<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 Section 240.14a-11(c) or
Section 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:
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(2) Aggregate number of securities to which the
transaction applies:
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(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):
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transaction:
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[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing:
(1) Amount previously paid: __________________________________
(2) Form, Schedule or Registration Statement No.: ____________
(3) Filing Party: ____________________________________________
(4) Date Filed: ______________________________________________
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PETROQUEST ENERGY, INC.
400 E. KALISTE SALOOM ROAD, SUITE 3000
LAFAYETTE, LOUISIANA 70508
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 23, 2000
----------------
Dear Stockholder:
We cordially invite you to attend the 2000 Annual Meeting of
Stockholders of PetroQuest Energy, Inc. The meeting will be held on Wednesday,
May 23, 2000 at 10:00 a.m. (Lafayette time), at our offices at 400 E. Kaliste
Saloom Road, Suite 3000, Lafayette, Louisiana 70508. At the meeting we will:
1. Elect the board of directors;
2. Vote on an amendment to the 1998 Stock Incentive Plan to
increase the number of shares of our common stock reserved
thereunder by 600,000 shares of common stock to an aggregate
of 2,400,000 shares; and
3. Transact any other business as may properly come before the
meeting.
Stockholders who owned our common stock at the close of business on
Friday, April 7, 2000 may attend and vote at the meeting. A stockholders' list
will be available at our offices listed above for a period of ten days prior to
the meeting. If you cannot attend the meeting, you may vote by mailing the proxy
card in the enclosed postage- prepaid envelope. Any stockholder attending the
meeting may vote in person, even though he or she has already returned a proxy
card.
You will notice that this year we have changed the format of the proxy
statement to make it easier to understand. The Securities and Exchange
Commission is encouraging companies to write documents for investors in plain
English and we support this effort.
We look forward to seeing you at the meeting.
Sincerely,
/s/ Robert R. Brooksher
Robert R. Brooksher
Chief Financial Officer and Secretary
April 24, 2000
PLEASE COMPLETE, SIGN AND DATE THE PROXY CARD AS PROMPTLY
AS POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE
<PAGE> 3
PETROQUEST ENERGY, INC.
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
Our board of directors is soliciting proxies for the 2000 Annual
Meeting of Stockholders to be held on Wednesday, May 23, 2000 at 10:00 a.m.
(Lafayette time) at our principal executive offices located at 400 E. Kaliste
Saloom Road, Suite 3000, Lafayette, Louisiana 70508, and at any adjournments or
postponements of the meeting. This proxy statement contains important
information for you to consider when deciding how to vote on the matters brought
before the meeting. Please read it carefully.
PetroQuest will pay the costs of soliciting proxies from stockholders.
Directors, officers and regular employees may solicit proxies on behalf of
PetroQuest, without additional compensation, personally or by telephone. Voting
materials, which include the proxy statement, proxy card and 2000 Annual Report,
will be mailed to stockholders on or about April 24, 2000.
QUESTIONS AND ANSWERS
Q: Who can attend and vote at the meeting?
A: You can attend and vote at the meeting if you were a stockholder at the
close of business on the record date, April 7, 2000. On that date, there
were 24,089,222 shares outstanding and entitled to vote at the annual
meeting.
Q: What am I voting on?
A: You are voting on:
o The election of directors; and
o The approval of an amendment to the 1998 Stock Incentive Plan.
The nine individuals receiving the highest number of "FOR" votes will be
elected to the board of directors. The approval of the amendment to the
1998 Stock Incentive Plan requires the affirmative "FOR" vote of a majority
of the shares present at the meeting and entitled to vote.
Q: How will the proxies vote on any other business brought up at the meeting?
A: By submitting your proxy card, you authorize the proxies to use their
judgment to determine how to vote on any other matter brought before the
meeting. We do not know of any other business to be considered at the
meeting.
The proxies' authority to vote according to their judgment applies only to
shares you own as a stockholder of record.
Q: How do I cast my vote?
A: If you hold your shares as a stockholder of record, you can vote in
person at the annual meeting or you can vote by mail. If you are a
street-name stockholder, you will receive instructions from your bank,
broker or other nominee describing how to vote your shares.
The enclosed proxy card contains instructions for mail voting. The proxies
identified on the back of the proxy card will vote the shares of which you
are the stockholder of record in accordance with your instructions. If you
submit a proxy card without giving specific voting instructions, the
proxies will vote those shares as recommended by the board of directors.
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Q: How does the board recommend I vote on the proposals?
A: The board recommends you vote "FOR" each of the nominees to the board of
directors and "FOR" the amendment to the 1998 Stock Incentive Plan.
Q: Can I revoke my proxy card?
A: Yes. You can revoke your proxy card by:
o Submitting a new proxy card;
o Giving written notice before the meeting to our Secretary stating that
you are revoking your proxy card; or o Attending the meeting and voting
your shares in person.
Q: Who will count the vote?
A: The inspector(s) of election, will count the vote. PetroQuest's Secretary
will act as the inspector of election.
Q: What is a "quorum?"
A: A quorum is the number of shares that must be present to hold the meeting.
The quorum requirement for the meeting is one-half of the outstanding
shares as of the record date, present in person or represented by proxy. If
you submit a valid proxy card or attend the meeting, your shares will be
counted to determine whether there is a quorum. Abstentions and broker
non-votes count toward the quorum. "Broker non-votes" occur when nominees
(such as banks and brokers) that hold shares on behalf of beneficial owners
do not receive voting instructions from the beneficial owners by ten days
before the meeting and do not have discretionary voting authority to vote
those shares.
Q: Will broker non-votes or abstentions affect the voting results?
A: Although abstentions and broker non-votes count for quorum purposes, they
do not count as votes "FOR" or "AGAINST" a proposal. As a result,
abstentions and broker non-votes will not affect the voting results on the
election of directors or the amendment to the 1998 Stock Incentive Plan.
Q: What shares are included on my proxy card?
A: Your proxy card represents all shares registered to your account in the
same social security number and address.
Q: What does it mean if I get more than one proxy card?
