-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TA/NXniHgThOuoiajGoJpWY0K85mHTTWfeTqdWD6QqdCigAkUxNtpa7lHiPJj3ez tGCBLN36kpYwzowP/LJFcw== /in/edgar/work/20000814/0000950134-00-007044/0000950134-00-007044.txt : 20000921 0000950134-00-007044.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950134-00-007044 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PETROQUEST ENERGY INC CENTRAL INDEX KEY: 0000872248 STANDARD INDUSTRIAL CLASSIFICATION: [1311 ] IRS NUMBER: 980115468 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19020 FILM NUMBER: 699759 BUSINESS ADDRESS: STREET 1: 400 E KALISTE SALOOM RD SUITE 3000 CITY: LAFAYETTE STATE: LA ZIP: 70508 BUSINESS PHONE: 3372327028 MAIL ADDRESS: STREET 1: 600 595 HOWE ST STREET 2: VANCOUVER BRITISH COLUMBIA CITY: CANADA V6C 2T5 STATE: A1 FORMER COMPANY: FORMER CONFORMED NAME: OPTIMA PETROLEUM CORP DATE OF NAME CHANGE: 19950726 10-Q 1 e10-q.txt FORM 10-Q FOR QUARTER ENDED JUNE 30, 2000 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from: to: Commission file number: 019020 PETROQUEST ENERGY, INC. (Exact name of registrant as specified in its charter) DELAWARE 72-1440714 (State of Incorporation) (I.R.S. Employer Identification No.) 400 E. KALISTE SALOOM RD., LAFAYETTE, LOUISIANA 70508 (Address of principal executive offices) (Zip code)
---------- Registrant's telephone number, including area code: (337) 232-7028 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of August 10, 2000, there were 29,471,156 shares of the Registrant's Common Stock, par value $.001 per share, outstanding. 2 PETROQUEST ENERGY, INC. Table of Contents
Page No. Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999. . . . . . . . . . . . . . . . 3 Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2000 and 1999. . . . . . . . . 4 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2000 and 1999. . . . . . . . . . 5 Consolidated Statement of Stockholders' Equity for the Six Months Ended June 30, 2000 . . . . . . . . . . . . . . . . . . 6 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . . . . 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk. . . . . . . . . . . 11 Part II. Other Information Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Item 2. Changes in Securities and Use of Proceeds . . . . . . . . . . . . . . . . . . . 11 Item 3. Defaults upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . 12 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . 12 Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . 12
2 3 PETROQUEST ENERGY, INC. Consolidated Balance Sheets (amounts in thousands)
June 30, December 31, 2000 1999 ------------ ------------ (Unaudited) ASSETS Current assets: Cash $ 10,691 $ 3,006 Oil and gas revenue receivable 2,694 2,337 Joint interest billing receivable 4,929 2,190 Subscriptions receivable 1,183 -- Other current assets 199 235 ------------ ------------ Total current assets 19,696 7,768 ------------ ------------ Oil and gas properties Oil and gas properties, full cost method 63,188 51,149 Unevaluated oil and gas properties 6,169 5,753 Accumulated depreciation, depletion and amortization (37,671) (35,412) ------------ ------------ Oil and gas properties, net 31,686 21,490 Plugging and abandonment escrow 375 255 Other assets, net of accumulated depreciation and amortization of $464,977 and $378,531, respectively 405 388 ------------ ------------ Total assets $ 52,162 $ 29,901 ============ ============ LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable and accrued liabilities $ 9,809 $ 3,021 Advances from co-owners 5,824 3,157 Current portion of long-term debt 2,559 1,942 ------------ ------------ Total current liabilities 18,192 8,120 ------------ ------------ Commitments and contingencies Long-term debt 2,304 2,927 Other liabilities 749 749 Stockholders' equity Common stock, $0.001 par value, 29,930,730 and 24,089,222 issued and outstanding, respectively 30 24 Paid-in capital 60,009 48,869 Accumulated deficit (29,122) (30,788) ------------ ------------ Total stockholders' equity 30,917 18,105 ------------ ------------ Total liabilities and stockholders' equity $ 52,162 $ 29,901 ============ ============
The accompanying notes are an integral part of these statements. 3 4 PETROQUEST ENERGY, INC. Consolidated Statements of Operations (unaudited) (amounts in thousands, except per share amounts)
