<PAGE> 1
PROXY STATEMENT
PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Sections 240.14a-11(c) or Sections
240.14a-12
PETROQUEST ENERGY, INC.
(Name of Registrant as specified in its Charter)
PETROQUEST ENERGY, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which the transaction
applies:
---------------------------------------------------------------
(2) Aggregate number of securities to which the transaction
applies:
---------------------------------------------------------------
(3) Per unit price or other underlying value of the transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
---------------------------------------------------------------
(4) Proposed maximum aggregate value of the transaction:
---------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing:
(1) Amount previously paid:
-------------------------------------
(2) Form, Schedule or Registration Statement:
--------------------
(3) Filing Party:
------------------------------------------------
(4) Date Filed:
--------------------------------------------------
<PAGE> 2
PETROQUEST ENERGY, INC.
625 E. KALISTE SALOOM ROAD, SUITE 400
LAFAYETTE, LOUISIANA 70508
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 25, 1999
----------------
Notice is hereby given that the annual meeting of the stockholders of
PetroQuest Energy, Inc. (the "Company") will be held at 10:00 a.m. (Lafayette
time) on May 25, 1999 at the offices of the Company, 625 E. Kaliste Saloom Road,
Suite 400, Lafayette, Louisiana 70508, for the following purposes:
1. To elect a board of seven directors; and
2. To consider and to act on such other business as may properly come
before the meeting.
A record of stockholders was taken at the close of business on April 9,
1999, and only those stockholders of record on that date will be entitled to
notice of and to vote at the meeting. A stockholders' list will be available at
the offices of the Company, 625 E. Kaliste Saloom Road, Suite 400, Lafayette,
Louisiana 70508, for a period of ten days prior to the meeting.
Your participation in the Company's affairs is important. To ensure
your representation, if you do not expect to be present at the meeting, please
sign and date the enclosed proxy and return it to the Company promptly. A
stamped envelope has been provided for your convenience. The prompt return of
proxies will ensure a quorum and save the Company the expense of further
solicitation.
By Order of the Board of Directors,
by: /s/ Robert R. Brooksher
-------------------------------------
ROBERT R. BROOKSHER,
Chief Financial Officer and Secretary
April 21, 1999
<PAGE> 3
PETROQUEST ENERGY, INC.
625 E. KALISTE SALOOM ROAD, SUITE 400
LAFAYETTE, LOUISIANA 70508
PROXY STATEMENT
This Proxy Statement is being furnished in connection with the
solicitation by the Board of Directors of PetroQuest Energy, Inc., a Delaware
corporation (the "Company"), of proxies to be voted at the annual meeting of the
Company's stockholders to be held in Lafayette, Louisiana on May 25, 1999, and
at any adjournment thereof, for the purposes set forth in the accompanying
notice. This Proxy Statement and the accompanying proxy card are being mailed to
stockholders on or about April 21, 1999. Business at the annual meeting is
conducted in accordance with the procedures determined by the presiding officer
and is generally limited to matters properly brought before the meeting by or at
the suggestion of the Board of Directors or by a stockholder pursuant to
provisions requiring advance notice and disclosure of relevant information.
Because many stockholders are unable to attend the meeting, the Board
of Directors solicits proxies to ensure that each stockholder has an opportunity
to vote on all matters scheduled to come before the meeting. Stockholders are
urged to read carefully the material in this Proxy Statement, to register votes
by marking the appropriate boxes on the enclosed proxy card and to sign, date
and return the proxy card in the enclosed stamped envelope. Proxies will be
voted in accordance with the directions specified thereon and otherwise in
accordance with the judgment of the persons designated as proxies. Pursuant to
Delaware law: (i) shares represented by proxies that reflect abstentions or
"broker non-votes" (i.e., shares held by a broker or nominee that are
represented at the meeting, but with respect to which such broker or nominee is
not empowered to vote on a particular proposal) will be counted as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum; (ii) there is no cumulative voting and the director nominees receiving
the highest number of votes, up to the number of directors to be elected, are
elected and, accordingly, abstentions, broker non-votes and withholding of
authority to vote will not affect the election of directors; (iii) proxies that
reflect abstentions as to a particular proposal will be treated as voted for
purposes of determining the approval of that proposal and will have the same
effect as a vote against that proposal; and (iv) proxies that reflect broker
non-votes will be treated as unvoted for purposes of determining approval of
that proposal and will not be counted as votes for or against that proposal. Any
proxy on which no direction is specified will be voted for the election of all
nominees for director named below and, in the discretion of the persons named on
the proxy cards, on any other matter which may properly come before the meeting.
A stockholder may revoke a proxy by delivering to the Company written notice of
revocation, delivering to the Company a signed proxy of a later date or
appearing at the meeting and voting in person.
OUTSTANDING VOTING SECURITIES
The number of voting securities of the Company outstanding on April 9,
1999, the record date for the determination of stockholders entitled to vote at
the annual meeting (the "Record Date"), was 18,537,347 shares of the Company's
common stock, par value $.001 per share (the "Common Stock"), each of which is
entitled to one vote on all matters properly brought before the meeting. Holders
of a majority of the shares of Common Stock entitled to vote must be present, in
person or by proxy, to constitute a quorum for the transaction of business.
PROPOSAL 1
ELECTION OF DIRECTORS
At the annual meeting, seven directors are to be elected. Each director
is to hold office until the next annual meeting of stockholders or until his
successor is elected and qualified. The persons named in the accompanying proxy
have been designated by the Board of Directors, and unless authority is
withheld, they intend to vote for the election of the nominees named below to
the Board of Directors. All of the nominees have previously been elected by the
Company's stockholders. If any nominee should become unavailable for election,
the proxy may be voted for a substitute nominee selected by the persons named in
the proxy or the Board may be reduced accordingly; however, the Board of
Directors is not aware of any circumstances likely to render any nominee
unavailable.
<PAGE> 4
NOMINEES
Certain information regarding the nominees is set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
- ---- --- -------- --------------
<S> <C> <C> <C>
William C. Leuschner 70 Chairman of the Board of Directors 1989
Charles T. Goodson 43 President, Chief Executive Officer 1998
and Director
Alfred J. Thomas, II 62 Chief Operating Officer and Director 1998
Ralph J. Daigle 51 Senior Vice President of Exploration and 1998
Director
Robert R. Brooksher 48 Chief Financial Officer, Secretary and Director 1998
Robert L. Hodgkinson (1)(2) 49 Director 1989
Daniel G. Fournerat (1)(2) 45 Director 1998
</TABLE>
(1) Member, Compensation Committee of the Board of Directors
(2) Member, Audit Committee of the Board of Directors
William C. Leuschner has been chairman of the board of directors since
May 1989. Mr. Leuschner served as a director of Skyline Natural Resources, a
publicly-traded company on the Alberta Stock Exchange, from 1985 to 1995. He was
president of Arenosa Resource Corporation, a private oil and gas company
subsequently sold to the Company, from 1982 to 1992. In 1982, he founded
Leuschner International Resources Ltd., a private hydrocarbon consulting and
independent oil and gas producing firm, of which he is President. Mr. Leuschner
is a professional geologist with a Bachelor of Geology from Texas A&M University
in 1950.
Charles T. Goodson has served as president and chief executive officer
of the Company and as a member of the board of directors since September 1998.