A: Your shares are probably registered in more than one account. You should
vote each proxy card you receive. We encourage you to consolidate all your
accounts by registering them in the same name, social security number and
address.
Q: How many votes can I cast?
A: On all matters you are entitled to one vote per share.
Q: When are stockholder proposals due for the 2001 Annual Meeting of
Stockholders?
A: If you want to present a proposal from the floor at the 2001 Annual
Meeting, you must give us written notice of your proposal no later than
March 23, 2001 and no earlier than January 22, 2001. If the date of the
2001 Annual Meeting is more than 30 calendar days before or after the date
of our 2000 Annual Meeting, your written notice will be timely if we
receive it by the close of business on the tenth day following the date
that we publicly announce the date of the 2001 Annual Meeting. Your notice
should be sent to the Secretary, PetroQuest Energy, Inc., 400 E. Kaliste
Saloom Road, Suite 3000, Lafayette, Louisiana 70508.
If instead of presenting your proposal at the meeting you want your
proposal to be considered for inclusion in next year's proxy statement, you
must submit the proposal in writing to the Secretary so that it is received
at the above address by December 25, 2000.
Q: Where can I find the voting results of the meeting?
A: The preliminary voting results will be announced at the meeting. The final
results will be published in our quarterly report on Form 10-Q for the
second quarter of fiscal 2000.
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PROPOSAL 1
ELECTION OF DIRECTORS
At the meeting, nine 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. 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.
NOMINEES
Certain information regarding the nominees is set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
- ---- --- -------- --------------
<S> <C> <C> <C>
Charles T. Goodson 44 President, Chief Executive Officer 1998
and Director
Alfred J. Thomas, II 63 Chief Operating Officer and Director 1998
Ralph J. Daigle 52 Senior Vice President of Exploration and 1998
Director
Robert R. Brooksher 49 Chief Financial Officer, Secretary and Director 1998
Daniel G. Fournerat (1)(2) 46 Director 1998
Francisco A. Garcia (1)(3) 48 Director 1999
William W. Rucks, IV (3) 42 Director 1999
E. Wayne Nordberg 61 Director 2000
Jay B. Langner 70 Director 2000
</TABLE>
- ------------------------
(1) Member, Compensation Committee of the board of directors
(2) Member, Audit Committee of the board of directors
(3) In connection with a private placement to accredited investors in
August 1999, Mr. Garcia, as designated by Cramer Rosenthal McGlynn,
LLC, and Mr. Rucks were appointed to serve on our board of directors
effective September 1999 and October 1999, respectively. See "Other
Information - Certain Relationships and Related Transactions - August
1999 Private Placement."
Charles T. Goodson has served as our president and chief executive
officer 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 we subsequently acquired. 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 us 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 our chief operating officer 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 we subsequently acquired. 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 us
and is currently inactive. From 1976 through 1984 he was a partner in Petitfils,
Thomas
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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 our senior vice president of exploration
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 we subsequently
acquired. 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 us 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.
Robert R. Brooksher has served as our chief financial officer and
secretary 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 we
subsequently acquired. 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 us 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.
Daniel G. Fournerat has served as our outside counsel 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 specializing in an oil and gas
transactional practice.
Francisco A. Garcia has served as our director since September 1999.
Since January 1, 2000, Mr. Garcia has served as an advisor to ECC Advisers, LLC,
a venture capital management company, and to Cramer Rosenthal McGlynn, LLC, an
investment management firm. From January 1, 1999 to December 31, 1999, Mr.
Garcia served as the director of Corporate Finance for Cramer Rosenthal McGlynn,
LLC. From July 1997 to November 1999, Mr. Garcia was a director at Logimetrics,
Inc., a broadband wireless equipment and component manufacturer and seller. From
1987 to December 1997, he served as chairman of the board of Neptune Management
Company, Inc., a manager of funds and accounts investing in distressed
securities, obligations and consumer receivables. From 1991 until December 1998,
Mr. Garcia served as president of Nethuns, Inc., a firm engaged in financial
advisory, consumer finance and investment activities. Mr. Garcia is a citizen of
Spain.
William W. Rucks, IV has served as our director since October 1999. Mr.
Rucks has been a private venture capitalist-investor since September 1996. He
has served as a director of OMNI Energy Services, Inc. since 1997. He served as
president and vice chairman of Ocean Energy, Inc., formerly Flores & Rucks,
Inc., from July 1995 until September 1996 and as its president and chief
executive officer from its inception in 1992 until July 1995. From 1985 to 1992,
Mr. Rucks served as president of FloRuxco, Inc. Before then, Mr. Rucks worked as
a petroleum landman with Union Oil Company of California in its Southwest
Louisiana District, serving as area land manager from 1981 to 1984.
E. Wayne Nordberg has served as our director since April 2000. Since
1998, Mr. Nordberg has served as vice chairman of the board of KBW Asset
Management, Inc. KBW is an affiliate of Keefe, Bruyette, & Woods, Inc., a
registered investment advisor offering investment management services to
institutions and high net worth individuals. From 1988 to 1998, Mr. Nordberg
served in various capacities for Lord, Abbet & Co., a mutual fund company,
including partner and director of their family of funds. He is a member of the
Financial Analysts Federation and The
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<PAGE> 7
New York Society of Security Analysts. Mr. Nordberg received a Bachelor of Arts
in Economics from Lafayette College, Easton, Pennsylvania, where he is a Trustee
Emeritus.
Jay B. Langner has served as our director since April 2000. Since April
of 1999, Mr. Langner has served as honorary chairman of Hudson General
Corporation, an aviation services company. From 1961 to 1999, Mr. Langner served
in various capacities for Hudson General, including chairman and chief executive
officer. He serves as chairman of the board of Montefiore Medical Center and is
a member of the board of directors of Orpheus Chamber Orchestra and Gregorian
University Foundation. Mr. Langner received a Bachelor of Science in Economics
from the Wharton School of the University of Pennsylvania.
