- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of Commission Only (as permitted by Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
PANACO, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of 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 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 No.:
3) Filing Party:
4) Dated Filed:
PANACO, INC.
1100 Louisiana
Suite 5100
Houston, Texas 77002
Annual Meeting - May 27, 1999
April 23, 1999
Dear Fellow Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
of PANACO, Inc. to be held at 9:00 a.m., Thursday, May 27, 1999, at the Sheraton
Towers Hotel, 811 Seventh Avenue at 53rd Street, New York, New York 10019. Your
Board of Directors and management look forward to greeting personally those
stockholders able to attend.
At this Annual Meeting, as more fully set forth in the accompanying Notice
of Annual Meeting and Proxy Statement, stockholders are being asked to amend the
Certificate of Incorporation of the Company to increase the number of authorized
shares of Common Stock from 40 million to 100 million, and to amend the
Certificate of Incorporation and Bylaws of the Company to permit the holders of
25% or more of the outstanding shares of the Common Stock to call a special
meeting of stockholders or an annual meeting if not called by June 1 of any
year, to eliminate the classification of directors, and to provide that the term
of each director will be until the next annual meeting of stockholders. If such
amendments are adopted, the stockholders will also be asked to elect two
directors to serve for a one-year term. If such amendments are not adopted, the
stockholders will be asked to elect two directors to serve for three-year terms.
It is very important that your shares are represented and voted at the
Annual Meeting, so we request your cooperation in promptly signing, dating and
mailing the enclosed WHITE proxy card in the envelope provided for your
convenience.
On behalf of your Board of Directors.
Sincerely,
/s/ Larry M. Wright
Larry M. Wright,
Chief Executive Officer and President
- --------------------------------------------------------------------------------
PLEASE SIGN, DATE AND MAIL PROMPTLY
THE ENCLOSED WHITE PROXY CARD
PANACO, INC.
1100 Louisiana
Suite 5100
Houston, Texas 77002
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
The 1999 Annual Meeting of Stockholders (the "Annual Meeting") of PANACO, Inc.
(the "Company") will be held at the Sheraton Towers Hotel, 811 Seventh Avenue at
53rd Street, New York, New York 10019, on Thursday, May 27, 1999, at 9:00 a.m.
for the following purposes:
1. To consider a proposed amendment to the Certificate of Incorporation of
the Company to increase the number of authorized shares of the Company's Common
Stock from 40 million to 100 million;
2. To consider a proposed amendment to the Certificate of Incorporation and
Bylaws of the Company to permit the holders of 25% or more of the outstanding
shares of the Company's Common Stock to call (i) a special meeting of the
stockholders or (ii) an annual meeting of the stockholders if such annual
meeting has not been called by June 1 of any year;
3. To consider a proposed amendment to the Certificate of Incorporation and
Bylaws of the Company to eliminate the classification of the Directors of the
Company and to provide that the term of each Director shall continue until the
next annual meeting of stockholders and until his successor is elected and
qualified or until his earlier death, resignation or removal;
4. To elect two Directors with terms ending at the next annual meeting of
stockholders in the year 2000 if the stockholders approve item 3 above, or to
elect two Class I Directors for three-year terms ending at the annual meeting of
stockholders in the year 2002 if the stockholders do not approve item 3 above;
and
5. To act upon such other matters as may properly come before the Annual
Meeting.
Only stockholders of record at the close of business on April 16, 1999 will be
entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof. Please note that attendance at the Annual Meeting will be limited to
stockholders (or their authorized representatives) as of April 16, 1999, the
record date, and to guests of the Company.
YOUR VOTE IS IMPORTANT
The vote of each stockholder is important, regardless of the number of shares
held. Whether or not you plan to attend the Annual Meeting, please sign, date
and mail the accompanying proxy card promptly in the enclosed postage-paid
envelope. PLEASE NOTE THAT YOUR VOTE CANNOT BE COUNTED UNLESS YOU SIGN AND
RETURN THE PROXY CARD OR ATTEND THE MEETING AND VOTE IN PERSON. ACCORDINGLY, YOU
ARE URGED TO RETURN YOUR WHITE PROXY CARD AT YOUR EARLIEST CONVENIENCE.
Thank you for your cooperation and support.
/s/ Todd R. Bart
Todd R. Bart, Secretary
April 23, 1999
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PANACO, INC.
1100 Louisiana
Suite 5100
Houston, Texas 77002
PROXY STATEMENT
This Proxy Statement and the accompanying form of proxy are being mailed to
stockholders on or about April 23, 1999 in connection with the solicitation of
proxies by the Board of Directors of PANACO, Inc. (the "Company") for use at the
1999 Annual Meeting of the Stockholders to be held at 9:00 a.m. on Thursday,
May 27, 1999, and at any postponement or adjournment thereof (the "Annual
Meeting").
At the Annual Meeting, stockholders will be asked to:
1. To consider a proposed amendment to the Certificate of Incorporation of
the Company to increase the number of authorized shares of the Company's Common
Stock from 40 million to 100 million;
2. To consider a proposed amendment to the Certificate of Incorporation and
Bylaws of the Company to permit the holders of 25% or more of the outstanding
shares of the Company's Common Stock to call (i) a special meeting of the
stockholders or (ii) an annual meeting of the stockholders if such annual
meeting has not been called by June 1 of any year;
3. To consider a proposed amendment to the Certificate of Incorporation and
Bylaws of the Company to eliminate the classification of the Directors of the
Company and to provide that the term of each Director shall continue until the
next annual meeting of stockholders and until his successor is elected and
qualified or until his earlier death, resignation or removal;
4. To elect two Directors with terms ending at the next annual meeting of
stockholders in the year 2000 if the stockholders approve item 3 above, or to
elect two ClassI Directors for three-year terms ending at the annual meeting of
stockholders in the year 2002 if the stockholders do not approve item 3 above;
and
5. To act upon such other matters as may properly come before the Annual
Meeting.
On the record date, April 16, 1999, the outstanding voting securities of the
Company consisted of 23,985,927 shares of the Company's Common Stock, par value
$.01 per share ("Common Stock"), all of one class. Each share of Common Stock
has one vote on each matter presented for action at the Annual Meeting.
The cost of soliciting proxies will be borne by the Company. Copies of
solicitation material may be furnished to brokers, custodians, nominees and
other fiduciaries for forwarding to beneficial owners of shares of the Company's
Common Stock, and normal handling charges may be paid for such forwarding
service. Solicitation of proxies may be made by mail, personal interview,
telephone and facsimile by officers and other management employees of the
Company, who will receive no additional compensation for their services.
Voting
Shares of Common Stock can be voted at the Annual Meeting only if the
stockholder is represented by proxy or is present in person. A stockholder
giving a proxy in the accompanying form retains the power to revoke it by a
later dated appointment or by giving notice of revocation to the Company in
writing or by voting in open meeting. Any such notices should be directed to
Todd R. Bart, Secretary of the Company, at the address set forth above. Shares
of Common Stock for which proxies are properly executed and returned prior to
the Annual Meeting will be voted in accordance with the instructions contained
therein, or in the absence of contrary instructions, such shares will be voted:
(1) to amend the Certificate of Incorporation of the Company to increase the
number of authorized shares of the Company's Common Stock from 40 million to
100 million;(2)to amend the Certificate of Incorporation and Bylaws of the
Company to permit the holders of 25% or more of the outstanding shares of the
Company's Common Stock to call a special meeting of the stockholders or an
annual meeting of the stockholders if such annual meeting has not been called by
June 1; (3)to amend the Certificate of Incorporation and Bylaws to eliminate
the classification of Directors and to provide that the term of each director
shall continue until the next annual meeting of stockholders; (4) to elect two
directors with terms ending at the next annual meeting of stockholders in the
year 2000 if the stockholders approve the elimination of the classification of
directors, or to elect two Class I directors for three year terms ending at the
annual meeting of stockholders in the year 2002 if the stockholders do not
approve the termination of classification of directors; and (5) to act in the
proxies' discretion upon such other matters as may properly come before the
Annual Meeting.