Three Months Ended Six Months Ended June 30, June 30, 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Revenues: Oil and gas sales $ 3,803 $ 1,521 $ 6,902 $ 2,738 Interest income 56 20 108 40 ---------- ---------- ---------- ---------- 3,859 1,541 7,010 2,778 ---------- ---------- ---------- ---------- Expenses: Lease operating expenses 694 567 1,297 975 Production taxes 177 93 350 157 Depreciation, depletion and amortization 1,204 1,126 2,347 2,012 General and administrative 739 428 1,341 711 Interest expense 9 122 9 191 Foreign exchange (gain) loss -- -- -- (10) ---------- ---------- ---------- ---------- Income (loss) from operations 1,036 (795) 1,666 (1,258) Income tax expense -- -- -- -- ---------- ---------- ---------- ---------- Net income (loss) $ 1,036 $ (795) $ 1,666 $ (1,258) ========== ========== ========== ========== Earnings per common share Basic 0.04 (0.04) 0.07 (0.07) ========== ========== ========== ========== Diluted 0.04 (0.04) 0.07 (0.07) ========== ========== ========== ========== Weighted average common shares Basic 24,110 18,551 24,119 18,544 Diluted 25,201 18,551 25,157 18,544
The accompanying notes are an integral part of these statements. 4 5 PETROQUEST ENERGY, INC. Consolidated Statements of Cash Flows (unaudited) (amounts in thousands)
Six Months Ended June 30, 2000 1999 -------- -------- Cash flows from operating activities: Net income (loss) $ 1,666 $ (1,258) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 2,346 2,012 Compensation expense 116 -- Changes in working capital accounts: Oil and gas revenue receivable (356) (262) Joint interest billing receivable (2,739) -- Other current assets (51) 168 Accounts payable and accrued liabilities 2,491 1,435 Advances from co-owners 2,667 -- Plugging and abandonment escrow (120) 66 Other (17) (374) -------- -------- Net cash provided by operating activities 6,003 1,787 -------- -------- Cash flows from investing activities: Investment in oil and gas properties (8,159) (4,793) Sale of oil and gas properties -- 424 -------- -------- Net cash used in investing activities (8,159) (4,369) -------- -------- Cash flows from financing activities: Proceeds from borrowings 3,100 2,399 Repayment of long-term debt (3,107) (165) Proceeds from private placement 9,693 -- Payment of costs related to private placement (326) -- Proceeds from exercise of warrants 343 -- Proceeds from exercise of stock options 138 34 -------- -------- Net cash provided by financing activities 9,841 2,268 -------- -------- Net increase (decrease) in cash 7,685 (314) Cash balance, beginning of period $ 3,006 $ 1,081 -------- -------- Cash balance, end of period $ 10,691 $ 767 ======== ======== Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 205 $ 68 ======== ========
The accompanying notes are an integral part of these statements. 5 6 PETROQUEST ENERGY, INC. Consolidated Statements of Stockholders' Equity (unaudited) (amounts in thousands)
Total Common Paid-In Accumulated Stockholders' Stock Capital Deficit Equity ------------ ------------ ------------ ------------ Balance, December 31, 1999 $ 24 $ 48,869 $ (30,788) $ 18,105 Stock based employee compensation -- 116 -- 116 Private placement 4 9,689 -- 9,693 Fees incurred for private placement -- (326) -- (326) Common stock subscriptions 1 1,181 -- 1,182 Exercise of options and warrants 1 480 -- 481 Net income -- -- 1,666 1,666 ------------ ------------ ------------ ------------ Balance, June 30, 2000 $ 30 $ 60,009 $ (29,122) $ 30,917 ============ ============ ============ ============
The accompanying notes are an integral part of these statements. 6 7 PETROQUEST ENERGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 BASIS OF PRESENTATION The consolidated financial information for the three and six-month periods ended June 30, 2000 and 1999, respectively, has been prepared by the Company and was not audited by its independent public accountants. In the opinion of management, all adjustments have been made to present fairly the financial position, results of operations, and cash flows of the Company at June 30, 2000 and for all reported periods. Results of operations for the interim periods presented are not necessarily indicative of the operating results for the full year or any future periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. These consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. Unless the context otherwise indicates, any references in this Quarterly Report on Form 10-Q to the "Company" refer to PetroQuest Energy, Inc. and its consolidated subsidiaries, PetroQuest Energy, Inc. (Louisiana) and PetroQuest Energy One, L.L.C. Certain reclassifications of prior year amounts have been made to conform with the current year presentation. NOTE 2 EARNINGS PER SHARE Basic earnings per common share was computed based on the weighted average number of common shares issued and outstanding during the relevant