From 1995 to 1998, Mr. Goodson was president of American Explorer, L.L.C., a
private oil and gas exploration and production company subsequently sold to the
Company. Since 1985, he has served as president and 50% owner of American
Explorer, Inc., an oil and gas operating company which formerly operated
properties for the Company and is currently inactive. From 1980 to 1985 he
worked for Callon Petroleum Company, first as a landman, then district land
manager and then regional land manager. He began his career in 1978 as a landman
for Mobil Oil Corporation.
Alfred J. Thomas, II has served as chief operating officer of the
Company and as a member of the board of directors since September 1998. From
1995 to 1998, Mr. Thomas was chief executive officer of American Explorer,
L.L.C., a private oil and gas exploration and production company subsequently
sold to the Company. Since 1985, he has served as chief executive officer and
50% owner of American Explorer, Inc., an oil and gas operating company which
formerly operated properties for the Company and is currently inactive. From
1976 through 1984 he was a partner in Petitfils, Thomas and Associates, an oil
and gas engineering consulting firm. He worked for the Superior Oil Company as a
petroleum engineer from 1959 until 1976.
Ralph J. Daigle has served as senior vice president of exploration of
the Company and as a member of the board of directors since September 1998. From
1995 to 1998, Mr. Daigle was senior vice president of exploration of American
Explorer, L.L.C., a private oil and gas exploration and production company
subsequently sold to the Company. Since 1989, he has served as the senior vice
president of exploration of American Explorer, Inc., an oil and gas operating
company which formerly operated properties for the Company and is currently
inactive. From 1984 to 1989, he worked as an independent geophysical consultant.
From 1979 to 1984, he was employed by X-Plor, an exploration and production
consulting group. He worked for Texas Pacific Oil Company as a geophysical
interpreter of seismic data from 1977 until 1979 and served in the same capacity
with Union Oil Company from 1973 to 1977. He began his career as a field
observer, party manager and party chief for Seismic Delta, Inc.
2
<PAGE> 5
Robert R. Brooksher has served as chief financial officer and secretary
of the Company and has served as a member of the board of directors since
September 1998. From 1997 to 1998, Mr. Brooksher was chief financial officer of
American Explorer, L.L.C., a private oil and gas exploration and production
company subsequently sold to the Company. Since the beginning of 1997, he has
served as the chief financial officer of American Explorer, Inc., an oil and gas
operating company which formerly operated properties for the Company and is
currently inactive. From 1994 to 1997, he served as a financial consultant to
energy related companies. From 1988 to 1994 he was vice president of
acquisitions and chief financial officer of Espero Energy Corporation. He was an
investment manager with Graham Resources, Inc. from 1987 to 1988 and chief
financial officer of Crescent Exploration Company from 1985 to 1987. From 1983
to 1985, he was a financial consultant for an individual with interests in oil
and gas and real estate. He began his career with Arthur Andersen & Co. in 1973
and worked in its audit division until 1983.
Robert L. Hodgkinson has served as a member of the board of directors
since April 1989. Mr. Hodgkinson has served as director of Equatorial Energy,
Inc., formerly Australian Oilfields Pty. Ltd., since February 1996. From April
1993 to September 1995, he was director of Roxbury Capital Corp., an oil and gas
exploration and production company subsequently sold to the Company in September
1995. From 1982 to November 1990, he was vice president of L.O.M. Western
Securities Ltd., a securities firm in Vancouver, British Columbia.
Daniel G. Fournerat has served as outside counsel to the Company and as
a member of the board of directors since September 1998. Mr. Fournerat is an
attorney-at-law practicing since 1977 with the Lafayette, Louisiana law firm of
Onebane, Bernard, Torian, Diaz, McNamara & Abell (A Professional Law
Corporation) with an oil and gas transactional practice.
BOARD AND COMMITTEE ACTIVITY, STRUCTURE AND COMPENSATION
In accordance with Delaware corporate law, the business of the Company
is managed under the direction of its Board of Directors. There are currently
two standing committees of the Board of Directors, the audit committee and the
compensation committee. Committee membership and the functions of those
committees are described below.
During 1998, the Board of Directors held four meetings. All directors,
except for Messrs. Goodson, Thomas, Daigle, Brooksher and Fournerat (all of whom
became directors effective September 1, 1998), attended at least 75% of the
total meetings of the Board and the committees on which they serve.
AUDIT COMMITTEE. The current members of the Audit Committee are Robert
L. Hodgkinson and Daniel G. Fournerat. Prior to the Merger (see "Change in
Control"), the members of the Audit Committee were Ronald P. Bourgeois and Emile
D. Stehelin. The Audit Committee met one time during 1998 prior to the Merger.
The audit Committee is responsible for recommending to the entire Board of
Directors engagement and discharge of independent auditors of the financial
statements of the Company, reviews the professional service provided by the
independent auditors, reviews the independence of independent auditors, reviews
with the auditors the plan and results of the auditing engagement, considers the
range of audit and non-audit fees and reviews the adequacy of the Company's
system of internal audit controls. In addition, the Audit Committee directs and
supervises special investigations as deemed necessary by the Audit Committee.
COMPENSATION COMMITTEE. The current members of the Compensation
Committee are Robert L. Hodgkinson and Daniel G. Fournerat. Prior to the Merger
(see "Change in Control"), the members of the Compensation Committee were Robert
L. Hodgkinson, Emile D. Stehelin and Martin G. Abbott. The Compensation
Committee met one time during 1998 prior to the Merger. The Compensation
Committee recommends to the Board of Directors the compensation to be paid to
officers and key employees of the Company and the compensation of the Board of
Directors. Except as otherwise provided in any specific plan adopted by the
Board of Directors, the Compensation Committee is responsible for administration
of executive compensation plans, stock option plans and other forms of direct or
indirect compensation of officers and key employees, and each member of the
Compensation Committee has the power and authority to execute and bind the
Company to such documents, agreements and instruments related to such plans and
compensation as are approved by the Compensation Committee. In the alternative,
the Compensation Committee may authorize any officer of the Company to execute
such documents, agreements and instruments on
3
<PAGE> 6
behalf of the Company. In addition, the Compensation Committee reviews levels of
pension benefits and insurance programs for officers and key employees.
DIRECTOR COMPENSATION. During the year ended December 31, 1998,
employee and non-employee directors of the Company received no compensation for
their services as directors. The Company is in the process of formulating its
compensation policy that will be put in place for employee and non-employee
directors of the Company.
VOTE REQUIRED FOR APPROVAL
The seven nominees for election as directors at the annual meeting who
receive the greatest number of votes cast for election by the holders of Common
Stock entitled to vote and present, in person or by proxy, at the annual meeting
shall be the duly elected directors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL SEVEN NOMINEES TO THE
COMPANY'S BOARD OF DIRECTORS.
4
<PAGE> 7
OTHER INFORMATION
PRINCIPAL STOCKHOLDERS
The following table presents certain information as of March 22, 1999,
as to (i) each stockholder known by the Company to be the beneficial owner of
more than five percent of the outstanding shares of Common Stock, (ii) each
officer named in the Summary Compensation Table and (iii) all directors and
executive officers as a group:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED (1)
---------------------------------
PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER (2) NUMBER CLASS
---------------------------------------- --------- ----------
<S> <C> <C>
Charles T. Goodson (3).................................. 3,202,700 17.3%
Ralph J. Daigle (4)..................................... 2,720,600 14.7%
Alfred J. Thomas, II (5)................................ 2,257,492 12.2%
Wellington Management Company, L.P...................... 1,090,000 5.9%
75 State Street
Boston, Massachusetts 02109
Robert L. Hodgkinson (6)................................ 840,000 4.5%
Hodgkinson Equities Corporation
600-595 Howe Street
Vancouver, B.C.