Abstentions and broker non-votes are each included in the determination of the
number of shares present and voting for the purposes of determining the presence
of a quorum. A proxy submitted by a stockholder may indicate that all or a
portion of the shares represented by such proxy have not been voted by such
stockholder with respect to a particular matter. This may occur, for example,
when a broker is not permitted to vote stock held in street name on certain
matters in the absence of instruction from the beneficial owner of the stock.
The shares subject to any such proxy which have not been voted with respect to a
particular matter (the "Non-Voted Shares") will be treated as shares not present
and entitled to vote on such matter, although such shares may be considered
present and entitled to vote for other purposes and will count for purposes of
determining the presence of a quorum. Shares voted to abstain as to a particular
matter will not be considered Non-Voting Shares.
The proposed amendment to the Certificate of Incorporation to increase the
number of authorized shares from 40 million to 100 million requires a vote
approving such amendment of the
Page 2
majority of the Company's outstanding shares of Common Stock. Thus, Non-Voted
Shares and abstentions will be treated the same as a vote against such
amendment.
The proposed amendments to the Certificate of Incorporation and Bylaws
authorizing 25% or more of the outstanding shares of the Company to call a
special or, in certain circumstances, an annual meeting as well as the amendment
to eliminate the classification of the Board of Directors requires an
affirmative vote of 66-2/3% of the outstanding shares of Common Stock. Thus,
Non-Voted Shares and abstentions will be treated the same as a vote against such
proposals.
The election of directors requires a plurality of the votes. Thus, abstentions
and Non-Voted Shares will not affect the outcome of the election of directors.
YOUR VOTE IS IMPORTANT. Please sign, date and promptly mail your proxy card so
that a quorum may be represented at the Annual Meeting.
Page 3
BOARD OF DIRECTORS
General Information
The Board of Directors has the responsibility for establishing broad corporate
policies and for the overall performance and governance of the Company, although
it is not involved in day-to-day operating details. Directors are kept informed
of the Company's business by various reports and documents, as well as by
operating and financial reports presented at Board and committee meetings by the
Chairman and other officers.
Meetings of the Board of Directors are regularly held each quarter and following
the Annual Meeting. Additional meetings of the Board, including meetings by
telephone conference call, may be called whenever needed. The Board of Directors
of the Company held 14 meetings in 1998, eight of which were meetings by
telephone conference call. During that period, each incumbent director attended
at least 75% of the total number of meetings of the Board of Directors that were
held after his election to the Board.
ELECTION OF DIRECTORS
(Item 4 on Proxy Card)
The Board of Directors of the Company presently consists of nine members, eight
of whom are independent non-employees of the Company. Pursuant to a Board
resolution adopted in August 1998, the number of directors constituting the full
Board of Directors was reduced from eleven (11) to nine (9). The Board of
Directors following the 1999 Annual Meeting is proposed to be made up of eight
(8) directors. The Company's Certificate of Incorporation requires that the
directors be divided into three classes, with an equal number of directors in
each class when possible. At each annual meeting of stockholders, directors
constituting a class are elected to hold office until the third annual meeting
of stockholders following their election. The term of the present Class I
Directors expires in 1999. The Board of Directors has nominated
Messrs. Stautberg and Pardo for re-election as directors in Class I. Mr.Springs
has determined not to stand for re-election. The three directors in Class II
continue to serve until the 2000 annual meeting of stockholders and the three
directors in Class III continue to serve until the 2001 annual meeting of
stockholders, and until their respective successors are elected and qualified.
However, if Item 3 on the Proxy Card is approved by the stockholders, the
classes of directors will be eliminated and the term of each director will
continue only until the 2000 annual meeting (or until his successor is elected
and qualified). If Item 3 is not approved, the term of the Class I Directors,
will continue until the 2002 annual meeting of stockholders and the Class II and
Class III Directors' terms will remain as previously approved by the
stockholders.
It is intended that shares of Common Stock represented by the accompanying form
of proxy will be voted for the election of the nominees, unless contrary
instructions are indicated as provided on the proxy card. If you do not wish
your shares to be voted for a particular nominee, you may so indicate on the
proxy card. The shares of Common Stock vote as a single class for the election
of directors. If one or more of the nominees should at the time of the meeting
be unavailable or unable to serve as a candidate, the shares represented by the
proxies will be voted to elect the remaining
Page 4
nominees and any substitute nominee or nominees designated by the Board of
Directors. The Board of Directors knows of no reason why any of the nominees
will be unavailable or unable to serve.
For each director of the Company, including those nominated for election,
following is a brief description of each nominee or director's principal
occupation and business experience during the last five years, directorships of
publicly held companies presently held by any nominee or director, age, and
certain other information. When indicating the tenure with the Company of each
director, the "Company" means the present corporation (post-August 1992) and Pan
Petroleum MLP ("PAN") (pre-September 1992).
Class I Directors and Nominees
A. Theodore Stautberg, Jr., age 52. Mr. Stautberg, a Director of the Company
since 1993, has since 1981 been the President and a director of Triumph
Resources Corporation and its parent company, Triumph Oil and Gas Corporation of
New York. Triumph engages in the oil and natural gas business, assists others in
financing energy transactions, and serves as general partner of Triumph
Production L.P. Mr. Stautberg is also the President and a director of Triumph
Securities Corporation and BT Energy Corporation. Prior to forming Triumph in
1981, Mr. Stautberg was a Vice President of Butcher & Singer, Inc., an
investment-banking firm, from 1977 to 1981. From 1972 to 1977, Mr. Stautberg was
an attorney with the Securities and Exchange Commission. Mr. Stautberg is a
graduate of the University of Texas and the University of Texas School of Law.
He serves on the Executive Committee.
Felix Pardo, age 61. Mr. Pardo, a Director of the Company since 1999, serves as
a member of the Board of Directors of Innovative Valve Technologies, an oilfield
services company, Newalta Corp., an oilfield waste company, and Philip Services
Corp., a metals recycling and industrial services company. From July 1998 to the
present, he has acted as chairman of Dyckerhoff, Inc., a cement and building
materials company. From March 1998 through November 1998 he was President of
Philip Services Corp. From May 1992 through March 1998, he served as President
of Ruhr American Coal Corporation and Chairman of Newalta Corp. Mr.Pardo was
elected to fill a vacancy on the Board of Directors pursuant to an agreement
between High River Limited Partnership and the Company in connection with the
purchase of Common Stock by High River Limited Partnership from Leonard
Tallerine, formerly a member of the Board of Directors. He serves on the
Compensation Committee. Mr. Pardo received an MBA degree from the Wharton
Business School of the University of Pennsylvania in 1963 and a B.A. in
economics from Brown University in 1960.
