Net income (loss) $ (6,548) $ (9,682) $ 4,321
========== ========== ==========
Basic earnings (loss) per share:
Earnings (loss) before extraordinary losses $ (0.11) $ 0.06 $ 0.21
Extraordinary losses (0.14) (1.33) -
---------- ---------- ----------
Earnings (loss) per share $ (0.25) $ (1.27) $ 0.21
========== ========== ==========
Diluted earnings (loss) per share:
Earnings (loss) before extraordinary losses $ (0.11) $ 0.06 $ 0.20
Extraordinary losses (0.14) (1.33) -
---------- ---------- ----------
Earnings (loss) per share $ (0.25) $ (1.27) $ 0.20
========== ========== ==========
Weighted average common shares used
in computing earnings (loss) per share:
Basic 31,131 8,190 20,395
========== ========== ==========
Diluted 31,131 8,190 21,639
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
December 31, 1999, 1998 and 1997
(in thousands, except share data)
<TABLE>
<CAPTION>
Preferred Common Additional Retained
stock Preferred stock Common paid-in earnings
shares stock shares stock capital (deficit) Total
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1996 25,917 $ 250 20,394,983 $ 20 $ 1,580 $ 2,347 $ 4,197
Net income - - - - - 4,321 4,321
Cash dividends on preferred stock - - - - - (30) (30)
Cash dividends on common stock - - - - - (2,843) (2,843)
--------------------------------------------------------------------------------------
Balances, December 31, 1997 25,917 250 20,394,983 20 1,580 3,795 5,645
Net loss - - - - - (9,682) (9,682)
Recapitalization (12,250) (249) (15,053,318) (15) 55,767 (113,004) (57,501)
Stock issued under subordinated
debt agreement 404 - 146,771 - 2,300 - 2,300
Stock awarded to management 137 - 49,895 - 800 - 800
Stock issued subsequent to
recapitalization 5,484 1 441,770 - 17,099 - 17,100
Stock issued to sellers of acquired
businesses 308 - 92,505 - 1,398 - 1,398
Dividends on preferred stock 252 - - - 738 (738) -
--------------------------------------------------------------------------------------
Balances, December 31, 1998 20,252 2 6,072,606 5 79,682 (119,629) (39,940)
Net loss - - - - - (6,548) (6,548)
Stock issued for cash 2,312 - 15,515,437 16 54,984 - 55,000
Dividends on preferred stock 1,084 - - - 1,330 (1,330) -
Stock issued under subordinated
debt agreement 54 - 19,167 - 130 - 130
Merger with Superior Energy
Services, Inc. - - 28,849,523 29 109,052 109,081
Preferred stock conversion - Merger
with Superior Energy Services, Inc. (23,702) (2) 8,632,356 9 (9) - (2)
Acquisition of Production
Management Companies, Inc. - - 610,000 1 3,452 - 3,453
Exercise of stock options - - 111,700 - 313 - 313
--------------------------------------------------------------------------------------
Balances, December 31, 1999 - $ - 59,810,789 $ 60 $ 248,934 $(127,507) $ 121,487
======================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31, 1999, 1998 and 1997
(in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (6,548) $ (9,682) $ 4,321
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Extraordinary losses 4,514 10,885 -
Loss (gain) on disposal of assets - (732) 22
Stock compensation awards - 800 -
Deferred income taxes (1,868) (44) 1,930
Depreciation and amortization 12,625 6,522 4,207
Amortization of debt acquisition costs 593 565 266
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable 3,312 (3,913) (6,187)
Other - net 1,628 (1,090) 55
Accounts payable (4,620) 3,871 785
Accrued expenses 4,009 (2,178) 2,640
Income taxes 820 (1,410) 1,229
---------- ---------- ----------
Net cash provided by operating activities 14,465 3,594 9,268
---------- ---------- ----------
Cash flows from investing activities:
Payments for purchases of property and equipment (9,179) (19,039) (18,980)
Proceeds from sales of assets - 2,700 -
Intangible assets acquired - - (250)
Businesses acquired, net of cash acquired (4,114) (22,373) -
Advances to related parties - - 2,658
---------- ---------- ----------
Net cash used in investing activities (13,293) (38,712) (16,572)
---------- ---------- ----------
Cash flows from financing activities:
Net borrowings (payments) on notes payable (4,440) 2,117 1,517
Net increase (decrease) in bank overdraft - (1,370) 1,370
Proceeds from long-term debt 125,000 133,500 10,829
Principal payments on long-term debt (165,786) (40,615) (3,722)
Debt acquisition costs (2,827) (4,371) -
Payment of premium on subordinated debt (835) - -
Redemption of stock warrants - (13,320) -
Proceeds from issuance of common and preferred stock 55,000 74,353 -
Proceeds from exercise of stock options 313 - -
Payments to redeem stock - (114,755) -
Dividends paid - - (2,843)
---------- ---------- ----------
Net cash provided by financing activities 6,425 35,539 7,151
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 7,597 421 (153)
Cash and cash equivalents at beginning of year 421 - 153
---------- ---------- ----------
Cash and cash equivalents at end of year $ 8,018 $ 421 $ -
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
(1) MERGER
On July 15, 1999, Superior consummated a subsidiary merger (the "Merger")
whereby it acquired all of the outstanding capital stock of Cardinal Holding
Corp. ("Cardinal") from the stockholders of Cardinal in exchange for an
aggregate of 30,239,568 shares of Superior's common stock (or 51% of the then
outstanding common stock). The acquisition was effected through the merger of
a wholly-owned subsidiary of Superior, formed for this purpose, with and into
Cardinal, with the effect that Cardinal became a wholly-owned subsidiary of
Superior.
As used in the consolidated financial statements for Superior Energy Services,
Inc., the term "Superior" refers to the Company as of dates and periods prior
to the Merger and the term "Company" refers to the combined operations of
Superior and Cardinal after the consummation of the Merger.
Due to the fact that the former Cardinal shareholders received 51% of the
outstanding common stock at the date of the Merger, among other factors, the
Merger has been accounted for as a reverse acquisition (i.e., a purchase of
Superior by Cardinal) under the purchase method of accounting. As such, the
Company's consolidated financial statements and other financial information
reflect the historical operations of Cardinal for periods and dates prior to
the Merger. The net assets of Superior, at the time of the Merger, have been
reflected at their estimated fair value pursuant to the purchase method of
accounting at the date of the Merger.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the
Company. All significant intercompany accounts and transactions are
eliminated in consolidation. Certain previously reported amounts
have been reclassified to conform to the 1999 presentation.
(b) BUSINESS
The Company provides a broad range of specialized oilfield services
and equipment primarily to major and independent oil and gas
companies engaged in the exploration, production and development of
oil and gas properties offshore in the Gulf of Mexico and throughout
the Gulf Coast region. These services and equipment include oil and
gas well plug and abandonment services, coiled tubing services,
engineering services, electric line services, mechanical wireline
services, the rental of liftboats and the rental of specialized
oilfield equipment. Additional services provided include offshore
and dockside environmental cleaning services, contract operating and
supplemental labor, offshore maintenance services, the manufacture
and sale of drilling instrumentation and the manufacture and sale of
oil spill containment equipment. A majority of the Company's
business is conducted with major and independent oil and gas
exploration companies. The Company continually evaluates the
financial strength of their customers but does not require collateral
to support the customer receivables.
The Company's P&A, wireline, marine and tank cleaning services are
contracted for specific projects on either a day rate or turnkey
basis. Rental tools are leased to customers on an as-needed basis on
a day rate basis. The Company derives a significant amount of its
revenue from a small number of major and independent oil and gas
companies. No single customer represented 10% or more of the
Company's total revenue in 1999 or 1998. In 1997, one customer
accounted for approximately 11.2% of the Company's total revenue,
primarily in the marine and wireline segments. The inability of the
Company to continue to perform services for a number of its large
existing customers, if not offset by sales to new or existing
customers, could have a material adverse effect on the Company's
business and financial condition.
(c) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(d) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is
computed using the straight-line method over the estimated useful
lives of the related lives as follows:
Buildings and improvements 15 to 30 years
Marine vessels and equipment 5 to 18 years
Machinery and equipment 5 to 15 years
Automobiles, trucks, tractors and trailers 2 to 5 years
Furniture and fixtures 3 to 7 years
Long-lived assets and certain identifiable intangibles are reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the asset
exceeds its fair value. Assets to be disposed of are reported at the
lower of the carrying amount or fair value less costs to sell.
CHANGE IN ACCOUNTING ESTIMATE
Effective October 1, 1999, the Company changed the estimated useful
lives on its marine vessels from fifteen years to eighteen years.
The Company believes the revised estimated useful lives will more
appropriately reflect its financial results by better matching costs
over the estimated useful lives of these assets. The effect of this
change on net income for the three months ended December 31, 1999 was
a reduction in depreciation expense of approximately $350,000.
(e) GOODWILL
The Company amortizes costs in excess of fair value of the net assets
of businesses acquired using the straight-line method over a period
not to exceed 30 years. Recoverability is reviewed by comparing the
undiscounted fair value of cash flows of the assets, to which the
goodwill applies, to the net book value, including goodwill, of
assets. Goodwill amortization expense recorded for the years ended
December 31, 1999, 1998 and 1997 was $1,480,000, $226,000 and none,
respectively.
(f) OTHER ASSETS
Other assets consist primarily of debt acquisition costs and
covenants not to compete. Debt acquisition costs are being amortized
over the term of the related debt, which is approximately seven
years. The amortization of debt acquisition costs, which is
classified as interest expense, was $593,000, $565,000 and $266,000
for the years ended December 31, 1999, 1998 and 1997, respectively.
The covenants not to compete are being amortized over the terms of
the agreements, which is four years. Amortization expense recorded
on the covenants not to compete for the years ended December 31,
1999, 1998 and 1997 was $265,000, $163,000 and $68,000, respectively.
(g) CASH EQUIVALENTS
The Company considers all short-term deposits with a maturity of
ninety days or less to be cash equivalents.
(h) REVENUE RECOGNITION
For the Company's marine, well services, wireline, rental tool
operations and environmental cleaning services, revenue is recognized
when services or equipment are provided. The Company contracts for
marine, well services, wireline and environmental projects either on
a day rate or turnkey basis, with a majority of its projects
conducted on a day rate basis. The Company's rental tools are leased
on a day rate basis, and revenue from the sale of equipment is
recognized when the equipment is shipped. Reimbursements from
customers for the cost of rental tools that are damaged or lost
downhole are reflected as revenue at the time of the incident.
(i) INCOME TAXES
The Company provides for income taxes in accordance with Statement of
Financial Accounting Standards (FAS) No. 109, ACCOUNTING FOR INCOME
TAXES. FAS No. 109 requires an asset and liability approach for
financial accounting and reporting for income taxes. Deferred income
taxes reflect the impact of temporary differences between amounts of
assets for financial reporting purposes and such amounts as measured
by tax laws.
(j) EARNINGS PER SHARE
Basic earnings per share is computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding during the period. Diluted earnings per share is
computed in the same manner as basic earnings per share except that
the denominator is increased to include the number of additional
common shares that could have been outstanding assuming the exercise
of stock options, convertible preferred stock and warrants and the
potential shares that would have a dilutive effect on earnings per
share.
On July 15, 1999, the Company effected an approximate 364 to 1 stock
issuance as a result of the Merger. All earnings per common share
amounts, references to common stock, and stockholders' equity amounts
have been restated as if the stock issuance had occurred as of
the earliest period presented. The effect of the preferred
dividends on arriving at the income available to common stockholders
was $1,330,000 in 1999, $738,000 in 1998 and $30,000 in 1997.
The number of dilutive stock options, convertible preferred stock
shares and warrants used in computing diluted earnings per share
were 1,244,000 in 1997, and these securities were anti-dilutive in
1998 and 1999.
(k) FINANCIAL INSTRUMENTS
The Company uses interest rate swap agreements to manage its interest
rate exposure. The Company specifically designates these agreements
as hedges of debt instruments and recognizes interest differentials
as adjustments to interest expense in the period the differentials
occur. Under interest rate swap agreements, the Company agrees with
other parties to exchange, at specific intervals, the difference
between fixed-rate and variable-rate interest amounts calculated by
reference to an agreed-upon notional principal amount. The fair
value of the interest rate swap agreements is estimated using quotes
from counterparties and represents the cash receipt if the existing
agreements had been settled at year-end.
(l) COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (FAS) No. 130, REPORTING
COMPREHENSIVE INCOME. FAS No. 130 establishes standards for
reporting and display of comprehensive income and its components in a
full set of general purpose financial statements. The Company
adopted this standard in 1998. Such adoption had no effect on the
Company's financial statement presentation as the Company has no
items of other comprehensive income.
(3) SUPPLEMENTAL CASH FLOW INFORMATION (IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Cash paid for:
Interest $ 12,019 $ 10,329 $ 3,428
========== ========== ==========
Income taxes $ 251 $ 2,846 $ 1,559
========== ========== ==========
Details of acquisitions:
Fair value of assets $ 173,737 $ 25,626 $ -
Fair value of liabilities 55,679 1,541 -
Common stock issued 112,531 1,398 -
---------- ---------- ----------
Cash paid 5,527 22,687 -
Less cash acquired 1,413 314 -
---------- ---------- ----------
Net cash paid for acquisitions $ 4,114 $ 22,373 $ -
========== ========== ==========
Non-cash investing activity:
Amounts due under covenant
not-to-compete $ 893 $ - $ 402
========== ========== ==========
Non-cash financing activity:
Stock dividends issued on
preferred stock $ 1,330 $ 738 $ -
========== ========== ==========
Stock issued under subordinated
debt agreement $ 130 $ 2,300 $ -
========== ========== ==========
</TABLE>
(4) BUSINESS COMBINATIONS
On July 15, 1999, the Company acquired Cardinal through a merger by issuing
30,239,568 shares of the Company's common stock. Because the Cardinal
shareholders received 51% of the outstanding common stock at the date of
the Merger, among other factors, the transaction has been accounted for as
a reverse acquisition which has resulted in the adjustment of the net
assets of Superior to its estimated fair value as required by the rules of
purchase accounting. The valuation of Superior's net assets is based upon
the 28,849,523 common shares outstanding prior to the Merger at the
approximate trading price of $3.78 at the time of the negotiation of the
Merger on April 21, 1999. The purchase price allocated to net assets was
$54.2 million. The revaluation reflected excess purchase price of $54.8
million over the fair value of net assets, which was recorded as goodwill.
The results of operations of Superior have been included from July 15,
1999.
Effective November 1, 1999, the Company acquired Production Management
Companies, Inc. ("PMI") for aggregate consideration consisting of $3.0
million in cash and 610,000 shares of the Company's common stock at an
approximate trading price of $5.66. Additional consideration, if any, will
be based upon a multiple of four times PMI's EBITDA (earnings before
interest, income taxes, depreciation and amortization expense) less certain
adjustments. The additional consideration will be paid on the first and
third anniversary of the acquisition, and in no event will the total
additional payments exceed $11 million. If the overall current industry
activity levels continue, the additional consideration actually paid will
be materially less than the maximum consideration. The acquisition was
accounted for as a purchase, and PMI's assets and liabilities have been
revalued at their estimated fair market value. The purchase price
allocated to net assets was $3.5 million, and the excess purchase price of
$3.0 million over the fair value of net assets was recorded as goodwill.
The results of operations of PMI have been included from November 1, 1999.
Effective July 1, 1999, Superior sold two subsidiaries for a promissory
note having an aggregate principal amount of $8.9 million, which bears
interest of 7.5% per annum. These two subsidiaries were originally
acquired in the second quarter of 1998. As part of the sale, the
purchasers were granted the right to resell the capital stock of the two
companies to the Company in 2002 subject to certain terms and conditions.
No gain or loss was recorded on this sale.
In 1998, Cardinal acquired all of the outstanding stock of three companies
for an aggregate purchase price of $24.1 million with a combination of cash
and stock as consideration for the acquisitions. Each of these
acquisitions was accounted for using the purchase method and the results of
operations of the acquired companies have been included from their
respective acquisition dates.
The following unaudited pro forma information for the years ended December
31, 1999 and 1998, presents a summary of consolidated results of operations
of Superior and Cardinal as if the Merger, the acquisitions, and the sales
of subsidiaries, had occurred on January 1, 1998, with pro forma
adjustments to give effect to amortization of goodwill, depreciation and
certain other adjustments, together with related income tax effects (in
thousands, except per share amounts).
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Revenues $ 191,312 $ 230,744
========== ==========
Income before extraordinary losses $ 509 $ 2,869
========== ==========
Basic earnings per share before extraordinary losses $ 0.01 $ 0.05
========== ==========
Diluted earnings per share before extraordinary losses $ 0.01 $ 0.05
========== ==========
</TABLE>
The above pro forma financial information is not necessarily indicative of
the results of operations as they would have been had the acquisitions been
effected on January 1, 1998.
Most of Superior's acquisitions have involved additional contingent
consideration based upon a multiple of the acquired companies' respective
average EBITDA over a three year period from the respective date of
acquisition. In no event will the maximum aggregate consideration exceed
$49.3 million for all acquisitions inclusive of the PMI acquisition. If
the overall current industry activity levels continue, the additional
consideration actually paid will be materially less than the maximum
consideration. The additional consideration is not currently reflected in
the respective companies' purchase price. The additional consideration, if
any, will be capitalized as additional purchase price.
(5) PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment at December 31, 1999 and 1998
(in thousands) is as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Buildings and improvements $ 57,416 $ 56,300
Marine vessels and equipment 10,076 2,684
Machinery and equipment 87,982 18,881
Automobiles, trucks, tractors and trailers 5,427 2,604
Furniture and fixtures 3,088 1,703
Construction-in-progress 881 -
Land 2,730 313
---------- ----------
167,600 82,485
Accumulated depreciation (32,877) (22,157)
---------- ----------
Property, plant and equipment, net $ 134,723 $ 60,328
========== ==========
</TABLE>
The cost of property, plant and equipment leased to third parties was
$7,065,000 at December 31, 1999 and 1998.
(6) NOTES PAYABLE, LONG-TERM DEBT AND SUBORDINATED DEBT
NOTES PAYABLE
The Company's notes payable as of December 31, 1999 and 1998 consist of the
following (in thousands):
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Notes payable - bear interest at 7.25%, due March 15, 2000 $ 3,669 $ -
Revolving Credit Facility - paid in July 1999 - 4,440
---------- ----------
$ 3,669 $ 4,440
========== ==========
</TABLE>
The notes payable outstanding at December 31, 1999 represent the additional
contingent consideration that was earned by two of Superior's 1997
acquisitions and were paid according to their terms subsequent to year end.
LONG-TERM DEBT
The Company's long-term debt as of December 31, 1999 and 1998 consist of
the following (in thousands):
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Term Loan A - interest payable monthly at floating rate
(8.87% at December 31, 1999), due in quarterly
installments from December 1999 through September 2005 $ 21,551 $ -
Term Loan B - interest payable monthly at floating rate
(9.37% at December 31, 1999), due in quarterly
installments from December 1999 through September 2005
with two lump sum payments due in 2006 97,930 -
Previous Term Loan A - paid in July 1999 - 51,250
Previous Term Loan B - paid in July 1999 - 58,126
Other installment notes payable (interest rates ranging
from 5.9% to 11.25%), due in 2001 557 -
---------- ----------
120,038 109,376
Less current portion 2,579 7,096
---------- ----------
Long-term debt $ 117,459 $ 102,280
========== ==========
</TABLE>
On July 15, 1999, the Company entered into a $152 million term loan and
revolving credit facility. The credit facility was implemented to provide
$110 million term loan to refinance the combined debt of Superior and
Cardinal, provide a $20 million working capital facility and $22 million
of borrowings that may be used to fund the additional consideration that
may be payable as a result of Superior's prior acquisitions. The Company
executed an amendment to the credit facility on November 3, 1999 to
increase the maximum borrowings under the credit facility by $10 million to
refinance PMI's existing indebtedness and to pay the cash portion of the
acquisition price for PMI. Under the amended credit facility, the
term loans require quarterly principal installments commencing December
31, 1999 in the aggregate amount of $519,000 and then increasing up
to an aggregate of approximately $1.6 million a quarter until 2006 when $92
million will be due and payable. As amended, the term loan and revolving
credit facility bears interest at a LIBOR rate plus margins that depend
on the Company's leverage ratio. Indebtedness under the credit facility is
secured by substantially all of the assets of the Company and its
subsidiaries and a pledge of all the common stock of the Company's
subsidiaries. Pursuant to the credit facility, the Company has also
agreed to maintain certain debt coverage and leverage ratios. The credit
facility also imposes certain limitations on the ability of the Company
and its subsidiaries to make capital expenditures, pay dividends or other
distributions, make acquisitions, make changes to the capital structure,
create liens or incur additional indebtedness. At December 31, 1999, the
Company was in compliance with all such covenants.
Annual maturities of long-term debt for each of the five fiscal years
following December 31, 1999 and in total thereafter are as follows (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
2000 $ 2,579
2001 3,767
2002 4,529
2003 5,621
2004 6,440
Thereafter 97,102
---------
Total $ 120,038
=========
</TABLE>
SUBORDINATED DEBT
In connection with the recapitalization (see note 8), Cardinal borrowed $20
million under the terms of a Senior Subordinated Notes Agreement, which was
repaid in July 1999.
The early extinguishment of the Cardinal and Superior indebtedness in July
1999 resulted in an extraordinary loss of $4.5 million, net of a $2.1
million income tax benefit, which included the premium on the subordinated
debt and the write-off of unamortized debt acquisition costs.
(7) INCOME TAXES
The components of income tax expense (benefit) before the income tax effect
of the extraordinary losses for the years ended December 31, 1999, 1998 and
1997 are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Current
Federal $ (3,101) $ 1,127 $ 2,286
State (150) 66 134
---------- ---------- ----------
(3,251) 1,193 2,420
---------- ---------- ----------
Deferred
Federal 2,354 (42) 1,823
State 286 (2) 107
---------- ---------- ----------
2,640 (44) 1,930
---------- ---------- ----------
$ (611) $ 1,149 $ 4,350
========== ========== ==========
</TABLE>
Income tax expense (benefit) differs from the amounts computed by applying
the US. Federal income tax rate of 34% to income before income taxes as
follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Computed expected tax expense (benefit) $ (899) $ 800 $ 2,949
Increase (decrease) resulting from:
Goodwill amortization 502 89 -
Interest related to warrants - 130 739
State income taxes 136 75 277
Prior year overaccrual (167) (183) -
Other (183) 238 385
---------- ---------- ----------
Income tax expense (benefit) $ (611) $ 1,149 $ 4,350
========== ========== ==========
</TABLE>
The significant components of deferred income taxes at December 31, 1999
and 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 1,187 $ 315
Alternative minimum tax credit and net
operating loss carryforward 7,777 776
Other 854 548
---------- ----------
9,818 1,639
Valuation allowance (1,198) -
---------- ----------
Net deferred tax asset 8,620 1,639
---------- ----------
Deferred tax liabilities:
Property, plant and equipment 18,647 5,795
Other 928 360
---------- ----------
19,575 6,155
---------- ----------
$ 10,955 $ 4,516
========== ==========
</TABLE>
The net change in the valuation allowance for the year ended December 31,
1999 was an increase of $1.2 million. There was no valuation allowance at
December 31, 1998 or 1997. The net deferred tax assets reflect
management's estimate of the amount that will be realized from future
profitability and the reversal of taxable temporary differences that can be
predicted with reasonable certainty.
As of December 31, 1999, the Company had a net operating loss carryforward
of an estimated $15.6 million, which is available to reduce future Federal
taxable income through 2014.
(8) STOCKHOLDERS' EQUITY
In July 1999, the Company's stockholders approved the 1999 Stock Incentive
Plan ("1999 Incentive Plan") to provide long-term incentives to its key
employees, including officers and directors, consultants and advisers to
the Company ("Eligible Participants"). Under the 1999 Incentive Plan, the
Company may grant incentive stock options, non-qualified stock options,
restricted stock, stock awards or any combination thereof to Eligible
Participants for up to 5,929,327 shares of the Company's common stock. The
Compensation Committee of the Board of Directors establishes the term
and the exercise price of any stock options granted under the 1999
Incentive Plan, provided the exercise price may not be less than the fair
market value of the common share on the date of grant.
In addition to the 1999 Incentive Plan, Superior maintains its 1995 Stock
Incentive Plan ("1995 Incentive Plan"), as amended. Under the 1995
Incentive Plan, as amended, the Company may grant incentive stock
options, non-qualified stock options, restricted stock, stock awards or any
combination thereof to Eligible Employees which consists of its key
employees, including officers and directors who are employees of the
Company for up to 1,900,000 shares of the Company's common stock. All of
the Company's 1995 Stock Incentive Plan's options which have been granted
are vested.
Prior to the Merger, Cardinal had no stock option plan.
A summary of stock options granted under the incentive plans for the year
ended December 31, 1999 is as follows:
<TABLE>
<CAPTION>
1999
--------
Number Weighted
of Average
Shares Price
------------------------
<S> <C> <C>
Outstanding at beginning of year 1,696,500 $ 4.49
Granted 2,612,617 $ 5.74
Exercised (148,700) $ 2.87
Forfeited (25,500) $ 6.19
---------- --------
Outstanding at end of year 4,134,917 $ 5.56
========== ========
Exercisable at end of year 1,522,300 $ 5.26
========== ========
Available for future grants 3,406,210
==========
</TABLE>
A summary of information regarding stock options outstanding at December 31,
1999 is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------ ----------------------
Range of Remaining Weighted Weighted
Exercise Contractual Average Average
Prices Shares Life Price Shares Price
- - -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$2.50 - $3.43 594,800 5 - 7 years $ 3.02 594,800 $ 3.02
$4.75 - $9.25 3,540,117 7 - 10 years $ 5.99 927,500 $ 6.69
</TABLE>
The Company accounts for its stock based compensation under the principles
prescribed by the Accounting Principles Board's Opinion No. 25, ACCOUNTING
FOR STOCK ISSUED TO EMPLOYEES (Opinion No. 25). However, Statement of
Financial Accounting Standards (FAS) No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION permits the continued use of the value based method prescribed
by Opinion No. 25 but requires additional disclosures, including pro forma
calculations of earnings and net earnings per share as if the fair value
method of accounting prescribed by FAS No. 123 had been applied. The pro
forma data presented below is not representative of the effects on reported
amounts for future years (in thousands, except per share amounts).