Canada, V6C 2T5
William C. Leuschner (7) ............................... 672,779 3.6%
Leuschner International Resources, Ltd.
600-595 Howe Street
Vancouver, B.C.
Canada, V6C 2T5
Robert R. Brooksher (8)................................. 494,367 2.7%
Ronald P. Bourgeois (9)................................. 159,151 *
c/o Asia Pacific Power Corporation
400 Burrard Street
Vancouver, B.C.
Canada, V6C 3A6
Daniel G. Fournerat (10)................................ 16,667 *
All directors and executive officers
as a group (7 persons)
(3)(4)(5)(6)(7)(8)(9)(10) .................... 11,453,756 61.8%
</TABLE>
* Less than 1%
(1) Except as otherwise indicated, all shares are beneficially owned,
and the sole investment and voting power is held, by the person
named. This table is based on information supplied by officers,
directors and principal stockholders and reporting forms, if any,
filed with the Securities and Exchange Commission on behalf of
such persons.
(2) Unless otherwise indicated, the address of all persons set forth
above is 625 E. Kaliste Saloom Road, Suite 400, Lafayette,
Louisiana 70508.
(3) Includes (i) 2,567,250 shares of Common Stock directly held by Mr.
Goodson, (ii) 583,450 shares of Common Stock which may be directly
held by Mr. Goodson pursuant to Contingent Stock Issue Rights (as
defined hereafter in "Change in Control") , (iii) 30,000 shares of
Common Stock indirectly held by American Explorer, Inc., a company
in which Mr. Goodson has 50% ownership, and (iv) 22,000 shares of
Common Stock issuable on the exercise of vested options. See
"Change in Control" and "Certain Relationships and Related
Transactions."
5
<PAGE> 8
(4) Includes (i) 2,200,500 shares of Common Stock directly held by Mr.
Daigle, (ii) 500,100 shares of Common Stock which may be directly held
by Mr. Daigle pursuant to Contingent Stock Issue Rights and (iii)
20,000 shares of Common Stock issuable on the exercise of vested
options. See "Change in Control" and "Certain Relationships and Related
Transactions."
(5) Includes (i) 1,309,298 shares of Common Stock directly held by Mr.
Thomas, (ii) 297,560 shares of Common Stock which may be directly held
by Mr. Thomas pursuant to Contingent Stock Issue Rights, (iii) 487,778
shares of Common Stock directly held by his wife, Janell B. Thomas,
(iv) 110,856 shares of Common Stock which may be held directly by his
wife, Janell B. Thomas, pursuant to Contingent Stock Issue Rights, (v)
30,000 shares of Common Stock indirectly held by American Explorer,
Inc., a company in which Mr. Thomas has 50% ownership, and (vi) 22,000
shares of Common Stock issuable on the exercise of vested options. See
"Change in Control" and "Certain Relationships and Related
Transactions."
(6) Includes shares held indirectly through Hodgkinson Equities
Corporation, a company wholly owned by Mr. Hodgkinson and 90,000 shares
of Common Stock issuable on the exercise of vested options. Includes
60,000 shares of Common Stock issued pursuant to the acquisition of a
5% working interest in the Valentine prospect from Colima Oil Company
as to 2% and Yukon as to 3%. See "Certain Relationships and Related
Transactions".
(7) Includes shares held indirectly in the name of Leuschner International
Resources, Ltd., a company wholly owned by Mr. Leuschner and 90,000
shares of Common Stock issuable on the exercise of vested options. See
"Certain Relationships and Related Transactions." Includes 80,000
shares of Common Stock issued pursuant to the acquisition of a 5%
working interest in the Valentine prospect from Colima Oil Company as
to 2% and Yukon as to 3%. See "Certain Relationships and Related
Transactions".
(8) Includes (i) 31,600 shares of Common Stock directly held by Mr.
Brooksher, (ii) 366,750 shares of Common Stock which may be directly
held by Mr. Brooksher on the exercise of a vested option to acquire
Common Stock from Charles T. Goodson, Alfred J. Thomas, II, Janell B.
Thomas, Alfred J. Thomas, III, Blaine A. Thomas, Natalie A. Thomas and
Ralph J. Daigle, (iii) 83,350 shares of Common Stock which may be
directly held by Mr. Brooksher pursuant to Contingent Stock Issue
Rights on the exercise of a vested option to acquire Contingent Stock
Issue Rights from Charles T. Goodson, Alfred J. Thomas, II, Janell B.
Thomas, Alfred J. Thomas, III, Blaine A. Thomas, Natalie A. Thomas and
Ralph J. Daigle and (iv) 12,667 shares of Common Stock issuable on the
exercise of vested options. See "Change in Control" and "Certain
Relationships and Related Transactions."
(9) Includes 90,000 shares of Common Stock issuable on the exercise of
vested options.
(10) Includes 16,667 shares of Common Stock issuable on the exercise of
vested options. See "Certain Relationships and Related Transactions."
EXECUTIVE OFFICERS
The executive officers of the Company serve at the pleasure of the
Board of Directors and are subject to annual appointment by the Board at its
first meeting following the annual meeting of stockholders. All of the Company's
executive officers are listed in the following table:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Charles T. Goodson 43 President, Chief Executive Officer and Director
Alfred J. Thomas, II 62 Chief Operating Officer and Director
Ralph J. Daigle 51 Senior Vice President of Exploration and Director
Robert R. Brooksher 48 Chief Financial Officer, Secretary and Director
</TABLE>
6
<PAGE> 9
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table provides information
concerning compensation paid or accrued during the fiscal years ended December
31, 1998, 1997 and 1996 to the Company's Chief Executive Officer and each of the
other four most highly-paid executive officers of the Company (collectively, the
"Named Executive Officers") determined at the end of the last fiscal year:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
COMPENSATION
------------------------------ ------------
NAME AND OTHER ANNUAL NUMBER OF ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS (1) COMPENSATION
- ------------------ ---- ------ ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Hodgkinson(2)......... 1998 -- -- CDN 100,000(3) 90,000(4) (5)
President and Chief 1997 -- -- CDN 150,000(3) 200,000(4) --
Executive 1996 -- -- CDN 150,000(3) -- --
Officer
William C. Leuschner 1998 -- -- (6) 90,000(7) (8)
Chairman of the Board 1997 -- -- CDN 150,000(9) -- --
1996 -- -- CDN 150,000(9) 125,000(7) --
Ronald P. Bourgeois(2) 1998 -- -- (10) 90,000(11) (12)
Chief Financial Officer 1998 -- -- CDN 118,000(13) -- --
and 1996 -- -- CDN 118,000(13) 75,000(11) --
Secretary
Charles T. Goodson(14).......... 1998 70,000 -- -- 66,000(15) --
President and Chief 1997 -- -- -- -- --
Executive 1996 -- -- -- -- --
Officer
Alfred J. Thomas, II(16)........ 1998 70,000 -- -- 66,000(15) --
Chief Operating Officer 1997 -- -- -- -- --
1996 -- -- -- -- --
Ralph J. Daigle(17)............. 1998 60,000 -- -- 60,000(15) --
Senior Vice President of 1997 -- -- -- -- --
Exploration 1996 -- -- -- -- --
Robert R. Brooksher(18)......... 1998 60,000 -- -- 38,000(15) --
Chief Financial Officer 1997 -- -- -- -- --
and 1996 -- -- -- -- --
Secretary
</TABLE>
(1) See "Option Grants in Last Fiscal Year" for certain information with
respect to options granted during the fiscal year ended December 31, 1998.