Michael Springs, age 49. Mr. Springs, a Director of the Company since 1996, is
the President and founder of Ortho-Care, Inc. of Kansas City, Missouri and
Ortho-Care Southeast of Charlotte, North Carolina. Ortho-Care, Inc. is a
manufacturer of Orthopedic fracture management and sports medicine products, and
holds a number of patents in the field. Mr. Springs is also controlling partner
in OrthoImplants, a distributor of total joint replacement prosthesis. He serves
on the Compensation Committee. Mr. Springs graduated from the Medical Field
Service School, Brooke Hospital, San Antonio, Texas in 1971 and the University
of Missouri, Kansas City, in 1969
Page 5
with a degree in Business. Mr. Springs has determined not to run for re-election
to the Board of Directors in 1999.
Class II Directors
Larry M. Wright, age 54. Mr. Wright has been a Director of the Company since
1992. Mr. Wright was elected Chief Executive Officer of the Company in August
1998. From 1966 to 1976 he was with Union Oil Company of California (UNOCAL).
From 1976 to 1980, he was with Texas International Petroleum Corporation,
ultimately as division operations manager. From 1980 to 1981, he was with what
is now Trans Texas Gas Company as Vice President-Exploration and Production.
From 1981-1982, he was Senior Vice President of Operations for Texas
International Petroleum Corporation, and, from 1983 to 1985, he was Executive
Vice President of Funk Fuels Corp., a subsidiary of Funk Exploration. From 1985
to 1993, Mr. Wright was an independent consultant to the Company and its
predecessors. From 1993 to 1997, he served as Executive Vice President of the
Company and from October 1997 to August 1998, he served as President and Chief
Operating Officer. Mr. Wright received his B.S. Degree in Chemical Engineering
from the University of Oklahoma in 1966.
Mark C. Barrett, age 48. Mr. Barrett, a Director of the Company since 1996, is
licensed to practice as a Certified Public Accountant in both Kansas and
Missouri. He was a partner in the accounting firm of Drees Dunn Lubow and
Company from 1974 until 1981. He founded Barrett & Associates, a certified
public accounting firm, in 1981 and is the president and majority stockholder in
that firm. His firm served as the Company's independent public accountants from
1985 to 1995. Mr. Barrett received his B.S. Degree in Business
Administration/Accounting in 1972.
Harold First, age 62. Mr. First became a director of the Company in
September 1997. Mr. First has been since January 1993 an independent financial
consultant. From December 1990 through January 1993, Mr. First served as Chief
Financial Officer of Icahn Holding Corp., a privately-held holding company, and
related entities. He has been a director of Taj Mahal Holding Corporation, a
public casino and gaming corporation, and a director of Trump Taj Mahal Realty
Corporation, a privately-held real estate company, from October 1991 until
September 1996. He was a member of the Supervisory Board of Directors of Memorex
Telex N.V., a public technology company, from February 1992 until February 1997,
and has been a director of Tel-Save.Com, a public long distance telephone
service company since September 1995. Mr. First has been a director of the Cadus
Pharmaceutical Corporation since April 1995, and a director of Philip Services
Corporation, a leading integrated provider of industrial and metals service,
since November 1998. Mr. First was a director of Trans World Airlines, Inc., a
public airline company from December 1990 through January 1993; a director ACF
Industries, Inc., a privately-held railcar leasing and manufacturing company,
from February 1991 through December 1992; Vice Chairman of the Board of
Directors of American Property Investors, Inc., the general partner of American
Real Estate Partners, L.P., a public limited partnership that invests in real
estate, from March 1991 through December 1992; and a director of both Marvel
Entertainment Group, Inc., a public company that publishes comic books and
develops, sells and licenses comic books and the comic book characters, and Toy
Biz, Inc., a public company that markets and sells toys, from June 1997 through
April 1998. He is a Certified Public Accountant and holds a B.S. Degree from
Brooklyn College.
Page 6
Class III Directors
Donald W. Chesser, age 60. Mr.Chesser, a Director of the Company since 1992,
has served with several certified public accounting firms since that time,
including eight years with Elmer Fox and Company. From 1977 to 1981, he was with
IMCO Enterprises, Inc. Since 1982 he has been a stockholder and President of
Chesser & Company, P.A., a certified public accounting firm. He is also
President of Financial Advisors, Inc., a registered investment advisor. He
serves on the Audit Committee. Mr. Chesser received his B.B.A. Degree in
Accounting from Texas Tech University in 1963.
James B. Kreamer, age 60. Mr. Kreamer, a Director of the Company since 1993, has
been active in investment banking since that time. Since 1982 he has managed his
personal investments. Mr. Kreamer is currently a director for Tengasco, Inc. He
serves on the Compensation Committee. Mr. Kreamer received his B.S. Degree in
Business from the University of Kansas in 1963.
Richard J. Lampen, age 45. Mr. Lampen has been a Director of the Company since
1999. From January 1991 to April 1992 he was a Managing Director of Salomon
Brothers Inc., an investment banking firm. From May 1992 through September 1995
he was a partner in the law firm of Steel Hector & Davis. Since that time he has
been Executive Vice President and General Counsel of New Valley Corporation, an
investment banking and real estate development firm. He has also served since
1996 as Executive Vice President of Brooke Group Ltd., a New York Stock Exchange
listed holding company, and BGLS Inc. (a subsidiary of Brooke Group Ltd.). He
has also acted as President and Chief Executive Officer since November 1998 of
CDSI Holdings, Inc., a manufacturer of an inventory control system. Mr. Lampen
is also a director of CDSI Holdings, Inc. and New Valley Corporation. Mr. Lampen
was elected to fill a vacancy on the Board of Directors in February 1999
pursuant to an agreement between New Valley Corporation and the Company in
connection with the purchase of Common Stock by New Valley Corporation from Mark
Licata, formerly a member of the Board of Directors. He serves on the Audit
Committee. Mr. Lampen received a J.D. from Columbia University Law School in
1978 and his B.A. Degree from Johns Hopkins University in 1975.
Committees of the Board
The committees established by the Board of Directors to assist it in the
discharge of its responsibilities are described below.
Audit Committee. The Audit Committee meets with management to consider the
adequacy of the internal controls of the Company and the objectivity of its
financial reporting. The Audit Committee recommends to the Board the appointment
of the independent accountants. The independent accountants periodically meet
alone with the Committee and have unrestricted access to the Committee. Members
of the Audit Committee are Donald Chesser, Richard Lampen and Harold First, The
Audit Committee met three times in 1998.
Page 7
Compensation Committee. The Compensation Committee makes recommendations to the
Board with respect to the compensation of senior management of the Company and
the PANACO, Inc. Long Term Incentive Plan (the "Long Term Incentive Plan").
Members of the Compensation Committee are Felix Pardo, James B. Kreamer and
Michael Springs. The Compensation Committee met two times in 1998.
Executive Committee. The Board established an Executive Committee in August 1998
and restated its Charter in February 1999. The Executive Committee consists of
two members. Members of the Executive Committee are A. Theodore Stautberg, Jr.
and Harold First. The Executive Committee has the authority to approve all
checks in excess of $10,000, expense reports of the Senior Executive Officers of
the Company, review all acquisitions or draws on the Company's line of credit,
and make all press releases. In addition, the Committee reviews all financial
statements, budgets, and other financial matters including hedging, drilling and
exploration costs and preparation of reserve reports.
The Company does not have a standing nominating committee.
Compensation of Directors
Non-employee directors are compensated for their services by receiving $2,000
for attending Board of Directors meetings, $500 for attending committee meetings
(not including Executive Committee meetings) and $500 for participating in
telephone meetings. Officers of the Company who serve as directors do not
receive additional compensation for serving on the Board of Directors or a
committee thereof. Directors are reimbursed for travel expenses incurred in
attending Board of Directors or committee meetings.
Each Director also receives $500 per month for reimbursement of expenses.