<TABLE>
<CAPTION>
As Reported Pro forma
----------- -----------
1999 1999
---- ----
<S> <C> <C>
Net loss $ (6,548) $ (9,552)
Basic loss per share $ (0.25) $ (0.35)
Diluted loss per share $ (0.25) $ (0.35)
Average fair value of grants during the year $ - $ 3.64
Black-Scholes option pricing model assumptions:
Risk free interest rate 5.8%
Expected life (years) 2
Volatility 125.7%
Dividend yield -
</TABLE>
In 1999 and 1998, pursuant to the stock awards plan adopted by Cardinal,
shares of Class A common stock and Class C preferred stock were awarded to
certain members of management. Compensation expense was recorded for fair
value of these awards, as estimated based on sales of similar stock. The
stock awards plan was eliminated as a result of the Merger.
In February 1998, Cardinal completed a recapitalization and refinancing
which was funded through a combination of senior secured debt, subordinated
debt and equity investments. As a result of the recapitalization, Cardinal
recorded an increase in equity of $57.5 million from the issuance of Class
A common stock and Class C preferred stock; incurred $7.1 million of costs
associated with the debt acquisition and reduction to net proceeds from the
issuance of stock; recorded a reduction in equity of $114.8 million from
the redemption of Class A common stock and Class C preferred stock; and
recorded an extraordinary loss of $10.9 million for the estimated value of
warrants of $10.5 million and unamortized debt acquisition costs of
$379,000 (net of $214,000 income tax benefit).
(9) PROFIT-SHARING PLAN
The Company maintains various defined contribution profit-sharing plans for
employees who have satisfied minimum service and age requirements.
Employees may contribute up to 15% of their earnings to the plans. The
Company matches employees' contributions up to 2.5% of an employee's
salary. The Company made contributions of $142,000, $299,000 and $209,000
in 1999, 1998 and 1997, respectively.
(10) FINANCIAL INSTRUMENTS
The Company utilizes derivative instruments on a limited basis to manage
risks related to interest rates. The Company designates these agreements
as hedges of debt instruments and recognizes interest differentials as
adjustments to interest expense in the period the differential occurs. At
December 31, 1999, 1998 and 1997, the Company had interest rate swap
agreements with notional amounts totaling $46.2 million, $48.4 million and
$10.6 million, respectively, to convert an equal amount of variable rate
long-term debt to fixed rates. The swaps mature in March of 2001 and
October of 2002. The swaps require the Company to pay a weighted-average
interest rate of 5.81% in 1999 and 1998 and 5.8% in 1997 and to receive a
variable rate, which averaged 5.2%, 5.5% and 5.6% in 1999, 1998 and 1997,
respectively. As a result of these swap agreements, interest expense was
increased by $299,000 in 1999, $107,000 in 1998 and $6,000 in 1997. The
effect to the Company to terminate these swap agreements at December 31,
1999 is estimated to be a gain of approximately $350,000.
With the exception of derivative instruments, the Company's financial
instruments of cash and cash equivalents, accounts receivable, accounts
payable and long-term debt have carrying values, which approximate their
fair market value.
(11) COMMITMENTS AND CONTINGENCIES
The Company leases certain office, service and assembly facilities under
operating leases. The leases expire at various dates over the next several
years. Total rent expense was $683,000 in 1999, $749,000 in 1998 and
$948,000 in 1997. Future minimum lease payments under non-cancelable
leases for the five years ending December 31, 2000 through 2004 and
thereafter are as follows: $1,264,000, $774,000, $683,000, $597,000,
$455,000 and $331,000, respectively.
In September 1999, one of the Company's two hundred-foot class liftboats
was damaged in the Gulf of Mexico. The vessel was fully insured and
management does not believe any related unasserted claims will have a
material effect on the financial position, results of operations or
liquidity of the Company. In late December, the Company received an
insurance settlement of $6.6 million which is expected to pay for the
refurbishment of the vessel, replace lost equipment and pay for the loss of
hire during the period the vessel will be out of commission.
From time to time, the Company is involved in litigation arising out of
operations in the normal course of business. In management's opinion, the
Company is not involved in any litigation, the outcome of which would have
a material effect on the financial position, results of operations or
liquidity of the Company.
(12) RELATED PARTY TRANSACTIONS
Cardinal paid consulting fees, which is reported in other expenses, to a
related party of $1,150,000 in 1997. No such fees were paid in 1999 or
1998.
(13) SEGMENT INFORMATION
The Company's reportable segments, subsequent to the Merger, are as
follows: well services, wireline, marine, rental tools, environmental,
field management and other. Each segment offers products and services
within the oilfield services industry. The well services segment provides
plug and abandonment services, coiled tubing services, well pumping and
stimulator services, data acquisition services, gas lift services and
electric wireline services. The wireline segment provides mechanical
wireline services that perform a variety of ongoing maintenance and repairs
to producing wells, as well as performs modifications to enhance the
production capacity and life span of the well. The marine segment operates
liftboats for oil and gas production facility maintenance and construction
operations as well as production service activities. The rental tools
segment rents and sells specialized equipment for use with onshore and
offshore oil and gas well drilling, completion, production and workover
activities. The environmental segment provides offshore oil and gas
cleaning services, as well as dockside cleaning of items including
supply boats, cutting boxes, and process equipment. The field management
segment provides contract operations and maintenance services, interconnect
piping services, sandblasting and painting maintenance services, and
transportation and logistics services. The other segment manufactures and
sells drilling instrumentation and oil spill containment equipment. All
the segments operate primarily in the Gulf Coast Region.
The accounting policies of the reportable segments are the same as those
described in Note 2 of the Notes to the Consolidated Financial Statements.
The Company evaluates the performance of its operating segments based on
operating profits or losses. Segment revenues reflect direct sales of
products and services for that segment, and each segment records direct
expenses related to its employees and its operations. Identifiable assets
are primarily those assets directly used in the operations of each segment.
Summarized financial information concerning the Company's segments as of
December 31, 1999, 1998 and 1997 and for the years then ended is shown in
the following tables (in thousands):
<TABLE>
<CAPTION>
Well Rental Field Unallocated Consolidated
1999 Service Wireline Marine Tools Environ. Mgmt. Other Amount Total
- - ---- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Identifiable assets $ 39,878 $ 30,961 $ 48,655 $ 134,287 $ 8,525 $ 12,768 $ 4,533 $ 2,648 $ 282,255
Capital expenditures 2,297 652 1,417 4,209 579 13 12 - 9,179
Revenues $ 29,862 $ 28,264 $ 23,822 $ 21,302 $ 3,480 $ 4,340 $ 2,006 $ - $ 113,076
Costs of services 19,394 19,692 14,649 6,518 2,241 3,848 1,022 - 67,364
Depreciation and amortization 2,474 2,465 3,605 3,688 180 150 63 - 12,625
General and administrative 5,690 5,490 4,366 5,194 1,171 584 576 - 23,071
Operating income 2,304 617 1,202 5,902 (112) (242) 345 - 10,016
Interest expense - - - - - - - (12,969) (12,969)
Interest income - - - - - - - 308 308
------------------------------------------------------------------------------------------------------
Income before income taxes
and extraordinary loss $ 2,304 $ 617 $ 1,202 $ 5,902 $ (112) $ (242) $ 345 $ (12,661) $ (2,645)
======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Well Unallocated Consolidated
1998 Services Wireline Marine Amount Total
- - ---- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Identifiable assets $ 21,175 $ 28,920 $ 53,844 $ 4,022 $ 107,961
Capital expenditures 5,925 1,104 12,010 - 19,039
Revenues 18,794 26,315 37,114 - 82,223
Cost of services 12,777 16,470 14,691 - 43,938
Depreciation and amortization 1,794 1,296 3,432 - 6,522
General and administrative 4,592 5,803 5,810 - 16,205
Operating income (369) 2,746 13,181 - 15,558
Interest expense - - - (13,206) (13,206)
--------------------------------------------------------------
Income before income taxes
and extraordinary loss $ (369) $ 2,746 $ 13,181 $ (13,206) $ 2,352
==============================================================
</TABLE>
<TABLE>
<CAPTION>
Well Unallocated Consolidated
1997 Services Wireline Marine Amount Total
- - ---- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Identifiable assets $ 8,826 $ 7,305 $ 45,641 $ 615 $ 62,387
Capital expenditures 5,140 786 13,054 - 18,980
Revenues $ 10,317 $ 20,209 $ 32,886 $ - $ 63,412
Cost of services 7,804 13,035 12,643 - 33,482
Depreciation and amortization 1,278 570 2,359 - 4,207
General and administrative 1,984 3,734 4,720 - 10,438
Operating income (749) 2,870 13,164 - 15,285
Interest expense - - - (5,464) (5,464)
Other - - - (1,150) (1,150)
--------------------------------------------------------------
Income before income taxes
and extraordinary loss $ (749) $ 2,870 $ 13,164 $ (6,614) $ 8,671
==============================================================
</TABLE>
(14) INTERIM FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of consolidated interim financial information
for the years ended December 31, 1999 and 1998 (amounts in thousands,
except per share data):
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1999
- - ----
Revenues $ 18,978 $ 16,267 $ 33,729 $ 44,102
Gross profit 8,472 2,838 15,037 19,365
Income (loss) before extraordinary
loss (453) (4,361) 978 1,802
Net income (loss) (453) (4,361) (3,536) 1,802
Earnings (loss) before extraordinary
loss per share:
Basic $ (0.18) $ (0.75) $ 0.02 $ 0.03
Diluted (0.18) (0.75) 0.02 0.03
Earnings (loss) per share:
Basic $ (0.18) $ (0.75) $ (0.07) $ 0.03
Diluted (0.18) (0.75) (0.07) 0.03
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1998
- - ----
Revenues $ 18,982 $ 20,909 $ 17,765 $ 24,567
Gross profit 9,851 9,668 6,196 12,570
Income (loss) before extraordinary
loss 984 (384) (761) 1,364
Net income (loss) (9,901) (384) (761) 1,364
Earnings (loss) before extraordinary
loss per share:
Basic $ 0.07 $ (0.19) $ (0.13) $ 0.22
Diluted 0.07 (0.19) (0.13) 0.10
Earnings (loss) per share:
Basic $ (0.66) $ (0.19) $ (0.13) $ 0.22
Diluted (0.66) (0.19) (0.13) 0.10
</TABLE>
(15) ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (FAS) No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. FAS No. 133, as amended, is effective
for all fiscal quarters of fiscal years beginning after June 15, 2000 and
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and
for hedging activities. FAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes
in the fair value of derivatives are to be recorded each period in current
earnings or other comprehensive income, depending on whether a derivative
is designated as part of a hedge transaction and, if it is, the type of
hedge transaction. Earlier application of the provisions of the Statement
is encouraged and is permitted as of the beginning of any fiscal quarter
that begins after the issuance of the Statement. The Company has not yet
assessed the financial impact of adopting this statement.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this item will be included in the Company's
definitive proxy statement in connection with its 2000 Annual Meeting of
Stockholders and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item will be included in the Company's
definitive proxy statement in connection with its 2000 Annual Meeting of
Stockholders and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item will be included in the Company's
definitive proxy statement in connection with its 2000 Annual Meeting of
Stockholders and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item will be included in the Company's
definitive proxy statement in connection with its 2000 Annual Meeting of
Stockholders and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
The following financial statements are Included in Part II of this
Report:
Independent Auditors' Reports
Consolidated Balance Sheets - December 31, 1999 and 1998
Consolidated Statements of Operations for the years ended December 31,
1999, 1998 and 1997
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for
the years ended December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
Schedule II - Valuation and Qualifying accounts for the years ended
December 31, 1999, 1998 and 1997.
(3) Exhibits
The exhibits filed as part of this Form 10-K are listed on the Index to
Exhibits immediately preceding such exhibits, which index is
incorporated herein by reference.
(b) Reports on Form 8-K
On November 12, 1999, the Company filed a current report on Form 8-K
reporting, under Items 5 and 7, the results for the third quarter of
1999 and the consummation of the acquisition of Production Management
Companies, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SUPERIOR ENERGY SERVICES, INC.
By:/s/ TERENCE E. HALL
Terence E. Hall
Chairman of the Board,
Chief Executive Officer and
President
Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/S/ TERENCE E. HALL Chairman of the Board, March 30, 2000
TERENCE E. HALL Chief Executive Officer and President
(Principal Executive Officer)
/S/ ROBERT S. TAYLOR Chief Financial Officer (Principal March 30, 2000
ROBERT S. TAYLOR Financial and Accounting Officer)
/S/ JUSTIN L. SULLIVAN Director March 30, 2000
JUSTIN L. SULLIVAN
/S/ ROBERT E. ROSE Director March 30, 2000
ROBERT E. ROSE
/S/ WILLIAM MACAULAY Director March 30, 2000
WILLIAM MACAULAY
/S/ BEN GUILL Director March 30, 2000
BEN GUILL
/S/ Richard Bachmann Director March 30, 2000
RICHARD BACHMANN
<PAGE>
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Schedule II Valuation and Qualifying Accounts
December 31, 1999, 1998 and 1997
(in thousands)
</TABLE>
<TABLE>
<CAPTION>
Additions
--------------------------
Balance at the Charged to Balance
beginning of costs and Balances from at the end
Description the year expenses acquisitions Deductions of the year
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1999: $ 868 $ 518 $ 1,790 $ 284 $ 2,892
Allowance for doubtful accounts
Year ended December 31, 1998: $ 569 $ 291 $ 8 $ - $ 868
Allowance for doubtful accounts
Year ended December 31, 1997: $ 569 $ - $ - $ - $ 569
Allowance for doubtful accounts
</TABLE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION SEQ. NO.
<S> <C> <C>
2.1 Agreement and Plan of Merger (incorporated herein by
reference to Exhibit 2.1 to the Company's Current Report
on Form 8-K dated April 20, 1999).
2.2 Amendment No. 1 to Agreement and Plan of Merger
(incorporated herein by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K dated June 30, 1999).
3.1 Certificate of Incorporation of the Company (incorporated
herein by reference to the Company's Quarterly Report on
Form 10-QSB for the quarter ended March 31, 1996).
3.2 Certificate of Amendment to the Company's Certificate of
Incorporation (incorporated herein by reference to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999).
3.3 Amended and Restated Bylaws (incorporated herein by
reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1999).
4.1 Specimen Stock Certificate (incorporated herein by
reference to Amendment No. 1 to the Company's Form S-4 on
Form SB-2 (Registration Statement No. 33-94454)).
4.2 Registration Rights Agreement dated as of July 15, 1999 by
and among the Company, First Reserve Fund VII, Limited
Partnership and First Reserve Fund VIII, Limited
Partnership (incorporated herein by reference to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999).
4.3 Registration Rights Agreement dated as of July 15, 1999 by
and among the Company and certain stockholders named
therein (incorporated herein by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1999).
4.4 Stockholders' Agreement dated as of July 15, 1999 by and
among the Company, First Reserve Fund VII, Limited
Partnership and First Reserve Fund VIII, Limited
Partnership (incorporated herein by reference to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999).
10.1 Credit Agreement dated as of July 15, 1999 by and among
the Company, General Electric Capital Corporation and
others (incorporated herein by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1999).
10.2* Superior Energy Services, Inc. 1999 Stock Incentive Plan
as amended.
10.3 Amendment and Assumption Agreement dated as of November 3,
1999 by and among the Company, General Electric Capital
Corporation and others (incorporated herein by reference
to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999).
10.4 Form of Consultant Option, as amended (incorporated herein
by reference to the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1995).
10.5* Employment Agreement between the Company and Terence Hall.
10.6* Employment Agreement between the Company and Kenneth
Blanchard.
10.7* Employment Agreement between the Company and Charles
Funderburg.
10.8* Employment Agreement between the Company and Robert
Taylor.
10.9* Employment Agreement between the Company and James
Holleman.
10.10* Employment Agreement between the Company and Dale
Mitchell.
21.1* Subsidiaries of the Company.
23.1* Consent of KPMG LLP.
23.2* Consent of Ernst & Young LLP.
27.1* Financial Data Schedule.
</TABLE>
_______________
* Filed herein
SUPERIOR ENERGY SERVICES, INC. 1999 STOCK INCENTIVE PLAN
1. PURPOSE. The purpose of the 1999 Stock Incentive Plan (the
"Plan") of Superior Energy Services, Inc. ("Superior") is to increase
stockholder value and to advance the interests of Superior and its
subsidiaries (collectively, the "Company") by furnishing a variety of
equity incentives (the "Incentives") designed to attract, retain and
motivate officers, directors, key employees, consultants and advisers and
to strengthen the mutuality of interests between such persons and Superior
stockholders. Incentives may consist of opportunities to purchase or
receive shares of common stock, $.001 par value per share, of Superior (the
"Common Stock"), on terms determined under the Plan.
2. ADMINISTRATION.
2.1. COMPOSITION. The Plan shall be administered by the
compensation committee of the Board of Directors of Superior, or by a
subcommittee of the compensation committee. The committee or
subcommittee that administers the Plan shall hereinafter be referred
to as the "Committee". The Committee shall consist of not fewer than
two members of the Board of Directors, each of whom shall (a) qualify
as a "disinterested person" under Rule 16b-3 under the Securities
Exchange Act of 1934 (the "1934 Act"), as currently in effect or any
successor rule, and (b) qualify as an "outside director" under Section
162(m) of the Internal Revenue Code (the "Code"), as currently in
effect or any successor provision.
2.2. AUTHORITY. The Committee shall have plenary authority to
award Incentives under the Plan, to interpret the Plan, to establish
any rules or regulations relating to the Plan that it determines to be
appropriate, to enter into agreements with participants as to the
terms of the Incentives (the "Incentive Agreements") and to make any
other determination that it believes necessary or advisable for the
proper administration of the Plan. Its decisions in matters relating
to the Plan shall be final and conclusive on the Company and
participants. The Committee may delegate its authority hereunder to
the extent provided in Section 3 hereof.
3. ELIGIBLE PARTICIPANTS.
3.1. OFFICERS, KEY EMPLOYEES, CONSULTANTS AND ADVISERS. Officers
(including officers who also serve as directors of the Company), key
employees, consultants and advisers to the Company shall become
eligible to receive Incentives under the Plan when designated by the
Committee. Participants may be designated individually or by groups
or categories, as the Committee deems appropriate. With respect to
participants not subject to Section 16 of the 1934 Act or Section
162(m) of the Code, the Committee may delegate to appropriate
personnel of the Company its authority to designate participants, to
determine the size and type of Incentives to be received by those
participants and to determine or modify performance objectives for
those participants.
3.2. OUTSIDE DIRECTORS. Members of the Board of Directors of Superior
who are not also full-time employees of the Company ("Outside
Directors") may receive awards under the Plan only as specifically
provided in Section 9 hereof.
4. SHARES SUBJECT TO THE PLAN.
4.1. NUMBER OF SHARES.
(A) Subject to adjustment as provided in Section 10.6, a
total of 5,929,327 shares of Common Stock are authorized to be
issued under the Plan. Awards that by their terms may be paid
only in cash shall not be counted against such share limit.
(B) Subject to adjustment as provided in Section 10.6,
Incentives with respect to no more than 1,000,000 shares of
Common Stock may be granted through the Plan to a single
participant in one calendar year.
(C) In the event that a stock option or other award granted
hereunder expires or is terminated or cancelled prior to exercise
or issuance of shares, any shares of Common Stock that were
issuable thereunder may again be issued under the Plan.
(D) In the event that shares of Common Stock are issued as
Incentives under the Plan and thereafter are forfeited or
reacquired by the Company pursuant to rights reserved upon
issuance thereof, such forfeited and reacquired shares may again
be issued under the Plan.
(E) The number of shares of Common Stock that may be issued
pursuant to incentive stock options under Section 422 of the Code
may not exceed 250,000 shares.
(F) Subject to the other provisions of this Section 4.1, the
maximum number of shares of Common Stock with respect to which
awards may be issued in the form of restricted stock and Other
Stock-Based Awards (as defined herein) payable in shares of
Common Stock shall be 250,000 shares.
(G) If the exercise price of any option is satisfied by
tendering shares of Common Stock to the Company, only the number
of shares issued net of the shares tendered shall be deemed
issued for purposes of determining the maximum number of shares
available for issuance under Section 4.1.A. However, all of the
shares issued upon exercise shall be deemed issued for purposes
of determining the maximum number of shares that may be issued
pursuant to incentive stock options under Section 4.1.E.
(H) Additional rules for determining the number of shares
granted under the Plan may be made by the Committee, as it deems
necessary or appropriate.
4.2. TYPE OF COMMON STOCK. Common Stock issued under the Plan
may be authorized and unissued shares or issued shares held as
treasury shares, including shares acquired in the open market or
otherwise obtained by the Company.
5. TYPES OF INCENTIVES. Incentives may be granted under the Plan to
eligible participants in any of the following forms, either individually or
in combination, (a) incentive stock options and non-qualified stock
options; (b) restricted stock; and (c) other stock-based awards.
6. STOCK OPTIONS. A stock option is a right to purchase shares of
Common Stock from Superior. Stock options granted under this Plan may be
incentive stock options under Section 422 of the Code, as amended (the
"Code") or non-qualified stock options. Any option that is designated as a
non-qualified stock option shall not be treated as an incentive stock
option. Each stock option granted by the Committee under this Plan shall
be subject to the following terms and conditions:
6.1. PRICE. The exercise price per share shall be determined by
the Committee, subject to adjustment under Section 10.6; provided that
in no event shall the exercise price be less than the Fair Market
Value of a share of Common Stock on the date of grant.
6.2. NUMBER. The number of shares of Common Stock subject to the
option shall be determined by the Committee, subject to Section 4.1
and subject to adjustment as provided in Section 10.6.
6.3. DURATION AND TIME FOR EXERCISE. The term of each stock
option shall be determined by the Committee. Subject to the automatic
acceleration of exercisability under Section 10.12, each stock option
shall become exercisable at such time or times during its term as
shall be determined by the Committee. Notwithstanding the foregoing,
the Committee may accelerate the exercisability of any stock option at
any time.
6.4. REPURCHASE. Upon approval of the Committee, the Company may
repurchase a previously granted stock option from a participant by
mutual agreement before such option has been exercised by payment to
the participant of the amount per share by which: (i) the Fair Market
Value (as defined in Section 10.13) of the Common Stock subject to the
option on the business day immediately preceding the date of purchase
exceeds (ii) the exercise price.
6.5. MANNER OF EXERCISE. A stock option may be exercised, in
whole or in part, by giving written notice to the Company, specifying
the number of shares of Common Stock to be purchased. The exercise
notice shall be accompanied by the full purchase price for such
shares. The option price shall be payable in United States dollars
and may be paid by (a) cash; (b) uncertified or certified check; (c)
unless otherwise determined by the Committee, by delivery of shares
of Common Stock held by the optionee for at least six months, which
shares shall be valued for this purpose at the Fair Market Value on
the business day immediately preceding the date such option is
exercised; (d) delivering a properly executed exercise notice
together with irrevocable instructions to a broker approved in advance
by Superior (with a copy to Superior) to promptly deliver to Superior
the amount of sale or loan proceeds to pay the exercise price; or
(e) in such other manner as may be authorized from time to time by the
Committee. In the case of delivery of an uncertified check upon
exercise of a stock option, no shares shall be issued until the check
has been paid in full. Prior to the issuance of shares of Common
Stock upon the exercise of a stock option, a participant shall have
no rights as a stockholder.
6.6. INCENTIVE STOCK OPTIONS. Notwithstanding anything in the
Plan to the contrary, the following additional provisions shall apply
to the grant of stock options that are intended to qualify as
incentive stock options (as such term is defined in Section 422 of the
Code):
(A) Any incentive stock option agreement authorized under
the Plan shall contain such other provisions as the Committee
shall deem advisable, but shall in all events be consistent with
and contain or be deemed to contain all provisions required in
order to qualify the options as incentive stock options.
(B) All incentive stock options must be granted within ten
years from the date on which this Plan is adopted by the Board of
Directors.
(C) Unless sooner exercised, all incentive stock options
shall expire no later than ten years after the date of grant.
(D) No incentive stock options shall be granted to any
participant who, at the time such option is granted, would own
(within the meaning of Section 422 of the Code) stock possessing
more than 10% of the total combined voting power of all classes
of stock of the employer corporation or of its parent or
subsidiary corporation.
(E) The aggregate Fair Market Value (determined with respect
to each incentive stock option as of the time such incentive
stock option is granted) of the Common Stock with respect to
which incentive stock options are exercisable for the first time
by a participant during any calendar year (under the Plan or any
other plan of Superior or any of its subsidiaries) shall not
exceed $100,000. To the extent that such limitation is exceeded,
such options shall not be treated, for federal income tax
purposes, as incentive stock options.
7. RESTRICTED STOCK
7.1. GRANT OF RESTRICTED STOCK. The Committee may award shares
of restricted stock to such persons as the Committee determines to be
eligible pursuant to the terms of Section 3. An award of restricted
stock may be subject to the attainment of specified performance goals
or targets, restrictions on transfer, forfeitability provisions and
such other terms and conditions as the Committee may determine,
subject to the provisions of the Plan. To the extent restricted stock
is intended to qualify as performance based compensation under Section
162(m) of the Code, it must meet the additional requirements imposed
thereby.
7.2. THE RESTRICTED PERIOD. The Committee shall establish a
period of time during which the transfer of the shares of restricted
stock shall be restricted (the "Restricted Period"). Each award of
restricted stock may have a different Restricted Period. The
expiration of the Restricted Period shall also occur under the
conditions described in Section 10.12 hereof and may occur upon death,
disability or retirement, if so determined by the Committee. A
Restricted Period of at least three years is required, except that if
vesting of the shares is subject to the attainment of specified
performance goals, a Restricted Period of one year or more is
permitted. The expiration of the Restricted Period shall also occur
as provided under Section 10.12.
7.3. ESCROW. The participant receiving restricted stock shall
enter into an Incentive Agreement with the Company setting forth the
conditions of the grant. Certificates representing shares of
restricted stock shall be registered in the name of the participant
and deposited with the Company, together with a stock power endorsed
in blank by the participant. Each such certificate shall bear a
legend in substantially the following form:
The transferability of this certificate and the shares of
Common Stock represented by it are subject to the terms and
conditions (including conditions of forfeiture) contained in
the Superior Energy Services, Inc. 1999 Stock Incentive Plan
(the "Plan"), and an agreement entered into between the
registered owner and Superior Energy Services, Inc.
thereunder. Copies of the Plan and the agreement are on
file at the principal office of the Company.