(2) Mr. Hodgkinson and Mr. Bourgeois resigned their respective positions
effective September 1, 1998.
(3) These monies were paid to Hodgkinson Equities Corporation, a private
company of which Mr. Hodgkinson is the principal shareholder, pursuant to
a now terminated consulting agreement. See "Certain Relationships and
Related Transactions."
(4) Pursuant to the Merger, 110,000 of 200,000 option shares outstanding under
the 1995 and 1996 Plans were canceled, and the remaining 90,000 were
amended as to exercise price and expiry date and are governed under the
1998 Incentive Plan. See "Change in Control" and "Certain Relationships
and Related Transactions."
(5) Pursuant to the Merger, Mr. Hodgkinson received CDN $150,000 in severance
and received CDN $100,000 and will retain the furnishings from the
Company's Vancouver office in consideration for assuming the office and
equipment
7
<PAGE> 10
leases for the Company's Vancouver office. See "Change in Control" and
"Certain Relationships and Related Transactions."
(6) Pursuant to a now terminated consulting agreement, CDN $100,000 was paid
to Leuschner International Resources Ltd., a private company of which Mr.
Leuschner is the chairman and principal shareholder. Pursuant to a current
consulting agreement, US $50,000 was paid to Leuschner International
Resources Ltd., a private company of which Mr. Leuschner is the chairman
and principal shareholder. See "Certain Relationships and Related
Transactions."
(7) Pursuant to the Merger, 35,000 of 125,000 option shares outstanding under
the 1995 and 1996 Plans were canceled, and the remaining 90,000 were
amended as to exercise price and expiry date and are governed under the
1998 Incentive Plan. See "Change in Control" and "Certain Relationships
and Related Transactions."
(8) Pursuant to the Merger, Mr. Leuschner received CDN $150,000 in severance
and received CDN $100,000 in consideration for terminating the Calgary
consultants and closing the Company's Calgary office. See "Change in
Control" and "Certain Relationships and Related Transactions."
(9) These monies were paid to Leuschner International Resources Ltd., a
private company of which Mr. Leuschner is the chairman and principal
shareholder, pursuant to a now terminated consulting agreement.
(10) Pursuant to a now terminated consulting agreement, CDN $100,000 was paid
to Mr. Bourgeois. Pursuant to a current consulting agreement, Mr.
Bourgeois was paid US $30,000. See "Certain Relationships and Related
Transactions."
(11) Pursuant to the Merger, 75,000 option shares under the 1995 and 1996 Plans
were amended as to exercise price and expiry date and are governed under
the 1998 Incentive Plan. Also pursuant to the Merger, Mr. Bourgeois was
granted an additional 15,000 option shares under the 1998 Incentive Plan.
See "Change in Control" and "Certain Relationships and Related
Transactions."
(12) Pursuant to the Merger, Mr. Bourgeois received CDN $120,000 in severance
and CDN $5,000 for a disability plan premium. See "Change in Control" and
"Certain Relationships and Related Transactions."
(13) These monies were paid to Mr. Bourgeois pursuant to a now terminated
consulting agreement. See "Certain Relationships and Related
Transactions."
(14) Mr. Goodson joined the Company on September 1, 1998 and is compensated at
an annual rate of $210,000.
(15) Options vest in installments on each of December 31, 1998, December 31,
1999 and December 31, 2000.
(16) Mr. Thomas joined the Company on September 1, 1998 and is compensated an
at annual rate of $210,000.
(17) Mr. Daigle joined the Company on September 1, 1998 and is compensated at
an annual rate of $180,000.
(18) Mr. Brooksher joined the Company on September 1, 1998 and is compensated
at an annual rate of $180,000.
8
<PAGE> 11
Option Grants in Last Fiscal Year. The following table provides
information concerning stock options granted to the Named Executive Officers
during the year ended December 31, 1998:
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE EXPIRATION OPTION TERM(1)
NAME OPTIONS GRANTED FISCAL YEAR PRICE DATE 5% 10%
---- --------------- ------------ -------- ---------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Hodgkinson....... 90,000 (2) 8.9% $.8479 9/1/01 $12,029 $25,259
William C. Leuschner....... 90,000 (2) 8.9% $.8479 9/1/01 $12,029 $25,259
Ronald P. Bourgeois........ 75,000 (2) 7.4% $.8479 9/1/01 $10,024 $21,049
15,000 (3) 1.5% $.8479 9/1/01 $2,005 $4,210
Charles T. Goodson......... 66,000 (4) 6.5% $.8479 9/1/08 $35,194 $89,188
Alfred J. Thomas........... 66,000 (4) 6.5% $.8479 9/1/08 $35,194 $89,188
Ralph J. Daigle............ 60,000 (4) 5.9% $.8479 9/1/08 $31,994 $81,080
Robert R. Brooksher........ 38,000 (4) 3.8% $.8479 9/1/08 $20,263 $51,351
</TABLE>
- -----------------------
(1) Based on actual option term (three years for options granted to Messrs.
Hodgkinson, Leuschner and Bourgeois, and ten years for options granted
to Messrs. Goodson, Thomas, Daigle and Brooksher ) and annual
compounding at rates shown. Because the exercise prices of options
granted equaled the fair market value of the Common Stock on the date
of grant, the potential realizable value at 0% is nil.
(2) These are incentive stock options, to the extent allowed by tax law,
previously granted under the Company's 1995 and 1996 Plans that,
pursuant to the Merger, have been amended as to exercise price and
expiry date and are now governed under the 1998 Incentive Plan. See
"Change in Control" and "Certain Relationships and Related
Transactions."
(3) These are incentive stock options, to the extent allowed by tax law,
granted under the 1998 Incentive Plan pursuant to the Merger. These
options vested immediately upon grant. See "Change in Control" and
"Certain Relationships and Related Transactions."
(4) These are incentive stock options, to the extent allowed by tax law,
granted under the 1998 Incentive Plan, and vest and become exercisable
in approximately equal annual installments over a three-year period
beginning December 31, 1998.
9
<PAGE> 12
Aggregated Option Exercises In Last Fiscal Year and Year-End Option
Values. The following table provides information concerning the number of
unexercised options and the value of in-the-money options held by the Named
Executive Officers as of December 31, 1998:
<TABLE>
<CAPTION>
SHARES NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED ON VALUE OPTIONS AT FY-END IN-THE-MONEY OPTIONS (1)
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Hodgkinson -- -- 90,000 -- -- --
William C. Leuschner -- -- 90,000 -- -- --
Ronald P. Bourgeois -- -- 90,000 -- -- --
Charles T. Goodson -- -- 22,000 44,000 -- --
Alfred J. Thomas -- -- 22,000 44,000 -- --
Ralph J. Daigle -- -- 20,000 40,000 -- --
Robert R. Brooksher -- -- 12,667 25,333 -- --
</TABLE>
(1) Value of in-the-money options calculated based on the closing price per
share of Common Stock at December 31, 1998 ($0.813 per share) as
reported by the Nasdaq National Market System.