Non-employee members of the Executive Committee are paid $3,750 per month plus
reimbursement of reasonable out-of-pocket expenses for their services on such
committee.
During 1998, in lieu of certain Directors' cash compensation, Directors received
shares of Common Stock of the Company. In the aggregate, Directors received
40,573 shares of Common Stock in 1998.
EXECUTIVE OFFICERS
The following table provides information regarding the executive officers of the
Company who are not also a Director. The officers of the Company serve at the
discretion of the Board of Directors of the Company.
Name Age Since Position
Robert G. Wonish 45 1997 Senior Vice President
Todd R. Bart 34 1995 Chief Financial Officer, Secretary
Barbara A. Whitton 37 1997 Vice President - Marketing/Planning
Greg K. Sampson 44 1998 Vice President - Land, Assistant Secretary
Mr. Wonish has been with the Company since 1992. He served as Vice President
until his election in October 1997 as Senior Vice President.
Mr. Bart joined the Company as Controller in 1995 and was elected Chief
Financial Officer and Secretary in 1996. From 1992 until 1995 he worked for
Yellow Freight System, Inc., a trucking company, in financial accounting and
reporting. Mr. Bart is a certified public accountant.
Ms. Whitton was elected Vice President - Marketing/Planning of the Company on
August 1, 1997. Previously, she served as Manager of Revenue Accounting and Vice
President - Marketing/Planning and Analysis of Goldking Production Company from
December, 1993 until its acquisition by the Company.
Mr. Sampson was elected Vice President - Land and Assistant Secretary of the
Company in October, 1998. He joined the Company in April, 1998 as Land Manager.
From November, 1997 until April, 1998, he was a landman for Norcen Exploration.
From March, 1993 until November, 1997, he served as a Senior Landman and then
District Landman for American Exploration.
None of the companies mentioned in the descriptions of the business backgrounds
above is a parent, subsidiary, or other affiliate of the Company.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth information with respect to beneficial ownership
of the Company's Common Stock by (a) each executive officer of the Company
listed in the Summary Compensation Table and Director of the Company, (b) all
executive officers and Directors of the Company as a group, and (c) each person
who beneficially owns 5% or more of the Common Stock as of the Record Date.
Except as set forth in footnote (c) below, each stockholder has sole voting and
sole investment power over all shares.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Shares Owned Beneficially
Directors and Executive Officers Number Percent
Larry M. Wright; President and Chief Executive Officer........................ 1,094,561 4.56% (a)
Robert G. Wonish; Sr. Vice President.......................................... 116,705 * (b)
Todd R. Bart; Chief Financial Officer and Secretary........................... 53,987 * (c)
Mark C. Barrett; Director..................................................... 8,780 *
Donald W. Chesser; Director .................................................. 8,043 * (d)
Harold First; Director ....................................................... 9,099 *
James B. Kreamer; Director ................................................... 58,102 *
Richard J. Lampen; Director (g) ............................................. 0 *
Felix Pardo; Director ........................................................ 0 *
Michael Springs; Director..................................................... 9,340 *
A. Theodore Stautberg, Jr; Director........................................... 13,298 *
All Directors and Executive Officers as a group (13 persons) ................. 1,393,696 5.81% (e)
</TABLE>
Page 8
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Shares Owned Beneficially
Beneficial Owners of 5% or more (excluding persons named above) Number Percent
Carl C. Icahn (f) ............................................................ 4,584,921 19.12%
% Icahn Associates Corp.
767 Fifth Avenue, 47th Floor
New York, NY 10153
New Valley Corporation (g) .................................................. 2,118,479 8.83%
100 S.E. 2nd Street, 32nd Floor
Miami, FL 33131
Croft Leominster, Inc.(h)..................................................... 1,669,100 6.96%
207 East Redwood Street, Suite 802
Baltimore, MD 21202
Dolphin Offshore Partners (i)................................................. 1,590,800 6.63%
c/o Dolphin Management
129 East 17th Street
New York, NY 10003
* Less than 1%
</TABLE>
(a) Includes 400,000 currently exercisable options to purchase shares at
$4.45 per share. These options are exercisable any time before June 20, 2000.
However, the holder may not dispose of the shares acquired upon exercise for a
period of three years and must remain an employee of PANACO during that
three-year period. Otherwise, the shares may be reacquired by PANACO at the
person's cost, thereby denying them the benefit of the option. Also includes
47,561 shares allocated to the account of Mr. Wright under the Panaco, Inc.
Employee Stock Ownership Plan ("ESOP"). UMB Bank is the sole trustee of the ESOP
and as such has sole voting and investment power with respect to such shares.
Also includes 633,200 shares owned directly and indirectly by Mr. Wright, and
13,800 shares owned by Mr. Wright's individual retirement account, as to which
shares Mr. Wright has sole voting and investment power.
(b) Includes 40,000 currently exercisable options to purchase shares at
$4.45 per share, which options are subject to terms similar to those of Mr.
Wright's options. See footnote (a) above. Also includes 41,230 shares allocated
to Mr. Wonish's account in the ESOP. See footnote (a) above. Also includes
34,300 shares held by Mr. Wonish directly, as to which Mr. Wonish has sole
voting and investment power. Also includes 1,175 shares held in the individual
retirement account of Mr. Wonish's spouse.
(c) Includes 30,000 currently exercisable options to purchase shares at
$4.45 per share. See footnote (a) above. Also includes 21,487 shares allocated
to Mr. Bart's account in the ESOP. See footnote (a) above. Mr. Bart owns
directly and has sole voting and investment power over the remaining 2,500
shares.
Page 9
(d) Such shares are held by Chesser & Company, P.A., which is owned by Mr.
Chesser and his spouse.
(e) Includes 21,781 shares allocated to the accounts of certain executive
officers not named above under the ESOP. See footnote (a) above.
(f) Mr. Icahn is the sole stockholder of Riverdale Investors Corp. Inc.,
the general partner of High River Limited Partnership, the record holder of
these shares. Based on information filed with the Securities and Exchange
Commission on January 11, 1999.
(g) In connection with the purchase of 2,118,479 shares of Common Stock by
New Valley Corporation from Mark Licata, the Company agreed to cause a person
recommended by New Valley Corporation to be elected to the Board of Directors of
the Company. Mr. Richard Lampen, Executive Vice President and a Director of New
Valley Corporation, was elected as a member of the Board of Directors in
February 1999 pursuant to such arrangement. Mr. Lampen disclaims beneficial
ownership of the shares held by New Valley Corporation.
(h) Based on information filed with the Securities and Exchange Commission
on February 4, 1999.
(i) Based on information filed with the Securities and Exchange Commission
on March 22, 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the Company's officers and Directors and persons who own more
than ten percent of a registered class of the Company's equity securities to
file initial statements of beneficial ownership (Form 3) and statements of
changes in beneficial ownership (Forms 4 or 5) of Common Stock with the
Securities and Exchange Commission ("SEC"). Officers, Directors and greater than
ten-percent stockholders are required by SEC regulation to furnish the Company
with copies of all such forms they file.
The Company believes that its officers, Directors and greater than ten-percent
beneficial owners complied with all of these filing requirements in 1998, with
the exception of Larry M. Wright, who failed to timely report the 250,000 shares
of the Company Common Stock he acquired in 1997. Mr. Wright subsequently filed
the appropriate report.
Page 10
EXECUTIVE COMPENSATION
Summary Compensation Table.