7.4. DIVIDENDS ON RESTRICTED STOCK. Any and all cash and stock
dividends paid with respect to the shares of restricted stock shall be
subject to any restrictions on transfer, forfeitability provisions or
reinvestment requirements as the Committee may, in its discretion,
prescribe in the Incentive Agreement.
7.5. FORFEITURE. In the event of the forfeiture of any shares of
restricted stock under the terms provided in the Incentive Agreement
(including any additional shares of restricted stock that may result
from the reinvestment of cash and stock dividends, if so provided in
the Incentive Agreement), such forfeited shares shall be surrendered
and the certificates cancelled. The participants shall have the same
rights and privileges, and be subject to the same forfeiture
provisions, with respect to any additional shares received pursuant to
Section 10.6 due to a recapitalization, merger or other change in
capitalization.
7.6. EXPIRATION OF RESTRICTED PERIOD. Upon the expiration or
termination of the Restricted Period and the satisfaction of any other
conditions prescribed by the Committee, the restrictions applicable to
the restricted stock shall lapse and a stock certificate for the
number of shares of restricted stock with respect to which the
restrictions have lapsed shall be delivered, free of all such
restrictions and legends, except any that may be imposed by law, to
the participant or the participant's estate, as the case may be.
7.7. RIGHTS AS A STOCKHOLDER. Subject to the terms and
conditions of the Plan and subject to any restrictions on the receipt
of dividends that may be imposed in the Incentive Agreement, each
participant receiving restricted stock shall have all the rights of a
stockholder with respect to shares of stock during any period in which
such shares are subject to forfeiture and restrictions on transfer,
including without limitation, the right to vote such shares.
7.8. PERFORMANCE-BASED RESTRICTED STOCK. The Committee shall
determine at the time of grant if a grant of restricted stock is
intended to qualify as "performance-based compensation" as that term
is used in Section 162(m) of the Code. Any such grant shall be
conditioned on the achievement of one or more performance measures.
The performance measures pursuant to which the restricted stock shall
vest shall be any or a combination of the following: earnings per
share, return on assets, an economic value added measure, stockholder
return, earnings, return on equity, return on investment, cash
provided by operating activities, increase in cash flow, or safety
performance of the Company, a division of the Company or a Subsidiary.
For any performance period, such performance objectives may be
measured on an absolute basis or relative to a group of peer companies
selected by the Committee, relative to internal goals or relative to
levels attained in prior years. For grants of restricted stock
intended to qualify as "performance-based compensation," the grants of
restricted stock and the establishment of performance measures shall
be made during the period required under Section 162(m).
8. OTHER STOCK-BASED AWARDS.
8.1. GRANT OF OTHER STOCK-BASED AWARDS. The Committee is
authorized to grant "Other Stock-Based Awards," which shall consist of
awards the value of which is based in whole or in part on the value of
shares of Common Stock, that is not an instrument or award specified
in Sections 6 of 7 of the Plan. Other Stock-Based Awards may be awards
of shares of Common Stock or may be denominated or payable in, valued
in whole or in part by reference to, or otherwise based on or related
to, shares of Common Stock (including, without limitation, restricted
stock units or securities convertible or exchangeable into or
exercisable for shares of Common Stock ), as deemed by the Committee
consistent with the purposes of the Plan. The Committee shall
determine the terms and conditions of any such Other Stock-Based Award
and may provide that such awards would be payable in whole or in part
in cash. An Other Stock-Based Award may be subject to the attainment
of such specified performance goals or targets as the Committee may
determine, subject to the provisions of the Plan. To the extent that
an Other Stock-Based Award is intended to qualify as "performance-
based compensation" under Section 162(m) of the Code, it must meet the
additional requirements imposed thereby. Except in the case of an
Other Stock-Based Award granted in assumption of or in substitution
for an outstanding award of a company acquired by the Company or with
which the Company combines, the price at which securities may be
purchased pursuant to any Other Stock-Based Award granted under this
Plan, or the provision, if any, of any such Award that is analogous to
the purchase or exercise price, shall not be less than 100% of the
fair market value of the securities to which such Award relates on the
date of grant. An Other-Stock Based Award, including an outright
grant of shares of Common Stock, may be made in lieu of the payment of
cash compensation otherwise due to a participant.
8.2. PERFORMANCE-BASED OTHER STOCK-BASED AWARDS. The Committee
shall determine at the time of grant if the grant of an Other Stock-
Based Award is intended to qualify as "performance-based compensation"
as that term is used in Section 162(m) of the Code. Any such grant
shall be conditioned on the achievement of one or more performance
measures. The performance measures pursuant to which the Other Stock-
Based Award shall vest shall be any or a combination of the following:
earnings per share, return on assets, an economic value added measure,
stockholder return, earnings, return on equity, return on investment,
cash provided by operating activities, increase in cash flow, or the
safety of the Company, a division of the Company or a Subsidiary. For
any performance period, such performance objectives may be measured on
an absolute basis or relative to a group of peer companies selected by
the Committee, relative to internal goals or relative to levels
attained in prior years. For grants of Other Stock-Based Awards
intended to qualify as "performance-based compensation," the grants of
Other Stock-Based Awards and the establishment of performance measures
shall be made during the period required under Section 162(m) of the
Code.
9. STOCK OPTIONS FOR OUTSIDE DIRECTORS
9.1 ELIGIBILITY. Each person who serves as an Outside
Director shall be entitled to participate and automatically
granted (a) a non-qualified stock option to acquire 20,000 shares
of Common Stock as of the day that the Plan is approved by the
stockholders of the Company and (b) a non-qualified stock option
to acquire 5,000 shares of Common Stock on the day following the
2000 annual meeting of stockholders and thereafter on the day
following each subsequent annual meeting of stockholders, for as
long as the Plan remains in effect and shares of Common Stock
remain available for grant under Section 4.1 hereof.
9.2 EXERCISABILITY OF STOCK OPTIONS. The stock options
granted to Outside Directors under this Section 9 shall be
exercisable immediately. No stock option granted to an Outside
Director under the terms of this Section 9 may be exercised more
than ten years after the date of grant.
9.3 EXERCISE PRICE. The per share exercise price of stock
options granted to Outside Directors shall be equal to 100% of
the Fair Market Value, as defined in the Plan, of a share of
Common Stock on the date of grant.
9.4 EXERCISE AFTER TERMINATION OF BOARD SERVICE. In the
event that an Outside Director ceases to serve on the Board of
Directors for any reason, the stock options granted hereunder
must be exercised within one year from the date of termination of
Board service, but in no event later than ten years after the
date of grant.
10. GENERAL.
10.1. DURATION. Subject to Section 10.11, the Plan shall remain
in effect until all Incentives granted under the Plan have either been
satisfied by the issuance of shares of Common Stock or terminated
under the terms of the Plan and all restrictions imposed on shares of
Common Stock in connection with their issuance under the Plan have
lapsed.
10.2. TRANSFERABILITY OF INCENTIVES. Options granted under the
Plan shall not be transferable except:
(A) by will;
(B) by the laws of descent and distribution; or
(C) in the case of stock options only, if permitted by the
Committee and so provided in the Incentive Agreement or an
amendment thereto, (i) pursuant to a domestic relations order, as
defined in the Code, (ii) to Immediate Family Members, (iii) to a
partnership in which Immediate Family Members, or entities in
which Immediate Family Members are the sole owners, members or
beneficiaries, as appropriate, are the only partners, (iv) to a
limited liability company in which Immediate Family Members, or
entities in which Immediate Family Members are the sole owners,
members or beneficiaries, as appropriate, are the only members,
or (v) to a trust for the sole benefit of Immediate Family
Members. "Immediate Family Members" shall be defined as the
spouse and natural or adopted children or grandchildren of the
participant and their spouses. To the extent that an incentive
stock option is permitted to be transferred during the lifetime
of the participant, it shall be treated thereafter as a non-
qualified stock option.
Any attempted assignment, transfer, pledge, hypothecation or other
disposition of an Incentive, or levy of attachment or similar process
upon the Incentive not specifically permitted herein, shall be null
and void and without effect.
10.3. DIVIDEND EQUIVALENTS. In the sole and complete discretion
of the Committee, an Incentive may provide the holder thereof with
dividends or dividend equivalents, payable in cash, shares, other
securities or other property on a current or deferred basis.
10.4. EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH. In the event
that a participant, other than an Outside Director, ceases to be an
employee of the Company or to provide services to the Company for any
reason, including death, disability, early retirement or normal
retirement, any Incentives may be exercised, shall vest or shall
expire at such times as may be determined by the Committee in the
Incentive Agreement.
10.5. ADDITIONAL CONDITION. Anything in this Plan to the
contrary notwithstanding: (a) the Company may, if it shall determine
it necessary or desirable for any reason, at the time of award of any
Incentive or the issuance of any shares of Common Stock pursuant to
any Incentive, require the recipient of the Incentive, as a condition
to the receipt thereof or to the receipt of shares of Common Stock
issued pursuant thereto, to deliver to the Company a written
representation of present intention to acquire the Incentive or the
shares of Common Stock issued pursuant thereto for his own account for
investment and not for distribution; and (b) if at any time the
Company further determines, in its sole discretion, that the listing,
registration or qualification (or any updating of any such document)
of any Incentive or the shares of Common Stock issuable pursuant
thereto is necessary on any securities exchange or under any federal
or state securities or blue sky law, or that the consent or approval
of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with the award of any Incentive, the
issuance of shares of Common Stock pursuant thereto, or the removal of
any restrictions imposed on such shares, such Incentive shall not be
awarded or such shares of Common Stock shall not be issued or such
restrictions shall not be removed, as the case may be, in whole or in
part, unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions
not acceptable to the Company.
10.6. ADJUSTMENT. In the event of any recapitalization, stock
dividend, stock split, combination of shares or other change in the
Common Stock, the number of shares of Common Stock then subject to the
Plan, including shares subject to outstanding Incentives, shall be
adjusted in proportion to the change in outstanding shares of Common
Stock. In the event of any such adjustments, the purchase price of
any option shall be adjusted as and to the extent appropriate, in the
reasonable discretion of the Committee, to provide participants with
the same relative rights before and after such adjustment.
10.7. INCENTIVE AGREEMENTS. The terms of each Incentive shall be
stated in an agreement or notice approved by the Committee. The
Committee may also determine to enter into agreements with holders of
options to reclassify or convert certain outstanding options, within
the terms of the Plan, as incentive stock options or as non-qualified
stock options.
10.8. WITHHOLDING. At any time that a participant is required to
pay to the Company an amount required to be withheld under the
applicable tax laws in connection with the issuance of shares of
Common Stock under the Plan or upon the lapse of restrictions on
shares of restricted stock, the participant may, subject to the
Committee's right of disapproval, satisfy this obligation in whole or
in part by electing (the AElection@) to have the Company withhold from
the distribution shares of Common Stock having a value equal to the
amount required to be withheld. The value of the shares withheld
shall be based on the Fair Market Value of the Common Stock on the
date that the amount of tax to be withheld shall be determined (the
"Tax Date").
Each Election must be made prior to the Tax Date. The Committee
may disapprove of any Election or may suspend or terminate the right
to make Elections. If a participant makes an election under Section
83(b) of the Code with respect to shares of restricted stock or an
Other Stock-Based Award, an Election is not permitted to be made.
A participant may also satisfy his or her total tax liability
related to the Incentive by delivering shares of Common Stock that
have been owned by the participant for at least six months. The value
of the shares delivered shall be based on the Fair Market Value of the
Common Stock on the Tax Date.
10.9. NO CONTINUED EMPLOYMENT. No participant under the Plan
shall have any right, because of his or her participation, to continue
in the employ of the Company for any period of time or to any right to
continue his or her present or any other rate of compensation.
10.10. DEFERRAL PERMITTED. Distribution of shares of Common
Stock or cash to which a participant is entitled under any Incentive
shall be made as provided in the Incentive Agreement. Payment may be
deferred at the option of the participant if provided in the Incentive
Agreement.
10.11. AMENDMENT OF THE PLAN. The Board may amend or discontinue
the Plan at any time; provided, however, that no such amendment may
(A) without the approval of the stockholders, (i)
increase, subject to adjustments permitted under Section
10.6, the maximum number of shares of Common Stock that may
be issued through the Plan, (ii) materially increase the
benefits accruing to participants under the Plan or (iii)
materially expand the classes of persons eligible to
participate in the Plan, or
(B) materially impair, without the consent of the recipient,
an Incentive previously granted, except that the Company retains the
right to (i) convert any outstanding incentive stock option to a non-
qualified stock option, or (ii) exercise all rights under Section
10.12.
10.12. CHANGE OF CONTROL.
(A) A Change of Control shall mean:
(i) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934
Act) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the 1934 Act) of more than 30% of the
outstanding shares of the Common Stock; provided, however, that
for purposes of this subsection (i), the following acquisitions
shall not constitute a Change of Control:
a) any acquisition of Common Stock directly from
the Company,
b) any acquisition of Common Stock by the Company,
c) any acquisition of Common Stock by any employee
benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company, or
d) any acquisition of Common Stock by any
corporation pursuant to a transaction that complies with
clauses a), b) and c) of subsection (iii) of this Section
10.12(A); or
(ii) individuals who, as of the date this Plan was
adopted by the Board of Directors (the "Approval Date"),
constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to
the Approval Date whose election, or nomination for election by
the stockholders of the Company, was approved by a vote of at
least a majority of the directors then comprising the Incumbent
Board shall be considered a member of the Incumbent Board, unless
such individual's initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a person
other than the Incumbent Board; or
(iii) consummation of a reorganization, merger or
consolidation, or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination,
a) all or substantially all of the individuals and
entities who were the beneficial owners of the outstanding
Common Stock and the voting securities of the Company
entitled to vote generally in the election of directors
immediately prior to such Business Combination have direct
or indirect beneficial ownership, respectively, of more than
50% of the then outstanding shares of common stock, and more
than 50% of the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, of the corporation resulting from
such Business Combination (which, for purposes of this
clause a) and clauses b) and c), shall include a corporation
that as a result of such transaction owns the Company or all
or substantially all of the assets of the Company either
directly or through one or more subsidiaries), and
b) except to the extent that such ownership
existed prior to the Business Combination, no person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan or related trust of
the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20%
or more of the then outstanding shares of common stock of
the corporation resulting from such Business Combination or
20% or more of the combined voting power of the then
outstanding voting securities of such corporation, and
c) at least a majority of the members of the board
of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action
of the Board, providing for such Business Combination; or
(iv) approval by the stockholders of the Company of a
plan of complete liquidation or dissolution of the Company.
(B) Upon a Change of Control, or immediately prior to the
closing of a transaction that will result in a Change of Control
if consummated, all outstanding options granted pursuant to the
Plan shall automatically become fully exercisable, all
restrictions or limitations on any Incentives shall lapse and all
performance criteria and other conditions relating to the payment
of Incentives shall be deemed to be achieved and waived by the
Company, without the necessity of action by any person.
(C) No later than 30 days after the approval by the Board of
a Change of Control of the types described in subsections (iii)
or (iv) of Section 10.12(A) and no later than 30 days after a
Change of Control of the type described in subsections (i) and
(ii) of Section 10.12(A), the Committee (as the Committee was
composed immediately prior to such Change of Control and
notwithstanding any removal or attempted removal of some or all
of the members thereof as directors or Committee members), acting
in its sole discretion without the consent or approval of any
participant, may act to effect one or more of the alternatives
listed below and such act by the Committee may not be revoked or
rescinded by persons not members of the Committee immediately
prior to the Change of Control:
(i) require that all outstanding options be exercised
on or before a specified date (before or after such Change
of Control) fixed by the Committee, after which specified
date all unexercised options shall terminate,
(ii) make such equitable adjustments to Incentives then
outstanding as the Committee deems appropriate to reflect
such Change of Control (provided, however, that the
Committee may determine in its sole discretion that no
adjustment is necessary),
(iii) provide for mandatory conversion of some or all
of the outstanding options held by some or all participants
as of a date, before or after such Change of Control,
specified by the Committee, in which event such options
shall be deemed automatically cancelled and the Company
shall pay, or cause to be paid, to each such participant an
amount of cash per share equal to the excess, if any, of the
Change of Control Value of the shares subject to such option
or, as defined and calculated below, over the exercise
price(s) of such options or, in lieu of such cash payment,
the issuance of Common Stock or securities of an acquiring
entity having a Fair Market Value equal to such excess, or
(iv) provide that thereafter upon any exercise of an
option the participant shall be entitled to purchase under
such option, in lieu of the number of shares of Common Stock
then covered by such option, the number and class of shares
of stock or other securities or property (including, without
limitation, cash) to which the participant would have been
entitled pursuant to the terms of the agreement providing
for the reorganization, merger, consolidation or asset sale,
if, immediately prior to such Change of Control, the
participant had been the holder of record of the number of
shares of Common Stock then covered by such options.
<PAGE>
(v) For the purposes of paragraph (iii) of this Section
10.12(C) the "Change of Control Value" shall equal the
amount determined by whichever of the following items is
applicable:
a) the per share price to be paid to stockholders
of Superior in any such merger, consolidation or other
reorganization.
b) the price per share offered to stockholders of
Superior in any tender offer or exchange offer whereby
a Change of Control takes place, or
c) in all other events, the Fair Market Value per
share of Common Stock into which such options being
converted are exercisable, as determined by the
Committee as of the date determined by the Committee to
be the date of conversion of such options.
d) in the event that the consideration offered to
stockholders of Superior in any transaction described
in this Section 10.12 consists of anything other than
cash, the Committee shall determine the fair cash
equivalent of the portion of the consideration offered
that is other than cash.
10.13. DEFINITION OF FAIR MARKET VALUE. Whenever "Fair Market
Value" of Common Stock shall be determined for purposes of this Plan,
it shall be determined as follows: (i) if the Common Stock is listed
on an established stock exchange or any automated quotation system
that provides sale quotations, the closing sale price for a share of
the Common Stock on such exchange or quotation system on the
applicable date; (ii) if the Common Stock is not listed on any
exchange or quotation system, but bid and asked prices are quoted and
published, the mean between the quoted bid and asked prices on the
applicable date, and if bid and asked prices are not available on such
day, on the next preceding day on which such prices were available;
and (iii) if the Common Stock is not regularly quoted, the fair market
value of a share of Common Stock on the applicable date as established
by the Committee in good faith.
11. STOCKHOLDER APPROVAL. Adoption of this plan by the Board of
Directors is subject to approval by the holders of a majority of the Common
Stock present and voting at a meeting of the stockholders to be held no
later than the date of the first annual meeting after the date of the
adoption hereof by the Board of Directors.
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
BETWEEN
SUPERIOR ENERGY SERVICES, INC.
AND
TERENCE E. HALL
<PAGE>
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered in and
effective as of July 15, 1999, (the "Effective Date") between Superior
Energy Services, Inc., a Delaware corporation (the "Company"), and Terence
E. Hall (the "Executive").
WITNESSETH:
WHEREAS, Executive is serving as the President and Chief Executive
Officer of the Company pursuant to that certain Employment Agreement dated
December 13, 1995; and
WHEREAS, the Company and the Executive desire to amend and restate
such Employment Agreement as of the Effective Date on the terms and
conditions contained herein.
1. EMPLOYMENT. The Company hereby agrees to employ Executive,
and Executive hereby agrees to serve the Company, on the terms and
conditions set forth herein.
2. TERM. Subject to earlier termination as hereinafter
provided, the employment of Executive by the Company as provided in Section
1 shall have an initial term of three years; provided, however, that on
each anniversary of the Effective Date, the term of Executive's employment
under this Agreement shall be automatically extended for one additional
year, unless either party hereto gives written notice of its election not
to so extend the term at least 90 days prior to the applicable anniversary
date.
3. POSITION AND DUTIES.
(a) The Company agrees to employ Executive, and Executive
agrees to be so employed, in the capacity of Chairman of the Board,
President and Chief Executive Officer of the Company. The Executive shall
be nominated for re-election as a member of the Company's Board of
Directors (the "Board") annually, commencing with the annual stockholders
meeting in 2000, and shall serve as Chairman of the Board so long as this
Agreement is in effect. In addition, for so long as the Executive is
employed by the Company and without further compensation, the Executive
shall serve as a director and officer of the Company's principal
subsidiaries to which he may be elected or appointed from time to time.
(b) The Executive shall be subject to the direction of the
Board and shall have such powers, duties and responsibilities consistent
with the Executive's position as President and Chief Executive Officer of
the Company as may from time to time be prescribed by the Board including,
but not limited to, full authority for all operating, personnel (including
officer positions of the Company, subject to approval by the Board) and
capital expenditure decisions (subject to the supervision of the Board).
(c) Executive shall devote his full business time and
attention to the business and affairs of the Company and shall use his best
efforts in performing faithfully his duties under this Agreement as the
Company's President and Chief Executive Officer. Notwithstanding the
foregoing, Executive shall be free to pursue and attend to on a regular
basis other business matters in accordance with the terms of this Agreement
that do not involve competition with the business of the Company and the
performance of which do not detract from or impair the discharge of his
duties on behalf of the Company.
4. PLACE OF PERFORMANCE. In connection with Executive's
employment by the Company, Executive shall be based at the principal
executive offices of the Company in the greater New Orleans Louisiana,
metropolitan area and shall not be transferred to any other location
without his consent.
5. COMPENSATION AND RELATED MATTERS.
(a) SALARY. The Company shall pay to Executive a base
salary of $375,000 or such greater amount as may be approved from time to
time by the Board, payable in equal semi-monthly installments in accordance
with the Company's regular payroll practices for its principal executives.
The Executive's base salary will be reviewed annually by the Board.
(b) INCENTIVE BONUS. During the term hereof, the Executive
shall be eligible to earn an annual bonus pursuant to the Company's
Management Incentive Plan (the "bonus"), in an amount of up to 125% of his
then current base salary, the exact amount of which shall be determined by
the Board based on the Executive's achievement of performance objectives
for each year, as established by the Board following its review with the
Executive of the Company's operating budget, financial position and
business prospects for such fiscal year. The Bonus shall be payable within
30 days after final determination of the amount payable, but in no event
later than three months after the close of each fiscal year of the Company,
commencing with the fiscal year ending December 31, 1999. It is expressly
agreed by the parties that with respect to the 1999 fiscal year, the
Executive's annual bonus shall not be less than $160,000.
(c) STOCK OPTIONS. On the Effective Date, the Company
shall grant to the Executive, pursuant to the Company's 1998 Stock
Incentive Plan, options to purchase a total of 488,617 shares of the
Company's common stock, $0.001 par value per share, at an exercise price
equal to the closing sales price of the common stock on the Nasdaq National
Market on the Effective Date. The stock option will be granted pursuant to
the form of Stock Option Agreement in the form attached hereto as Exhibit
"A."
(d) EXPENSES. During the term of Executive's employment
hereunder, Executive shall be entitled to receive prompt reimbursement
for all reasonable and necessary expenses incurred by Executive in
performing services hereunder, including all expenses of travel and living
expenses while away from home on business or at the request of and in the
service of the Company; provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established
by the Company.
(e) OTHER BENEFITS. During the term hereof, Executive
shall be entitled to participate in any medical/dental, life insurance,
accidental death, long-term disability insurance plan and 401(k) or other
insurance and retirement plans which have been or may be adopted by the
Company for the general and overall benefit of executive employees of the
Company, according to the participation or eligibility requirements of each
such plan.
(f) VACATIONS. Executive shall be excused from rendering
his services during reasonable vacation periods for not more than 15 days
per year and during other reasonable temporary absences. Executive shall
also be entitled to all paid holidays and personal days given by the
Company to its executives.
(g) VEHICLE. The Company shall make available to Executive
a Company vehicle selected by the Executive for his use in the discharge of
his duties. The Company shall reimburse the Executive for all related
expenses such as repair, insurance and gasoline in accordance with the
policies and practices of the Company in effect from time to time.
6. TERMINATION. Executive's employment hereunder may be
terminated effective as of the Date of Termination (as defined below)
without any breach of this Agreement only under the following
circumstances:
(a) DEATH. Executive's employment hereunder shall
terminate upon his death.
(b) DISABILITY. If, as a result of Executive's incapacity
due to physical or mental illness, Executive shall have been absent from
his duties hereunder on a full-time basis for a period of 120 consecutive
days, or 180 non-consecutive days within any 365 day period, the Company
may terminate Executive's employment.
(c) CAUSE. The Company may terminate Executive's
employment hereunder for Cause. For purposes of this Agreement, the
Company shall have "Cause" to terminate Executive's employment hereunder
upon: (i) substantial and continued willful failure by the Executive to
perform his duties hereunder which results, or could reasonably be expected
to result, in material harm to the business or reputation of the Company,
which failure is not cured (if curable) by Executive within 15 days after
written notice of such failure is delivered to the Executive by the
Company; and (ii) the commission by Executive of any criminal act involving
moral turpitude or a felony which results in an arrest or indictment, or
the commission by Executive, based on reasonable proof, of any act of fraud
or embezzlement involving the Company or its customers or suppliers. For
purposes of this Section 6(c), no act, or failure to act, on Executive's
part shall be considered "willful" unless done, or omitted to be done, by
him not in good faith and without reasonable belief that his action or
omission was in the best interest of the Company. Notwithstanding the
foregoing, Executive shall not be deemed to have been terminated for Cause
without (A) reasonable notice to Executive setting forth the reasons for
the Company's intention to terminate for Cause, (B) an opportunity for
Executive, together with his counsel, to be heard before the Board, and (C)
delivery to Executive of a Notice of Termination (as hereinafter defined)
from the Board, finding that, in good faith opinion of the Board, Executive
was guilty of conduct set forth above, and specifying the particulars
thereof in detail.
(d) TERMINATION BY EXECUTIVE.
(i) The Executive may terminate his status as an
employee for Good Reason. The termination by the Executive of his
status as an employee for Good Reason shall be deemed to be a
justifiable termination and shall excuse the Executive from the
obligation to render services under or relating to this Agreement. As
used herein, the term "Good Reason" shall mean:
(A) The occurrence of any of the following:
(1) the assignment by the Board to the
Executive of any duties or responsibilities that are inconsistent with the
Executive's status, title and position as President and Chief Executive
Officer of the Company;
(2) any removal of the Executive from, or any
failure to reappoint or reelect the Employee to, the position of President
and Chief Executive Officer of the Company, except in connection with a
termination by the Company of the Executive's employment for Cause or on
account of disability or death of the Executive;
(3) the failure by the Company to obtain the
assumption of its obligations under this Agreement by any successor or
assign as contemplated in Section 10;
(4) the Company's requiring the Executive to
be based anywhere other than in greater New Orleans, Louisiana metropolitan
area, except for required travel in the ordinary course of the Company's
business;
(5) a reduction in the Employee's base salary
or a failure by the Company to pay to the Employee any installment of the
base salary or to pay any other amounts required to be paid under this
Agreement, which failure continues for a period of ten days after written
notice thereof is given by the Executive to the Company;
(6) any purported termination by the Company
of the Employee's status as an employee which is not effected pursuant to a
Notice of Termination satisfying the requirements of Section 6(e), or which
is not justified as a termination based on Cause; or
(7) any breach of this Agreement by the
Company.