periods. Diluted earnings per common share was computed based on the weighted average number of common shares issued and outstanding plus all potentially dilutive common shares that would have been outstanding in the relevant periods assuming the issuance of common shares for stock options and warrants through the application of the treasury stock method. There were no antidilutive shares for the three and six-month period ended June 30, 2000. The assumed conversion of certain stock options and warrants into 1,002,300 shares of the Company's common stock were excluded from the computation of diluted earnings per share for the three and six-month periods ended June 30, 1999 as the effect was antidilutive. NOTE 3 LONG-TERM DEBT The Company's borrowing base under the reducing revolving line of credit at June 30, 2000 was $3,550,000 and reduces $225,000 per month on the first day of each month thereafter. At June 30, 2000, $3,100,000 was outstanding under this facility. The next borrowing base redetermination is scheduled for August 2000. Interest under the loan is payable monthly at prime plus 1/2% (10% at June 30, 2000). Amounts outstanding under this line of credit were paid in July with proceeds received from the private placement (discussed below). On April 21, 1999, the Company entered into a loan agreement for non-recourse financing to fund completion, flow line and facility costs of its High Island Block 494 property. The property is security for the loan. Interest is payable at 12% and the lender receives a 2 1/2% overriding royalty interest in the property. For the first three production months, all of the net cash flow from the property was dedicated to payment of principal and interest on the loan. Subsequently, 85% of the net cash flow from the property (assuming production levels of 12.5 MMcf/day) is dedicated to debt service. The well began producing during the first part of July 1999. $1,763,000 remains outstanding under this loan at June 30, 2000. 7 8 NOTE 4 PRIVATE PLACEMENTS The Company filed a Form 8-K on July 21, 2000, reporting the funding of a private placement of 4.89 million shares of common stock at a purchase price of $2.50 per share for a total consideration of $12,225,000 before fees and expenses. The Company received proceeds of $10,000,000 before fees and expenses by June 30, 2000 and recorded an additional $1,182,250 of common stock subscriptions receivables in the accompanying balance sheet. These subscriptions were paid on July 20, 2000. The proceeds from the private placement will be used to build and install production facilities, and for development drilling and completion activities. The Company agreed to file a registration statement covering the resale of the Company's common stock issued in the private placement within 30 days after the closing of the transaction. Such filing occurred on July 28, 2000. The securities offered pursuant to the private placement were not registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. NOTE 5 NEW ACCOUNTING STANDARDS In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Statement establishes accounting and reporting standards that require every derivative instrument (including certain derivative instruments embedded in other contracts) to be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 is effective for the Company on January 1, 2001. Because the Company does not currently use derivative instruments, the adoption of SFAS No. 133 will not impact the Company's financial statements. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL PetroQuest Energy, Inc. is an independent oil and gas company engaged in the acquisition, exploration, development and operation of oil and gas properties onshore and offshore in the Gulf Coast Region. The Company and its predecessors have been active in this area since 1986, which gives the Company extensive geophysical, technical and operational expertise in this area. The Company's business strategy is to increase production, cash flow and reserves through exploration, development and acquisition of properties located in the Gulf Coast Region. At June 30, 2000, the Company operated 74% of all wells in which it participated. For the six months ended June 30, 2000, approximately 20% of the Company's equivalent production is oil and 80% is gas. Before year-end, the Company plans to drill six new wells, two of which are offshore. 8 9 RESULTS OF OPERATIONS The following table sets forth certain operating information with respect to the oil and gas operations of the Company for the three and six-month periods ended June 30, 2000 and 1999.