The following table sets forth certain information concerning the annual
compensation paid to each person who served as the Company's Chief Executive
Officer during 1998 and each other executive officer serving at the end of 1998
whose compensation exceeded $100,000 during 1998.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Long Term Compensation
Annual Compensation Awards
Name and Other Annual Restricted Securities All Other
Principal Compensa- Stock Underlying Compensa-
Position Year Salary ($) Bonus ($)(a) tion (b) ($) Awards($) Options(#) tion ($)
H. James Maxwell (c) 1998 155,845 37,300 0 0 0 271,000(d)
Chairman and Chief 1997 215,100 21,400 22,500 0 600,000 0
Executive Officer 1996 166,900 0 22,500 0 0 0
Larry M. Wright (e) 1998 271,300 35,600 24,000 0 0 0
President and Chief 1997 205,500 20,500 22,500 0 400,000 0
Executive Officer 1996 160,300 0 22,500 0 0 0
Robert G. Wonish 1998 164,800 21,400 24,000 0 0 0
Senior Vice 1997 117,100 12,800 19,500 20,000 40,000 0
President - 1996 100,200 0 15,500 0 0 0
Operations
Todd R. Bart 1998 90,600 13,200 15,600 0 0 20,000(f)
Chief Financial 1997 60,500 6,500 10,100 10,000 30,000 0
Officer and Secretary 1996 48,700 0 7,300 0 0 0
</TABLE>
(a) Such bonuses were paid for services rendered in the previous year.
(b) Contributions to the accounts of the employees under the ESOP.
(c) Mr. Maxwell resigned from his position as Chairman and Chief Executive
Officer in August 1998.
(d) Represents severance payments made to Mr. Maxwell in 1998 and 1999.
(e) Mr. Wright was elected as Chief Executive Officer in August 1998.
(f) Moving expense allowance paid to Mr. Bart for his move from Kansas City
to Houston in connection with the relocation of the Company's principal
office.
Aggregate Option and Warrant Exercises.
The Company did not grant any options in the year ended December 31, 1998 to any
of the persons listed in the Summary Compensation Table. The following table
provides information relating to the number and value of Common Stock subject to
options exercised during 1998 or held by the named executive officers as of
December 31, 1998.
Page 11
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Number of Value of Unexercised
Securities Underlying In-the-Money Options
Unexercised Options at Year-End ($)
Shares Acquired Value At Fiscal Year End (#) Exercised/Unexercised
Name Upon Exercise (#) Realized ($) Exercisable/Unexercisable (a)
H. James Maxwell - - 600,000/0 -0-
Larry M. Wright - - 400,000/0 -0-
Robert G. Wonish - - 40,000/0 -0-
Todd R. Bart - - 30,000/0 -0-
</TABLE>
(a) All options are exercisable at prices above the closing price of the
Company's Common Stock on December 31, 1998.
Employment Agreements and Change-in-Control Arrangements
Effective September 1, 1998, the Company entered into an Employment Agreement
with Larry M. Wright pursuant to which Mr. Wright serves as President and Chief
Executive Officer of the Company. The Agreement is for a term of three years and
automatically renews for consecutive terms of two years unless terminated by
either party. The Employment Agreement provides that Mr. Wright will receive a
base salary of $285,000, plus a supplemental payment on March 31, 1999 of all
interest accrued through February 28, 1999 on the Promissory Note described
under "Certain Relationships and Related Transactions" and, thereafter, on a
monthly basis, a supplemental payment in an amount equal to the interest accrued
on such note during the preceding month. Mr. Wright is also entitled to
participate in the Company's employee benefit plans, to receive life and
disability insurance coverage, and to reimbursement of reasonable expenses in
connection with his duties. As partial consideration for the Agreement,
Mr. Wright has agreed to keep confidential all information he receives in
connection with his duties and has further agreed not to solicit any employees
of the Company for a period of two years following such employment. Pursuant to
the Agreement, Mr. Wright may be terminated for Cause, as defined in the
Agreement, in which case he would not be entitled to any further payments. He
may also be terminated other than for Cause or upon his death or disability.
Mr. Wright is required to give 90 days prior written notice of any voluntary
termination. Upon termination by the Company other than for Cause or upon death
or disability, or upon termination by Mr. Wright because of a change in
conditions, he is entitled to receive his base salary for a period of 24 months
if such termination occurs after September 1, 1999 or, if such termination
occurs before September 1, 1999, for the period ending August 31, 2001, and all
options held by Mr. Wright become immediately vested.
The Company has also entered into a letter agreement with Todd R. Bart, the
Chief Financial Officer and Secretary of the Company, providing that Mr. Bart
will be entitled to receive insurance coverage and severance payments equal to
his base salary for a period of one year upon certain events including a change
in control of the Company.
Page 12
Compensation Committee Interlocks and Insider Participation
During the last fiscal year, James B. Kreamer, Michael Springs, Michael Licata
and A. Theodore Stautberg served on the Compensation Committee of the Board of
Directors of the Company. None of them has ever served as an officer of the
Company.
Compensation Committee Report on Executive Compensation
Objectives and Approach
The overall goals of the Company's executive compensation program are: (i) to
encourage and provide an incentive to its executive officers to achieve the
Company's strategic business and financial goals, both short-term and long-term,
and thereby enhance stockholder value, (ii) to attract and retain well-qualified
executive officers and (iii) to reward individuals for outstanding job
performance in a fair and equitable manner when measured not only with respect
to the Company's internal performance goals but also the Company's performance
in comparison to its peers. The components of the Company's executive
compensation are salary, incentive bonuses and awards under its Long Term
Incentive Plan and Employee Stock Ownership Plan, each of which assists in
achieving the program's goals.
Long Term Incentive Plan
The Company's Long-Term Incentive Plan provides for the granting, to certain
officers and key employees of the Company and its participating subsidiaries, of
incentive awards in the form of stock options, stock appreciation rights
("SARS"), stock, and cash awards. The Long-Term Incentive Plan is administered
by a committee of independent members of the Board of Directors (the "Plan
Committee") with respect to awards to certain executive officers of the Company
but may be administered by the Board of Directors with respect to any other
awards. Except for certain automatic awards, the Plan Committee has discretion
to select the employees to be granted awards, to determine the type, size, and
terms of the awards, to determine when awards will be granted, and to prescribe
the form of the instruments evidencing awards.
Options, which include nonqualified stock options and incentive stock options,
are rights to purchase a specified number of shares of Common Stock at a price
fixed at the time the option is granted. Payment of the option price may be made
with (i) cash, (ii) other Common Stock presently owned by the optionee valued at
the then current market price, or (iii) a combination of both. Options are
exercisable at the time and on the terms that the Plan Committee determines.
SARs are rights to receive a payment, in cash or Common Stock or both, based on
the value of the Common Stock. A stock award is an award of Common Stock or
denominated in Common Stock. Cash awards are generally based on the extent to
which pre-established performance goals are achieved over a pre-established
period but may also include individual bonuses paid for previous, exemplary
performance. The Plan Committee determines performance objectives and award
levels before the beginning of each plan year.
Page 13
The Long-Term Incentive Plan allows for the satisfaction of a participant's tax
withholding with respect to an award by the withholding of Common Stock issuable
pursuant to the award or the delivery by the participant of previously owned
Common Stock, in either case valued at the fair market value, subject to
limitations the Plan Committee may adopt.
Awards granted pursuant to the Long-Term Incentive Plan may provide that, upon a
change of control of the Company, (a) each holder of an option will be granted a
corresponding SAR (b) all outstanding SARs and stock options become immediately
and fully vested and exercisable in full, and (c) the restriction period on any
restricted stock award shall be accelerated and the restriction shall expire.