(e) Any termination of Executive's employment by the
Company or by Executive (other than termination pursuant to Section 6(a))
shall be communicated by written Notice of Termination to the other party
hereto in accordance with Section 11. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the
specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executive's employment under the provision so
indicated.
(f) "Date of Termination" shall mean (i) if Executive's
employment is terminated by his death, the date of his death, (ii) if
Executive's employment is terminated pursuant to Section 6(b), 30 days
after Notice of Termination is given (provided that Executive shall not
have returned to the performance of his duties on a full-time basis during
such 30 day period), (iii) if Executive's employment is terminated pursuant
to Section 6(c), the date specified in the Notice of Termination, and (iv)
if Executive's employment is terminated pursuant to Section 6(d),
immediately upon the Executive's giving to the Company a Notice of
Termination; provided, however, that, if within 30 days after any Notice of
Termination is given the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the termination,
the Date of Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties, by a binding
and final arbitration award or by a final judgment, order or decree of a
court of competent jurisdiction (the time for appeal therefrom having
expired and no appeal having been perfected).
7. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(a) If Executive's employment is terminated pursuant to
Section 6(a) or 6(b), the Company shall pay the Executive, in a lump sum
within 30 days following the Date of Termination, an amount equal to the
Executive's then current annual base salary.
(b) If Executive's employment is terminated by the Company
for Cause or by Executive for other than Good Reason, the Company shall pay
Executive his then current base salary through the Date of Termination and
the Company shall have no further obligations to Executive under this
Agreement.
(c) If (i) in breach of this Agreement, the Company shall
terminate Executive's employment; or (ii) Executive shall terminate his
employment for Good Reason, then
in lieu of any further salary payments to Executive for periods subsequent
to the Date of Termination, the Company shall pay as liquidated damages to
Executive an amount equal to the product of (A) the sum of Executive's then
current annual base salary and the bonus paid or payable to the Executive
for the preceding fiscal year, and (B) the greater of the number of years
(including partial years) remaining in the term of employment hereunder or
the number 2 in one lump sum within 30 days following the Date of
Termination.
(d) If Executive terminates this Agreement for Good Reason
and such termination occurs within two years of the occurrence of a Change
in Control (as defined below), then, in addition to any amounts otherwise
due under this Agreement, the Company shall: (i) pay to Executive an amount
equal to two times his then current annual base salary plus the bonus paid
or payable to Executive for the preceding fiscal year; (ii) continue
Executive's participation in the Company's medical, dental, accidental
death, and life insurance plans, as provided in Section 5, for two years,
subject to COBRA required benefits thereafter; and (iii) cause Executive to
be fully vested in any stock options or stock grants held by Executive.
The Company shall make the payment due in one lump sum within 30 days
following the Date of Termination. A "Change in Control" shall mean the
occurrence at any time after the date of this Agreement of any of the
following events: (A) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially
all of the assets of the Company, to any person or group of related
persons, together with any affiliates thereof; (B) any person or group
shall become the owner, directly or indirectly, beneficially or of record,
of shares representing more than 50% of the aggregate voting power of the
issued and outstanding common stock of the Company; or (C) a merger or
consolidation of the Company with another person in which the holders of
the Company's common stock immediately prior to the consummation of the
transaction hold, directly or indirectly, immediately following the
consummation of the transaction, 50% or less of the common equity interest
in the surviving person in such transaction. Notwithstanding anything to
the contrary in this Agreement, in no event shall the aggregate amount
payable to the Executive pursuant to Section 7(c) and 7(d)(i) exceed an
amount equal to three times the Executive's current base annual salary plus
the bonus paid or payable to Executive for the preceding fiscal year.
(e) If Executive's employment is terminated hereunder other
than by the Company for Cause, the Company shall provide following such
termination to the extent required by the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA"), COBRA continuation coverage with
respect to the employee benefit plans to which Executive was entitled
immediately prior to the Notice of Termination.
(f) If Executive is subjected to an excise tax as a result
of the "golden parachute" provisions of Section 4999 of the Internal
Revenue Code of 1986, as amended, the Company shall pay to Executive such
amounts as are necessary to place Executive in the same after-tax position
as he would have been had such golden parachute provisions not been
applicable to him. This gross-up provision shall take into account any
such applicable excise tax, any state or federal interest and penalties and
any state or federal income tax and excise tax payable with respect to the
additional payment provided by this Section 6(f).
8. MITIGATION. If Executive's employment is terminated,
Executive shall not be required to make efforts to mitigate damages by
seeking other employment; provided, however, that, to the extent Executive
shall receive compensation from such other employment, the payments to be
made by the Company under the provisions of Sections 7(c) and 7(d) shall
(provided (i) that the term "employment" as used herein shall not include
any independent financial ventures undertaken by executive or employment of
Executive by any proprietorship owned by Executive or any entity in which
Executive has a majority equity interest or in which he is a general
partner and (ii) such independent financial ventures are undertaken after
leaving the employ of the Company and are not in conflict with any non-
compete obligations of the executive) be correspondingly reduced or
correspondingly repaid by Executive to the Company.
9. NONDISCLOSURE AND NONCOMPETITION
(a) CERTAIN DEFINITIONS. For purposes of this Agreement,
the following terms shall have the following meanings:
(i) "Confidential Information" means any
information, knowledge or data of any nature and in any form
(including information that is electronically transmitted or stored on
any form of magnetic or electronic storage media) relating to the
past, current or prospective business or operations of the
Company and its subsidiaries, that at the time or times concerned is
not generally known to persons engaged in businesses similar to those
conducted or contemplated by the Company and its subsidiaries
(other than information known by such persons through a violation of
an obligation of confidentiality to the Company), whether produced by
the Company and its subsidiaries or any of their consultants,
agents or independent contractors or by Executive, and whether or
not marked confidential, including without limitation information
relating to the Company's or its subsidiaries' products and services,
business plans, business acquisitions, processes, product or service
research and development methods or techniques, training methods
and other operational methods or techniques, quality assurance
procedures or standards, operating procedures, files, plans,
specifications, proposals, drawings, charts, graphs, support data,
trade secrets, supplier lists, supplier information, purchasing
methods or practices, distribution and selling activities,
consultants' reports, marketing and engineering or other technical
studies, maintenance records, employment or personnel data, marketing
data, strategies or techniques, financial reports, budgets,
projections, cost analyses, price lists and analyses, employee
lists, customer lists, customer source lists, proprietary computer
software, and internal notes and memoranda relating to any of the
foregoing.
(ii) "Company's Business" includes providing
services in connection with the plugging and abandonment of oil and
gas wells, providing wireline services, chartering and operating lift
boats and other marine service vessels, renting specialized tools and
equipment used in oil and gas drilling and production, providing
workover services on oil and gas wells, providing oil spill
containment services, and renting equipment and/or tools used in
fishing operations.
(b) NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Executive
shall hold in a fiduciary capacity for the benefit of the Company all
Confidential Information which shall have been obtained by Executive during
Executive's employment (whether prior to or after the effective date
hereof) and shall use such Confidential Information solely within the scope
of his employment with and for the exclusive benefit of the Company. At
the end of the employment term, Executive agrees (i) not to communicate,
divulge or make available to any person or entity (other than the Company)
any such Confidential Information, except upon the prior written
authorization of the Company or as may be required by law or legal process,
and (ii) to deliver promptly to the Company any Confidential Information in
his possession, including any duplicates thereof and any notes or other
records Executive has prepared with respect thereto. In the event that the
provisions of any applicable law or the order of any court would require
Executive to disclose or otherwise make available any Confidential
Information then Executive shall give the Company prompt prior written
notice of such required disclosure and an opportunity to contest the
requirement of such disclosure or apply for a protective order with respect
to such Confidential Information by appropriate proceedings.
(c) LIMITED COVENANT NOT TO COMPETE. During the term of
this Agreement and for a period of two years thereafter, commencing with
the Date of Termination, Executive agrees that:
(i) Executive shall not, directly or indirectly, for
himself or others, own, manage, operate, control, be employed by,
engage or participate in, allow his skill, knowledge, experience or
reputation to be used by, or otherwise be connected in any manner with
the ownership, management, operation or control of, any company or
other business enterprise engaged in any aspect of the Company's
Business, within any parish (or any adjacent offshore areas) of the
State of Louisiana, (as set forth in Appendix A), or within the States
of Florida, Alabama, Mississippi or Texas (including any adjacent
offshore areas), and any other state or other jurisdiction (or any
adjacent offshore areas) (whether within or outside the United
States), in which the Company or any of its subsidiaries carries on a
like line of business on the Date of Termination; provided, however,
that nothing contained herein shall prohibit Executive from making
passive investments in any publicly held company that do not exceed in
the aggregate 1% of the equity interest of such company;
(ii) Executive shall not call upon any customer of the
Company or its subsidiaries or any potential customer of the Company,
for the purpose of soliciting, diverting or enticing away the business
of such person or entity, or otherwise disrupting any previously
established relationship existing between such person or entity and
the Company or its subsidiaries;
(iii) Executive shall not solicit, induce, influence or
attempt to influence any supplier, lessor, licensor, or any other
person who has a business relationship with the Company or its
subsidiaries, or who on the Date of Termination is engaged in
discussions or negotiations to enter into a business relationship with
the Company or its subsidiaries, to discontinue or reduce the extent
of such relationship with the Company or its subsidiaries; and
(iv) Executive shall not make contact with any of the
employees of the Company or its subsidiaries with whom he had contact
during the course of his employment with the Company for the purpose
of soliciting such employee for hire, whether as an employee or
independent contractor, or otherwise disrupting such employee's
relationship with the Company or its subsidiaries.
Executive further agrees that, for a period of one year from and after the
Date of Termination, Executive shall not hire any employee of the Company
as an employee or independent contractor, whether or not such engagement is
solicited by Executive.
Notwithstanding the foregoing, the parties agree that this paragraph
(c) shall not be binding upon Executive in the event that Executive is
discharged by the Company for other than death, disability or Cause, or the
Executive terminates his employment for Good Reason.
(d) PROTECTION OF INFORMATION.
(i) The Company shall disclose to Executive, or
place Executive in a position to have access to or develop, trade
secrets or confidential information of the Company; and/or shall
entrust Executive with business opportunities of the Company; and/or
shall place Executive in a position to develop business good will on
behalf of the Company.
(ii) Executive agrees not to disclose or utilize,
for Executive's personal benefit or for the direct or indirect benefit
of any other person or entity, or for any other reason, whether for
consideration or otherwise, during the term of his employment
hereunder or at any time thereafter, any information, ideas, concepts,
improvements, discoveries or inventions, whether patentable or not,
which are conceived, made, developed, or acquired by Executive,
individually or in conjunction with others, during Executive's
employment by the Company (whether during business hours or otherwise
and whether on the Company's premises or otherwise) which relate to
the business, products, or services of the Company (including, without
limitation, all such business ideas, prospects, proposals or other
opportunities which are developed by Executive during his employment
hereunder, or originated by any third party and brought to the
attention of Executive during his employment hereunder, together with
information relating thereto (including, without limitation, data,
memoranda, opinions or other written, electronic or charted means, or
any other trade secrets or other confidential or proprietary
information of or concerning the Company)) (collectively, "Business
Information"). Moreover, all documents, drawings, notes, files, data,
records, correspondence, manuals, models, specifications, computer
programs, E-mail, voice mail, electronic databases, maps, and all
other writings or materials of any type embodying any such Business
Information are and shall be the sole and exclusive property of the
Company. Upon termination of Executive's employment by the Company,
for any reason, Executive promptly shall deliver all Business
Information, and all copies thereof, to the Company. As a result of
knowledge of confidential Business Information of third parties, such
as customers, suppliers, partners, joint ventures, and the like, of
the Company, Executive also agrees to preserve and protect the
confidentiality of such third party Business Information to the same
extent, and on the same basis, as the Company's Business Information.
(iii)Executive agrees that, during his employment,
any inventions (whether or not patentable), concepts, ideas,
expressions, discoveries, or improvements, including, without
limitation, products, processes, methods, publications, works of
authorship, software programs, designs, trade secrets, technical
specifications, algorithms, technical data, know-how, internal reports
and memoranda, marketing plans and any other patent or proprietary
rights conceived, devised, developed, or reduced to practice, in whole
or in part, by the Executive during the term of his employment by the
Company (the "Developments") are the sole and exclusive property of
the Company on a worldwide basis as works made for hire or otherwise,
and further that any revenue or other consideration obtained from the
sale, license or other transfer or conveyance of any such Development,
or a product or service incorporating such Development, is solely for
the benefit of and becomes the property of the Company. To the extent
a Development may not be considered work made by the Executive for
hire for the Company, the Executive agrees to assign, and
automatically assigns at the time of creation of the Development,
without any requirement of further consideration, any and all right,
title and interest he may have in such Development. Executive shall
preserve each such Development as confidential and proprietary
information of the Company. Executive shall promptly disclose each
such Development and shall, upon demand, at the Company's expense,
execute and deliver to the Company such documents, instruments, deeds,
acts and things as the Company may request to evidence or maintain the
Company's ownership of the Development, in any and all countries of
the world, or to effect enforcement thereof, and to assign all rights,
if any, of the Executive in and to each of such Developments. In
addition, Executive agrees not to publish or seek to publish any
information whatsoever concerning any Development without the prior
written consent of the Company, which may be withheld in its sole and
absolute discretion.
(iv) Any inventions relating to the business of
the Company conceived or reduced to practice after the Executive
leaves the employ of the Company shall be conclusively deemed to have
been conceived and/or reduced to practice during the period of the
employment if conceived and/or reduced to practice within six months
from termination of employment, and shall be subject to the terms of
this Section 9.
(e) INJUNCTIVE RELIEF. Executive acknowledges that a
breach by Executive of paragraph (b), (c) or (d) of this Section 9 would
cause immediate and irreparable harm to the Company for which an adequate
monetary remedy does not exist; hence, Executive agrees that, in the event
of a breach or threatened breach by Executive of the provisions of
paragraph (b), (c) or (d) of this Section 10 during or after the employment
term, the Company shall be entitled to injunctive relief restraining
Executive from violation of any such paragraph without the necessity of
proof of actual damage or the posting of any bond, except as required by
non-waivable, applicable law. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedy at law or in equity
to which the Company may be entitled under applicable law in the event of a
breach or threatened breach of this Agreement by Executive including, but
not limited to, recovery of costs and expenses such as reasonable
attorney's fees incurred by reason of any such breach, actual damages
sustained by the Company as a result of any such breach, and cancellation
of any unpaid salary, bonus, commissions or reimbursements otherwise
outstanding at the Date of Termination.
(f) GOVERNING LAW OF THIS SECTION 9; CONSENT TO
JURISDICTION. Any dispute regarding the reasonableness of the covenants
and agreements set forth in this Section 9, or the territorial scope or
duration thereof, or the remedies available to the Company upon any breach
of such covenants and agreements, shall be governed by and interpreted in
accordance with the laws of the state in which the prohibited competing
activity or disclosure occurs, and, with respect to each such dispute, the
Company and Executive each hereby irrevocably consent to the exclusive
jurisdiction of the state and federal courts sitting in the relevant state
for resolution of such dispute, and agree to be irrevocably bound by any
judgment rendered thereby in connection with such dispute, and further
agree that service of process may be made upon him in any legal proceeding
relating to this Section 9 by any means allowed under the laws of such
state. Each party irrevocably waives any objection he, she or it may have
as to the venue of any such suit, action or proceeding brought in such a
court or that such a court is an inconvenient forum.
(g) EXECUTIVE'S UNDERSTANDING OF THIS SECTION. Executive
hereby represents to the Company that he has read and understands, and
agrees to be bound by, the terms of this Section. Executive acknowledges
that the geographic scope and duration of the covenants contained in
paragraph (c) are the result of arm's-length bargaining and are fair and
reasonable in light of (i) the importance of the functions performed by
Executive and the length of time it would take the Company to find and
train a suitable replacement, (ii) the nature and wide geographic scope of
the operations of the Company, (iii) Executive's level of control over and
contact with the Company's business and operations in all jurisdictions
where same are conducted and (iv) the fact that the Company's Business is
conducted throughout the geographic area where competition is restricted by
this Agreement. It is the desire and intent of the parties that the
provisions of this Agreement be enforced to the fullest extent permitted
under applicable law, whether now or hereafter in effect and therefore, to
the extent permitted by applicable law, the parties hereto waive any
provision of applicable law that would render any provision of this Section
9 invalid or unenforceable.
10. SUCCESSORS; BINDING AGREEMENT
(a) The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to Executive, to expressly
assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle Executive to
compensation from the Company in the same amount and on the same terms as
he would be entitled to hereunder if he terminated his employment for Good
Reason, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the Company
as hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this
Section 10 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.
(b) This Agreement and all rights of Executive hereunder
shall inure to the benefit of and be enforceable by Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Executive should die while any
amounts would still be payable to him hereunder if he had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to Executive's devisee,
legatee, or other designee or, if there be no such designee, to Executive's
estate.
11. NOTICE. For the purpose of this Agreement, notices, demands
and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
(unless otherwise specified) mailed by United States certified or
registered mail, return receipt requested, postage prepared, addressed as
follows:
If to Executive:
1105 Peters Road
Harvey, Louisiana 70058
If to the Company:
Superior Energy Services, Inc.
1105 Peters Road
Harvey, Louisiana 70058
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
12. MISCELLANEOUS. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by Executive and such officer of
the Company as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise
express or implied, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this Agreement.
13. VALIDITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain
in full force and effect.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
15. RIGHTS AND REMEDIES. In the event that Executive institutes
proceedings to enforce this Agreement; he shall be entitled to recover all
reasonable attorneys' fees and costs incurred, in addition to any damages
or other relief awarded.
16. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral
or written, by any officer, employee or representative of any party hereto;
and any prior agreement of the parties hereto in respect of the subject
matter contained herein is hereby terminated and cancelled.
17. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with and governed by the internal laws of the State
of Louisiana without regard to principles of conflict of laws, except as
expressly provided in Section 9(f) with respect to the resolution of
disputes arising under, or the Company's enforcement of, Section 9 of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the date and year first above written.
SUPERIOR ENERGY SERVICES, INC.
By: _____________________
Kenneth Blanchard
Vice President
_____________________
Terence E. Hall
APPENDIX A
Acadia Madison
Allen Morehouse
Ascension Natchitoches
Assumption Orleans
Avoyelles Ouachita
Beauregard Plaquemines
Bienville Pointe Coupee
Bossier Rapides
Caddo Red River
Calcasieu Richland
Caldwell Sabine
Cameron St. Bernard
Catahoula St. Charles
Claiborne St. Helena
Concordia St. James
DeSoto St. John the Baptist
East Baton Rouge St. Landry
East Carroll St. Martin
East Feliciana St. Mary
Evangeline St. Tammany
Franklin Tangipahoa
Grant Tensas
Iberia Terrebonne
Iberville Union
Jackson Vermillion
Jefferson Vernon
Jefferson Davis Washington
Lafayette Webster
Lafourche West Baton Rouge
LaSalle West Carroll
Lincoln West Feliciana
Livingston Winn
EMPLOYMENT AND NON-COMPETITION AGREEMENT
Between
SUPERIOR ENERGY SERVICES, INC.
and
KENNETH BLANCHARD
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This Employment and Non-Competition Agreement (this "Agreement") is
entered into and effective as of July 15, 1999 (the "Effective Date")
between Superior Energy Services, Inc., a Delaware corporation (the
"Company"), and Kenneth Blanchard (the "Executive").
W I T N E S S E T H:
WHEREAS, the Board of Directors (the "Board") of the Company
recognizes that Executive's contribution to the growth and success of the
Company has been substantial and desires to provide for the continued
employment of Executive by the Company, and Executive desires to continue
to serve the Company on a full-time basis upon the terms and conditions
herein provided; and
WHEREAS, Executive has performed valuable services in connection with,
and made significant contributions of time, energy and expertise toward,
the consummation of the transactions that are the subject of that certain
Agreement and Plan of Merger Agreement (the "Merger Agreement") dated as of
April 20, 1999 by and among, INTER ALIA, the Company and Cardinal Holding
Corp.
NOW, THEREFORE, in consideration of the premises and of the respective
representations and warranties hereinafter set forth and of the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. EMPLOYMENT. The Company hereby agrees to continue to employ
Executive, and Executive hereby agrees to continue to serve the Company, on
the terms and conditions set forth herein.
2. TERM.
(a) Commencing on the Effective Date hereof, Executive
shall be employed by the Company as provided in Section 1 and such
employment shall continue until the second anniversary of the Effective
Date unless sooner terminated as hereinafter provided.
(b) If Executive continues to serve as an employee of the
Company after the second anniversary of the Effective Date, his continued
employment shall be subject to the terms of this Agreement but shall be
terminable at will by either the Company or Executive.
(c) Following Executive ceasing for whatever reason to be
an employee of the Company, each party shall have the right to enforce all
its rights, and shall be bound by all obligations, that are continuing
rights and obligations under the terms of this Agreement.
3. POSITION AND DUTIES. The Executive shall perform such
duties, consistent with the Executive's status as an officer of the Company
elected by the Board, as may be prescribed from time to time by the
Company's President and Chief Executive Officer or other officers to whom
authority has been delegated by the President and Chief Executive Officer.
The Executive also agrees to serve without additional compensation, if
elected or appointed thereto, as an officer of any of the Company's
subsidiaries.
4. COMPENSATION AND RELATED MATTERS.
(a) SALARY. The Company shall pay to Executive a minimum
annual base salary of $135,000, payable in equal semi-monthly installments
in accordance with the Company's regular payroll practices for its
principal executives. The Executive's base salary will be reviewed
annually.
(b) INCENTIVE BONUS. During the term hereof, the Executive
shall be eligible to earn an annual bonus pursuant to the Company's
Management Incentive Plan based on the Executive's achievement of
performance objectives for each year.
(c) STOCK OPTIONS. On the Effective Date, the Company
shall grant to the Executive, pursuant to the Company's 1998 Stock
Incentive Plan (the "Incentive Plan"), options to purchase a total of
372,000 shares of the Company's common stock, $0.001 par value per share
(the "Common Stock"), at an exercise price equal to the closing sales price
of the Common Stock on the Nasdaq National Market on the Effective Date.
Options to acquire 107,000 shares of Common Stock shall have a five year
term and shall vest on the first anniversary of the Effective Date and
shall be exercisable for four years thereafter regardless of whether the
Executive continues to be employed by the Company. Options to acquire
265,000 shares of Common Stock shall have a ten year term and shall vest in
equal increments on each of the first two anniversaries of the Effective
Date and shall otherwise have the same terms and conditions as other
options generally granted to the Company's officers and employees under the
Incentive Plan. On the first anniversary of the Effective Date, the
Company shall grant to the Executive, pursuant to the Incentive Plan,
options having a five year term to purchase a number of additional shares
of the Company's Common Stock at an exercise price equal to the closing
sales price of the Common Stock on the Nasdaq National Market on such date
having a present value equal to $250,000 using the Black-Scholes option
pricing model. The assumptions to be used in calculating the Black-Scholes
present value for the additional options shall be: (i) the options will be
assumed to be exercised at the end of their five year term; (ii) volatility
will be based on the closing prices of the Common Stock from the Effective
Date to the first anniversary of the Effective Date; (iii) the risk free
rate of return will be based on the five year zero coupon treasury average
yield for the month immediately preceding the first anniversary of the
Effective Date; and (iv) the dividend yield will be 0%. No further
discount to the option value calculated will be taken to give effect to the
fact that the options are not freely transferrable or to the exercise of
the options after the vesting period but prior to the end of the option
term.
(d) PAYMENT FOR PAST SERVICES. In consideration of the
services performed by Executive in connection with Executive's management
of the Company's operations so as to facilitate the closing of the
transactions contemplated by the Merger Agreement, the Company shall pay
to Executive a one-time payment in the amount of $500,000, payable in cash
on the Effective Date.
(e) CONSIDERATION FOR COVENANT NOT TO COMPETE. In
consideration of the Executive's covenants and agreements contained in
Section 7(c) hereof, the Company shall pay to Executive an aggregate of
$500,000, payable in equal installments of $250,000, in cash, on each of
the first and second anniversaries of the Effective Date.
(f) COMPANY AUTOMOBILE. The Company shall either provide a
car allowance to the Executive or make available to Executive a Company
automobile for the Executive's use in the discharge of his duties. The
automobile so obtained by the Executive shall be maintained at the expense
of the Company in accordance with the policies and practices of the Company
in effect from time to time.
(g) EXPENSES. During the term of Executive's employment
hereunder, Executive shall be entitled to receive prompt reimbursement for
all reasonable and necessary expenses incurred by Executive in performing
services hereunder, including all expenses of travel and living expenses
while away from home on business or at the request of and in the service of
the Company, provided that such expenses are incurred and accounted for in
accordance with the policies and procedures established by the Company.
(h) OTHER BENEFITS. Executive shall be entitled to
participate in or receive benefits under any employee benefit plan or
arrangement made available by the Company to its executives and key
management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements.
Nothing paid to Executive under any plan or arrangement presently in effect
or made available in the future shall be deemed to be in lieu of the salary
and bonuses payable to Executive pursuant to this Section 4.
(i) VACATIONS. Executive shall be excused from rendering
his services during reasonable vacation periods for not more than 15 days
per year and during other reasonable temporary absences. Executive shall
also be entitled to all paid holidays and personal days given by the
Company to its executives.
5. TERMINATION. Executive's employment hereunder may be
terminated without any breach of this Agreement only under the following
circumstances:
(a) DEATH. Executive's employment hereunder shall
terminate upon his death.
(b) DISABILITY. If, as a result of Executive's incapacity
due to physical or mental illness, Executive shall have been absent from
his duties hereunder on a full-time basis for a period of 60 consecutive
days, or 120 non-consecutive days within any 365 day period, the Company
may terminate Executive's employment.