Three Months Ended Six Months Ended June 30, June 30, 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Production: Oil (Bbls) 34,112 19,629 68,341 42,394 Gas (Mcf) 829,085 560,209 1,660,105 1,070,304 Total production (Mcfe) 1,033,757 677,983 2,070,151 1,324,668 Revenues: Total oil sales $ 887,807 $ 322,211 $1,826,930 $ 560,188 Total gas sales 2,915,637 1,190,820 5,075,255 2,150,274 Average Sales Prices: Oil (per Bbl) $ 26.03 $ 16.42 $ 26.73 $ 13.21 Gas (per Mcf) 3.52 2.13 3.06 2.01 Per Mcfe 3.68 2.23 3.33 2.05
The net income (loss) totaled $1,036,000 and $(795,000) for the quarters ended June 30, 2000 and 1999, respectively. Net income for the six months ended June 30, 2000 was $1,666,000 as compared to net loss of $(1,258,000) for the first six months of 1999. The positive results are due to the following components: PRODUCTION. Oil produced in 2000 increased 74% and 61% over the second quarter and six months ended 1999, respectively. Natural gas produced in 2000 increased 48% and 55% over the second quarter and six months ended 1999, respectively. On a Mcfe basis, 2000 production for the second quarter and six months increased 52% and 56%, respectively, over 1999. The increase in 2000 production volumes, as compared to 1999, was due primarily to three new wells that were not producing in 1999. CL&F#13 and CL&F#14 at Turtle Bayou and Valentine Sugars #1 came on-line in October 1999, December 1999, and May 2000, respectively. Oil production in the first half of 2000 was also boosted by the Company's Bully Camp Field, which was shut-in the first half of 1999 due to low product prices. PRICES. Average oil prices for the second quarter and six months ended June 30, 2000 were $26.03 and $26.73, respectively, as compared to $16.42 and $13.21 for the same periods in 1999. Average gas prices were $3.52 and $3.06 for the second quarter and six months ended 2000, respectively, as compared to $2.13 and $2.01 for the same periods in 1999. Stated on a Mcfe basis, unit prices received during the second quarter and the first six months of 2000 were 65% and 62% higher, respectively, than the prices received during the comparable 1999 period. REVENUE. Oil and gas sales during the second quarter of 2000 increased 150% to $3,803,000, as compared to second quarter 1999 revenues of $1,513,000. For the first six months of 2000, oil and gas sales increased 155% to $6,902,000, compared to oil and gas revenues of $2,710,000 during the 1999 period. The strong rise in product prices coupled with the growth in production volumes resulted in significant increases in revenue. EXPENSES. Lease operating expenses for the second quarter of 2000 increased to $694,000 from $567,000 during the second quarter of 1999. Lease operating expenses for the six months ended June 30, 2000 increased to $1,297,000 from $975,000 during the six months ended June 30, 1999. The rise in lease operating expenses for 2000 is primarily due to the three new wells that began operating after June 30, 1999, and workovers in the Valentine and Deer Island Fields. On a Mcfe basis, lease operating expenses for the second quarter decreased from $0.84 per Mcfe in 1999 to $0.67 in 2000 and from $0.74 per Mcfe in 1999 to $0.62 in 2000 for the first six months due to increased production volumes with nominal increases in operating costs. 9 10 General and administrative expenses during the second quarter of 2000 totaled $739,000 as compared to expenses of $428,000 during the 1999 quarter. For the six months ended June 30, 2000 general and administrative expenses were $1,341,000 compared to $711,000 in 1999. The increases in overhead expenses are primarily due to a 25% increase in personnel due to increased activity in 2000. In addition, the Company expensed $240,000 for fees and expenses related to a mezzanine debt financing, which was not completed in favor of the Company's successfully completed private placement. Depreciation, depletion and amortization ("DD&A") expense for the six months ended June 30, 2000 increased 17% from the 1999 period. The rise in DD&A is due to bringing the three new wells on-line. On a Mcfe basis, which reflects the changes in production, the DD&A rate for the first six months of 2000 was $1.13 per Mcfe compared to $1.52 per Mcfe for the same period in 1999. For the second quarter of 2000, DD&A per Mcfe was $1.16 compared to $1.66 for the comparable period in 1999. The reduction in per unit of DD&A is due to reserve additions at Valentine and Turtle Bayou Fields and Vermilion Block 376. LIQUIDITY AND CAPITAL RESOURCES WORKING CAPITAL AND CASH FLOW. For the first six months of 2000, working capital (before considering the current portion of debt) increased from $1.6 million in 1999 to $4.1 million in 2000. The increase in working capital is primarily the result of improved operating results and the private placement of common stock partially offset by expenditures for exploration and development. The Company's borrowing base under the reducing revolving line of credit at June 30, 2000 was $3,550,000 and reduces $225,000 per month on the first day of each month. At June 30, 2000, $3,100,000 was outstanding