BOARD AND COMMITTEE ACTIVITY, STRUCTURE AND COMPENSATION
In accordance with Delaware corporate law, our business is managed
under the direction of our board of directors. There are currently two standing
committees of the board of directors, the audit committee and the compensation
committee. The board of directors does not currently have a nominating
committee. Committee membership and the functions of those committees are
described below.
During 1998, the board of directors held three meetings. All directors,
except for Messrs. Garcia and Rucks (both of whom were appointed to the board of
directors effective in September 1999 and October 1999, respectively), 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 Daniel
G. Fournerat and Robert L. Hodgkinson; however, Mr. Hodgkinson is not standing
for re-election at the annual meeting. Our board of directors intends to appoint
additional members to the committee following the annual meeting. The committee
met one time during 1999. The committee is responsible for recommending to the
entire board of directors engagement and discharge of independent auditors of
our financial statements, 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.
COMPENSATION COMMITTEE. The current members of the Compensation
Committee are Robert L. Hodgkinson, Daniel G. Fournerat and Francisco A. Garcia;
however, Mr. Hodgkinson is not standing for re-election at the annual meeting.
The committee met one time during 1999. The committee recommends to the board of
directors the compensation to be paid to our officers and key employees and the
compensation of the board of directors. 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 and other
forms of direct or indirect compensation of officers and key employees, and the
committee has the power and authority to authorize any of our officers to
execute and bind PetroQuest to such documents, agreements and instruments
related to such plans and compensation as are approved by the committee.
DIRECTOR COMPENSATION. During the year ended December 31, 1999, our
employee and non-employee directors received no compensation for their services
as directors, except for Messrs. Garcia and Rucks, both of whom received
nonstatutory stock options to purchase 50,000 shares of our common at exercise
prices of $1.50 and $1.69 per share, respectively. See "Other Information -
Certain Relationships and Related Transactions - August 1999 Private Placement."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NINE NOMINEES TO OUR
BOARD OF DIRECTORS.
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PROPOSAL 2
AMENDMENT OF 1998 STOCK INCENTIVE PLAN
GENERAL
We are asking stockholders to ratify an amendment to the PetroQuest
Energy, Inc. 1998 Stock Incentive Plan to increase by 600,000 the number of
shares authorized for issuance under the incentive plan. The board of directors
approved this amendment on March 28, 2000, subject to ratification by the
stockholders. This amendment would increase the number of shares authorized for
issuance under the incentive plan from 1.8 million to 2.4 million. At April 7,
2000, approximately 1,415,300 shares of the common stock either were subject to
awards granted under the incentive plan or had been issued under the incentive
plan, and approximately 384,700 shares remained available for future issuance.
The objectives of the incentive plan, are to attract and retain
selected key employees, consultants and directors, encourage their commitment,
motivate their performance, facilitate their obtaining ownership interests by
aligning their personal interests to those of our stockholders and enable them
to share in our long-term growth and success. The proposed share increase will
ensure that a sufficient reserve of common stock is available under the
incentive plan to attract and retain the services of key individuals essential
to our long-term growth and success.
The incentive plan was adopted by our board of directors in March of
1998 and approved by a majority of our stockholders at the special meeting of
stockholders held on August 21, 1998.
SUMMARY OF THE 1998 STOCK INCENTIVE PLAN
The description set forth below summarizes the principal terms and
conditions of the incentive plan, does not purport to be complete and is
qualified in its entirety by reference to the incentive plan, a copy of which
has been attached as Appendix A hereto.
Shares Subject to Incentive Plan. Under the incentive plan, we may
issue incentive awards covering 1.8 million shares of our common stock. No more
than 1.8 million shares of our common stock will be available for incentive
stock options. The number of securities available under the incentive plan and
outstanding incentive awards are subject to adjustments to prevent enlargement
or dilution of rights resulting from stock dividends, stock splits,
recapitalizations or similar transactions or resulting from a change in
applicable laws or other circumstances.
Administration. The incentive plan will be administered by the
compensation committee of the board of directors. The committee consists solely
of directors each of whom is:
o an "outside director" under Section 162(m) of the Internal Revenue
Code of 1986, and
o a "non-employee director" under Rule 16b-3 of the Exchange Act.
The committee may delegate to the chief executive officer or other senior
officers its duties under the incentive plan, except with respect to any
authority to grant incentive awards or take other action with respect to persons
who are subject to Section 16 of the Exchange Act or Section 162(m) of the
Internal Revenue Code. In the case of an incentive award to an outside director,
the entire board of directors acts as the committee. Subject to the express
provisions of the incentive plan, the committee is authorized to, among other
things, select grantees under the incentive plan and determine the size,
duration and type, as well as the other terms and conditions, of each incentive
award. The committee also construes and interprets the incentive plan and any
related agreements. All determinations and decisions of the committee are final,
conclusive and binding on all parties. We will indemnify members of the
committee against any damage, loss, liability, cost or expenses arising in
connection with any claim, action, suit or
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proceeding by reason of any action taken or failure to act under the incentive
plan, except for an act or omission constituting wilful misconduct or gross
negligence.
Eligibility. Key employees, including officers, consultants and outside
directors are eligible to participate in the incentive plan. A key employee
generally is any of our employees who, in the committee's opinion, is in a
position to contribute materially to our growth, development and financial
success. As of April 7, 2000, there were 26 employees, one consultant, and seven
outside directors eligible to receive awards under the incentive plan.
Types of Incentive awards. Under the incentive plan, the committee may
grant incentive awards which can be any of the following:
o incentive stock options, as defined in Section 422 of the Internal
Revenue Code,
o "nonstatutory" stock options,
o reload options, and
o stock appreciation rights.
Incentive stock options and nonstatutory stock options together are called
"options." The terms of each incentive award will be reflected in an incentive
agreement between us and the participant.
Options. Generally, options must be exercised within 10 years of the
grant date. Incentive stock options may be granted only to employees, and the
exercise price of each incentive stock option may not be less than 100% of the
fair market value of a share of our common stock on the date of grant. The
committee has the discretion to determine the exercise price of each
nonstatutory stock option granted under the incentive plan. To the extent that
the aggregate fair market value of shares of our common stock with respect to
which incentive stock options are exercisable for the first time by any employee
during any calendar year exceeds $100,000, such options must be treated as
nonstatutory stock options.