(c) CAUSE. The Company may terminate Executive's
employment hereunder for Cause. For purposes of this Agreement, the
Company shall have "Cause" to terminate Executive's employment hereunder
upon: (i) substantial and continued willful failure by the Executive to
perform his duties hereunder which results, or could reasonably be expected
to result, in material harm to the business or reputation of the Company,
which failure is not cured (if curable) by Executive within 15 days after
written notice of such failure is delivered to the Executive by the
Company; and (ii) the commission by Executive of any criminal act involving
moral turpitude or a felony which results in an arrest or indictment, or
the commission by Executive, based on reasonable proof, of any act of fraud
or embezzlement involving the Company or its customers or suppliers. For
purposes of this Section 5(c), no act, or failure to act, on Executive's
part shall be considered "willful" unless done, or omitted to be done, by
him not in good faith and without reasonable belief that his action or
omission was in the best interest of the Company.
(d) NOTICE OF TERMINATION. Any termination of Executive's
employment by the Company or by Executive (other than termination pursuant
to Section 5(a)) shall be communicated by written Notice of Termination to
the other party hereto in accordance with Section 9. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice that shall
indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under
the provision so indicated.
(e) DATE OF TERMINATION. "Date of Termination" shall mean
(i) if Executive's employment is terminated by his death, the date of his
death, (ii) if Executive's employment is terminated pursuant to Section
5(b), 30 days after Notice of Termination is given (provided that Executive
shall not have returned to the performance of his duties on a full-time
basis during such 30 day period) and (iii) if Executive's employment is
terminated pursuant to Section 5(c), the date specified in the Notice of
Termination.
Notwithstanding anything to the contrary in this Section 5, during the
period commencing on the Effective Date and ending on the second
anniversary of the Effective Date, the Company shall not be entitled to
terminate Executive's employment "without cause" or for any reason that is
not expressly specified in this Section 5.
6. COMPENSATION UPON TERMINATION.
(a) If Executive's employment is terminated pursuant to
Section 5, the Company shall pay Executive his then current base salary
through the Date of Termination and the Company shall have no further
obligations to Executive under this Agreement.
(b) In addition to compensation otherwise provided in this
Section 6, in the event Executive's employment is terminated for any
reason, he shall be entitled to receive any amounts that are due or become
due under Section 4(e).
(c) If Executive's employment is terminated pursuant to
Section 5(a) or 5(b), the Company shall provide following such termination
to the extent required by the Consolidated Omnibus Budget Reconciliation
Act of 1985 ("COBRA"), COBRA continuation coverage with respect to the
relevant group medical and dental insurance benefits to which Executive was
entitled immediately prior to the Notice of Termination.
7. NONDISCLOSURE AND NONCOMPETITION
(a) CERTAIN DEFINITIONS. For purposes of this Agreement,
the following terms shall have the following meanings:
(i)"Confidential Information" means any information,
knowledge or data of any nature and in any form (including information
that is electronically transmitted or stored on any form of magnetic
or electronic storage media) relating to the past, current or
prospective business or operations of the Company and its
subsidiaries, that at the time or times concerned is not generally
known to persons engaged in businesses similar to those conducted or
contemplated by the Company and its subsidiaries (other than
information known by such persons through a violation of an obligation
of confidentiality to the Company), whether produced by the Company
and its subsidiaries or any of their consultants, agents or
independent contractors or by Executive, and whether or not marked
confidential, including without limitation information relating to the
Company's or its subsidiaries' products and services, business plans,
business acquisitions, processes, product or service research and
development methods or techniques, training methods and other
operational methods or techniques, quality assurance procedures or
standards, operating procedures, files, plans, specifications,
proposals, drawings, charts, graphs, support data, trade secrets,
supplier lists, supplier information, purchasing methods or practices,
distribution and selling activities, consultants' reports, marketing
and engineering or other technical studies, maintenance records,
employment or personnel data, marketing data, strategies or
techniques, financial reports, budgets, projections, cost analyses,
price lists and analyses, employee lists, customer lists, customer
source lists, proprietary computer software, and internal notes and
memoranda relating to any of the foregoing.
(ii)"Company's Business" includes providing services in
connection with the plugging and abandonment of oil and gas wells,
providing wireline services, chartering and operating lift boats and
other marine service vessels, renting specialized tools and equipment
used in oil and gas drilling and production, providing workover
services on oil and gas wells, providing oil spill containment
services, and renting equipment and/or tools used in fishing
operations.
(b) NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Executive
shall hold in a fiduciary capacity for the benefit of the Company all
Confidential Information which shall have been obtained by Executive during
Executive's employment (whether prior to or after the effective date
hereof) and shall use such Confidential Information solely within the scope
of his employment with and for the exclusive benefit of the Company. At
the end of the employment term, Executive agrees (i) not to communicate,
divulge or make available to any person or entity (other than the
Company) any such Confidential Information, except upon the prior written
authorization of the Company or as may be required by law or legal process,
and (ii) to deliver promptly to the Company any Confidential Information
in his possession, including any duplicates thereof and any notes or other
records Executive has prepared with respect thereto. In the event that
the provisions of any applicable law or the order of any court would
require Executive to disclose or otherwise make available any Confidential
Information then Executive shall give the Company prompt prior written
notice of such required disclosure and an opportunity to contest the
requirement of such disclosure or apply for a protective order with respect
to such Confidential Information by appropriate proceedings.
(c) LIMITED COVENANT NOT TO COMPETE. During the term of
Executive's employment under this Agreement and for a period of two years
thereafter, Executive agrees that:
(i) Executive shall not, directly or indirectly, for
himself or others, own, manage, operate, control, be employed by,
engage or participate in, allow his skill, knowledge, experience or
reputation to be used by, or otherwise be connected in any manner with
the ownership, management, operation or control of, any company or
other business enterprise engaged in any aspect of the Company's
Business, within any parish (or any adjacent offshore areas) of the
State of Louisiana, (as set forth in Appendix A), or within the States
of Florida, Alabama, Mississippi or Texas (including any adjacent
offshore areas), and any other state or other jurisdiction (or any
adjacent offshore areas) (whether within or outside the United
States), in which the Company or any of its subsidiaries carries on a
like line of business on the Date of Termination; provided, however,
that nothing contained herein shall prohibit Executive from making
passive investments in any publicly held company that do not exceed in
the aggregate 1% of the equity interest of such company;
(ii) Executive shall not call upon any customer of the
Company or its subsidiaries or any potential customer of the Company,
for the purpose of soliciting, diverting or enticing away the business
of such person or entity, or otherwise disrupting any previously
established relationship existing between such person or entity and
the Company or its subsidiaries;
(iii) Executive shall not solicit, induce, influence or
attempt to influence any supplier, lessor, licensor, or any other
person who has a business relationship with the Company or its
subsidiaries, or who on the Date of Termination is engaged in
discussions or negotiations to enter into a business relationship with
the Company or its subsidiaries, to discontinue or reduce the extent
of such relationship with the Company or its subsidiaries; and
(iv) Executive shall not make contact with any of the
employees of the Company or its subsidiaries with whom he had contact
during the course of his employment with the Company for the purpose
of soliciting such employee for hire, whether as an employee or
independent contractor, or otherwise disrupting such employee's
relationship with the Company or its subsidiaries.
Executive further agrees that during the term of this Agreement and for a
period of two years thereafter, Executive shall not hire any employee of
the Company as an employee or independent contractor, whether or not such
engagement is solicited by Executive.
Notwithstanding the foregoing, the parties agree that this Section 7(c)
shall not be binding upon the Executive in the event that Executive is
discharged by the Company for other than theft, disability or Cause.
(d) PROTECTION OF INFORMATION.
(i) The Company shall disclose to Executive, or place
Executive in a position to have access to or develop, trade secrets or
confidential information of the Company; and/or shall entrust
Executive with business opportunities of the Company; and/or shall
place Executive in a position to develop business good will on behalf
of the Company.
(ii) Executive agrees not to disclose or utilize, for
Executive's personal benefit or for the direct or indirect benefit of
any other person or entity, or for any other reason, whether for
consideration or otherwise, during the term of his employment
hereunder or at any time thereafter, any information, ideas, concepts,
improvements, discoveries or inventions, whether patentable or not,
which are conceived, made, developed, or acquired by Executive,
individually or in conjunction with others, during Executive's
employment by the Company (whether during business hours or otherwise
and whether on the Company's premises or otherwise) which relate to
the business, products, or services of the Company (including, without
limitation, all such business ideas, prospects, proposals or other
opportunities which are developed by Executive during his employment
hereunder, or originated by any third party and brought to the
attention of Executive during his employment hereunder, together with
information relating thereto (including, without limitation, data,
memoranda, opinions or other written, electronic or charted means, or
any other trade secrets or other confidential or proprietary
information of or concerning the Company)) (collectively, "Business
Information"). Moreover, all documents, drawings, notes, files, data,
records, correspondence, manuals, models, specifications, computer
programs, E-mail, voice mail, electronic databases, maps, and all
other writings or materials of any type embodying any such Business
Information are and shall be the sole and exclusive property of the
Company. Upon termination of Executive's employment by the Company,
for any reason, Executive promptly shall deliver all Business
Information, and all copies thereof, to the Company. As a result of
knowledge of confidential Business Information of third parties, such
as customers, suppliers, partners, joint ventures, and the like, of
the Company, Executive also agrees to preserve and protect the
confidentiality of such third party Business Information to the same
extent, and on the same basis, as the Company's Business Information.
(iii) Executive agrees that, during his employment,
any inventions (whether or not patentable), concepts, ideas,
expressions, discoveries, or improvements, including, without
limitation, products, processes, methods, publications, works of
authorship, software programs, designs, trade secrets, technical
specifications, algorithms, technical data, know-how, internal reports
and memoranda, marketing plans and any other patent or proprietary
rights conceived, devised, developed, or reduced to practice, in
whole or in part, by the Executive during the term of his employment
by the Company (the "Developments") are the sole and exclusive
property of the Company on a worldwide basis as works made for hire
or otherwise, and further that any revenue or other consideration
obtained from the sale, license or other transfer or conveyance of
any such Development, or a product or service incorporating such
Development, is solely for the benefit of and becomes the property of
the Company. To the extent a Development may not be considered work
made by the Executive for hire for the Company, the Executive agrees
to assign, and automatically assigns at the time of creation of
the Development, without any requirement of further consideration, any
and all right, title and interest he may have in such Development.
Executive shall preserve each such Development as confidential and
proprietary information of the Company. Executive shall promptly
disclose each such Development and shall, upon demand, at the
Company's expense, execute and deliver to the Company such documents,
instruments, deeds, acts and things as the Company may request to
evidence or maintain the Company's ownership of the Development, in
any and all countries of the world, or to effect enforcement thereof,
and to assign all rights, if any, of the Executive in and to each
of such Developments. In addition, Executive agrees not to publish or
seek to publish any information whatsoever concerning any Development
without the prior written consent of the Company, which may be
withheld in its sole and absolute discretion.
(iv) Any inventions relating to the business of the
Company conceived or reduced to practice after the Executive leaves
the employ of the Company shall be conclusively deemed to have been
conceived and/or reduced to practice during the period of the
employment if conceived and/or reduced to practice within six months
from termination of employment, and shall be subject to the terms of
this Section 7.
(e) INJUNCTIVE RELIEF. Executive acknowledges that a
breach by Executive of paragraph (b), (c) and (d) of this Section 7 would
cause immediate and irreparable harm to the Company for which an adequate
monetary remedy does not exist; hence, Executive agrees that, in the event
of a breach or threatened breach by Executive of the provisions of
paragraph (b), (c) or (d) of this Section 7 during or after the employment
term, the Company shall be entitled to injunctive relief restraining
Executive from violation of any such paragraph without the necessity of
proof of actual damage or the posting of any bond, except as required by
non-waivable, applicable law. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedy at law or in equity
to which the Company may be entitled under applicable law in the event of a
breach or threatened breach of this Agreement by Executive including, but
not limited to, recovery of costs and expenses such as reasonable
attorney's fees incurred by reason of any such breach, actual damages
sustained by the Company as a result of any such breach, and cancellation
of any unpaid salary, bonus, commissions or reimbursements otherwise
outstanding at the Date of Termination.
(f) GOVERNING LAW OF THIS SECTION 7; CONSENT TO
JURISDICTION. Any dispute regarding the reasonableness of the covenants and
agreements set forth in his Section 7, or the territorial scope or
duration thereof, or the remedies available to the Company upon any breach
of such covenants and agreements, shall be governed by and interpreted in
accordance with the laws of the state in which the prohibited competing
activity or disclosure occurs, and, with respect to each such dispute, the
Company and Executive each hereby irrevocably consent to the exclusive
jurisdiction of the state and federal courts sitting in the relevant state
for resolution of such dispute, and agree to be irrevocably bound by any
judgment rendered thereby in connection with such dispute, and further
agree that service of process may be made upon him in any legal proceeding
relating to this Section 7 by any means allowed under the laws of such
state. Each party irrevocably waives any objection he, she or it may have
as to the venue of any such suit, action or proceeding brought in such a
court or that such a court is an inconvenient forum.
(g) EXECUTIVE'S UNDERSTANDING OF THIS SECTION. Executive
hereby represents to the Company that he has read and understands, and
agrees to be bound by, the terms of this Section. Executive acknowledges
that the geographic scope and duration of the covenants contained in
paragraph (c) are the result of arm's-length bargaining and are fair and
reasonable in light of (i) the importance of the functions performed by
Executive and the length of time it would take the Company to find and
train a suitable replacement, (ii) the nature and wide geographic scope of
the operations of the Company, (iii) Executive's level of control over and
contact with the Company's business and operations in all jurisdictions
where same are conducted and (iv) the fact that the Company's Business is
conducted throughout the geographic area where competition is restricted by
this Agreement. It is the desire and intent of the parties that the
provisions of this Agreement be enforced to the fullest extent permitted
under applicable law, whether now or hereafter in effect and therefore, to
the extent permitted by applicable law, the parties hereto waive any
provision of applicable law that would render any provision of this Section
7 invalid or unenforceable.
8. SUCCESSORS; BINDING AGREEMENT
(a) The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to Executive, to expressly
assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle Executive to
compensation from the Company in the same amount and on the same terms as
he would be entitled to hereunder if he terminated his employment for Good
Reason, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the Company
as hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this
Section 8 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.
(b) This Agreement and all rights of Executive hereunder
shall inure to the benefit of and be enforceable by Executive's personal
or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Executive should die while any
amounts would still be payable to him hereunder if he had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to Executive's devisee,
legatee, or other designee or, if there be no such designee, to Executive's
estate.
9. NOTICE. For the purpose of this Agreement, notices, demands
and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
(unless otherwise specified) mailed by United States certified or
registered mail, return receipt requested, postage prepared, addressed as
follows:
If to Executive:
1105 Peters Road
Harvey, Louisiana 70058
If to the Company:
Superior Energy Services, Inc.
1105 Peters Road
Harvey, Louisiana 70058
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
10. MISCELLANEOUS. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by Executive and such officer of
the Company as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise
express or implied, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this Agreement.
11. VALIDITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain
in full force and effect.
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
13. RIGHTS AND REMEDIES. In the event that Executive institutes
proceedings to enforce this Agreement; he shall be entitled to recover all
reasonable attorneys' fees and costs incurred, in addition to any damages
or other relief awarded.
14. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral
or written, by any officer, employee or representative of any party hereto;
and any prior agreement of the parties hereto in respect of the subject
matter contained herein is hereby terminated and cancelled.
15. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with and governed by the internal laws of the State
of Louisiana without regard to principles of conflict of laws, except as
expressly provided in Section 7(f) above with respect to the resolution of
disputes arising under, or the Company's enforcement of, Section 7 of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the date and year first above written.
SUPERIOR ENERGY SERVICES, INC.
By:___________________________
Terence E. Hall
Chairman of the Board
___________________________
Kenneth Blanchard
<PAGE>
APPENDIX A
Acadia Madison
Allen Morehouse
Ascension Natchitoches
Assumption Orleans
Avoyelles Ouachita
Beauregard Plaquemines
Bienville Pointe Coupee
Bossier Rapides
Caddo Red River
Calcasieu Richland
Caldwell Sabine
Cameron St. Bernard
Catahoula St. Charles
Claiborne St. Helena
Concordia St. James
DeSoto St. John the Baptist
East Baton Rouge St. Landry
East Carroll St. Martin
East Feliciana St. Mary
Evangeline St. Tammany
Franklin Tangipahoa
Grant Tensas
Iberia Terrebonne
Iberville Union
Jackson Vermillion
Jefferson Vernon
Jefferson Davis Washington
Lafayette Webster
Lafourche West Baton Rouge
LaSalle West Carroll
Lincoln West Feliciana
Livingston Winn
EMPLOYMENT AND NON-COMPETITION AGREEMENT
Between
SUPERIOR ENERGY SERVICES, INC.
and
CHARLES FUNDERBURG
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This Employment and Non-Competition Agreement (this "Agreement") is
entered into and effective as of July 15, 1999 (the "Effective Date")
between Superior Energy Services, Inc., a Delaware corporation (the
"Company"), and Charles Funderburg (the "Executive").
W I T N E S S E T H:
WHEREAS, the Board of Directors (the "Board") of the Company
recognizes that Executive's contribution to the growth and success of the
Company has been substantial and desires to provide for the continued
employment of Executive by the Company, and Executive desires to continue
to serve the Company on a full-time basis upon the terms and conditions
herein provided; and
WHEREAS, Executive has performed valuable services in connection with,
and made significant contributions of time, energy and expertise toward,
the consummation of the transactions that are the subject of that certain
Agreement and Plan of Merger Agreement (the "Merger Agreement") dated as of
April 20, 1999 by and among, INTER ALIA, the Company and Cardinal Holding
Corp.
NOW, THEREFORE, in consideration of the premises and of the respective
representations and warranties hereinafter set forth and of the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. EMPLOYMENT. The Company hereby agrees to continue to employ
Executive, and Executive hereby agrees to continue to serve the Company, on
the terms and conditions set forth herein.
2. TERM.
(a) Commencing on the Effective Date hereof, Executive
shall be employed by the Company as provided in Section 1 and such
employment shall continue until the second anniversary of the Effective
Date unless sooner terminated as hereinafter provided.
(b) If Executive continues to serve as an employee of the
Company after the second anniversary of the Effective Date, his continued
employment shall be subject to the terms of this Agreement but shall be
terminable at will by either the Company or Executive.
(c) Following Executive ceasing for whatever reason to be
an employee of the Company, each party shall have the right to enforce all
its rights, and shall be bound by all obligations, that are continuing
rights and obligations under the terms of this Agreement.
3. POSITION AND DUTIES. The Executive shall perform such duties,
consistent with the Executive's status as an officer of the Company elected
by the Board, as may be prescribed from time to time by the Company's
President and Chief Executive Officer or other officers to whom authority
has been delegated by the President and Chief Executive Officer. The
Executive also agrees to serve without additional compensation, if elected
or appointed thereto, as an officer of any of the Company's subsidiaries.
4. COMPENSATION AND RELATED MATTERS.
(a) SALARY. The Company shall pay to Executive a minimum
annual base salary of $135,000, payable in equal semi-monthly installments
in accordance with the Company's regular payroll practices for its
principal executives. The Executive's base salary will be reviewed
annually.
(b) INCENTIVE BONUS. During the term hereof, the Executive
shall be eligible to earn an annual bonus pursuant to the Company's
Management Incentive Plan based on the Executive's achievement of
performance objectives for each year.
(c) STOCK OPTIONS. On the Effective Date, the Company
shall grant to the Executive, pursuant to the Company's 1998 Stock
Incentive Plan (the "Incentive Plan"), options to purchase a total of
372,000 shares of the Company's common stock, $0.001 par value per share
(the "Common Stock"), at an exercise price equal to the closing sales price
of the Common Stock on the Nasdaq National Market on the Effective Date.
Options to acquire 107,000 shares of Common Stock shall have a five year
term and shall vest on the first anniversary of the Effective Date and
shall be exercisable for four years thereafter regardless of whether the
Executive continues to be employed by the Company. Options to acquire
265,000 shares of Common Stock shall have a ten year term and shall vest in
equal increments on each of the first two anniversaries of the Effective
Date and shall otherwise have the same terms and conditions as other
options generally granted to the Company's officers and employees under the
Incentive Plan. On the first anniversary of the Effective Date, the
Company shall grant to the Executive, pursuant to the Incentive Plan,
options having a five year term to purchase a number of additional shares
of the Company's Common Stock at an exercise price equal to the closing
sales price of the Common Stock on the Nasdaq National Market on such date
having a present value equal to $250,000 using the Black-Scholes option
pricing model. The assumptions to be used in calculating the Black-Scholes
present value for the additional options shall be: (i) the options will be
assumed to be exercised at the end of their five year term; (ii) volatility
will be based on the closing prices of the Common Stock from the Effective
Date to the first anniversary of the Effective Date; (iii) the risk free
rate of return will be based on the five year zero coupon treasury average
yield for the month immediately preceding the first anniversary of the
Effective Date; and (iv) the dividend yield will be 0%. No further
discount to the option value calculated will be taken to give effect to the
fact that the options are not freely transferrable or to the exercise of
the options after the vesting period but prior to the end of the option
term.
(d) PAYMENT FOR PAST SERVICES. In consideration of the
services performed by Executive in connection with Executive's management
of the Company's operations so as to facilitate the closing of the
transactions contemplated by the Merger Agreement, the Company shall pay to
Executive in cash a one-time payment in the amount of $500,000 payable in
cash on the Effective Date.
(e) CONSIDERATION FOR COVENANT NOT TO COMPETE. In
consideration of the Executive's covenants and agreements contained in
Section 7(c) hereof and subject to Executive's continued employment by the
Company, the Company shall pay to Executive an aggregate of $500,000,
payable in equal installments of $250,000, in cash, on each of the first
and second anniversaries of the Effective Date.
(f) COMPANY AUTOMOBILE. The Company shall either provide a
car allowance to the Executive or make available to Executive a Company
automobile for the Executive's use in the discharge of his duties. The
automobile so obtained by the Executive shall be maintained at the expense
of the Company in accordance with the policies and practices of the Company
in effect from time to time.
(g) EXPENSES. During the term of Executive's employment
hereunder, Executive shall be entitled to receive prompt reimbursement for
all reasonable and necessary expenses incurred by Executive in performing
services hereunder, including all expenses of travel and living expenses
while away from home on business or at the request of and in the service of
the Company, provided that such expenses are incurred and accounted for in
accordance with the policies and procedures established by the Company.
(h) OTHER BENEFITS. Executive shall be entitled to
participate in or receive benefits under any employee benefit plan or
arrangement made available by the Company to its executives and key
management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements.
Nothing paid to Executive under any plan or arrangement presently in effect
or made available in the future shall be deemed to be in lieu of the salary
and bonuses payable to Executive pursuant to this Section 4.
(i) VACATIONS. Executive shall be excused from rendering
his services during reasonable vacation periods for not more than 15 days
per year and during other reasonable temporary absences. Executive shall
also be entitled to all paid holidays and personal days given by the
Company to its executives.
5. TERMINATION. Executive's employment hereunder may be
terminated without any breach of this Agreement only under the following
circumstances:
(a) DEATH. Executive's employment hereunder shall
terminate upon his death.
(b) DISABILITY. If, as a result of Executive's incapacity
due to physical or mental illness, Executive shall have been absent from
his duties hereunder on a full-time basis for a period of 60 consecutive
days, or 120 non-consecutive days within any 365 day period, the Company
may terminate Executive's employment.
(c) CAUSE. The Company may terminate Executive's
employment hereunder for Cause. For purposes of this Agreement, the
Company shall have "Cause" to terminate Executive's employment hereunder
upon: (i) substantial and continued willful failure by the Executive to
perform his duties hereunder which results, or could reasonably be expected
to result, in material harm to the business or reputation of the Company,
which failure is not cured (if curable) by Executive within 15 days after
written notice of such failure is delivered to the Executive by the
Company; and (ii) the commission by Executive of any criminal act involving
moral turpitude or a felony which results in an arrest or indictment, or
the commission by Executive, based on reasonable proof, of any act of fraud
or embezzlement involving the Company or its customers or suppliers; or
(iii) chronic alcohol or drug abuse by the Executive. For purposes of this
Section 5(c), no act, or failure to act, on Executive's part shall be
considered "willful" unless done, or omitted to be done, by him not in good
faith and without reasonable belief that his action or omission was in the
best interest of the Company.
(d) NOTICE OF TERMINATION. Any termination of Executive's
employment by the Company or by Executive (other than termination pursuant
to Section 5(a)) shall be communicated by written Notice of Termination to
the other party hereto in accordance with Section 9. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice that shall
indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under
the provision so indicated.
(e) DATE OF TERMINATION. "Date of Termination" shall mean
(i) if Executive's employment is terminated by his death, the date of his
death, (ii) if Executive's employment is terminated pursuant to Section
5(b), 30 days after Notice of Termination is given (provided that Executive
shall not have returned to the performance of his duties on a full-time
basis during such 30 day period) and (iii) if Executive's employment is
terminated pursuant to Section 5(c), the date specified in the Notice of
Termination.
Notwithstanding anything to the contrary in this Section 5, during the
period commencing on the Effective Date and ending on the second
anniversary of the Effective Date, the Company shall not be entitled to
terminate Executive's employment "without cause" or for any reason that is
not expressly specified in this Section 5.
6. COMPENSATION UPON TERMINATION.
(a) If Executive's employment is terminated pursuant to
Section 5, the Company shall pay Executive his then current base salary
through the Date of Termination and the Company shall have no further
obligations to Executive under this Agreement.
(b) If Executive's employment is terminated pursuant to
Section 5(a) or 5(b), the Company shall provide following such termination
to the extent required by the Consolidated Omnibus Budget Reconciliation
Act of 1985 ("COBRA"), COBRA continuation coverage with respect to the
relevant group medical and dental insurance benefits to which Executive was
entitled immediately prior to the Notice of Termination.