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements. On September 1, 1998, the Company entered into employment
agreements (the "Employment Agreements") with Charles T. Goodson, the Company's
President and Chief Executive Officer and a director, Alfred J. Thomas, II, the
Company's Chief Operating Officer and a director, Ralph J. Daigle, the Company's
Senior Vice President of Exploration and a director, and Robert R. Brooksher,
the Company's Chief Financial Officer and Secretary and a director (the
"Executives"), providing for annual salaries of $210,000, $210,000, $180,000 and
$180,000, respectively. Each of the Employment Agreements has a term of three
years with automatic one-year renewals thereafter unless terminated. The
Employment Agreements provide for termination with or without cause (as
defined), with 12 months severance provided in the event of termination without
cause. The Employment Agreements also contain a non-competition agreement
prohibiting the Executive from competing with the Company during his employment
and for one year after termination of the agreement for cause or by the
Executive for any reason. As of January 21, 1999, Messrs. Goodson, Thomas,
Daigle and Brooksher have voluntarily agreed to temporarily reduce their annual
salaries payable under the Employment Agreements by one-third for an
undetermined period of time due to the present economic conditions in the oil
and gas exploration and production industry.
On December 16, 1998, the Company entered into termination agreements
with Charles T. Goodson, the Company's president and chief executive officer and
a director, Alfred J. Thomas, II, the Company's chief operating officer and a
director, Ralph J. Daigle, the Company's senior vice president of exploration
and a director, and Robert R. Brooksher, the Company's chief financial officer
and secretary and a director (the "Executives"), which provide for the payment
of severance benefits upon the Change in Control (as defined) and consequent
actual or constructive termination of the Executive's employment with the
Company. Each of the agreements was effective immediately and will continue in
effect until December 31, 2001; provided, however, that commencing on January 1,
2002 and each January 1 thereafter, the term of each of the agreements is
automatically extended for one additional year unless the Company, not later
than September 30 of the preceding year, gives notice that it does not wish to
extend any one of the agreements; provided, further, that notwithstanding any
such notice by the Company not to extend, each of the agreements will
automatically be extended for 24 months beyond the term provide in each of the
agreements if a Change in Control occurred during the term of each of the
agreements. If an Executive's employment is terminated following a Change in
Control of the Company other than for Cause (as defined) or by an Executive for
Good Reason (as defined), the Executive will be entitled to (i) a lump sum
payment, in cash, equal to two multiplied by the sum of (a) the Executive's
annual base salary in effect on date of termination and (b) the Executive's most
recent annual bonus; (ii) for a twenty-four month period (or, if less, the
number of months from the date of termination until the Executive would have
reached the age of 65), life insurance, health, disability and other welfare
benefits substantially similar in all respects to those the Executive was
receiving prior to notice of termination; and (iii) in the event that an
Executive becomes entitled to any Severance Benefits (as defined) or other
payments or benefits under the agreements by reason of accelerated vesting of
stock options thereunder (together, the "Total Benefits"), and in the event that
any of the Total Benefits will be subject to the Excise Tax (as defined), an
additional amount such that the net amount retained by the Executive, after the
deduction of any Excise Tax on the Total Benefits and any federal, state and
local
10
<PAGE> 13
income tax, Excise Tax and FICA and Medicare withholding taxes upon the payment
provided hereunder, is equal to the Total Benefits. The Executive will not be
entitled to any benefits under each of the agreements if the Executive's
employment terminates (i) pursuant to Executive retiring at age 65, (ii) by
reason of Executive's total and permanent disability, or (iii) by reason or
Executive's death.
Report on Repricing of Options. In conjunction with the negotiations
regarding the Merger (see "Change in Control"), the former management of the
Company proposed and the stockholders of the Company approved the amendment of
the exercise price and expiry date of 682,500 option shares outstanding under
the 1995 and 1996 stock option plans as of the date of the closing of the Merger
on September 1, 1998 (the "Effective Date"). The exercise price of the amended
options was determined as follows: the higher of the weighted average trading
price of the common shares of Optima Petroleum Corporation for the five business
days prior to the Effective Date and the closing price of the Common shares of
Optima Petroleum Corporation on the business day immediately prior to the
Effective Date. The amended options vested upon grant, expire three years from
the Effective Date (but in no event more than 10 years from the date of the
original grant) and are governed under the Company's 1998 Incentive Plan. See
"Executive Compensation - Summary Compensation Table" and "Certain Relationships
and Related Transactions."
William C. Leuschner
Robert L. Hodgkinson
Ronald P. Bourgeois
Emile D. Stehelin
Martin G. Abbott
The following table provides information concerning the amendment of
the exercise price of options held by the Named Executive Officers during the
year ended December 31, 1998:
10 YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF MARKET LENGTH OF
SECURITIES PRICE OF EXERCISE ORIGINAL OPTION
UNDERLYING STOCK AT PRICE AT TERM
OPTIONS TIME OF TIME OF REMAINING AT
REPRICED REPRICING REPRICING NEW DATE OF
OR OR OR EXERCISE REPRICING
NAME DATE AMENDED AMENDMENT AMENDMENT PRICE(1) AMENDMENT
---- ---- ------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Hodgkinson (2) 9-1-98 90,000(2) $.938 (3) $.8479 11 months
President and
Chief Executive Officer
William C. Leuschner 9-1-98 90,000(4) $.938 $4.15 $.8479 11 months
Chairman of the Board
Ronald P. Bourgeois (2) 9-1-98 75,000 $.938 $4.15 $.8479 11 months
Chief Financial Officer and
Secretary
</TABLE>
(1) The exercise price of the amended options was determined as follows:
the higher of the weighted average trading price of the common shares
of Optima Petroleum Corporation for the five business days prior to the
Merger and the closing price of the Common shares of Optima Petroleum
Corporation on the business day immediately prior to the Merger. See
"Change in Control " and "Certain Relationships and Related
Transactions."
(2) Mr. Hodgkinson and Mr. Bourgeois resigned their positions effective
September 1, 1998.
(3) Prior to the Amendment, Mr. Hodgkinson held 125,000 option shares
exercisable at $4.15 and 75,000 option shares exercisable at $4.05.
11
<PAGE> 14
(4) Prior to the Amendment, Mr. Leuschner held 125,000 option shares
exercisable at $4.15.
Compensation Committee Interlocks and Insider Participation. Prior to
the Merger (see "Change in Control"), Robert L. Hodgkinson, Emile D. Stehelin
and Martin G. Abbott were members of the Compensation Committee. The current
members of the Compensation Committee are Robert L. Hodgkinson and Daniel G.
Fournerat. Mr. Hodgkinson had served as the Company's president and chief
executive officer from 1989 until the Merger. In connection with the Merger, Mr.
Hodgkinson has entered into severance and consulting agreements with the
Company. See "Certain Relationships and Related Transactions." Also in
connection with the Merger, the Company entered into an agreement dated May 26,
1998 to purchase a 5% working interest in the Valentine Prospect from Colima Oil
Company ("Colima"), as to 2% and 7804 Yukon, Inc. ("Yukon") as to 3%. Yukon was
owned 51% by Mr. Stehelin and 49% by Mr. Hodgkinson. See "Certain Relationships
and Related Transactions." Mr. Fournerat, who practices law with the Lafayette,
Louisiana law firm of Onebane, Bernard, Torian, Diaz, McNamara & Abell (A
Professional Law Corporation), has served as outside counsel to the Company
since September 1998. See "Certain Relationships and Related Transactions."