The exercise price of each option is payable in cash or, in the
committee's discretion, by the delivery of shares of common stock owned by the
optionee or the withholding of shares that would otherwise be acquired on the
exercise of the option or by any combination of the two.
An employee will not recognize any income for federal income tax
purposes at the time an incentive stock option is granted, or on the qualified
exercise of an incentive stock option, but instead will recognize capital gain
or loss upon the subsequent sale of shares acquired in an qualified exercise.
The exercise of an incentive stock option is qualified if a participant does not
dispose of the shares acquired by such exercise within two years after the
incentive stock option grant date and one year after the exercise date. We are
not entitled to a tax deduction as a result of the grant or qualified exercise
of an incentive stock option.
An optionee will not recognize any income for federal income tax
purposes, nor will we be entitled to a deduction, at the time a nonstatutory
stock option is granted. However, when a nonstatutory stock option is exercised,
the optionee will recognize ordinary income in an amount equal to the difference
between the fair market value of the shares received and the exercise price of
the nonstatutory stock option, and we will generally recognize a tax deduction
in the same amount at the same time.
Stock Appreciation Rights. Upon exercise of a stock appreciation right,
the holder will receive cash, shares of our common stock or a combination of the
two, as specified in the related incentive agreement, the aggregate value of
which equals the amount by which the weighted average of the fair market value
per share of our common stock for the 5 trading days immediately preceding the
date of exercise exceeds the exercise price of the stock appreciation right,
multiplied by the number of shares underlying the exercised portion of the stock
appreciation right. A stock appreciation right may be granted in tandem with or
independently of a nonstatutory stock option. Stock appreciation rights will be
subject to such terms and conditions and will be exercisable at such times as
determined by the committee, provided, that the exercise price per share must
equal at least 100% of the fair market value of a share of
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our common stock on the date of grant. The value of a stock appreciation right
may be paid in cash, shares of our common stock or a combination of the two, as
determined by the committee.
Reload Options. The committee may grant a replacement option permitting
a grantee to purchase an additional number of shares of our common stock equal
to the number of previously owned shares surrendered by such grantee to pay all
or a portion of the option price upon exercise of his or her options. All such
replacement options shall have an exercise price of not less than 100% of the
market price of a share of our common stock on the date of grant of such
replacement options.
Other Tax Considerations. Upon accelerated exercisability of options
and other incentive awards in connection with a "change in control," certain
amounts associated with such incentive awards could, depending upon the
individual circumstances of the participant, constitute "excess parachute
payments" under Section 280G of the Internal Revenue Code, thereby subjecting
the participant to a 20% excise tax on those payments and denying us a
corresponding deduction. The limit on the deductibility of compensation under
Section 162(m) of the Internal Revenue Code is also reduced by the amount of any
excess parachute payments. Whether amounts constitute excess parachute payments
depends upon, among other things, the value of the incentive awards accelerated
and the past compensation of the participant.
Taxable compensation earned by executive officers who are subject to
Section 162(m) of the Internal Revenue Code in respect of incentive awards is
subject to certain limitations set forth in the incentive plan generally
intended to satisfy the requirements for "qualified performance-based
compensation," but we may not be able to satisfy these requirements in all
cases, and we may, in our sole discretion, determine in one or more cases that
it is in our best interest not to satisfy these requirements even if we are able
to do so.
Termination of Employment and Change in Control. Except as otherwise
provided in the applicable incentive agreement, if a participant's employment or
other service with us is terminated other than due to his death, disability,
retirement or for cause, his then exercisable options will remain exercisable
for 90 days after such termination. If this termination is due to disability or
death, his then exercisable options will remain exercisable for one year
following such termination. On his retirement, his then exercisable options will
remain exercisable for one year, except for incentive stock options, which will
remain exercisable for three months. On a termination for cause, all his options
will expire at the opening of business on the termination date.
If we undergo a "change in control," all outstanding options and stock
appreciation rights will become immediately exercisable. These provisions could
in some circumstances have the effect of an "anti-takeover" defense because, as
a result of these provisions, a change in control could be more difficult or
costly.
Incentive awards Nontransferable. No incentive award may be assigned,
sold or otherwise transferred by a participant, other than by will or by the
laws of descent and distribution, or be subject to any encumbrances, pledge,
lien, assignment or charge. An incentive award may be exercised during the
participant's lifetime only by the participant or the participant's legal
guardian.
Financing. We may extend and maintain, or arrange for and guarantee,
the extension and maintenance of financing to any grantee to purchase shares of
our common stock pursuant to the exercise of an option upon such terms as are
approved by the committee. In addition, the compensation committee may provide
for loans on either a short term or demand basis, from us to a grantee who is an
employee or consultant to permit the payment of taxes required by law.
Amendment and Termination. Our board of directors may amend or
terminate the incentive plan at any time subject to all necessary regulatory and
stockholder approval. No termination or amendment of the incentive plan shall
adversely affect in any material way any outstanding incentive award previously
granted to a participant without his consent.