7. NONDISCLOSURE AND NONCOMPETITION
(a) CERTAIN DEFINITIONS. For purposes of this Agreement,
the following terms shall have the following meanings:
(i)"Confidential Information" means any information,
knowledge or data of any nature and in any form (including information
that is electronically transmitted or stored on any form of magnetic
or electronic storage media) relating to the past, current or
prospective business or operations of the Company and its
subsidiaries, that at the time or times concerned is not generally
known to persons engaged in businesses similar to those conducted or
contemplated by the Company and its subsidiaries (other than
information known by such persons through a violation of an obligation
of confidentiality to the Company), whether produced by the Company
and its subsidiaries or any of their consultants, agents or
independent contractors or by Executive, and whether or not marked
confidential, including without limitation information relating to the
Company's or its subsidiaries' products and services, business plans,
business acquisitions, processes, product or service research and
development methods or techniques, training methods and other
operational methods or techniques, quality assurance procedures or
standards, operating procedures, files, plans, specifications,
proposals, drawings, charts, graphs, support data, trade secrets,
supplier lists, supplier information, purchasing methods or practices,
distribution and selling activities, consultants' reports, marketing
and engineering or other technical studies, maintenance records,
employment or personnel data, marketing data, strategies or
techniques, financial reports, budgets, projections, cost analyses,
price lists and analyses, employee lists, customer lists, customer
source lists, proprietary computer software, and internal notes and
memoranda relating to any of the foregoing.
(ii)"Company's Business" includes providing services in
connection with the plugging and abandonment of oil and gas wells,
providing wireline services, chartering and operating lift boats and
other marine service vessels, renting specialized tools and equipment
used in oil and gas drilling and production, providing workover
services on oil and gas wells, providing oil spill containment
services, and renting equipment and/or tools used in fishing
operations.
(b) NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Executive
shall hold in a fiduciary capacity for the benefit of the Company all
Confidential Information which shall have been obtained by Executive during
Executive's employment (whether prior to or after the effective date
hereof) and shall use such Confidential Information solely within the scope
of his employment with and for the exclusive benefit of the Company. At the
end of the employment term, Executive agrees (i) not to communicate,
divulge or make available to any person or entity (other than the
Company) any such Confidential Information, except upon the prior written
authorization of the Company or as may be required by law or legal process,
and (ii) to deliver promptly to the Company any Confidential Information in
his possession, including any duplicates thereof and any notes or other
records Executive has prepared with respect thereto. In the event that
the provisions of any applicable law or the order of any court would
require Executive to disclose or otherwise make available any Confidential
Information then Executive shall give the Company prompt prior written
notice of such required disclosure and an opportunity to contest the
requirement of such disclosure or apply for a protective order with respect
to such Confidential Information by appropriate proceedings.
(c) LIMITED COVENANT NOT TO COMPETE. During the term of
Executive's employment under this Agreement and for a period of two years
thereafter, Executive agrees that:
(i) Executive shall not, directly or indirectly, for
himself or others, own, manage, operate, control, be employed by,
engage or participate in, allow his skill, knowledge, experience or
reputation to be used by, or otherwise be connected in any manner with
the ownership, management, operation or control of, any company or
other business enterprise engaged in any aspect of the Company's
Business, within any parish (or any adjacent offshore areas) of the
State of Louisiana, (as set forth in Appendix A), or within the States
of Florida, Alabama, Mississippi or Texas (including any adjacent
offshore areas), and any other state or other jurisdiction (or any
adjacent offshore areas) (whether within or outside the United
States), in which the Company or any of its subsidiaries carries on a
like line of business on the Date of Termination; provided, however,
that nothing contained herein shall prohibit Executive from making
passive investments in any publicly held company that do not exceed in
the aggregate 1% of the equity interest of such company;
(ii) Executive shall not call upon any customer of the
Company or its subsidiaries or any potential customer of the Company,
for the purpose of soliciting, diverting or enticing away the business
of such person or entity, or otherwise disrupting any previously
established relationship existing between such person or entity and
the Company or its subsidiaries;
(iii) Executive shall not solicit, induce, influence or
attempt to influence any supplier, lessor, licensor, or any other
person who has a business relationship with the Company or its
subsidiaries, or who on the Date of Termination is engaged in
discussions or negotiations to enter into a business relationship with
the Company or its subsidiaries, to discontinue or reduce the extent
of such relationship with the Company or its subsidiaries; and
(iv) Executive shall not make contact with any of the
employees of the Company or its subsidiaries with whom he had contact
during the course of his employment with the Company for the purpose
of soliciting such employee for hire, whether as an employee or
independent contractor, or otherwise disrupting such employee's
relationship with the Company or its subsidiaries.
Executive further agrees that during the term of this Agreement and for a
period of two years thereafter, Executive shall not hire any employee of
the Company as an employee or independent contractor, whether or not such
engagement is solicited by Executive.
Notwithstanding the foregoing, the parties agree that this Section 7(c)
shall not be binding upon the Executive in the event that Executive is
discharged by the Company for other than theft, disability or Cause.
(d) PROTECTION OF INFORMATION.
(i) The Company shall disclose to Executive, or place
Executive in a position to have access to or develop, trade secrets or
confidential information of the Company; and/or shall entrust
Executive with business opportunities of the Company; and/or shall
place Executive in a position to develop business good will on behalf
of the Company.
(ii) Executive agrees not to disclose or utilize, for
Executive's personal benefit or for the direct or indirect benefit of
any other person or entity, or for any other reason, whether for
consideration or otherwise, during the term of his employment
hereunder or at any time thereafter, any information, ideas, concepts,
improvements, discoveries or inventions, whether patentable or not,
which are conceived, made, developed, or acquired by Executive,
individually or in conjunction with others, during Executive's
employment by the Company (whether during business hours or otherwise
and whether on the Company's premises or otherwise) which relate to
the business, products, or services of the Company (including, without
limitation, all such business ideas, prospects, proposals or other
opportunities which are developed by Executive during his employment
hereunder, or originated by any third party and brought to the
attention of Executive during his employment hereunder, together with
information relating thereto (including, without limitation, data,
memoranda, opinions or other written, electronic or charted means, or
any other trade secrets or other confidential or proprietary
information of or concerning the Company)) (collectively, "Business
Information"). Moreover, all documents, drawings, notes, files, data,
records, correspondence, manuals, models, specifications, computer
programs, E-mail, voice mail, electronic databases, maps, and all
other writings or materials of any type embodying any such Business
Information are and shall be the sole and exclusive property of the
Company. Upon termination of Executive's employment by the Company,
for any reason, Executive promptly shall deliver all Business
Information, and all copies thereof, to the Company. As a result of
knowledge of confidential Business Information of third parties, such
as customers, suppliers, partners, joint ventures, and the like, of
the Company, Executive also agrees to preserve and protect the
confidentiality of such third party Business Information to the same
extent, and on the same basis, as the Company's Business Information.
(iii) Executive agrees that, during his employment,
any inventions (whether or not patentable), concepts, ideas,
expressions, discoveries, or improvements, including, without
limitation, products, processes, methods, publications, works of
authorship, software programs, designs, trade secrets, technical
specifications, algorithms, technical data, know-how, internal reports
and memoranda, marketing plans and any other patent or proprietary
rights conceived, devised, developed, or reduced to practice, in
whole or in part, by the Executive during the term of his employment
by the Company (the "Developments") are the sole and exclusive
property of the Company on a worldwide basis as works made for hire
or otherwise, and further that any revenue or other consideration
obtained from the sale, license or other transfer or conveyance of
any such Development, or a product or service incorporating such
Development, is solely for the benefit of and becomes the property of
the Company. To the extent a Development may not be considered work
made by the Executive for hire for the Company, the Executive agrees
to assign, and automatically assigns at the time of creation of
the Development, without any requirement of further consideration, any
and all right, title and interest he may have in such Development.
Executive shall preserve each such Development as confidential and
proprietary information of the Company. Executive shall promptly
disclose each such Development and shall, upon demand, at the
Company's expense, execute and deliver to the Company such documents,
instruments, deeds, acts and things as the Company may request to
evidence or maintain the Company's ownership of the Development, in
any and all countries of the world, or to effect enforcement thereof,
and to assign all rights, if any, of the Executive in and to each
of such Developments. In addition, Executive agrees not to publish or
seek to publish any information whatsoever concerning any Development
without the prior written consent of the Company, which may be
withheld in its sole and absolute discretion.
(iv) Any inventions relating to the business of the
Company conceived or reduced to practice after the Executive leaves
the employ of the Company shall be conclusively deemed to have been
conceived and/or reduced to practice during the period of the
employment if conceived and/or reduced to practice within six months
from termination of employment, and shall be subject to the terms of
this Section 7.
(e) INJUNCTIVE RELIEF. Executive acknowledges that a
breach by Executive of paragraph (b), (c) or (d) of this Section 7 would
cause immediate and irreparable harm to the Company for which an adequate
monetary remedy does not exist; hence, Executive agrees that, in the event
of a breach or threatened breach by Executive of the provisions of
paragraph (b), (c) or (d) of this Section 7 during or after the employment
term, the Company shall be entitled to injunctive relief restraining
Executive from violation of any such paragraph without the necessity of
proof of actual damage or the posting of any bond, except as required by
non-waivable, applicable law. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedy at law or in equity
to which the Company may be entitled under applicable law in the event of a
breach or threatened breach of this Agreement by Executive including, but
not limited to, recovery of costs and expenses such as reasonable
attorney's fees incurred by reason of any such breach, actual damages
sustained by the Company as a result of any such breach, and cancellation
of any unpaid salary, bonus, commissions or reimbursements otherwise
outstanding at the Date of Termination.
(f) GOVERNING LAW OF THIS SECTION 7; CONSENT TO
JURISDICTION. Any dispute egarding the reasonableness of the covenants and
agreements set forth in this Section 7, or the territorial scope or
duration thereof, or the remedies available to the Company upon any breach
of such covenants and agreements, shall be governed by and interpreted in
accordance with the laws of the state in which the prohibited competing
activity or disclosure occurs, and, with respect to each such dispute, the
Company and Executive each hereby irrevocably consent to the exclusive
jurisdiction of the state and federal courts sitting in the relevant state
for resolution of such dispute, and agree to be irrevocably bound by any
judgment rendered thereby in connection with such dispute, and further
agree that service of process may be made upon him in any legal proceeding
relating to this Section 7 by any means allowed under the laws of such
state. Each party irrevocably waives any objection he, she or it may have
as to the venue of any such suit, action or proceeding brought in such a
court or that such a court is an inconvenient forum.
(g) EXECUTIVE'S UNDERSTANDING OF THIS SECTION. Executive
hereby represents to the Company that he has read and understands, and
agrees to be bound by, the terms of this Section. Executive acknowledges
that the geographic scope and duration of the covenants contained in
paragraph (c) are the result of arm's-length bargaining and are fair and
reasonable in light of (i) the importance of the functions performed by
Executive and the length of time it would take the Company to find and
train a suitable replacement, (ii) the nature and wide geographic scope of
the operations of the Company, (iii) Executive's level of control over and
contact with the Company's business and operations in all jurisdictions
where same are conducted and (iv) the fact that the Company's Business is
conducted throughout the geographic area where competition is restricted by
this Agreement. It is the desire and intent of the parties that the
provisions of this Agreement be enforced to the fullest extent permitted
under applicable law, whether now or hereafter in effect and therefore, to
the extent permitted by applicable law, the parties hereto waive any
provision of applicable law that would render any provision of this Section
7 invalid or unenforceable.
8. SUCCESSORS; BINDING AGREEMENT
(a) The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to Executive, to expressly
assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle Executive to
compensation from the Company in the same amount and on the same terms as
he would be entitled to hereunder if he terminated his employment for Good
Reason, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the Company
as hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this
Section 8 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.
(b) This Agreement and all rights of Executive hereunder
shall inure to the benefit of and be enforceable by Executive's personal
or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Executive should die while any
amounts would still be payable to him hereunder if he had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to Executive's devisee,
legatee, or other designee or, if there be no such designee, to Executive's
estate.
9. NOTICE. For the purpose of this Agreement, notices, demands
and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
(unless otherwise specified) mailed by United States certified or
registered mail, return receipt requested, postage prepared, addressed as
follows:
If to Executive:
1105 Peters Road
Harvey, Louisiana 70058
If to the Company:
Superior Energy Services, Inc.
1105 Peters Road
Harvey, Louisiana 70058
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
10. MISCELLANEOUS. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by Executive and such officer of
the Company as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise
express or implied, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this Agreement.
11. VALIDITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain
in full force and effect.
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
13. RIGHTS AND REMEDIES. In the event that Executive institutes
proceedings to enforce this Agreement; he shall be entitled to recover all
reasonable attorneys' fees and costs incurred, in addition to any damages
or other relief awarded.
14. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of any
party hereto; and any prior agreement of the parties hereto in respect of
the subject matter contained herein is hereby terminated and cancelled.
15. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with and governed by the internal laws of the State
of Louisiana without regard to principles of conflict of laws, except as
expressly provided in Section 7(f) above with respect to the resolution of
disputes arising under, or the Company's enforcement of, Section 7 of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the date and year first above written.
SUPERIOR ENERGY SERVICES, INC.
By: ___________________________
Terence E. Hall
Chairman of the Board
___________________________
Charles Funderburg
<PAGE>
APPENDIX A
Acadia Madison
Allen Morehouse
Ascension Natchitoches
Assumption Orleans
Avoyelles Ouachita
Beauregard Plaquemines
Bienville Pointe Coupee
Bossier Rapides
Caddo Red River
Calcasieu Richland
Caldwell Sabine
Cameron St. Bernard
Catahoula St. Charles
Claiborne St. Helena
Concordia St. James
DeSoto St. John the Baptist
East Baton Rouge St. Landry
East Carroll St. Martin
East Feliciana St. Mary
Evangeline St. Tammany
Franklin Tangipahoa
Grant Tensas
Iberia Terrebonne
Iberville Union
Jackson Vermillion
Jefferson Vernon
Jefferson Davis Washington
Lafayette Webster
Lafourche West Baton Rouge
LaSalle West Carroll
Lincoln West Feliciana
Livingston Winn
EMPLOYMENT AND NON-COMPETITION AGREEMENT
Between
SUPERIOR ENERGY SERVICES, INC.
and
ROBERT TAYLOR
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This Employment and Non-Competition Agreement (this "Agreement") is
entered into and effective as of July 15, 1999 (the "Effective Date")
between Superior Energy Services, Inc., a Delaware corporation (the
"Company"), and Robert Taylor (the "Executive").
W I T N E S S E T H:
WHEREAS, the Board of Directors (the "Board") of the Company desires
to provide for the employment of Executive by the Company, and Executive
desires to continue to serve the Company on a full-time basis upon the
terms and conditions herein provided.
NOW, THEREFORE, in consideration of the premises and of the respective
representations and warranties hereinafter set forth and of the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ Executive,
and Executive hereby agrees to continue to serve the Company, on the terms
and conditions set forth herein.
2. TERM.
(a) Commencing on the Effective Date hereof, Executive
shall be employed by the Company as provided in Section 1 and such
employment shall continue until the second anniversary of the Effective
Date unless sooner terminated as hereinafter provided.
(b) If Executive continues to serve as an employee of the
Company after the second anniversary of the Effective Date, his continued
employment shall be subject to the terms of this Agreement but shall be
terminable at will by either the Company or Executive.
(c) Following Executive ceasing for whatever reason to be
an employee of the Company, each party shall have the right to enforce all
its rights, and shall be bound by all obligations, that are continuing
rights and obligations under the terms of this Agreement.
3. POSITION AND DUTIES. The Executive shall perform such
duties, consistent with the Executive's status as an officer of the Company
elected by the Board, as may be prescribed from time to time by the
Company's President and Chief Executive Officer or other officers to whom
authority has been delegated by the President and Chief Executive Officer.
The Executive also agrees to serve without additional compensation, if
elected or appointed thereto, as an officer of any of the Company's
subsidiaries.
<PAGE>
4. COMPENSATION AND RELATED MATTERS.
(a) SALARY. The Company shall pay to Executive a minimum
annual base salary of $125,000, payable in equal semi-monthly installments
in accordance with the Company's regular payroll practices for its
principal executives. The Executive's base salary will be reviewed
annually.
(b) INCENTIVE BONUS. During the term hereof, the Executive
shall be eligible to earn an annual bonus pursuant to the Company's
Management Incentive Plan based on the Executive's achievement of
performance objectives for each year.
(c) STOCK OPTIONS. On the Effective Date, the Company
shall grant to the Executive, pursuant to the Company's 1998 Stock
Incentive Plan, options to purchase a total of 240,000 shares of the
Company's common stock, at an exercise price equal to the closing sales
price of the Common Stock on the Nasdaq National Market on the Effective
Date pursuant to the form of option agreement attached as Exhibit "A"
hereto.
(d) COMPANY AUTOMOBILE. The Company shall either provide a
car allowance to the Executive or make available to Executive a Company
automobile for the Executive's use in the discharge of his duties. The
automobile so obtained by the Executive shall be maintained at the expense
of the Company in accordance with the policies and practices of the Company
in effect from time to time.
(e) EXPENSES. During the term of Executive's employment
hereunder, Executive shall be entitled to receive prompt reimbursement for
all reasonable and necessary expenses incurred by Executive in performing
services hereunder, including all expenses of travel and living expenses
while away from home on business or at the request of and in the service of
the Company, provided that such expenses are incurred and accounted for in
accordance with the policies and procedures established by the Company.
(f) OTHER BENEFITS. Executive shall be entitled to
participate in or receive benefits under any employee benefit plan or
arrangement made available by the Company to its executives and key
management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements.
Nothing paid to Executive under any plan or arrangement presently in effect
or made available in the future shall be deemed to be in lieu of the salary
and bonuses payable to Executive pursuant to this Section 4.
(g) VACATIONS. Executive shall be excused from rendering
his services during reasonable vacation periods for not more than 15 days
per year and during other reasonable temporary absences. Executive shall
also be entitled to all paid holidays and personal days given by the
Company to its executives.
5. TERMINATION. Executive's employment hereunder may be
terminated without any breach of this Agreement only under the following
circumstances:
(a) DEATH. Executive's employment hereunder shall terminate
upon his death.
(b) DISABILITY. If, as a result of Executive's incapacity
due to physical or mental illness, Executive shall have been absent from
his duties hereunder on a full-time basis for a period of 60 consecutive
days, or 120 non-consecutive days within any 365 day period, the Company
may terminate Executive's employment.
(c) CAUSE. The Company may terminate Executive's
employment hereunder for Cause. For purposes of this Agreement, the
Company shall have "Cause" to terminate Executive's employment hereunder
upon: (i) substantial and continued willful failure by the Executive to
perform his duties hereunder which results, or could reasonably be expected
to result, in material harm to the business or reputation of the Company,
which failure is not cured (if curable) by Executive within 15 days after
written notice of such failure is delivered to the Executive by the
Company; and (ii) the commission by Executive of any criminal act involving
moral turpitude or a felony which results in an arrest or indictment, or
the commission by Executive, based on reasonable proof, of any act of fraud
or embezzlement involving the Company or its customers or suppliers. For
purposes of this Section 5(c), no act, or failure to act, on Executive's
part shall be considered "willful" unless done, or omitted to be done, by
him not in good faith and without reasonable belief that his action or
omission was in the best interest of the Company.
(d) NOTICE OF TERMINATION. Any termination of Executive's
employment by the Company or by Executive (other than termination pursuant
to Section 5(a)) shall be communicated by written Notice of Termination to
the other party hereto in accordance with Section 9. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice that shall
indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under
the provision so indicated.
(e) DATE OF TERMINATION. "Date of Termination" shall mean
(i) if Executive's employment is terminated by his death, the date of his
death, (ii) if Executive's employment is terminated pursuant to Section
5(b), 30 days after Notice of Termination is given (provided that Executive
shall not have returned to the performance of his duties on a full-time
basis during such 30 day period) and (iii) if Executive's employment is
terminated pursuant to Section 5(c), the date specified in the Notice of
Termination.
Notwithstanding anything to the contrary in this Section 5, during the
period commencing on the Effective Date and ending on the second
anniversary of the Effective Date, the Company shall not be entitled to
terminate Executive's employment "without cause" or for any reason that is
not expressly specified in this Section 5.
6. COMPENSATION UPON TERMINATION.
(a) If Executive's employment is terminated pursuant to
Section 5, the Company shall pay Executive his then current base salary
through the Date of Termination and the Company shall have no further
obligations to Executive under this Agreement.
(b) If Executive's employment is terminated pursuant to
Section 5(a) or 5(b), the Company shall provide following such termination
to the extent required by the Consolidated Omnibus Budget Reconciliation
Act of 1985 ("COBRA"), COBRA continuation coverage with respect to the
relevant group medical and dental insurance benefits to which Executive was
entitled immediately prior to the Notice of Termination.
7. NONDISCLOSURE AND NONCOMPETITION
(a) CERTAIN DEFINITIONS. For purposes of this Agreement,
the following terms shall have the following meanings:
(i)"Confidential Information" means any information,
knowledge or data of any nature and in any form (including information
that is electronically transmitted or stored on any form of magnetic
or electronic storage media) relating to the past, current or
prospective business or operations of the Company and its
subsidiaries, that at the time or times concerned is not generally
known to persons engaged in businesses similar to those conducted or
contemplated by the Company and its subsidiaries (other than
information known by such persons through a violation of an obligation
of confidentiality to the Company), whether produced by the Company
and its subsidiaries or any of their consultants, agents or
independent contractors or by Executive, and whether or not marked
confidential, including without limitation information relating to the
Company's or its subsidiaries' products and services, business plans,
business acquisitions, processes, product or service research and
development methods or techniques, training methods and other
operational methods or techniques, quality assurance procedures or
standards, operating procedures, files, plans, specifications,
proposals, drawings, charts, graphs, support data, trade secrets,
supplier lists, supplier information, purchasing methods or practices,
distribution and selling activities, consultants' reports, marketing
and engineering or other technical studies, maintenance records,
employment or personnel data, marketing data, strategies or
techniques, financial reports, budgets, projections, cost analyses,
price lists and analyses, employee lists, customer lists, customer
source lists, proprietary computer software, and internal notes and
memoranda relating to any of the foregoing.
(ii)"Company's Business" includes providing services in
connection with the plugging and abandonment of oil and gas wells,
providing wireline services, chartering and operating lift boats and
other marine service vessels, renting specialized tools and equipment
used in oil and gas drilling and production, providing workover
services on oil and gas wells, providing oil spill containment
services, and renting equipment and/or tools used in fishing
operations.
(b) NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Executive
shall hold in a fiduciary capacity for the benefit of the Company all
Confidential Information which shall have been obtained by Executive during
Executive's employment (whether prior to or after the effective date
hereof) and shall use such Confidential Information solely within the scope
of his employment with and for the exclusive benefit of the Company. At
the end of the employment term, Executive agrees (i) not to communicate,
divulge or make available to any person or entity (other than the
Company) any such Confidential Information, except upon the prior written
authorization of the Company or as may be required by law or legal process,
and (ii) to deliver promptly to the Company any Confidential Information
in his possession, including any duplicates thereof and any notes or other
records Executive has prepared with respect thereto. In the event that
the provisions of any applicable law or the order of any court would
require Executive to disclose or otherwise make available any Confidential
Information then Executive shall give the Company prompt prior written
notice of such required disclosure and an opportunity to contest the
requirement of such disclosure or apply for a protective order with respect
to such Confidential Information by appropriate proceedings.
(c) LIMITED COVENANT NOT TO COMPETE. During the term of
Executive's employment under this Agreement and for a period of two years
thereafter, Executive agrees that:
(i) Executive shall not, directly or indirectly, for
himself or others, own, manage, operate, control, be employed by,
engage or participate in, allow his skill, knowledge, experience or
reputation to be used by, or otherwise be connected in any manner with
the ownership, management, operation or control of, any company or
other business enterprise engaged in any aspect of the Company's
Business, within any parish (or any adjacent offshore areas) of the
State of Louisiana, (as set forth in Appendix A), or within the States
of Florida, Alabama, Mississippi or Texas (including any adjacent
offshore areas), and any other state or other jurisdiction (or any
adjacent offshore areas) (whether within or outside the United
States), in which the Company or any of its subsidiaries carries on a
like line of business on the Date of Termination; provided, however,
that nothing contained herein shall prohibit Executive from making
passive investments in any publicly held company that do not exceed in
the aggregate 1% of the equity interest of such company;
(ii) Executive shall not call upon any customer of the
Company or its subsidiaries or any potential customer of the Company,
for the purpose of soliciting, diverting or enticing away the business
of such person or entity, or otherwise disrupting any previously
established relationship existing between such person or entity and
the Company or its subsidiaries;
(iii) Executive shall not solicit, induce, influence or
attempt to influence any supplier, lessor, licensor, or any other
person who has a business relationship with the Company or its
subsidiaries, or who on the Date of Termination is engaged in
discussions or negotiations to enter into a business relationship with
the Company or its subsidiaries, to discontinue or reduce the extent
of such relationship with the Company or its subsidiaries; and
(iv) Executive shall not make contact with any of the
employees of the Company or its subsidiaries with whom he had contact
during the course of his employment with the Company for the purpose
of soliciting such employee for hire, whether as an employee or
independent contractor, or otherwise disrupting such employee's
relationship with the Company or its subsidiaries.
Executive further agrees that during the term of this Agreement and for a
period of two years thereafter, Executive shall not hire any employee of
the Company as an employee or independent contractor, whether or not such
engagement is solicited by Executive.
Notwithstanding the foregoing, the parties agree that this Section 7(c)
shall not be binding upon the Executive in the event that Executive is
discharged by the Company for other than theft, disability or Cause.
(d) PROTECTION OF INFORMATION.
(i) The Company shall disclose to Executive, or place
Executive in a position to have access to or develop, trade secrets or
confidential information of the Company; and/or shall entrust
Executive with business opportunities of the Company; and/or shall
place Executive in a position to develop business good will on behalf
of the Company.
(ii) Executive agrees not to disclose or utilize, for
Executive's personal benefit or for the direct or indirect benefit of
any other person or entity, or for any other reason, whether for
consideration or otherwise, during the term of his employment
hereunder or at any time thereafter, any information, ideas, concepts,
improvements, discoveries or inventions, whether patentable or not,
which are conceived, made, developed, or acquired by Executive,
individually or in conjunction with others, during Executive's
employment by the Company (whether during business hours or otherwise
and whether on the Company's premises or otherwise) which relate to
the business, products, or services of the Company (including, without
limitation, all such business ideas, prospects, proposals or other
opportunities which are developed by Executive during his employment
hereunder, or originated by any third party and brought to the
attention of Executive during his employment hereunder, together with
information relating thereto (including, without limitation, data,
memoranda, opinions or other written, electronic or charted means, or
any other trade secrets or other confidential or proprietary
information of or concerning the Company)) (collectively, "Business
Information"). Moreover, all documents, drawings, notes, files, data,
records, correspondence, manuals, models, specifications, computer
programs, E-mail, voice mail, electronic databases, maps, and all
other writings or materials of any type embodying any such Business
Information are and shall be the sole and exclusive property of the
Company. Upon termination of Executive's employment by the Company,
for any reason, Executive promptly shall deliver all Business
Information, and all copies thereof, to the Company. As a result of
knowledge of confidential Business Information of third parties, such
as customers, suppliers, partners, joint ventures, and the like, of
the Company, Executive also agrees to preserve and protect the
confidentiality of such third party Business Information to the same
extent, and on the same basis, as the Company's Business Information.