Compensation Committee Report On Executive Compensation. The Company's
Compensation Committee (the "Committee") is comprised of outside directors whose
role is to recommend to the Board of Directors the compensation to be paid to
officers and key employees of the Company and the compensation of the Board of
Directors. In addition, except as otherwise provided in any specific plan
adopted by the Board of Directors, the Committee is responsible for
administration of executive compensation plans, stock option plans, including
the 1998 Incentive Plan, and other forms of direct or indirect compensation of
officers and key employees. The Committee does not believe that the compensation
policies applicable to the Company's executives prior to the Merger (see "Change
in Control") are relevant for evaluating compensation on a going-forward basis.
Presently, Charles T. Goodson, the Company's President and Chief Executive
Officer, Alfred J. Thomas, II, the Company's Chief Operating Officer, Ralph J.
Daigle, the Company's Senior Vice President of Exploration, and Robert R.
Brooksher, the Company's Chief Financial Officer and Secretary, are compensated
pursuant to employment agreements effective at the time of the Merger. The
Committee is in the process of formulating the types of compensation policies
that will be put in place for the Company's officers and key employees. See
"Executive Compensation Employment Contracts, Termination of Employment and
Change-in-Control Arrangements."
Robert L. Hodgkinson
Daniel G. Fournerat
12
<PAGE> 15
Performance Graph. The following graph illustrates the yearly
percentage change in the cumulative shareholder return on the Company's Common
Stock, compared with the cumulative total return on (i) the Nasdaq Stock Market
(U.S. Companies) Index ("Nasdaq") and (ii) the Nasdaq Stocks - Crude Petroleum
and Natural Gas Extraction Index ("Nasdaq E&P"), for the five years ended
December 31, 1998.
PETROQUEST STOCK PRICE VS. NASDAQ AND NASDAQ E&P INDICES
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
VALUE OF INVESTMENT OF $100 ON DECEMBER 31, 1993
[GRAPH]
FISCAL YEAR ENDING
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PetroQuest Energy, Inc. 100 105.4 75.8 63.3 30.0 21.7
Nasdaq 100 97.8 138.3 170.0 208.5 293.8
Nasdaq E&P 100 92.5 97.2 140.5 133.9 64.9
</TABLE>
CHANGE IN CONTROL
On September 1, 1998, the Company, formerly Optima Petroleum
Corporation, a company originally organized under the Canada Business
Corporation Act ("Optima"), consummated a merger by and among the Company,
Optima Energy (U.S.) Corporation, a wholly owned subsidiary of the Company, and
Goodson Exploration Company ("Goodson"), NAB Financial, L.L.C. ("NAB") and Dexco
Energy, Inc. ("Dexco"), pursuant to which the Company acquired 100% of the
ownership interests of American Explorer L.L.C. (the "Merger") all which were
owned by Goodson, NAB and Dexco. Following the Merger, the Company was continued
and domesticated from a Canadian corporation to a Delaware corporation (the
"Continuation"), changing its name to "PetroQuest Energy, Inc.", and adopting a
new certificate of incorporation.
In connection with the Merger, the Company issued to the owners of
Goodson, NAB and Dexco 7,335,001 shares of Company Common Stock (as defined
below) and 1,667,001 Contingent Stock Issue Rights (the "CSIR"). The CSIRs
entitle the holders to receive an additional 1,667,001 shares of Company Common
Stock at such time as the trading price for the Company's Common Stock is $5.00
or higher for 20 consecutive trading days. The shares of
13
<PAGE> 16
Common Stock and CSIRs issued in the Merger were issued to the following
persons, each of whom is an officer and director of the Company upon completion
of the Merger:
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK CSIRs
---------------------- -----
<S> <C> <C>
Charles T. Goodson 2,567,250 583,450
Alfred J. Thomas II(1) 1,309,298 297,560
Ralph J. Daigle 2,200,500 500,000
</TABLE>
- --------------------
(1) Does not include 487,778 shares and 110,856 CSIRs issued to
Mr. Thomas' spouse and an aggregate of 770,175 shares and
175,035 CSIRs issued to Mr. Thomas' adult children.
In addition, Robert R. Brooksher, who became a director and Chief Financial
Officer and Secretary of the Company upon completion of the Merger, holds a
three year option to acquire from Charles T. Goodson, Alfred J. Thomas, II,
Janell B. Thomas, Alfred J. Thomas, III, Blaine A. Thomas, Natalie A. Thomas and
Ralph J. Daigle 5% of the shares of Common Stock and CSIRs issued in connection
with the Merger.
As part of the Merger, the following individuals were elected by the
shareholders as additional directors of the Company and also serve as the
executive officers of the Company as set forth below. William C. Leuschner and
Robert L. Hodgkinson continued to serve as directors of the Company after the
Merger.
<TABLE>
<S> <C>
Charles T. Goodson -- President, Chief Executive Officer and Director
Alfred J. Thomas, II -- Chief Operating Officer and Director
Ralph J. Daigle -- Senior Vice President-Exploration and Director
Robert R. Brooksher -- Chief Financial Officer, Secretary and Director
Daniel G. Fournerat -- Director
</TABLE>
As a result of the Merger, Messrs. Leuschner, Hodgkinson, Goodson,
Thomas, Daigle and Brooksher now beneficially own 10,585,384 shares or 57.1% of
the Common Stock of the Company. Prior to the Merger, the former directors and
executive officers as a group beneficially owned 2,541,718 shares or 23.1% of
the Common Stock of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to a consulting agreement dated February 1, 1996, as amended
by an amending agreement made as of January 1, 1998 (the "Agreement"), CDN
$12,500 per month was paid to Hodgkinson Equities Corporation ("Hodgkinson")
during the year ended December 31, 1998 through the date of the Merger (see
"Change in Control") for services provided to the Company which are normally
expected of an executive officer. The principal shareholder of Hodgkinson is
Robert L. Hodgkinson, the former President and Chief Executive Officer and
current director of the Company. In connection with the Merger, the Agreement
was terminated and the Company entered into a termination agreement and a
consulting agreement with Mr. Hodgkinson on August 21, 1998 and August 31, 1998,
respectively. Pursuant to the termination agreement, Mr. Hodgkinson received CDN
$150,000 in severance and also received CDN $100,000 and retained the
furnishings from the Company's Vancouver office in consideration for assuming
the office and equipment leases for the Company's Vancouver office. Pursuant to
the consulting agreement, Mr. Hodgkinson, through Hodgkinson Equities
Corporation, may provide consulting services to the Company from time to time at
the Company's request for a three-year period following the date of the Merger
at a rate of CDN $575 per day. The consulting agreement may be terminated on 30
days' notice by either party.
14
<PAGE> 17
Pursuant to a consulting agreement dated February 1, 1996, as amended
by an amending agreement made as of January 1, 1998(the "Agreement"), CDN
$12,500 per month was paid to Leuschner International Resources Ltd.
("Leuschner") during the year ended December 31, 1998 through the date of the
Merger (see "Change in Control") for services provided to the Company which are
normally expected of an executive officer. The Chairman and principal
shareholder of Leuschner is William S. Leuschner, the Chairman of the Board of
the Company. In connection with the Merger, the Agreement was terminated and the
Company entered into a termination agreement and a consulting agreement with Mr.