The Long-Term Incentive Plan provides for the issuance of a maximum number of
shares of Common Stock equal to 20% of the total number of shares of Common
Stock outstanding from time to time. Unexercised SARs, unexercised options,
restricted stock, and Performance units under the Long-Term Incentive Plan are
subject to adjustment in the event of a stock dividend, stock split,
recapitalization or combination of the Company, merger or similar transaction
and are not transferable except by will and by the laws of descent and
distribution. Except when a participant's employment terminates as a result of
death, disability, or retirement under an approved retirement plan or following
a change in control in certain circumstances, an award generally may be
exercised (or the restriction thereon may lapse) only if the participant is an
officer, employee, or director of the Company, or subsidiary at the time of
exercise or lapse or, in certain circumstance, if the exercise or lapse occurs
within 180 days after employment is terminated.
Under the Company's Long-Term Incentive Plan all full time employees share a
bonus equal to no less than 1% of the Company's cash flow, in accordance with
GAAP, exclusive of extraordinary and non-recurring items. The bonuses are paid
to all full time (1,000 + hours) employees at the time of delivery of the
independent audit. The bonuses are allocated to the full time employees based
upon their salary at December 31.
The Long-Term Incentive Plan may be amended by the Board of Directors. No grants
or awards may be made under the Long-Term Incentive Plan after the tenth
anniversary of the Plan. No stockholder approval will be sought for amendments
to the Long-Term Incentive Plan except as required by law (including Rule 16b-3
under the Exchange Act) or the rules of any national securities exchange on
which the Common Stock is then listed.
Employee Stock Ownership Plan
In 1994, the Company adopted the PANACO, Inc. Employee Stock Ownership Plan
("ESOP"). Pursuant to the terms of the ESOP, the Company may contribute up to
fifteen percent (15%) of the participant's annual compensation to the ESOP. ESOP
assets are allocated in accordance with a formula based on participant
compensation. In order to participate in the ESOP, a participant must complete
at least one thousand hours of service to the Company within twelve consecutive
months. A participant's interest in the ESOP becomes one hundred percent vested
after three years of service to the Company. Benefits are distributed from the
ESOP at such time as a participant retires, dies or terminates service with the
Company in accordance with the terms and
Page 14
conditions of the ESOP. Benefits may be distributed in cash or in shares of
Common Stock. No participant contributions are allowed to be made to the ESOP.
Company contributions to the ESOP may be in the form of Common Stock or cash.
Cash contributions may be used, at the discretion of the Board of Directors, to
purchase Common Stock in the open market or from the Company at prevailing
prices. The allocation of ESOP assets is determined by a formula based on
participant compensation. Participation in the ESOP requires completion of more
than one thousand (1,000) hours of service to the Company. The ESOP is intended
to satisfy any applicable requirements of the Internal Revenue Code of 1986 and
the Employee Retirement and Income Security Act of 1974. The Company has been
advised that its contributions to the ESOP will be deductible for Federal Income
Tax purposes, and the participants will not recognize income on their allocated
share of ESOP assets until such assets are distributed. As of December 31, 1998,
the ESOP owned of record 89,182 shares of Common Stock. Such Common Stock is
owned beneficially by the employees of the Company.
CEO Compensation
In establishing the annual compensation of the Chief Executive Officer, the
Compensation Committee considers the performance of the Company and the Chief
Executive Officer, including his leadership and effectiveness in identifying
opportunities for growth and increased profitability and implementing the
Company's strategic plan. While overall corporate performance is considered, the
CEO's compensation is determined by a subjective evaluation of his individual
performance.
In establishing the annual compensation of former Chief Executive Officer
H. James Maxwell in 1998, the Compensation Committee took into account
Mr. Maxwell's contribution to the growth of the Company and the role he played
in the numerous acquisitions made by the Company since 1991.
In establishing the annual compensation of the current Chief Executive Officer,
Larry Wright, in 1998, the Compensation Committee took into account Mr. Wright's
contribution to the growth of the Company, the role he played in the
acquisitions made by the Company and the Company's current financial position
and situation.
During 1998, with the approval of the full Board of Directors, the Committee
determined that the interest of the Company and its stockholders would be best
served by the Company entering into a multi-year Employment Agreement with
Mr. Wright. The Committee believes that such multi-year employment arrangement
benefits the Company and its stockholders by permitting the Company to attract
and retain an executive officer with demonstrated leadership abilities and to
secure the services of such executive officer at agreed upon terms over an
extended period of time. The compensation payable to Mr.Wright pursuant to the
Employment Agreement is consistent with the compensation policies of the Company
as established by the Compensation Committee. A
Page 15
summary of the principal terms of the Employment Agreement is included under the
caption "Employment Agreements and Change-in-Control Arrangements."
COMPENSATION COMMITTEE
Felix Pardo
James B. Kreamer
Michael Springs
Page 16
Performance Graphs
The following performance graph compares the annual change of the cumulative
total stockholder return, assuming reinvestment of dividends, of an assumed $100
investment on January 1, 1992 in (1) Common Stock, (2) the NASDAQ Market Index
and (3) a peer group of all crude petroleum and natural gas exploration and
production companies (SIC Code 1311) listed in NASDAQ.
[GRAPHIC OMITTED]
Date PANACO, Inc. Nasdaq Market Index Peer Group Index
Dec-93 100.00 100.00 100.00
Dec-94 152.38 104.99 130.90
Dec-95 169.05 136.18 139.17
Dec-96 185.71 169.23 211.91
Dec-97 152.38 207.00 194.96
Dec-98 34.53 291.96 109.15
Certain Relationships and Related Transactions
From July 14, 1998 to August 24, 1998, the Company advanced to Larry M. Wright
an aggregate of $300,000 to enable Mr. Wright to satisfy margin calls resulting
from the decline in price of Company stock owned by Mr. Wright. Mr. Wright
subsequently executed and delivered a Promissory Note to the Company in the
original principal amount of $300,000 bearing interest at 7% per annum, payable
monthly and maturing on the earlier of the expiration of three years or the
termination of Mr. Wright's employment with the Company. Such Promissory Note is
secured by a pledge of Mr. Wright's stock and securities in the Company,
although all of such securities are subject to prior liens securing other
indebtedness and, at the present time, the aggregate amount of such other
indebtedness may exceed the value of such stock and securities. The Board of
Directors of the Company approved a provision in Mr. Wright's Employment
Agreement for monthly supplemental payments to Mr. Wright equal to the amount of
the interest becoming due on such Promissory Note, with the Company having the
right to offset directly such supplemental payments
Page 17
against amounts becoming due under the Promissory Note. See also "Employment
Agreements and Change-in-Control Arrangements" under "Executive Compensation"
above.
On January 8, 1999, the Company entered into a Settlement Agreement with Leonard
Tallerine pursuant to the terms of which the Company paid Mr. Tallerine $150,000
in complete and final settlement of all claims by Mr. Tallerine might have had
against the Company arising from his employment with the Company, his
participation as a Director of the Board of Directors, and for breach of the
Restated Merger Agreement with Goldking Production Company. The Company also
returned to Mr. Tallerine a check in the amount of $32,583.77 which had
previously been tendered for payment of expenses owing to the Company. At that
time, Mr. Tallerine resigned from the Board of Directors.