(iii) Executive agrees that, during his employment, any
inventions (whether or not patentable), concepts, ideas, expressions,
discoveries, or improvements, including, without limitation, products,
processes, methods, publications, works of authorship, software
programs, designs, trade secrets, technical specifications,
algorithms, technical data, know-how, internal reports and memoranda,
marketing plans and any other patent or proprietary rights conceived,
devised, developed, or reduced to practice, in whole or in part, by
the Executive during the term of his employment by the Company (the
"Developments") are the sole and exclusive property of the Company on
a worldwide basis as works made for hire or otherwise, and further
that any revenue or other consideration obtained from the sale,
license or other transfer or conveyance of any such Development, or a
product or service incorporating such Development, is solely for the
benefit of and becomes the property of the Company. To the extent a
Development may not be considered work made by the Executive for hire
for the Company, the Executive agrees to assign, and automatically
assigns at the time of creation of the Development, without any
requirement of further consideration, any and all right, title and
interest he may have in such Development. Executive shall preserve
each such Development as confidential and proprietary information of
the Company. Executive shall promptly disclose each such Development
and shall, upon demand, at the Company's expense, execute and deliver
to the Company such documents, instruments, deeds, acts and things as
the Company may request to evidence or maintain the Company's
ownership of the Development, in any and all countries of the world,
or to effect enforcement thereof, and to assign all rights, if any, of
the Executive in and to each of such Developments. In addition,
Executive agrees not to publish or seek to publish any information
whatsoever concerning any Development without the prior written
consent of the Company, which may be withheld in its sole and absolute
discretion.
(iv) Any inventions relating to the business of the
Company conceived or reduced to practice after the Executive leaves
the employ of the Company shall be conclusively deemed to have been
conceived and/or reduced to practice during the period of the
employment if conceived and/or reduced to practice within six months
from termination of employment, and shall be subject to the terms of
this Section 7.
(e) INJUNCTIVE RELIEF. Executive acknowledges that a
breach by Executive of paragraph (b), (c) or (d) of this Section 7 would
cause immediate and irreparable harm to the Company for which an adequate
monetary remedy does not exist; hence, Executive agrees that, in the event
of a breach or threatened breach by Executive of the provisions of
paragraph (b), (c) or (d) of this Section 7 during or after the employment
term, the Company shall be entitled to injunctive relief restraining
Executive from violation of any such paragraph without the necessity of
proof of actual damage or the posting of any bond, except as required by
non-waivable, applicable law. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedy at law or in equity
to which the Company may be entitled under applicable law in the event of a
breach or threatened breach of this Agreement by Executive including, but
not limited to, recovery of costs and expenses such as reasonable
attorney's fees incurred by reason of any such breach, actual damages
sustained by the Company as a result of any such breach, and cancellation
of any unpaid salary, bonus, commissions or reimbursements otherwise
outstanding at the Date of Termination.
(f) GOVERNING LAW OF THIS SECTION 7; CONSENT TO
JURISDICTION. Any dispute regarding the reasonableness of the covenants and
agreements set forth in this Section 7, or the territorial scope or
duration thereof, or the remedies available to the Company upon any breach
of such covenants and agreements, shall be governed by and interpreted
in accordance with the laws of the state in which the prohibited competing
activity or disclosure occurs, and, with respect to each such dispute, the
Company and Executive each hereby irrevocably consent to the exclusive
jurisdiction of the state and federal courts sitting in the relevant state
for resolution of such dispute, and agree to be irrevocably bound by any
judgment rendered thereby in connection with such dispute, and further
agree that service of process may be made upon him in any legal proceeding
relating to this Section 7 by any means allowed under the laws of such
state. Each party irrevocably waives any objection he, she or it may have
as to the venue of any such suit, action or proceeding brought in such a
court or that such a court is an inconvenient forum.
(g) EXECUTIVE'S UNDERSTANDING OF THIS SECTION. Executive
hereby represents to the Company that he has read and understands, and
agrees to be bound by, the terms of this Section. Executive acknowledges
that the geographic scope and duration of the covenants contained in
paragraph (c) are the result of arm's-length bargaining and are fair and
reasonable in light of (i) the importance of the functions performed by
Executive and the length of time it would take the Company to find and
train a suitable replacement, (ii) the nature and wide geographic scope of
the operations of the Company, (iii) Executive's level of control over and
contact with the Company's business and operations in all jurisdictions
where same are conducted and (iv) the fact that the Company's Business is
conducted throughout the geographic area where competition is restricted by
this Agreement. It is the desire and intent of the parties that the
provisions of this Agreement be enforced to the fullest extent permitted
under applicable law, whether now or hereafter in effect and therefore, to
the extent permitted by applicable law, the parties hereto waive any
provision of applicable law that would render any provision of this Section
7 invalid or unenforceable.
8. SUCCESSORS; BINDING AGREEMENT
(a) The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to Executive, to expressly
assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle Executive to
compensation from the Company in the same amount and on the same terms as
he would be entitled to hereunder if he terminated his employment for Good
Reason, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the Company
as hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this
Section 8 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.
(b) This Agreement and all rights of Executive hereunder
shall inure to the benefit of and be enforceable by Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Executive should die while any
amounts would still be payable to him hereunder if he had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to Executive's devisee,
legatee, or other designee or, if there be no such designee, to Executive's
estate.
9. NOTICE. For the purpose of this Agreement, notices, demands
and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
(unless otherwise specified) mailed by United States certified or
registered mail, return receipt requested, postage prepared, addressed as
follows:
If to Executive:
1105 Peters Road
Harvey, Louisiana 70058
If to the Company:
Superior Energy Services, Inc.
1105 Peters Road
Harvey, Louisiana 70058
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
10. MISCELLANEOUS. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by Executive and such officer of
the Company as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise
express or implied, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this Agreement.
11. VALIDITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain
in full force and effect.
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
13. RIGHTS AND REMEDIES. In the event that Executive institutes
proceedings to enforce this Agreement; he shall be entitled to recover all
reasonable attorneys' fees and costs incurred, in addition to any damages
or other relief awarded.
14. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral
or written, by any officer, employee or representative of any party hereto;
and any prior agreement of the parties hereto in respect of the subject
matter contained herein is hereby terminated and cancelled.
15. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with and governed by the internal laws of the State
of Louisiana without regard to principles of conflict of laws, except as
expressly provided in Section 7(f) above with respect to the resolution of
disputes arising under, or the Company's enforcement of, Section 7 of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the date and year first above written.
SUPERIOR ENERGY SERVICES, INC.
By: ___________________________
Terence E. Hall
Chairman of the Board
___________________________
Executive
<PAGE>
APPENDIX A
Acadia Madison
Allen Morehouse
Ascension Natchitoches
Assumption Orleans
Avoyelles Ouachita
Beauregard Plaquemines
Bienville Pointe Coupee
Bossier Rapides
Caddo Red River
Calcasieu Richland
Caldwell Sabine
Cameron St. Bernard
Catahoula St. Charles
Claiborne St. Helena
Concordia St. James
DeSoto St. John the Baptist
East Baton Rouge St. Landry
East Carroll St. Martin
East Feliciana St. Mary
Evangeline St. Tammany
Franklin Tangipahoa
Grant Tensas
Iberia Terrebonne
Iberville Union
Jackson Vermillion
Jefferson Vernon
Jefferson Davis Washington
Lafayette Webster
Lafourche West Baton Rouge
LaSalle West Carroll
Lincoln West Feliciana
Livingston Winn
EMPLOYMENT AND NON-COMPETITION AGREEMENT
Between
SUPERIOR ENERGY SERVICES, INC.
and
JAMES HOLLEMAN
<PAGE>
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This Employment and Non-Competition Agreement (this "Agreement") is
entered into and effective as of July 15, 1999 (the "Effective Date")
between Superior Energy Services, Inc., a Delaware corporation (the
"Company"), and James Holleman (the "Executive").
W I T N E S S E T H:
WHEREAS, the Board of Directors (the "Board") of the Company desires
to provide for the employment of Executive by the Company, and Executive
desires to continue to serve the Company on a full-time basis upon the
terms and conditions herein provided.
NOW, THEREFORE, in consideration of the premises and of the respective
representations and warranties hereinafter set forth and of the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ Executive,
and Executive hereby agrees to continue to serve the Company, on the terms
and conditions set forth herein.
2. TERM.
(a) Commencing on the Effective Date hereof, Executive
shall be employed by the Company as provided in Section 1 and such
employment shall continue until the second anniversary of the Effective
Date unless sooner terminated as hereinafter provided.
b( If Employee continues to serve as an employee of the
Company after the second anniversary of the Effective Date, his continued
employment shall be subject to the terms of this Agreement but shall be
terminable at will by either the Company or Executive.
(c) Following Executive ceasing for whatever reason to be
an employee of the Company, each party shall have the right to enforce all
its rights, and shall be bound by all obligations, that are continuing
rights and obligations under the terms of this Agreement.
3. POSITION AND DUTIES. The Executive shall perform such
duties, consistent with the Executive's status as an officer of the Company
elected by the Board, as may be prescribed from time to time by the
Company's President and Chief Executive Officer or other officers to whom
authority has been delegated by the President and Chief Executive Officer.
The Executive also agrees to serve without additional compensation, if
elected or appointed thereto, as an officer of any of the Company's
subsidiaries.
4. COMPENSATION AND RELATED MATTERS.
(a) SALARY. The Company shall pay to Executive a minimum
annual base salary of $135,000, payable in equal semi-monthly installments
in accordance with the Company's regular payroll practices for its
principal executives. The Executive's base salary will be reviewed
annually.
(b) INCENTIVE BONUS. During the term hereof, the Executive
shall be eligible to earn an annual bonus pursuant to the Company's
Management Incentive Plan based on the Executive's achievement of
performance objectives for each year.
(c) STOCK OPTIONS. On the Effective Date, the Company
shall grant to the Executive, pursuant to the Company's 1998 Stock
Incentive Plan, options to purchase a total of 265,000 shares of the
Company's common stock, at an exercise price equal to the closing sales
price of the Common Stock on the Nasdaq National Market on the Effective
Date pursuant to the form of option agreement attached as Exhibit "A"
hereto.
(d) COMPANY AUTOMOBILE. The Company shall either provide a
car allowance to the Executive or make available to Executive a Company
automobile for the Executive's use in the discharge of his duties. The
automobile so obtained by the Executive shall be maintained at the expense
of the Company in accordance with the policies and practices of the Company
in effect from time to time.
(e) EXPENSES. During the term of Executive's employment
hereunder, Executive shall be entitled to receive prompt reimbursement for
all reasonable and necessary expenses incurred by Executive in performing
services hereunder, including all expenses of travel and living expenses
while away from home on business or at the request of and in the service of
the Company, provided that such expenses are incurred and accounted for in
accordance with the policies and procedures established by the Company.
(f) OTHER BENEFITS. Executive shall be entitled to
participate in or receive benefits under any employee benefit plan or
arrangement made available by the Company to its executives and key
management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements.
Nothing paid to Executive under any plan or arrangement presently in effect
or made available in the future shall be deemed to be in lieu of the salary
and bonuses payable to Executive pursuant to this Section 4.
(g) VACATIONS. Executive shall be excused from rendering
his services during reasonable vacation periods for not more than 15 days
per year and during other reasonable temporary absences. Executive shall
also be entitled to all paid holidays and personal days given by the
Company to its executives.
5. TERMINATION. Executive's employment hereunder may be
terminated without any breach of this Agreement only under the following
circumstances:
(a) DEATH. Executive's employment hereunder shall
terminate upon his death.
(b) DISABILITY. If, as a result of Executive's incapacity
due to physical or mental illness, Executive shall have been absent from
his duties hereunder on a full-time basis for a period of 60 consecutive
days, or 120 non-consecutive days within any 365 day period, the Company
may terminate Executive's employment.
(c) CAUSE. The Company may terminate Executive's
employment hereunder for Cause. For purposes of this Agreement, the
Company shall have "Cause" to terminate Executive's employment hereunder
upon: (i) substantial and continued willful failure by the Executive to
perform his duties hereunder which results, or could reasonably be expected
to result, in material harm to the business or reputation of the Company,
which failure is not cured (if curable) by Executive within 15 days after
written notice of such failure is delivered to the Executive by the
Company; and (ii) the commission by Executive of any criminal act involving
moral turpitude or a felony which results in an arrest or indictment, or
the commission by Executive, based on reasonable proof, of any act of fraud
or embezzlement involving the Company or its customers or suppliers. For
purposes of this Section 5(c), no act, or failure to act, on Executive's
part shall be considered "willful" unless done, or omitted to be done, by
him not in good faith and without reasonable belief that his action or
omission was in the best interest of the Company.
(d) NOTICE OF TERMINATION. Any termination of Executive's
employment by the Company or by Executive (other than termination pursuant
to Section 5(a)) shall be communicated by written Notice of Termination to
the other party hereto in accordance with Section 9. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice that shall
indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under
the provision so indicated.
(e) DATE OF TERMINATION. "Date of Termination" shall mean
(i) if Executive's employment is terminated by his death, the date of his
death, (ii) if Executive's employment is terminated pursuant to Section
5(b), 30 days after Notice of Termination is given (provided that Executive
shall not have returned to the performance of his duties on a full-time
basis during such 30 day period) and (iii) if Executive's employment is
terminated pursuant to Section 5(c), the date specified in the Notice of
Termination.
Notwithstanding anything to the contrary in this Section 5, during the
period commencing on the Effective Date and ending on the second
anniversary of the Effective Date, the Company shall not be entitled to
terminate Executive's employment "without cause" or for any reason that is
not expressly specified in this Section 5.
6. COMPENSATION UPON TERMINATION.
(a) If Executive's employment is terminated pursuant to
Section 5, the Company shall pay Executive his then current base salary
through the Date of Termination and the Company shall have no further
obligations to Executive under this Agreement.
(b) If Executive's employment is terminated pursuant to
Section 5(a) or 5(b), the Company shall provide following such termination
to the extent required by the Consolidated Omnibus Budget Reconciliation
Act of 1985 ("COBRA"), COBRA continuation coverage with respect to the
relevant group medical and dental insurance benefits to which Executive was
entitled immediately prior to the Notice of Termination.
7. NONDISCLOSURE AND NONCOMPETITION
(a) CERTAIN DEFINITIONS. For purposes of this Agreement,
the following terms shall have the following meanings:
(i)"Confidential Information" means any information,
knowledge or data of any nature and in any form (including information
that is electronically transmitted or stored on any form of magnetic
or electronic storage media) relating to the past, current or
prospective business or operations of the Company and its
subsidiaries, that at the time or times concerned is not generally
known to persons engaged in businesses similar to those conducted or
contemplated by the Company and its subsidiaries (other than
information known by such persons through a violation of an obligation
of confidentiality to the Company), whether produced by the Company
and its subsidiaries or any of their consultants, agents or
independent contractors or by Executive, and whether or not marked
confidential, including without limitation information relating to the
Company's or its subsidiaries' products and services, business plans,
business acquisitions, processes, product or service research and
development methods or techniques, training methods and other
operational methods or techniques, quality assurance procedures or
standards, operating procedures, files, plans, specifications,
proposals, drawings, charts, graphs, support data, trade secrets,
supplier lists, supplier information, purchasing methods or practices,
distribution and selling activities, consultants' reports, marketing
and engineering or other technical studies, maintenance records,
employment or personnel data, marketing data, strategies or
techniques, financial reports, budgets, projections, cost analyses,
price lists and analyses, employee lists, customer lists, customer
source lists, proprietary computer software, and internal notes and
memoranda relating to any of the foregoing.
(ii)"Company's Business" includes providing services in
connection with the plugging and abandonment of oil and gas wells,
providing wireline services, chartering and operating lift boats and
other marine service vessels, renting specialized tools and equipment
used in oil and gas drilling and production, providing workover
services on oil and gas wells, providing oil spill containment
services, and renting equipment and/or tools used in fishing
operations.
(b) NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Executive
shall hold in a fiduciary capacity for the benefit of the Company all
Confidential Information which shall have been obtained by Executive during
Executive's employment (whether prior to or after the effective date
hereof) and shall use such Confidential Information solely within the scope
of his employment with and for the exclusive benefit of the Company. At
the end of the employment term, Executive agrees (i) not to communicate,
divulge or make available to any person or entity (other than the Company)
any such Confidential Information, except upon the prior written
authorization of the Company or as may be required by law or legal process,
and (ii) to deliver promptly to the Company any Confidential Information in
his possession, including any duplicates thereof and any notes or other
records Executive has prepared with respect thereto. In the event that the
provisions of any applicable law or the order of any court would require
Executive to disclose or otherwise make available any Confidential
Information then Executive shall give the Company prompt prior written
notice of such required disclosure and an opportunity to contest the
requirement of such disclosure or apply for a protective order with respect
to such Confidential Information by appropriate proceedings.
(c) LIMITED COVENANT NOT TO COMPETE. During the term of
Executive's employment under this Agreement and for a period of two years
thereafter, Executive agrees that:
(i) Executive shall not, directly or indirectly, for
himself or others, own, manage, operate, control, be employed by,
engage or participate in, allow his skill, knowledge, experience or
reputation to be used by, or otherwise be connected in any manner with
the ownership, management, operation or control of, any company or
other business enterprise engaged in any aspect of the Company's
Business, within any parish (or any adjacent offshore areas) of the
State of Louisiana, (as set forth in Appendix A), or within the States
of Florida, Alabama, Mississippi or Texas (including any adjacent
offshore areas), and any other state or other jurisdiction (or any
adjacent offshore areas) (whether within or outside the United
States), in which the Company or any of its subsidiaries carries on a
like line of business on the Date of Termination; provided, however,
that nothing contained herein shall prohibit Executive from making
passive investments in any publicly held company that do not exceed in
the aggregate 1% of the equity interest of such company;
(ii) Executive shall not call upon any customer of the
Company or its subsidiaries or any potential customer of the Company,
for the purpose of soliciting, diverting or enticing away the business
of such person or entity, or otherwise disrupting any previously
established relationship existing between such person or entity and
the Company or its subsidiaries;
(iii) Executive shall not solicit, induce, influence or
attempt to influence any supplier, lessor, licensor, or any other
person who has a business relationship with the Company or its
subsidiaries, or who on the Date of Termination is engaged in
discussions or negotiations to enter into a business relationship with
the Company or its subsidiaries, to discontinue or reduce the extent
of such relationship with the Company or its subsidiaries; and
(iv) Executive shall not make contact with any of the
employees of the Company or its subsidiaries with whom he had contact
during the course of his employment with the Company for the purpose
of soliciting such employee for hire, whether as an employee or
independent contractor, or otherwise disrupting such employee's
relationship with the Company or its subsidiaries.
Executive further agrees that during the term of this Agreement and for a
period of two years thereafter, Executive shall not hire any employee of
the Company as an employee or independent contractor, whether or not such
engagement is solicited by Executive.
Notwithstanding the foregoing, the parties agree that this Section 7(c)
shall not be binding upon the Executive in the event that Executive is
discharged by the Company for other than theft, disability or Cause.
(d) PROTECTION OF INFORMATION.
(i) The Company shall disclose to Executive, or place
Executive in a position to have access to or develop, trade secrets or
confidential information of the Company; and/or shall entrust
Executive with business opportunities of the Company; and/or shall
place Executive in a position to develop business good will on behalf
of the Company.
(ii) Executive agrees not to disclose or utilize, for
Executive's personal benefit or for the direct or indirect benefit of
any other person or entity, or for any other reason, whether for
consideration or otherwise, during the term of his employment
hereunder or at any time thereafter, any information, ideas, concepts,
improvements, discoveries or inventions, whether patentable or not,
which are conceived, made, developed, or acquired by Executive,
individually or in conjunction with others, during Executive's
employment by the Company (whether during business hours or otherwise
and whether on the Company's premises or otherwise) which relate to
the business, products, or services of the Company (including, without
limitation, all such business ideas, prospects, proposals or other
opportunities which are developed by Executive during his employment
hereunder, or originated by any third party and brought to the
attention of Executive during his employment hereunder, together with
information relating thereto (including, without limitation, data,
memoranda, opinions or other written, electronic or charted means, or
any other trade secrets or other confidential or proprietary
information of or concerning the Company)) (collectively, "Business
Information"). Moreover, all documents, drawings, notes, files, data,
records, correspondence, manuals, models, specifications, computer
programs, E-mail, voice mail, electronic databases, maps, and all
other writings or materials of any type embodying any such Business
Information are and shall be the sole and exclusive property of the
Company. Upon termination of Executive's employment by the Company,
for any reason, Executive promptly shall deliver all Business
Information, and all copies thereof, to the Company. As a result of
knowledge of confidential Business Information of third parties, such
as customers, suppliers, partners, joint ventures, and the like, of
the Company, Executive also agrees to preserve and protect the
confidentiality of such third party Business Information to the same
extent, and on the same basis, as the Company's Business Information.
(iii) Executive agrees that, during his employment, any
inventions (whether or not patentable), concepts, ideas, expressions,
discoveries, or improvements, including, without limitation, products,
processes, methods, publications, works of authorship, software
programs, designs, trade secrets, technical specifications,
algorithms, technical data, know-how, internal reports and memoranda,
marketing plans and any other patent or proprietary rights conceived,
devised, developed, or reduced to practice, in whole or in part, by
the Executive during the term of his employment by the Company (the
"Developments") are the sole and exclusive property of the Company on
a worldwide basis as works made for hire or otherwise, and further
that any revenue or other consideration obtained from the sale,
license or other transfer or conveyance of any such Development, or a
product or service incorporating such Development, is solely for the
benefit of and becomes the property of the Company. To the extent a
Development may not be considered work made by the Executive for hire
for the Company, the Executive agrees to assign, and automatically
assigns at the time of creation of the Development, without any
requirement of further consideration, any and all right, title and
interest he may have in such Development. Executive shall preserve
each such Development as confidential and proprietary information of
the Company. Executive shall promptly disclose each such Development
and shall, upon demand, at the Company's expense, execute and deliver
to the Company such documents, instruments, deeds, acts and things as
the Company may request to evidence or maintain the Company's
ownership of the Development, in any and all countries of the world,
or to effect enforcement thereof, and to assign all rights, if any, of
the Executive in and to each of such Developments. In addition,
Executive agrees not to publish or seek to publish any information
whatsoever concerning any Development without the prior written
consent of the Company, which may be withheld in its sole and absolute
discretion.
(iv) Any inventions relating to the business of the
Company conceived or reduced to practice after the Executive leaves
the employ of the Company shall be conclusively deemed to have been
conceived and/or reduced to practice during the period of the
employment if conceived and/or reduced to practice within six months
from termination of employment, and shall be subject to the terms of
this Section 7.
(e) INJUNCTIVE RELIEF. Executive acknowledges that a
breach by Executive of paragraph (b), (c) or (d) of this Section 7 would
cause immediate and irreparable harm to the Company for which an adequate
monetary remedy does not exist; hence, Executive agrees that, in the event
of a breach or threatened breach by Executive of the provisions of
paragraph (b), (c) or (d) of this Section 7 during or after the employment
term, the Company shall be entitled to injunctive relief restraining
Executive from violation of any such paragraph without the necessity of
proof of actual damage or the posting of any bond, except as required by
non-waivable, applicable law. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedy at law or in equity
to which the Company may be entitled under applicable law in the event of a
breach or threatened breach of this Agreement by Executive including, but
not limited to, recovery of costs and expenses such as reasonable
attorney's fees incurred by reason of any such breach, actual damages
sustained by the Company as a result of any such breach, and cancellation
of any unpaid salary, bonus, commissions or reimbursements otherwise
outstanding at the Date of Termination.
(f) GOVERNING LAW OF THIS SECTION 7; CONSENT TO
JURISDICTION. Any dispute regarding the reasonableness of the covenants
and agreements set forth in this Section 7, or the territorial scope or
duration thereof, or the remedies available to the Company upon any breach
of such covenants and agreements, shall be governed by and interpreted in
accordance with the laws of the state in which the prohibited competing
activity or disclosure occurs, and, with respect to each such dispute, the
Company and Executive each hereby irrevocably consent to the exclusive
jurisdiction of the state and federal courts sitting in the relevant state
for resolution of such dispute, and agree to be irrevocably bound by any
judgment rendered thereby in connection with such dispute, and further
agree that service of process may be made upon him in any legal proceeding
relating to this Section 7 by any means allowed under the laws of such
state. Each party irrevocably waives any objection he, she or it may have
as to the venue of any such suit, action or proceeding brought in such a
court or that such a court is an inconvenient forum.
(g) EXECUTIVE'S UNDERSTANDING OF THIS SECTION. Executive
hereby represents to the Company that he has read and understands, and
agrees to be bound by, the terms of this Section. Executive acknowledges
that the geographic scope and duration of the covenants contained in
paragraph (c) are the result of arm's-length bargaining and are fair and
reasonable in light of (i) the importance of the functions performed by
Executive and the length of time it would take the Company to find and
train a suitable replacement, (ii) the nature and wide geographic scope of
the operations of the Company, (iii) Executive's level of control over and
contact with the Company's business and operations in all jurisdictions
where same are conducted and (iv) the fact that the Company's Business is
conducted throughout the geographic area where competition is restricted by
this Agreement. It is the desire and intent of the parties that the
provisions of this Agreement be enforced to the fullest extent permitted
under applicable law, whether now or hereafter in effect and therefore, to
the extent permitted by applicable law, the parties hereto waive any
provision of applicable law that would render any provision of this Section
7 invalid or unenforceable.
8. SUCCESSORS; BINDING AGREEMENT
(a) The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to Executive, to expressly
assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle Executive to
compensation from the Company in the same amount and on the same terms as
he would be entitled to hereunder if he terminated his employment for Good
Reason, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the Company
as hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this
Section 8 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.
(b) This Agreement and all rights of Executive hereunder
shall inure to the benefit of and be enforceable by Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Executive should die while any
amounts would still be payable to him hereunder if he had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to Executive's devisee,
legatee, or other designee or, if there be no such designee, to Executive's
estate.