Leuschner on August 21, 1998 and August 31, 1998, respectively. Pursuant to the
termination agreement Mr. Leuschner received CDN $150,000 in severance and also
received CDN $100,000 in consideration for terminating the Calgary consultants
and closing the Company's Calgary office. Pursuant to the consulting agreement,
Mr. Leuschner, through Leuschner International Resources Ltd., may provide
consulting services to the Company from time to time at the Company's request
for a three-year period following the date of the Merger at a rate of CDN $575
per day. The consulting agreement may be terminated on 30 days' notice by either
party. Also in connection with the Merger, the Company entered into a second
consulting agreement with Mr. Leuschner on August 28, 1998. Pursuant to the
second consulting agreement, Mr. Leuschner provides consulting services to the
Company for a one-year period following the date of the Merger for a total
compensation of US $150,000. For a two-year period thereafter, Mr. Leuschner may
provide consulting services to the Company from time to time at the Company's
request at a rate of US $1,000 per day. During the term of the second consulting
agreement, Mr. Leuschner will be reimbursed for all reasonable traveling and
other out-of-pocket expenses actually and properly incurred by Mr. Leuschner in
connection with his duties thereunder. The second consulting agreement may be
terminated by the Company only for cause following notice to Mr. Leuschner and
30 days opportunity for correction.
Pursuant to a consulting agreement effective January 1, 1996, as
amended by an amending agreement (the "Agreement"), a combination of CDN $10,000
per month was paid during the year ended December 31, 1998 through the date of
the Merger (see "Change in Control") to Ronald P. Bourgeois ("Bourgeois"),
former Chief Financial Officer, Secretary and director of the Company, for
services provided to the Company which are normally expected of an executive
officer. In connection with the Merger, the Agreement was terminated and the
Company entered into a termination agreement and a consulting agreement with Mr.
Bourgeois on August 21, 1998 and August 31, 1998, respectively. Pursuant to the
termination agreement, Mr. Bourgeois will be paid a severance fee of CDN
$120,000 and CDN $5,000 for a disability plan premium. Pursuant to the
consulting agreement, Mr. Bourgeois may provide consulting services to the
Company from time to time at the Company's request for a three-year period
following the date of the Merger at a rate of CDN $460 per day. The consulting
agreement may be terminated on 30 days' notice by either party. Also in
connection with the Merger, the Company entered into a second consulting
agreement with Mr. Bourgeois on August 28, 1998. Pursuant to the second
consulting agreement, Mr. Bourgeois provides consulting services to the Company
for a six-month period following the date of the Merger for compensation of US
$7,500 per month. For a two-and-half year period thereafter, Mr. Bourgeois may
provide consulting services to the Company from time to time at the Company's
request at a rate of US $460 per day. During the term of the second consulting
agreement, Mr. Bourgeois will be reimbursed for all reasonable traveling and
other out-of-pocket expenses actually and properly incurred by Mr. Bourgeois in
connection with his duties under the second consulting agreement. The second
consulting agreement may be terminated by the Company only for cause following
notice to Mr. Bourgeois and 30 days opportunity for correction.
In connection with the Merger, the Company issued 7,335,001 shares of
Common Stock and 1,667,001 Contingent Stock Issue Rights to certain individuals
including current officers and directors of the Company.
See "Change in Control."
In connection with the Merger (see "Change in Control"), the Company
granted incentive stock options to certain directors, officers and employees of
the Company, pursuant to the 1998 Incentive Plan as follows: (i) Ronald P.
Bourgeois (15,000 shares), Martin Abbott (15,000 shares) and Starbrite
Developments Ltd. (5,000 shares); (ii) Charles T. Goodson and Alfred J. Thomas,
II (66,000 shares each); (iii) Ralph J. Daigle (60,000 shares); (iv) Robert R.
Brooksher (38,000 shares); (v) Daniel G. Fournerat (50,000 shares); and (vi)
other employees as a group (232,300 shares). The options in paragraph (i) vested
immediately on grant, have a term of three years and an option price determined
as follows: the higher of the weighted average trading price of the shares of
the Company for
15
<PAGE> 18
the five business days immediately preceding the amendment and the closing price
of the common shares the Company on the business day immediately prior to the
amendment. The options in paragraphs (ii) to (vi) will vest one-third on each of
December 31, 1998, 1999 and 2000, have a term of 10 years and an option price
determined as follows: the higher of the weighted average trading price of the
common shares of the Company from the five business days immediately prior to
the grant and the closing price of the common shares of the Company on the
business day immediately prior to the grant. In addition, also in connection
with the Merger, options that were held by optionees pursuant to the 1995 and
1996 stock options plans that were exercisable into an aggregate of 465,000
shares of Common Stock were amended to change the exercise price and expiry
date. The optionees holding such options included William C. Leuschner as to
90,000 shares, Robert L. Hodgkinson as to 90,000 shares, Ronald P. Bourgeois as
to 75,000 shares, Emile Stehelin as to 65,000 shares and Martin Abbott as to
50,000 shares. These amended options vested immediately on amendment, have a
term of three years and an option price determined as follows: the higher of the
weighted average trading price of the shares of the Company for the five
business days immediately preceding the amendment and the closing price of the
common shares of the Company on the business day immediately prior to the
amendment.
In connection with the Merger (see "Change in Control"), the Company
entered into an agreement dated May 26, 1998 to purchase a 5% working interest
in the Valentine Prospect from Colima Oil Company ("Colima") as to 2% and 7804
Yukon, Inc. ("Yukon") as to 3%. Colima is wholly owned by William C. Leuschner,
Chairman of the Board and a director of the Company. Yukon was owned 51% by
Emile D. Stehelin, a former director of the Company, and 49% by Robert L.
Hodgkinson, a director of the Company. The total purchase price for the 5%
working interest was $675,300 ($270,120 to Colima and $405,180 to Yukon). A
portion of the purchase price, $325,300, was paid with 200,000 shares of Common
Stock of the Company at a deemed price of $1.6265 per share. The shares are
subject to a one-year hold period pursuant to Rule 144 of the Securities Act of
1933, as amended.
In conjunction with the Merger (see "Change in Control"), the employees
and consultants of Optima Petroleum Corporation, the Company's predecessor
entity ("Optima"), were terminated. American Explorer L.L.C. ("American"), which
was acquired pursuant to the Merger, has no employees. It was managed and its
properties (and certain of Optima's properties) were operated by American
Explorer, Inc. ("AEI"), a corporation owned by Charles T. Goodson, Company's
president and chief executive officer and a director, and Alfred J. Thomas, II,
the Company's chief operating officer and a director, and both former members of
American. From September 1, 1998 through December 31, 1998, the Company's
properties were operated by AEI and certain management functions were performed
by AEI. The officers of AEI are also the officers of the Company. AEI charges
the Company a management fee to cover its costs of services for the Company
($600,000 for period from September 1, 1998 to December 31, 1998). At December
31, 1998, the Company owed AEI approximately $1,053,000, which amount is
included in the Company's accounts payable. After the transition period, the
Company will assume the operating and management functions from AEI, whose
employees will become employees of the Company.