On January 25, 1999, the Company entered into a Settlement Agreement with Mark
Licata pursuant to the terms of which the Company paid Mr. Licata $150,000 in
complete and final settlement of any claim Mr. Licata might have had against the
Company arising out of his employment with the Company, his membership on the
Board of Directors, or for breach of the Restated Merger Agreement with Goldking
Production Company. The Company paid Mr. Licata an additional $15,000
representing unpaid directors fees and expenses. At that time, Mr. Licata
resigned from the Board of Directors.
Former officers and directors H. James Maxwell and Bob F. Mallory are personal
guarantors of the Company's obligation to plug the wells and remove the
platforms on the West Delta properties acquired from Conoco, Arco (now Vastar),
Texaco and Oxy in 1991. In connection with Mr. Maxwell's resignation, the
Company has agreed to use reasonable efforts to cause Mr. Maxwell and
Mr. Mallory to be released from such guarantee.
Messrs. Maxwell and Mallory are also the partners in a partnership that owns the
office building in which the Company leased its offices in Kansas City,
Missouri. In August 1998, the Company negotiated an agreement with such
partnership to terminate the lease effective December 31, 1998, in connection
with the relocation of the Company's offices to Houston, Texas. In consideration
for such early termination and release of the Company, the Company agreed to pay
such partnership $24,000 and to convey certain personal property to such
partnership.
The Company has several procedures, provisions, and plans designed to reduce the
likelihood of a change in the management or voting control of the Company
without the consent of the incumbent Board of Directors. These provisions may
have the effect of strengthening the ability of offices and directors of the
Company to continue as officers and directors of the Company despite changes in
share ownership of the Company.
Page 18
AMENDMENT OF THE CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED SHARES OF COMMON STOCK
(Item 1 on Proxy Card)
The Board of Directors proposes an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
40 million to 100 million shares. On the Record Date, there were 23,985,927
shares of Common Stock issued and outstanding and an additional 1,150,000 shares
of Common Stock were reserved for future issuance upon the exercise of stock
options issued by the Company. See "Certain Relationships and Related
Transactions." As a result, on the Record Date, there were 14,864,073 shares of
Common Stock available for general corporate purposes including future financing
and corporate actions involving Common Stock such as stock splits, stock
dividends, mergers and acquisitions. If the proposed amendment to the
Certificate of Incorporation is adopted there will be available for issuance by
the Company 74,864,073 authorized and unreserved shares of Common Stock.
It is not currently practicable to describe the transaction or transactions, if
any, in which such additional authorized shares of the Common Stock are to be
issued, because the Company has no present plans, understandings, or agreements
for the issuance or use of the additional shares of Common Stock proposed to be
authorized. However, the Board of Directors believes that the proposed increase
in the number of authorized shares of Common Stock is desirable in order to
enable the Company, as the need may arise, to take prompt advantage of market
conditions and to enhance the Company's flexibility in connection with possible
future actions, such as stock splits, stock dividends, financings, investment
opportunities, acquisitions, use in employee benefit plans, or other corporate
purposes. However, stockholders should note that the issuance of shares for any
of these corporate purposes could have the effect of diluting the current
stockholders' interest in the Company.
Unless required by applicable laws or regulations, no further authorization by
vote of stockholders will be solicited for the issuance of the additional shares
of Common Stock. Holders of the Common Stock have no pre-emptive rights. This
proposed amendment is not intended to have an anti-takeover effect. However,
stockholders should note that the availability of additional shares of Common
Stock could make any attempt to gain control of the Company or the Board of
Directors more difficult, costly, or time-consuming. Under certain
circumstances, the Board could create voting impediments or frustrate persons
seeking to effect a takeover or otherwise gain control of the Company, by
causing such shares to be issued to a holder or holders who might side with the
Board in opposing a takeover bid that the Board determines is not in the best
interests of the Company and its stockholders.
The adoption of this amendment to the Certificate of Incorporation will require
the affirmative vote of a majority of the outstanding shares of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE "FOR" THE APPROVAL OF THE AMENDMENT.
Page 19
AMENDMENT OF THE CERTIFICATE OF INCORPORATION AND BYLAWS
TO ALLOW STOCKHOLDERS TO CALL MEETINGS
(Item 2 on Proxy Card)
Description of the Proposed Amendment and Vote Required.
The Board of Directors has adopted a resolution approving a proposal to amend
the Company's Certificate of Incorporation and Bylaws to allow stockholders
owning 25% or more of the outstanding shares of Common Stock to call (i) a
special meeting of the stockholders or (ii) an annual meeting of the
stockholders if such annual meeting has not been called by June 1 of any year.
The Company's Certificate of Incorporation and Bylaws currently do not allow the
stockholders to call a special meeting, and specifically reserve that power
exclusively to the Board of Directors. The Board of Directors determined that
the amendment is advisable and directed that it be considered at the Annual
Meeting of Stockholders to be held on May 27, 1999. The affirmative vote of
two-thirds of the outstanding shares of Common Stock is required to approve the
proposed amendment.
The proposed amendment to the Certificate of Incorporation will require
replacing the first sentence in ARTICLE NINTH with the following language:
NINTH: Special meetings of the common stockholders of the Corporation, and any
proposals to be considered at such meetings, may be called and proposed at any
time and from time to time by the holders of 25% or more of the outstanding
shares then entitled to vote at an election of directors. In the event that the
Corporation does not hold an annual meeting by June 1 of any year, the holders
of 25% or more of the outstanding shares then entitled to vote at an election of
directors may call such annual meeting at a time specified by the stockholders
proposing the meeting.
The proposed amendments to the Bylaws will require adding the following sentence
at the end of Section 2.1:
In the event that the Corporation does not hold such meeting by June 1 of any
year, the holders of not less than 25% of the outstanding shares then entitled
to be voted at an election of Directors may call such annual meeting at a time
specified by the stockholders proposing the meeting.
In addition, the proposed amendment would change Section 2.2 of the Bylaws to
read as follows:
Except as otherwise required by law, special meetings of the common stockholders
of the Corporation and any proposals to be considered at such meetings, may be
called and proposed by the board of directors, pursuant to a resolution approved
by a majority of the members of the board of directors at the time in office, or
by the holders of 25% or more of the outstanding shares then entitled to be
voted at an election of directors. A special meeting shall be held on such date
and at such time as shall be designated by the resolution approved by a majority
of the members of the
Page 20
board of directors or by the stockholders calling the meeting, and stated in the
notice of the meeting or in a duly executed waiver of notice of such meeting.
Only such business shall be transacted at a special meeting as may be stated or
indicated in the notice of such meeting or in a duly executed waiver of notice
of such meeting.
Purpose and Effect of Amendment.
The purpose of the proposed amendment is to provide stockholders who
individually or as a group represent a substantial ownership interest with an
increased ability to voice their concerns and raise issues with the Company's
management and other stockholders. Under the present guidelines, the majority of
the membership of the Board has sole discretion over when to hold meetings, and
can limit the stockholders' ability to take action in a timely manner. The Board
of Directors has determined that a minimum threshold of 25% or more of the
Common Stock is an appropriate threshold of ownership interest to have the power
to call a meeting.
Additionally, the Company has recently held its annual meetings over nine months
after the fiscal year end. The Board of Directors has determined that such a
practice is not in the best interests of the Company's stockholders and believes
that it is important that stockholders have the power in future years to ensure
that the annual meeting is held in a more timely fashion.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE "FOR" THE APPROVAL OF THE AMENDMENT.