9. NOTICE. For the purpose of this Agreement, notices, demands
and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
(unless otherwise specified) mailed by United States certified or
registered mail, return receipt requested, postage prepared, addressed as
follows:
If to Executive:
1105 Peters Road
Harvey, Louisiana 70058
If to the Company:
Superior Energy Services, Inc.
1105 Peters Road
Harvey, Louisiana 70058
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
10. MISCELLANEOUS. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by Executive and such officer of
the Company as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise
express or implied, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this Agreement.
11. VALIDITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain
in full force and effect.
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
13. RIGHTS AND REMEDIES. In the event that Executive institutes
proceedings to enforce this Agreement; he shall be entitled to recover all
reasonable attorneys' fees and costs incurred, in addition to any damages
or other relief awarded.
14. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral
or written, by any officer, employee or representative of any party hereto;
and any prior agreement of the parties hereto in respect of the subject
matter contained herein is hereby terminated and cancelled.
15. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with and governed by the internal laws of the State
of Louisiana without regard to principles of conflict of laws, except as
expressly provided in Section 7(f) above with respect to the resolution of
disputes arising under, or the Company's enforcement of, Section 7 of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the date and year first above written.
SUPERIOR ENERGY SERVICES, INC.
By: ___________________________
Terence E. Hall
Chairman of the Board
___________________________
Executive
<PAGE>
APPENDIX A
Acadia Madison
Allen Morehouse
Ascension Natchitoches
Assumption Orleans
Avoyelles Ouachita
Beauregard Plaquemines
Bienville Pointe Coupee
Bossier Rapides
Caddo Red River
Calcasieu Richland
Caldwell Sabine
Cameron St. Bernard
Catahoula St. Charles
Claiborne St. Helena
Concordia St. James
DeSoto St. John the Baptist
East Baton Rouge St. Landry
East Carroll St. Martin
East Feliciana St. Mary
Evangeline St. Tammany
Franklin Tangipahoa
Grant Tensas
Iberia Terrebonne
Iberville Union
Jackson Vermillion
Jefferson Vernon
Jefferson Davis Washington
Lafayette Webster
Lafourche West Baton Rouge
LaSalle West Carroll
Lincoln West Feliciana
Livingston Winn
EMPLOYMENT AND NON-COMPETITION AGREEMENT
Between
SUPERIOR ENERGY SERVICES, INC.
and
DALE MITCHELL
<PAGE>
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This Employment and Non-Competition Agreement (this "Agreement") is
entered into and effective as of July 15, 1999 (the "Effective Date")
between Superior Energy Services, Inc., a Delaware corporation (the
"Company"), and Dale Mitchell (the "Executive").
W I T N E S S E T H:
WHEREAS, the Board of Directors (the "Board") of the Company desires
to provide for the employment of Executive by the Company, and Executive
desires to continue to serve the Company on a full-time basis upon the
terms and conditions herein provided.
NOW, THEREFORE, in consideration of the premises and of the respective
representations and warranties hereinafter set forth and of the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ Executive,
and Executive hereby agrees to continue to serve the Company, on the terms
and conditions set forth herein.
2. TERM.
(a) Commencing on the Effective Date hereof, Executive
shall be employed by the Company as provided in Section 1 and such
employment shall continue until the second anniversary of the Effective
Date unless sooner terminated as hereinafter provided.
(b) If Executive continues to serve as an employee of the
Company after the second anniversary of the Effective Date, his continued
employment shall be subject to the terms of this Agreement but shall be
terminable at will by either the Company or Executive.
(c) Following Employee ceasing for whatever reason to be an
Executive of the Company, each party shall have the right to enforce all
its rights, and shall be bound by all obligations, that are continuing
rights and obligations under the terms of this Agreement.
3. POSITION AND DUTIES. The Employee shall perform such
duties, consistent with the Employee's status as an officer of the Company
elected by the Board, as may be prescribed from time to time by the
Company's President and Chief Executive Officer or other officers to whom
authority has been delegated by the President and Chief Executive Officer.
The Executive also agrees to serve without additional compensation, if
elected or appointed thereto, as an officer of any of the Company's
subsidiaries.
4. COMPENSATION AND RELATED MATTERS.
(a) SALARY. The Company shall pay to Executive a minimum
annual base salary of $125,000, payable in equal semi-monthly installments
in accordance with the Company's regular payroll practices for its
principal executives. The Executive's base salary will be reviewed
annually.
(b) INCENTIVE BONUS. During the term hereof, the Executive
shall be eligible to earn an annual bonus pursuant to the Company's
Management Incentive Plan based on the Executive's achievement of
performance objectives for each year.
(c) STOCK OPTIONS. On the Effective Date, the Company
shall grant to the Executive, pursuant to the Company's 1998 Stock
Incentive Plan, options to purchase a total of 240,000 shares of the
Company's common stock, at an exercise price equal to the closing sales
price of the Common Stock on the Nasdaq National Market on the Effective
Date pursuant to the form of option agreement attached as Exhibit "A"
hereto.
(d) COMPANY AUTOMOBILE. The Company shall either provide a
car allowance to the Executive or make available to Executive a Company
automobile for the Executive's use in the discharge of his duties. The
automobile so obtained by the Executive shall be maintained at the expense
of the Company in accordance with the policies and practices of the Company
in effect from time to time.
(e) EXPENSES. During the term of Executive's employment
hereunder, Executive shall be entitled to receive prompt reimbursement for
all reasonable and necessary expenses incurred by Executive in performing
services hereunder, including all expenses of travel and living expenses
while away from home on business or at the request of and in the service of
the Company, provided that such expenses are incurred and accounted for in
accordance with the policies and procedures established by the Company.
(f) OTHER BENEFITS. Executive shall be entitled to
participate in or receive benefits under any Executive benefit plan or
arrangement made available by the Company to its executives and key
management Executives, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements.
Nothing paid to Executive under any plan or arrangement presently in effect
or made available in the future shall be deemed to be in lieu of the salary
and bonuses payable to Executive pursuant to this Section 4.
(g) VACATIONS. Executive shall be excused from rendering
his services during reasonable vacation periods for not more than 15 days
per year and during other reasonable temporary absences. Executive shall
also be entitled to all paid holidays and personal days given by the
Company to its executives.
5. TERMINATION. Executive's employment hereunder may be
terminated without any breach of this Agreement only under the following
circumstances:
(a) DEATH. Executive's employment hereunder shall
terminate upon his death.
(b) DISABILITY. If, as a result of Executive's incapacity
due to physical or mental illness, Executive shall have been absent from
his duties hereunder on a full-time basis for a period of 60 consecutive
days, or 120 non-consecutive days within any 365 day period, the Company
may terminate Executive's employment.
(c) CAUSE. The Company may terminate Executive's
employment hereunder for Cause. For purposes of this Agreement, the
Company shall have "Cause" to terminate Executive's employment hereunder
upon: (i) substantial and continued willful failure by the Executive to
perform his duties hereunder which results, or could reasonably be expected
to result, in material harm to the business or reputation of the Company,
which failure is not cured (if curable) by Executive within 15 days after
written notice of such failure is delivered to the Executive by the
Company; and (ii) the commission by Executive of any criminal act involving
moral turpitude or a felony which results in an arrest or indictment, or
the commission by Executive, based on reasonable proof, of any act of fraud
or embezzlement involving the Company or its customers or suppliers. For
purposes of this Section 5(c), no act, or failure to act, on Executive's
part shall be considered "willful" unless done, or omitted to be done, by
him not in good faith and without reasonable belief that his action or
omission was in the best interest of the Company.
(d) NOTICE OF TERMINATION. Any termination of Executive's
employment by the Company or by Executive (other than termination pursuant
to Section 5(a)) shall be communicated by written Notice of Termination to
the other party hereto in accordance with Section 9. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice that shall
indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under
the provision so indicated.
(e) DATE OF TERMINATION. "Date of Termination" shall mean
(i) if Executive's employment is terminated by his death, the date of his
death, (ii) if Executive's employment is terminated pursuant to Section
5(b), 30 days after Notice of Termination is given (provided that Executive
shall not have returned to the performance of his duties on a full-time
basis during such 30 day period) and (iii) if Executive's employment is
terminated pursuant to Section 5(c), the date specified in the Notice of
Termination.
Notwithstanding anything to the contrary in this Section 5, during the
period commencing on the Effective Date and ending on the second
anniversary of the Effective Date, the Company shall not be entitled to
terminate Executive's employment "without cause" or for any reason that is
not expressly specified in this Section 5.
6. COMPENSATION UPON TERMINATION.
(a) If Executive's employment is terminated pursuant to
Section 5, the Company shall pay Executive his then current base salary
through the Date of Termination and the Company shall have no further
obligations to Executive under this Agreement.
(b) If Executive's employment is terminated pursuant to
Section 5(a) or 5(b), the Company shall provide following such termination
to the extent required by the Consolidated Omnibus Budget Reconciliation
Act of 1985 ("COBRA"), COBRA continuation coverage with respect to the
relevant group medical and dental insurance benefits to which Executive was
entitled immediately prior to the Notice of Termination.
7. NONDISCLOSURE AND NONCOMPETITION
(a) CERTAIN DEFINITIONS. For purposes of this Agreement,
the following terms shall have the following meanings:
(i) "Confidential Information" means any information,
knowledge or data of any nature and in any form (including information
that is electronically transmitted or stored on any form of magnetic
or electronic storage media) relating to the past, current or
prospective business or operations of the Company and its
subsidiaries, that at the time or times concerned is not generally
known to persons engaged in businesses similar to those conducted or
contemplated by the Company and its subsidiaries (other than
information known by such persons through a violation of an obligation
of confidentiality to the Company), whether produced by the Company
and its subsidiaries or any of their consultants, agents or
independent contractors or by Executive, and whether or not marked
confidential, including without limitation information relating to the
Company's or its subsidiaries' products and services, business plans,
business acquisitions, processes, product or service research and
development methods or techniques, training methods and other
operational methods or techniques, quality assurance procedures or
standards, operating procedures, files, plans, specifications,
proposals, drawings, charts, graphs, support data, trade secrets,
supplier lists, supplier information, purchasing methods or practices,
distribution and selling activities, consultants' reports, marketing
and engineering or other technical studies, maintenance records,
employment or personnel data, marketing data, strategies or
techniques, financial reports, budgets, projections, cost analyses,
price lists and analyses, Executive lists, customer lists, customer
source lists, proprietary computer software, and internal notes and
memoranda relating to any of the foregoing.
(ii)"Company's Business" includes providing services in
connection with the plugging and abandonment of oil and gas wells,
providing wireline services, chartering and operating lift boats and
other marine service vessels, renting specialized tools and equipment
used in oil and gas drilling and production, providing workover
services on oil and gas wells, providing oil spill containment
services, and renting equipment and/or tools used in fishing
operations.
(b) NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Executive
shall hold in a fiduciary capacity for the benefit of the Company all
Confidential Information which shall have been obtained by Executive during
Executive's employment (whether prior to or after the effective date
hereof) and shall use such Confidential Information solely within the scope
of his employment with and for the exclusive benefit of the Company. At
the end of the employment term, Executive agrees (i) not to communicate,
divulge or make available to any person or entity (other than the Company)
any such Confidential Information, except upon the prior written
authorization of the Company or as may be required by law or legal process,
and (ii) to deliver promptly to the Company any Confidential Information in
his possession, including any duplicates thereof and any notes or other
records Executive has prepared with respect thereto. In the event that the
provisions of any applicable law or the order of any court would require
Executive to disclose or otherwise make available any Confidential
Information then Executive shall give the Company prompt prior written
notice of such required disclosure and an opportunity to contest the
requirement of such disclosure or apply for a protective order with respect
to such Confidential Information by appropriate proceedings.
(c) LIMITED COVENANT NOT TO COMPETE. During the term of
Executive's employment under this Agreement and for a period of two years
thereafter, Executive agrees that:
(i) Executive shall not, directly or indirectly, for
himself or others, own, manage, operate, control, be employed by,
engage or participate in, allow his skill, knowledge, experience or
reputation to be used by, or otherwise be connected in any manner with
the ownership, management, operation or control of, any company or
other business enterprise engaged in any aspect of the Company's
Business, within any parish (or any adjacent offshore areas) of the
State of Louisiana, (as set forth in Appendix A), or within the States
of Florida, Alabama, Mississippi or Texas (including any adjacent
offshore areas), and any other state or other jurisdiction (or any
adjacent offshore areas) (whether within or outside the United
States), in which the Company or any of its subsidiaries carries on a
like line of business on the Date of Termination; provided, however,
that nothing contained herein shall prohibit Executive from making
passive investments in any publicly held company that do not exceed in
the aggregate 1% of the equity interest of such company;
(ii) Executive shall not call upon any customer of the
Company or its subsidiaries or any potential customer of the Company,
for the purpose of soliciting, diverting or enticing away the business
of such person or entity, or otherwise disrupting any previously
established relationship existing between such person or entity and
the Company or its subsidiaries;
(iii) Executive shall not solicit, induce, influence or
attempt to influence any supplier, lessor, licensor, or any other
person who has a business relationship with the Company or its
subsidiaries, or who on the Date of Termination is engaged in
discussions or negotiations to enter into a business relationship with
the Company or its subsidiaries, to discontinue or reduce the extent
of such relationship with the Company or its subsidiaries; and
(iv) Executive shall not make contact with any of the
Executives of the Company or its subsidiaries with whom he had contact
during the course of his employment with the Company for the purpose
of soliciting such Executive for hire, whether as an Executive or
independent contractor, or otherwise disrupting such Executive's
relationship with the Company or its subsidiaries.
Executive further agrees that during the term of this Agreement and for a
period of two years thereafter, Executive shall not hire any Executive of
the Company as an Executive or independent contractor, whether or not such
engagement is solicited by Executive.
Notwithstanding the foregoing, the parties agree that this Section 7(c)
shall not be binding upon the Executive in the event that Executive is
discharged by the Company for other than theft, disability or Cause.
(d) PROTECTION OF INFORMATION.
(i) The Company shall disclose to Executive, or place
Executive in a position to have access to or develop, trade secrets or
confidential information of the Company; and/or shall entrust
Executive with business opportunities of the Company; and/or shall
place Executive in a position to develop business good will on behalf
of the Company.
(ii) Executive agrees not to disclose or utilize, for
Executive's personal benefit or for the direct or indirect benefit of
any other person or entity, or for any other reason, whether for
consideration or otherwise, during the term of his employment
hereunder or at any time thereafter, any information, ideas, concepts,
improvements, discoveries or inventions, whether patentable or not,
which are conceived, made, developed, or acquired by Executive,
individually or in conjunction with others, during Executive's
employment by the Company (whether during business hours or otherwise
and whether on the Company's premises or otherwise) which relate to
the business, products, or services of the Company (including, without
limitation, all such business ideas, prospects, proposals or other
opportunities which are developed by Executive during his employment
hereunder, or originated by any third party and brought to the
attention of Executive during his employment hereunder, together with
information relating thereto (including, without limitation, data,
memoranda, opinions or other written, electronic or charted means, or
any other trade secrets or other confidential or proprietary
information of or concerning the Company)) (collectively, "Business
Information"). Moreover, all documents, drawings, notes, files, data,
records, correspondence, manuals, models, specifications, computer
programs, E-mail, voice mail, electronic databases, maps, and all
other writings or materials of any type embodying any such Business
Information are and shall be the sole and exclusive property of the
Company. Upon termination of Executive's employment by the Company,
for any reason, Executive promptly shall deliver all Business
Information, and all copies thereof, to the Company. As a result of
knowledge of confidential Business Information of third parties, such
as customers, suppliers, partners, joint ventures, and the like, of
the Company, Executive also agrees to preserve and protect the
confidentiality of such third party Business Information to the same
extent, and on the same basis, as the Company's Business Information.
(iii) Executive agrees that, during his employment, any
inventions (whether or not patentable), concepts, ideas, expressions,
discoveries, or improvements, including, without limitation, products,
processes, methods, publications, works of authorship, software
programs, designs, trade secrets, technical specifications,
algorithms, technical data, know-how, internal reports and memoranda,
marketing plans and any other patent or proprietary rights conceived,
devised, developed, or reduced to practice, in whole or in part, by
the Executive during the term of his employment by the Company (the
"Developments") are the sole and exclusive property of the Company on
a worldwide basis as works made for hire or otherwise, and further
that any revenue or other consideration obtained from the sale,
license or other transfer or conveyance of any such Development, or a
product or service incorporating such Development, is solely for the
benefit of and becomes the property of the Company. To the extent a
Development may not be considered work made by the Executive for hire
for the Company, the Executive agrees to assign, and automatically
assigns at the time of creation of the Development, without any
requirement of further consideration, any and all right, title and
interest he may have in such Development. Executive shall preserve
each such Development as confidential and proprietary information of
the Company. Executive shall promptly disclose each such Development
and shall, upon demand, at the Company's expense, execute and deliver
to the Company such documents, instruments, deeds, acts and things as
the Company may request to evidence or maintain the Company's
ownership of the Development, in any and all countries of the world,
or to effect enforcement thereof, and to assign all rights, if any, of
the Executive in and to each of such Developments. In addition,
Executive agrees not to publish or seek to publish any information
whatsoever concerning any Development without the prior written
consent of the Company, which may be withheld in its sole and absolute
discretion.
(iv) Any inventions relating to the business of the
Company conceived or reduced to practice after the Executive leaves
the employ of the Company shall be conclusively deemed to have been
conceived and/or reduced to practice during the period of the
employment if conceived and/or reduced to practice within six months
from termination of employment, and shall be subject to the terms of
this Section 7.
(e) INJUNCTIVE RELIEF. Executive acknowledges that a
breach by Executive of paragraph (b), (c) or (d) of this Section 7 would
cause immediate and irreparable harm to the Company for which an adequate
monetary remedy does not exist; hence, Executive agrees that, in the event
of a breach or threatened breach by Executive of the provisions of
paragraph (b), (c) or (d) of this Section 7 during or after the employment
term, the Company shall be entitled to injunctive relief restraining
Executive from violation of any such paragraph without the necessity of
proof of actual damage or the posting of any bond, except as required by
non-waivable, applicable law. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedy at law or in equity
to which the Company may be entitled under applicable law in the event of a
breach or threatened breach of this Agreement by Executive including, but
not limited to, recovery of costs and expenses such as reasonable
attorney's fees incurred by reason of any such breach, actual damages
sustained by the Company as a result of any such breach, and cancellation
of any unpaid salary, bonus, commissions or reimbursements otherwise
outstanding at the Date of Termination.
(f) GOVERNING LAW OF THIS SECTION 7; CONSENT TO
JURISDICTION. Any dispute regarding the reasonableness of the covenants
and agreements set forth in this Section 7, or the territorial scope or
duration thereof, or the remedies available to the Company upon any breach
of such covenants and agreements, shall be governed by and interpreted in
accordance with the laws of the state in which the prohibited competing
activity or disclosure occurs, and, with respect to each such dispute, the
Company and Executive each hereby irrevocably consent to the exclusive
jurisdiction of the state and federal courts sitting in the relevant state
for resolution of such dispute, and agree to be irrevocably bound by any
judgment rendered thereby in connection with such dispute, and further
agree that service of process may be made upon him in any legal proceeding
relating to this Section 7 by any means allowed under the laws of such
state. Each party irrevocably waives any objection he, she or it may have
as to the venue of any such suit, action or proceeding brought in such a
court or that such a court is an inconvenient forum.
(g) EXECUTIVE'S UNDERSTANDING OF THIS SECTION. Executive
hereby represents to the Company that he has read and understands, and
agrees to be bound by, the terms of this Section. Executive acknowledges
that the geographic scope and duration of the covenants contained in
paragraph (c) are the result of arm's-length bargaining and are fair and
reasonable in light of (i) the importance of the functions performed by
Executive and the length of time it would take the Company to find and
train a suitable replacement, (ii) the nature and wide geographic scope of
the operations of the Company, (iii) Executive's level of control over and
contact with the Company's business and operations in all jurisdictions
where same are conducted and (iv) the fact that the Company's Business is
conducted throughout the geographic area where competition is restricted by
this Agreement. It is the desire and intent of the parties that the
provisions of this Agreement be enforced to the fullest extent permitted
under applicable law, whether now or hereafter in effect and therefore, to
the extent permitted by applicable law, the parties hereto waive any
provision of applicable law that would render any provision of this Section
7 invalid or unenforceable.
8. SUCCESSORS; BINDING AGREEMENT
(a) The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to Executive, to expressly
assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle Executive to
compensation from the Company in the same amount and on the same terms as
he would be entitled to hereunder if he terminated his employment for Good
Reason, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the Company
as hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this
Section 8 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.
(b) This Agreement and all rights of Executive hereunder
shall inure to the benefit of and be enforceable by Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Executive should die while any
amounts would still be payable to him hereunder if he had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to Executive's devisee,
legatee, or other designee or, if there be no such designee, to Executive's
estate.
9. NOTICE. For the purpose of this Agreement, notices, demands
and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
(unless otherwise specified) mailed by United States certified or
registered mail, return receipt requested, postage prepared, addressed as
follows:
If to Executive:
1105 Peters Road
Harvey, Louisiana 70058
If to the Company:
Superior Energy Services, Inc.
1105 Peters Road
Harvey, Louisiana 70058
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
10. MISCELLANEOUS. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by Executive and such officer of
the Company as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise
express or implied, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this Agreement.
11. VALIDITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain
in full force and effect.
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
13. RIGHTS AND REMEDIES. In the event that Executive institutes
proceedings to enforce this Agreement; he shall be entitled to recover all
reasonable attorneys' fees and costs incurred, in addition to any damages
or other relief awarded.
14. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral
or written, by any officer, Executive or representative of any party
hereto; and any prior agreement of the parties hereto in respect of the
subject matter contained herein is hereby terminated and cancelled.
15. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with and governed by the internal laws of the State
of Louisiana without regard to principles of conflict of laws, except as
expressly provided in Section 7(f) above with respect to the resolution of
disputes arising under, or the Company's enforcement of, Section 7 of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the date and year first above written.
SUPERIOR ENERGY SERVICES, INC.
By: ___________________________
Terence E. Hall
Chairman of the Board
___________________________
Executive
<PAGE>
APPENDIX A
Acadia Madison
Allen Morehouse
Ascension Natchitoches
Assumption Orleans
Avoyelles Ouachita
Beauregard Plaquemines
Bienville Pointe Coupee
Bossier Rapides
Caddo Red River
Calcasieu Richland
Caldwell Sabine
Cameron St. Bernard
Catahoula St. Charles
Claiborne St. Helena
Concordia St. James
DeSoto St. John the Baptist
East Baton Rouge St. Landry
East Carroll St. Martin
East Feliciana St. Mary
Evangeline St. Tammany
Franklin Tangipahoa
Grant Tensas
Iberia Terrebonne
Iberville Union
Jackson Vermillion
Jefferson Vernon
Jefferson Davis Washington
Lafayette Webster
Lafourche West Baton Rouge
LaSalle West Carroll
Lincoln West Feliciana
Livingston Winn
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
STATE OR JURISDICTION OF
SUBSIDIARY INCORPORATION OR ORGANIZATION
<S> <C>
Connection Technology, Ltd. Louisiana
Ace Rental Tools, Inc. Louisiana
Superior Well Service, Inc. Louisiana
Oil Stop, Inc. Louisiana
Nautilus Pipe & Tool Rental, Inc. Louisiana
Concentric Rentals, S.A. Caracas, Venezuela
F & F Wireline Service, Inc. Louisiana
Fastorq, Inc. Louisiana
Stabil-Drill Specialties, Inc. Louisiana
Tong Rentals and Supply Company, Inc. Louisiana
Hydro-Dynamics Oilfield Contractors, Inc. Louisiana
Superior Bareboat Charters, Inc. Louisiana
1105 Peters Road, Inc. Louisiana
1209 Peters Road, Inc. Louisiana
Dimensional Oil Field Services, Inc. Louisiana
Steerable Rotary Tools, L.L.C. Louisiana
Cardinal Services, Inc. Louisiana
Production Management Companies, Inc. Louisiana
Production Management Industries, Inc. Louisiana
Production Management Equities, Inc. Louisiana
Production Management Control Systems, Inc. Louisiana
</TABLE>
N0488763.1
The Board of Directors
Superior Energy Services, Inc.:
We consent to incorporation by reference in registration statements No. 333-
22603 and No. 333-86579 on Form S-3 and No. 333-12175 and No. 333-43421 on
Form S-8 of Superior Energy Services, Inc. of our report dated February 25,
2000, relating to the consolidated balance sheet of Superior Energy Services,
Inc. and subsidiaries as of December 31, 1999, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
the year then ended, and the related financial statement schedule, which
report appears in the December 31, 1999, annual report on Form 10-K of
Superior Energy Services, Inc.
KPMG LLP
New Orleans, Louisiana
March 28, 2000
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration
Statements (Form S-3 Nos. 333-22603 and 333-86579) of Superior Energy
Services, Inc. and in the related Prospectuses, and the incorporation by
reference in the Registration Statements (Form S-8 Nos. 333-12175 and
333-43421) of Superior Energy Services, Inc. of our report dated March 2,
1999, with respect to the consolidated financial statements and schedule
of Superior Energy Services, Inc. and subsidiaries (formerly Cardinal
Holding Corp.) included in this Annual Report (Form 10-K) for the year
ended December 31, 1999.
Ernst & Young LLP
New Orleans, Louisiana
March 27, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 8,018,000
<SECURITIES> 0
<RECEIVABLES> 44,770,000
<ALLOWANCES> (2,892,000)
<INVENTORY> 967,000
<CURRENT-ASSETS> 56,122,000
<PP&E> 167,600,000
<DEPRECIATION> (32,877,000)
<TOTAL-ASSETS> 282,255,000
<CURRENT-LIABILITIES> 30,917,000
<BONDS> 0
0
0
<COMMON> 60,000
<OTHER-SE> 121,427,000
<TOTAL-LIABILITY-AND-EQUITY> 282,255,000
<SALES> 113,076,000
<TOTAL-REVENUES> 113,076,000
<CGS> 67,364,000
<TOTAL-COSTS> 103,060,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,969,000
<INCOME-PRETAX> (2,645,000)
<INCOME-TAX> (611,000)
<INCOME-CONTINUING> (2,034,000)
<DISCONTINUED> 0
<EXTRAORDINARY> (4,514,000)
<CHANGES> 0
<NET-INCOME> (6,548,000)
<EPS-BASIC> (0.25)
<EPS-DILUTED> (0.25)
</TABLE>