Prior to the Merger (see "Change in Control"), Daniel G. Fournerat, who
practices law with the Lafayette, Louisiana law firm of Onebane, Bernard,
Torian, Diaz, McNamara & Abell (A Professional Law Corporation), served as
outside counsel to American Explorer, L.L.C., which was sold to the Company
pursuant to the Merger. Subsequent to the Merger, Mr. Fournerat has served as
outside counsel to the Company.
On October 8, 1998, Charles T. Goodson, the Company's president and
chief executive officer and a director, Alfred J. Thomas, II, the Company's
chief operating officer and a director, and Ralph J. Daigle, the Company's
senior vice president of exploration and a director, contributed their interests
in a lease at the Turtle Bayou Field to the Company in return for a 30% interest
after payout of 100% of the related well cost. Messrs. Goodson, Thomas and
Daigle had previously acquired this lease in June 1995. The Company promoted
this interest to industry partners thereby reducing its cost in the well. A
producing well was drilled and completed on the lease. No amounts are currently
payable to Messrs. Goodson, Thomas and Daigle pursuant to this farmout
agreement. No cost was recorded for the contribution of this lease in the
Company's financial statements because it was treated as an ordinary farmout
agreement.
16
<PAGE> 19
AUDITORS
On December 16, 1998, the board of directors of the Company determined
to replace KPMG Peat Marwick LLP ("KPMG") as its principal accountant with
Arthur Andersen LLP ("Arthur Andersen"). Arthur Andersen was the principal
independent accountant for American Explorer, L.L.C., which was combined into
the Company on September 1, 1998. See "Change in Control."
KPMG's report on the Company's financial statements for each of the
last two fiscal years did not contain an adverse opinion or a disclaimer of
opinion, nor was it qualified or modified to uncertainty, audit scope, or
accounting principles. During the Company's two most recent fiscal years and
subsequent interim periods preceding the replacement of KPMG, there were no
disagreements with KPMG on any matters of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure. The Company has
authorized KPMG to respond fully to any inquiries by Arthur Andersen.
While management anticipates that the Company's relationship with
Arthur Andersen will continue to be maintained during 1999, no formal action is
proposed to be taken at the Annual Meeting with respect to the continued
employment of Arthur Andersen inasmuch as no such action is legally required.
Representatives of Arthur Andersen, but not KPMG, plan to attend the annual
meeting and will be available to answer appropriate questions. Its
representatives also will have an opportunity to make a statement at the meeting
if they so desire, although it is not expected that any statement will be made.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who own
more than 10% of the equity securities of the Company to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of the Common Stock of the Company. Officers, directors and
greater than 10% stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) reports they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1998, its
officers, directors and greater than 10% beneficial owners timely filed all
required Section 16(a) reports.
OTHER MATTERS
The annual report to stockholders on Form 10-K covering the fiscal year
ended December 31, 1998 has been mailed to each stockholder entitled to vote at
the annual meeting.
Any stockholder proposals to be included in the Board of Directors'
solicitation of proxies for the 2000 Annual Meeting of Stockholders must be
received by Robert R. Brooksher, Secretary of the Company, 625 E. Kaliste Saloom
Road, Suite 400, Lafayette, Louisiana 70508, no later than December 21, 1999.
Stockholders that intend to present a proposal that will not be
included in the proxy statement for the 2000 Annual Meeting of Stockholders must
give written notice of a stockholder's intent to submit such a proposal on or
before March 24, 2000.
The accompanying proxy is being solicited on behalf of the Board of
Directors of the Company. The Company will bear the expense of preparing,
printing and mailing the proxy solicitation material and the proxy. In addition
to use of the mail, proxies may be solicited by personal interview, telephone
and telegram by directors and regular officers and employees of the Company.
Individual investors may request the Company's Form 10-K, Form 10-Q and
other information by calling (318) 232-7028 or write to the address below:
17
<PAGE> 20
PetroQuest Energy, Inc.
Corporate Communications
625 E. Kaliste Saloom Road, Suite 400
Lafayette, Louisiana 70508
The persons designated to vote shares covered by the Board of
Directors' proxies intend to exercise their judgment in voting such shares on
other matters that may properly come before the meeting. Management does not
expect that any matters other than those referred to in this proxy statement
will be presented for action at the meeting.
By Order of the Board of Directors,
by: /s/ Robert R. Brooksher
-------------------------------------
ROBERT R. BROOKSHER,
Chief Financial Officer and Secretary
April 21, 1999
18
<PAGE> 21
PETROQUEST ENERGY, INC.
THE BOARD OF DIRECTORS SOLICITS THIS PROXY FOR THE
ANNUAL MEETING ON MAY 25, 1999
<TABLE>
<S> <C>
PROXY
FOR The undersigned stockholder of PetroQuest Energy, Inc. (the "Company") hereby
ANNUAL appoints Charles T. Goodson and Robert R. Brooksher, or either of them, the true and
MEETING lawful attorneys, agents and proxies of the undersigned, each with full power of
OF substitution, to vote on behalf of the undersigned at the Annual Meeting of Stockholders
STOCKHOLDERS of the Company to be held at the offices of the Company, located at 625 E. Kaliste Saloom
Road, Suite 400, Lafayette, Louisiana 70508, on Tuesday, May 25, 1999, at 10:00 a.m.,
MAY 25, 1999 Lafayette time, and at any adjournments of said meeting, all of the shares of the
Company's common stock in the name of the undersigned or which the undersigned may be
entitled to vote.
1. THE ELECTION OF DIRECTORS
Nominees for directors are William C. Leuschner, Charles T. Goodson, Alfred J.
Thomas, II, Ralph J. Daigle, Robert R. Brooksher, Robert L. Hodgkinson and Daniel
G. Fournerat.
[ ] William C. Leuschner __________ [ ] Charles T. Goodson __________
[ ] Alfred J. Thomas, II __________ [ ] Ralph J. Daigle __________
[ ] Robert R. Brooksher __________ [ ] Robert L. Hodgkinson __________
[ ] Daniel G. Fournerat __________
Instruction: If you wish to withhold authority to vote for any individual nominee
or nominees, write the name or names of the nominee(s) on the line provided below:
----------------------------------------------------------------------------------
[ ] To withhold authority to vote ON all nominees for directors listed.
2. [ ] In their discretion, upon such other matters as may properly come before the
meeting; hereby revoking any proxy or proxies heretofore given by the
undersigned.
</TABLE>
(THIS PROXY MUST BE DATED AND SIGNED ON THE REVERSE SIDE.)
<PAGE> 22
(CONTINUED FROM OTHER SIDE)
PROXY
FOR This Proxy, when properly executed, will be voted in
ANNUAL the manner directed herein by the undersigned shareholder. If
MEETING no direction is made, this Proxy will be voted FOR the
OF election of the nominees above and in accordance with the
STOCKHOLDERS discretion of the persons designated above with respect to any
other business properly before the meeting.
The undersigned hereby acknowledges receipt of the
Notice of Annual Meeting of Stockholders and the Proxy
Statement furnished herewith.
Dated ____________________, 1999
-----------------------------------------
Stockholder's Signature
-----------------------------------------
Signature if held jointly
Signature should agree with name printed
hereon. If Stock is held in the name of
more than one person, EACH joint owner
should sign. Executors, administrators,
trustees, guardians and attorneys should
indicate the capacity in which they sign.
Attorneys should submit powers of
attorney.
PLEASE MARK, SIGN, DATE AND RETURN IN THE ENVELOPE ENCLOSED