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<PAGE> 11
PARTICIPATION IN THE 1998 STOCK INCENTIVE PLAN
The grant of options, reload options and stock appreciation rights
under the incentive plan to employees, consultants and outside directors,
including the executive officers named in the Summary Compensation Table, is
subject to the discretion of the board of directors. As of the date of this
proxy statement, there has been no determination by the board with respect to
future awards under the incentive plan. Accordingly, future awards are not
determinable. No reload options or stock appreciation rights were granted in the
last fiscal year. As of April 7, 2000, the fair market value of our common stock
was $1.8125 per share, which was the closing sale price reported by The Nasdaq
Stock Market. The following table sets forth information with respect to the
grant of options to the executive officers named in the Summary Compensation
Table, to all current executive officers as a group, to all current directors
who are not executive officers as a group and to all employees, including all
current officers who are not executive officers, as a group during the last
fiscal year:
AMENDED PLAN BENEFITS
1998 STOCK INCENTIVE PLAN
<TABLE>
<CAPTION>
NUMBER
DOLLAR OF
NAME AND POSITION VALUE ($) SHARES
- ---------------------------------------------------------------------------------- --------- ------
<S> <C> <C>
Charles T. Goodson................................................................ 0 0
President and Chief Executive Officer
Alfred T. Thomas, II.............................................................. 0 0
Chief Operating Officer
Ralph J. Daigle................................................................... 0 0
Senior Vice President of Exploration
Robert R. Brooksher............................................................... 0 0
Chief Financial Officer and Secretary
All current executive officers as a group......................................... 0 0
All current directors who are not executive officers as a group................... 181,250 100,000
All employees, including all current officers who are not executive
officers, as a group..................................................... 105,125 58,000
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE
1998 STOCK INCENTIVE PLAN.
9
<PAGE> 12
OTHER INFORMATION
PRINCIPAL STOCKHOLDERS
The following table presents certain information as of April 7, 2000,
as to:
o each stockholder known by us to be the beneficial owner of more
than five percent of our outstanding shares of common stock,
o each officer named in the Summary Compensation Table, and
o 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>
Cramer Rosenthal McGlynn, LLC (3).................................... 2,662,500 13.7%
707 Westchester Avenue
White Plains, New York 10604
Charles T. Goodson (4)............................................... 3,246,700 13.1%
Ralph J. Daigle (5).................................................. 2,707,100 11.0%
Wellington Management Company, LLP (6)............................... 1,703,200 9.2%
75 State Street
Boston, Massachusetts 02109
Alfred J. Thomas, II (7)............................................. 2,222,835 9.1%
William W. Rucks, IV (8)............................................. 755,000 3.1%
William C. Leuschner(9).............................................. 717,279 3.0%
Robert L. Hodgkinson(10)............................................. 590,000 2.4%
Robert R. Brooksher (11)............................................. 525,534 2.1%
E. Wayne Nordberg (12)............................................... 280,000 1.2%
Jay B. Langner (13).................................................. 200,000 *
Francisco A. Garcia (14)............................................. 110,000 *
Daniel G. Fournerat (15)............................................. 33,334 *
All directors and executive officers as a group (11 persons)
(4)(5)(7)(8)(9)(10)(11)(12)(13)(14) and (15) .................. 10,937,682 41.3%
</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 beneficial owners of
more than five percent of our shares of common stock set forth above is
400 E. Kaliste Saloom Road, Suite 3000, Lafayette, Louisiana 70508.
(3) The beneficial owners of these shares of common stock have shared
voting and shared investment power to all of the shares of common stock
as reflected on Schedule 13G filed by Cramer Rosenthal McGlynn, LLC
with the Securities Exchange Commission on March 6, 2000.
(4) Includes (i) 2,589,250 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, (iii) 30,000
shares of common stock indirectly held by American Explorer, Inc., a
company in which Mr. Goodson has 50% ownership, and (iv) 44,000 shares
of common stock issuable on the exercise of vested options.
(5) Includes (i) 2,141,000 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)
40,000 shares of common stock issuable on the exercise of vested
options.
10
<PAGE> 13
(6) The beneficial owners of these shares of common stock have shared
voting and investment power to all the shares of common stock as
reflected on Schedule 13G/A filed by Wellington Management Company, LLP
with the Securities Exchange Commission on February 11, 2000.
(7) Includes (i) 1,291,968 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) 448,451
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) 44,000
shares of common stock issuable on the exercise of vested options.
(8) Includes (i) 480,000 shares of common stock directly held by Mr. Rucks,
(ii) four-year warrants to purchase 225,000 shares of common stock at
an exercise price of $1.25 per share, and (iii) 50,000 shares of common
stock issuable on the exercise of vested options. See "Certain
Relationships and Related Transactions - August 1999 Private
Placement."
(9) 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. Mr.
Leuschner is not standing for re-election at the annual meeting.
(10) 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. Mr.
Hodgkinson is not standing for re-election at the annual meeting.
(11) Includes (i) 50,100 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) 25,334 shares of common stock issuable on the
exercise of vested options.
(12) Includes (i) 150,000 shares of common stock directly held by Mr.
Nordberg, (ii) 20,000 shares of common stock directly held by his wife,
(iii) four-year warrants to purchase 50,000 shares of common stock at
an exercise price of $1.25 per share directly held by Mr. Nordberg,
(iv) 50,000 shares of common stock issuable on the exercise of vested
options, and (v) four-year warrants to purchase 10,000 shares of common
stock at an exercise price of $1.25 per share directly held by his
wife. See "Certain Relationships and Related Transactions - August 1999
Private Placement."
(13) Includes (i) 100,000 shares of common stock directly held by Mr.
Langner, (ii) four-year warrants to purchase 50,000 shares of common
stock at an exercise price of $1.25 per share, and (iii) 50,000 shares
of common stock issuable on the exercise of vested options. See
"Certain Relationships and Related Transactions - August 1999 Private
Placement."
(14) Includes (i) 40,000 shares of common stock directly held by Mr. Garcia,
(ii) four-year warrants to purchase 20,000 shares of common stock at an
exercise price of $1.25 per share, and (iii) 50,000 shares of common
stock issuable on the exercise of vested options. See "Certain
Relationships and Related Transactions - August 1999 Private
Placement."
(15) Includes 33,334 shares of common stock issuable on the exercise of
vested options.