ELIMINATION OF THE CLASSIFICATION OF DIRECTORS
(Item 3 on the Proxy Card)
Description of the Proposed Amendment and Vote Required
The Board of Directors has adopted a resolution approving a proposal to amend
the Company's Certificate of Incorporation and Bylaws to eliminate the
classification of directors. The Company's Certificate of Incorporation and
Bylaws currently provide that the Board of Directors shall be divided into three
classes, designated as Class I, Class II, and Class III, as nearly equal in
number as possible. At each annual meeting of the stockholders, the directors of
only one class are elected for three year terms. The Board of Directors
determined that the amendment is advisable and directed that it be considered at
the annual meeting of stockholders to be held on May 27, 1999. The affirmative
vote of two thirds of the outstanding shares of Common Stock is required to
approve the proposed amendment.
The proposed amendment to the Certificate of Incorporation will require the
deletion of items 2, 3, 4, 5, and 6 of ARTICLE SIXTH of the Certificate of
Incorporation.
The proposed amendment to the Bylaws will require amending Section 3.2 of the
Bylaws to read as follows:
Page 21
The number of directors that shall constitute the entire of board of directors
shall be not less than three and not more than fifteen. Within the limits above
specified, the number of directors that shall constitute the whole board of
directors shall from time to time be fixed exclusively by the board of directors
by a resolution adopted by a majority of the whole board of directors serving at
the time of that vote. Except as otherwise required by law or required or
permitted by the certificate of incorporation of the Corporation or these
Bylaws, the directors shall be elected at an annual meeting of stockholders at
which a quorum is present. Directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy and entitled to
vote on the election of directors. Each director shall serve until the next
annual meeting of stockholders of the Corporation and until his successor is
elected and qualified or until his earlier death, resignation, or removal. None
of the directors need be a stockholder of the Corporation or a resident of the
state of Delaware. Each director must have attained the age of majority.
Purpose and Effect of Amendment
The purpose of the proposed amendment is to permit the stockholders to elect
each of the directors of the Company at each annual meeting of the stockholders
of the Company. Currently, the stockholders may only vote on the election of
three directors at each annual meeting of the stockholders, which directors then
serve for three year terms. The Board of Directors has determined that it is in
the best interest of the stockholders for the stockholders to be able to vote on
all directors at each annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT
YOU VOTE "FOR" THE APPROVAL OF THE AMENDMENT.
OTHER MATTERS
Accountants
One or more members of the firm of KPMG LLP, the Company's independent
accountants, will attend the Annual Meeting, will have an opportunity to make a
statement and will be available to answer questions as appropriate.
Changes in Independent Accountants
On June 11, 1998, Arthur Andersen LLP, which had audited the Company's financial
statements for the fiscal years ending December 31, 1996 and December 31, 1997,
informed the Company that it declined to stand for re-election as independent
accountants of the Company at its 1998 Annual Meeting. Effective August 25,
1998, the Company engaged KPMG LLP as independent accountants to audit the
Company's financial statements for the fiscal year 1998. The decision to engage
KPMG LLP was recommended and approved by the Audit Committee. During
Page 22
the Company's fiscal years ending December 31, 1996 and December 31, 1997 and
the subsequent interim period ending on June 11, 1998, there were no
disagreements with Arthur Andersen LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure which,
if not resolved to the satisfaction of Arthur Anderson LLP, would have caused
Arthur Anderson LLP to make a reference to the subject matter of the
disagreements in connection with its report.
Other
As of the date of this Proxy Statement, the Company knew of no other matters
which might be presented for action at the meeting. If any other matters
properly come before the meeting, it is intended that the Common Stock
represented by proxies solicited hereby will be voted with respect thereto in
accordance with the judgment of the persons voting them.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
The Board of Directors has set the date for the Company's 2000 Annual Meeting of
Stockholders for June 7, 2000. Stockholder proposals intended to be considered
for inclusion in next year's proxy statement should be sent to Investor
Relations, PANACO, Inc., 1100 Louisiana, Suite 5100, Houston, Texas 77002, and
must be received by December 31, 1999. Any such proposal must comply with
Rule 14a-8 promulgated by the SEC pursuant to the Exchange Act.
FINANCIAL STATEMENTS AVAILABLE
Financial statements for the Company were included in the Company's Annual
Report on Form 10-K ("Form 10-K") as filed with the SEC for the year 1998. A
copy of the Form 10-K is being provided to all stockholders as of the record
date together with the Company's proxy materials. Additional copies of the Form
10-K will be furnished without charge and without exhibits, on request directed
to Investor Relations, PANACO, Inc., 1100 Louisiana, Suite 5100, Houston,
Texas 77002. The Form 10-K does not form any part of the material for
solicitation of proxies.
By order of the Board of Directors
/s/ Todd R. Bart
Todd R. Bart
Secretary
April 23, 1999
Page 23
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PANACO, Inc.
Houston, Texas
This Proxy is solicited on behalf of the Board of Directors of PANACO, Inc.
for the Annual Meeting on Thursday, May 27, 1999
The undersigned hereby appoints Larry M. Wright and Todd R. Bart or either
of them, proxies for the undersigned, each with full power of substitution to
attend the Annual Meeting of Shareholders of PANACO, Inc. to be held on May 27,
1999 at 9:00 a.m., Eastern Time, and at any adjournments thereof, and to vote as
specified in this Proxy all the shares of stock of the Company which the
undersigned would be entitled to vote if personally present. The undersigned
hereby revokes any previous proxies with respect to the matters covered by this
Proxy.
TO BE SIGNED AND DATED ON THE REVERSE SIDE.
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
PANACO, Inc.
May 27, 1999
- --------------------------------------------------------------------------------
Please Detach and Mail in the Envelope Provided
Please mark your
votes as in this example.
For all nominees WITHHOLD
listed at right AUTHORITY
(except as marked to vote for
to the contrary all nominees
below) listed at right
1. ELECTION Nominees:
OF A. Theodore Stautberg
DIRECTORS Felix Pardo
(NSTRUCTION: To withhold authority
to vote for any individual nominee,
mark "FOR" above and write the name(s)
of that nominee(s) with respect to whom you
wish to withhold authority to vote here.)
____________________________________________
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL
NOMINEES AND FOR PROPOSAL 2, PROPOSAL 3, AND PROPOSAL 4.
FOR AGAINST ABSTAIN
2. Amendment of the Certificate of [ ] [ ] [ ]
Incorporation to increase the
number of authorized shares of
Common Stock from Forty Million
to Seventy-Five Million.
3. Amendment of the Certificate of [ ] [ ] [ ]
Incorporation and Bylaws to permit
the holders of 25% or more of the
outstanding shares of Common Stock
to call (i) a special meeting of the
stock holders or (ii) an annual
meeting of the stockholders if
such annual meeting has not been
called by June 1 of any year.
4. Amendment of the Certificate of [ ] [ ] [ ]
Incorporation and Bylaws to
eliminate the classification
of the Directors and to provide
that the term of each Director
shall continue until the next
annual meeting of stockholders.
5. In their discretion, the Proxies [ ] [ ] [ ]
are authorized to vote upon such
other business as may properly
come before the meeting. The
Board of Directors recommends
a vote "FOR" the election of all
nominees and "FOR" Proposals 2, 3, and 4.
PLEASE SIGN, DATE AND PROMPTLY MAIL YOUR PROXY IN THE ENCLOSED ENVELOPE
PROVIDED.
This Proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this Proxy will be voted FOR the nominees for Directors
listed above and FOR Proposals 2, 3, and 4.
Signature___________________________________________Date:______________________,
1999___ Note: Please sign exactly as your name appears on this card. Joint
Owners should each sign personally. Corporation proxies should be signed in
corporate name by an authorized officer. Executors, administrators, trustees or
guardians should give their title when signing.
120:20456-5