EXECUTIVE OFFICERS
Our executive officers 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 our executive officers are
listed in the following table:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Charles T. Goodson.............. 44 President, Chief Executive Officer and Director
Alfred J. Thomas, II ........... 63 Chief Operating Officer and Director
Ralph J. Daigle ................ 52 Senior Vice President of Exploration and
Director
Robert R. Brooksher ............ 49 Chief Financial Officer, Secretary and Director
</TABLE>
11
<PAGE> 14
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table provides information
concerning compensation paid or accrued during the fiscal years ended December
31, 1999, 1998 and 1997 to our chief executive officer and each of our other
executive officers determined at the end of the last fiscal year:
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------- ------------
NAME AND OTHER ANNUAL NUMBER OF ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- --------------------------------- ---- ----------- ------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Charles T. Goodson .............. 1999 145,385 (1) - - - -
President and Chief Executive 1998 70,000 (2) - - 66,000 (3) -
Officer 1997 - - - - -
Alfred J. Thomas, II ............ 1999 145,385 (1) - - - -
Chief Operating Officer 1998 70,000 (2) - - 66,000 (3) -
1997 - - - - -
Ralph J. Daigle ................. 1999 124,615 (1) - - - -
Senior Vice President of 1998 60,000 (2) - - 60,000 (3) -
Exploration 1997 - - - - -
Robert R. Brooksher ............. 1999 124,615 (1) - - - -
Chief Financial Officer and 1998 60,000 (2) - - 38,000 (3) -
Secretary 1997 - - - - -
</TABLE>
- --------------------------------
(1) Messrs. Goodson's, Thomas', Daigle's and Brooksher's employment
agreements provide for annual salaries of $210,000, $210,000, $180,000
and $180,000, respectively; however, Messrs. Goodson, Thomas, Daigle and
Brooksher agreed to temporarily reduce their respective salaries payable
under their respective employment agreements. See "Employment
Contracts."
(2) Messrs. Goodson, Thomas, Daigle and Brooksher joined us on September 1,
1998.
(3) These options vest in 1/3 installments on each of December 31, 1998,
December 31, 1999 and December 31, 2000 and have an exercise price of
$.8479 per share.
Aggregated Option Exercises In Last Fiscal Year and Year-End Option
Values. The following table provides information concerning the number of
unexercised options and the value of in-the-money options held by the executive
officers named in the Summary Compensation Table as of December 31, 1999:
<TABLE>
<CAPTION>
SHARES NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED ON VALUE OPTIONS AT FY-END IN-THE-MONEY OPTIONS (1)
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles T. Goodson - - 44,000 22,000 $32,819.60 $16,409.80
Alfred J. Thomas, II - - 44,000 22,000 $32,819.60 $16,409.80
Ralph J. Daigle - - 40,000 20,000 $29,836.00 $14,918.00
Robert R. Brooksher - - 25,334 12,666 $18,896.63 $9,447.57
</TABLE>
- ---------------------------
(1) Value of in-the-money options is calculated based on the closing price
per share of our common stock at December 31, 1999 ($1.5938 per share)
as reported by The Nasdaq Stock Market.
12
<PAGE> 15
Employment Contracts. On September 1, 1998, we entered into employment
agreements with the following directors and executive officers providing for the
following annual salaries:
Name Salary
- ---- --------
Charles T. Goodson $210,000
Alfred J. Thomas, II $210,000
Ralph T. Daigle $180,000
Robert R. Brooksher $180,000
Each of the employment agreements:
o has a term of three years with automatic one-year renewals
thereafter unless terminated,
o provides for termination with or without cause, with 12 months
severance provided in the event of termination without cause, and
o contains 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.
In January 1999, Messrs. Goodson, Thomas, Daigle and Brooksher agreed to
temporarily reduce their annual salaries payable under the employment agreements
by one-third for an undetermined period of time due to the then economic
conditions in the oil and gas exploration and production industry. In January
2000, our board of directors granted Messrs. Goodson, Thomas, Daigle and
Brooksher 22,000, 22,000, 18,500, 18,500 shares of our common stock,
respectively, and $22,000, $22,000, $18,500 and $18,500 in cash, respectively,
as compensation for their reduction in salary in 1999.
Termination Agreements. In December 1998, we entered into agreements
with Messrs. Goodson, Thomas, Daigle and Brooksher providing for the payment of
severance benefits upon a "change in control" and termination of the executive's
employment. Each of the agreements continues until December 31, 2001; provided,
however, that beginning on January 1, 2002 and each January 1 thereafter, the
term of each of the agreements is automatically extended for one additional year
unless, not later than September 30 of the preceding year, we give notice of our
intent not to extend any of the agreements. Even if we timely give the notice,
each of the agreements will automatically be extended for 24 months beyond its
term if a "change in control" occurred during the term of any of the agreements.
If an executive's employment is terminated following a "change in control" other
than for cause or by an executive for good reason, the executive will be
entitled to:
o a lump sum cash payment equal to two multiplied by the sum of the
executive's then annual base salary and the executive's most
recent annual bonus;
o life insurance, health, disability and other welfare benefits for
a twenty-four month period; and
o if an executive becomes entitled to any severance benefits or
other payments or benefits under the agreements by reason of
accelerated vesting of stock options thereunder, and if any of the
total benefits will be subject to the excise tax, an additional
cash payment to make the executive whole for the excise tax
liabilities 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 income tax, excise tax and FICA and
Medicare withholding taxes upon the payment provided hereunder, is
equal to the total benefits.
The executive is not entitled to any benefits under each of the agreements if
the executive's employment terminates due to:
o executive's retirement at age 65,
13
<PAGE> 16
o executive's total and permanent disability, or
o executive's death.
In July 1999, the termination agreements were amended to exclude from
the definition of "change in control" designated transactions resulting in
consideration to the company or our stockholders having a value of less than a
$1.00 per share, unless the designated transaction is approved by two-thirds of
our voting securities.
Compensation Committee Interlocks and Insider Participation. The
current members of the Compensation Committee are Robert L. Hodgkinson, Daniel
G. Fournerat and Francisco A. Garcia; however, Mr. Hodgkinson is not standing
for re-election at the annual meeting. In connection with the merger with
American Explorer, L.L.C. in September 1998, Mr. Hodgkinson entered into a
consulting agreement with us. 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 our outside counsel since September 1998. See
"Certain Relationships and Related Transactions - Outside Counsel." In
connection with our private placement to accredited investors in August of 1999,
Mr. Garcia purchased 40,000 shares of our common stock and warrants to purchase
an additional 20,000 shares of our common stock and is named as a selling
shareholder in our resale Registration Statement No. 333-89961. See "Certain
Relationships and Related Transactions - August 1999 Private Placement." In
addition, Mr. Garcia holds an ownership interest in CRM Exploration, LLC, an
affiliate of Cramer Rosenthal McGlynn, LLC, a beneficial owner of more than five
percent of our common stock. CRM Exploration has entered into a participation
agreement with us to participate in certain of our energy exploration programs.
See "Certain Relationships and Related Transactions -CRM Exploration, LLC."
Compensation Committee Report On Executive Compensation. The
Compensation Committee is comprised of outside directors whose role is to
recommend to the board of directors the compensation to be paid to our officers
and key employees 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 Stock Incentive Plan,
and other forms of direct or indirect compensation of officers and key
employees. Presently, Charles T. Goodson, our president and chief executive
officer, Alfred J. Thomas, II, our chief operating officer, Ralph J. Daigle, our
senior vice president of exploration, and Robert R. Brooksher, our chief
financial officer and secretary, are compensated pursuant to employment
agreements effective at the time of the merger with American Explorer, L.L.C. in
September 1998. See "Executive Compensation - Employment Contracts and -
Termination Agreements."
Daniel G. Fournerat
Francisco A. Garcia
14
<PAGE> 17
Performance Graph. The following graph illustrates the yearly
percentage change in the cumulative shareholder return on our common stock,
compared with the cumulative total return on the Nasdaq Stock Market (U.S.
Companies) Index and the Nasdaq Stocks - Crude Petroleum and Natural Gas
Extraction Index, for the five years ended December 31, 1999.
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, 1994
[GRAPH]
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
----------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PetroQuest Energy, Inc.......... 100 71.9 60.1 28.5 20.6 40.3
Nasdaq.......................... 100 141.3 173.9 213.1 300.4 556.0
Nasdaq E&P...................... 100 105.1 151.9 144.7 70.3 72.1
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Leuschner Consulting Agreements. In the merger with American Explorer,
L.L.C. in September 1998, we entered into consulting agreements with Leuschner
International Resources, Ltd., a private company of which the chairman and
principal shareholder is William S. Leuschner, our former chairman of the board.
Under the consulting agreement, Mr. Leuschner, through Leuschner International
Resources Ltd., may provide consulting services at our 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. In
the merger, we entered into a second consulting agreement whereby Mr. Leuschner
provides consulting services for a one-year period after the merger for a total
compensation of US $150,000. For the next two years, Mr. Leuschner may provide
consulting services at our request
15
<PAGE> 18
at a rate of US $1,000 per day. Under the second consulting agreement, Mr.
Leuschner is reimbursed for all reasonable traveling and other out-of-pocket
expenses incurred in the performance of his duties. The second consulting
agreement may be terminated only for cause following notice to Mr. Leuschner and
expiration of a 30 day cure period. In January 1999, Mr. Leuschner agreed to
temporarily reduce the amounts payable under the consulting agreements by
one-third for an undetermined period of time due to the then economic conditions
in the oil and gas exploration and production industry. In December 1999, the
board of directors granted Mr. Leuschner 14,500 shares of our common stock and
$14,500 as compensation for the reduction in the amounts payable under the
consulting agreements in 1999. Mr. Leuschner is not standing for re-election at
the annual meeting.
Hodgkinson Consulting Agreement. In the merger with American Explorer,
L.L.C. in September 1998, we entered into a consulting agreement with Hodgkinson
Equities Corporation, a private company of which the principal shareholder is
Robert L. Hodgkinson, a former member of the board of directors. Under the
consulting agreement, Mr. Hodgkinson, through Hodgkinson Equities Corporation,
may provide consulting services at our request for a three-year period after the
merger at a rate of CDN $575 per day. The consulting agreement may be terminated
on 30 days' notice by either party. Mr. Hodgkinson is not standing for
re-election at the annual meeting.
Outside Counsel. Daniel G. Fournerat, a member of our board of
directors and who practices law with the Lafayette, Louisiana law firm of
Onebane, Bernard, Torian, Diaz, McNamara & Abell, serves as our outside counsel.
Working Interest Owners. Certain of our officers and directors and
their affiliates are working interest owners in certain properties operated by
us and are billed for and pay their proportionate share of drilling and
operating costs in the normal course of business.
August 1999 Private Placement. In a private placement to accredited
investors in August of 1999, Cramer Rosenthal McGlynn, LLC, a beneficial owner
of more than five percent of our common stock, and its affiliates and investment
advisory clients, and Francisco A. Garcia, William W. Rucks, IV, E. Wayne
Nordberg and his wife and Jay B. Langner, our directors, purchased 1,936,000,
40,000, 450,000, 120,000 and 100,000 shares of our common stock, respectively,
and four-year warrants to purchase an additional 968,000, 20,000, 225,000,
60,000 and 50,000 shares of our common stock at an exercise price of $1.25 per
share. The shares of common stock issued or issuable under the warrants in the
private placement were registered with the Securities and Exchange Commission
pursuant to our resale Registration Statement No. 333-89961, which was declared
effective on February 3, 2000.
In connection with the private placement, we agreed, among other
things, to increase the number of directors comprising our board of directors by
two and to fill the vacancies by persons designated by Cramer Rosenthal and Mr.
Rucks, or a person designated by him, subject to certain conditions. On
September 14, 1999 and October 20, 1999, respectively, Francisco A. Garcia, the
Cramer Rosenthal designee, and Mr. Rucks, were elected to serve as members of
our board of directors. Additionally, Mr. Garcia was appointed to serve as a
member of the Compensation Committee of our board of directors. In connection
with their election to our board of directors, Messrs. Garcia and Rucks were
granted nonstatutory stock options to purchase 50,000 shares of our common stock
each at exercise prices of $1.50 and $1.69 per share, respectively.
CRM Exploration, LLC. In the fourth quarter of 1999, we reached an
understanding with CRM Investors, Inc. that allows CRM Investors to participate
in certain of our energy exploration programs through PetroQuest Energy One,
L.L.C., one of our subsidiaries, and CRM Exploration, LLC. CRM Investors holds a
1% ownership interest in and is the managing member of CRM Exploration. Certain
of the remaining 99% ownership interests in CRM Exploration are held by certain
of the participants in the August 1999 Private Placement, including Francisco A.
Garcia (through Nethuns, Inc.) and Jay B. Langner, our directors, or by
affiliates of certain of such participants, including Cramer Rosenthal McGlynn,
LLC, a beneficial owner of more than five percent of our common stock, named as
"Selling Stockholders" in our resale Registration Statement No. 333-89961, which
was declared effective by the Securities and Exchange Commission on February 3,
2000. CRM Investors and CRM, Inc. are beneficially owned by the same
stockholders although in different proportions. In turn, CRM, Inc. holds a 66%
ownership interest
16
<PAGE> 19
in Cramer Rosenthal McGlynn, LLC. CRM Exploration's initial investment in the
energy exploration programs is expected to be about $3.4 million. As a result of
the understanding, on December 15, 1999, PetroQuest Energy One and CRM
Exploration entered into a participation agreement, effective as of October 1,
1999, under which CRM Exploration purchased from PetroQuest Energy One an
undivided seven percent of eight eighths (7% of 8/8ths) interest in a federal
oil and gas lease known as Vermilion Block 376 located in the federal outer
continental shelf waters of the Gulf of Mexico in accordance with the terms of
the agreement. In addition, on January 18, 2000, PetroQuest Energy One and CRM
Exploration entered into an exploration agreement, effective as of September 1,
1999, under which CRM Exploration purchased from PetroQuest One an undivided
five percent of eight eighths (5% of 8/8ths) interest in various oil, gas and
mineral leases known as the Valentine Field located in Lafourche, Louisiana in
accordance with the terms of the agreement. It is expected that PetroQuest
Energy One and CRM Exploration will enter into additional agreements, under
which CRM Exploration will purchase various interests in the energy exploration
programs. We entered into the understanding with CRM Investors and the
participation agreement with CRM Exploration to obtain additional capital to
finance our energy exploration programs. We believe that the understanding and
the terms of the participation agreement were negotiated on an arm's length
basis and were made on terms no less favorable than could have been obtained
from other third parties.
AUDITORS
On December 16, 1998, our board of directors determined to replace KPMG
LLP as our principal accountant with Arthur Andersen LLP.
KPMG's report on our financial statements for the fiscal year of 1997
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 fiscal year of 1997 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. We have authorized KPMG to respond fully to any inquiries by
Arthur Andersen.
While management anticipates that our relationship with Arthur Andersen
will continue to be maintained during 2000, 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 our directors and executive officers, and persons who own more than 10%
of our equity securities to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of our common
stock. Officers, directors and greater than 10% stockholders are required by SEC
regulation to furnish us with copies of all Section 16(a) reports they file.
To our knowledge, based solely on review of the copies of such reports
furnished to us and written representations that no other reports were required,
during the fiscal year ended December 31, 1999, our officers, directors and
greater than 10% beneficial owners timely filed all required Section 16(a)
reports, except that in initial statements of beneficial ownership of securities
of Francisco A. Garcia and William W. Rucks, IV were incomplete as originally
filed and were subsequently amended.
17
<PAGE> 20
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. Individual investors may request the Company's Form 10-K,
Form 10-Q and other information by calling (337) 232-7028 or write to the
address below:
PetroQuest Energy, Inc.
Corporate Communications
400 E. Kaliste Saloom Road, Suite 3000
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.
Sincerely,
/s/ ROBERT R. BROOKSHER,
Robert R. Brooksher,
Chief Financial Officer and Secretary
April 24, 2000
18
<PAGE> 21
PETROQUEST ENERGY, INC.
THE BOARD OF DIRECTORS SOLICITS THIS PROXY FOR THE
ANNUAL MEETING ON MAY 23, 2000
PROXY
FOR
ANNUAL
MEETING
OF
STOCKHOLDERS
MAY 23, 2000
The undersigned stockholder of PetroQuest Energy, Inc. (the "Company")
hereby appoints Charles T. Goodson and Robert R. Brooksher, or either of them,
the true and lawful attorneys, agents and proxies of the undersigned, each with
full power of substitution, to vote on behalf of the undersigned at the Annual
Meeting of Stockholders of the Company to be held at the offices of the Company,
located at 400 E. Kaliste Saloom Road, Suite 3000, Lafayette, Louisiana 70508,
on Tuesday, May 23, 2000, at 10:00 a.m., 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 Charles T. Goodson, Alfred J. Thomas, II,
Ralph J. Daigle, Robert R. Brooksher, Daniel G. Fournerat, Francisco
A. Garcia, William W. Rucks, IV, E. Wayne Nordberg and Jay B.
Langner.
<TABLE>
<S> <C>
[ ] Charles T. Goodson [ ] Alfred J. Thomas, II
-------------- --------------
[ ] Ralph J. Daigle [ ] Robert R. Brooksher
----------------- ---------------
[ ] Daniel G. Fournerat [ ] Francisco A. Garcia
------------- ---------------
[ ] William W. Rucks, IV [ ] E. Wayne Nordberg
------------ ---------------
[ ] Jay B. Langner
-----------------
</TABLE>
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. APPROVAL OF THE AMENDMENT TO THE 1998 STOCK INCENTIVE PLAN
[ ] For [ ] Against [ ] Abstain
3. [ ] 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.
(THIS PROXY MUST BE DATED AND SIGNED ON THE REVERSE SIDE.)
<PAGE> 22
(CONTINUED FROM OTHER SIDE)
PROXY
FOR
ANNUAL
MEETING
OF
STOCKHOLDERS
MAY 23, 2000
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this Proxy will
be voted (i) FOR the election of the nominees above, (ii) FOR the amendment of
the 1998 Stock Incentive Plan, and (iii) in accordance with the 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 ____________________, 2000
----------------------------------------
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