under this facility. The next borrowing base redetermination is scheduled for August 2000. Interest under the loan is payable monthly at prime plus 1/2% (10% at June 30, 2000). Amounts outstanding under this line of credit were paid in July with proceeds received from the private placement. On April 21, 1999, the Company entered into a loan agreement for non-recourse financing to fund completion, flow line and facility costs of its High Island Block 494 property. The property is security for the loan. Interest is payable at 12% and the lender receives a 2 1/2% overriding royalty interest in the property. For the first three production months, all of the net cash flow from the property was dedicated to payment of principal and interest on the loan. Subsequently, 85% of the net cash flow from the property (assuming production levels of 12.5 MMcf/day) is dedicated to debt service. The well began producing during the first part of July 1999. $1,763,000 remains outstanding under this loan at June 30, 2000. Net cash flow from operations before working capital changes increased from $754,000 in 1999 to $4,128,000 in 2000. This is the result of increased production due to the Company's successful drilling program and higher product prices. The Company filed a Form 8-K on July 21, 2000, reporting funding of a private placement of 4.89 million shares of common stock at a purchase price of $2.50 per share for a total consideration of $12,225,000 before fees and expenses. The Company received proceeds of $10,000,000 before fees and expenses by June 30, 2000 and recorded an additional $1,182,250 of common stock subscription receivables in the accompanying balance sheet. These subscriptions were paid on July 20, 2000. The proceeds from the private placement will be used to build and install production facilities, and for development drilling and completion activities. Management believes the funds received from the private placement, cash flows from operations and additional borrowing capacity will be sufficient in the near term to fund exploration and development activities. In the future, our exploration activities could require additional financings, which may include sales of additional equity or debt securities, additional bank borrowings or joint venture arrangements with industry partners. There can be no assurances that such additional financings will be available on acceptable terms, if at all. If the Company is unable to obtain additional financing, it could be forced to delay or even abandon some of its exploration and development opportunities. DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS This Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical facts included in and incorporated by reference into this Form 10Q are forward-looking statements. These forward-looking statements include, without limitation, statements regarding the Company's estimate of the sufficiency of its existing capital resources and its ability to raise additional capital to fund 10 11 cash requirements for future operations, and regarding the uncertainties involved in estimating quantities of proved oil and natural gas reserves and in projecting future rates or production and timing of development expenditures. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, it cannot give any assurance that such expectation reflected in these forward-looking statements will prove to have been correct. When used in the Form 10-Q, the words, "expect," "anticipate," "intend," "plan," "believe," "seek," "estimate" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Because these forward-looking statements involve risks and uncertainties, actual results could differ materially from those expressed or implied by these forward-looking statements for a number of important reasons, including those discussed under "Management's Discussions and Analysis of Financial Condition and Results of Operations", and elsewhere in this Form 10-Q. Item 3. DISCLOSURE ABOUT MARKET RISKS The Company's indebtedness under its line of credit is variable rate financing. The Company believes that its exposure to market risk relating to interest rate changes is limited due to the relatively low level of debt outstanding at June 30, 2000. The Company believes that its business operations are not exposed to market risks relating to foreign currency exchange risk. Price Risk The Company's revenues are derived from the sale of its crude oil and natural gas production. Based on projected annual sales volumes for the remaining six months of 2000, a 10% decline in the prices the Company receives for its crude oil and natural gas production would have an approximate $875,000 impact on the Company's revenues. PART II Item 1. LEGAL PROCEEDINGS NONE Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS The Company filed a Form 8-K on July 21, 2000, reporting funding of a private placement of 4.89 million shares of common stock at a purchase price of $2.50 per share for a total consideration of $12,225,000 before fees and expenses. The Company received proceeds of $10,000,000 before fees and expenses by June 30, 2000 and recorded an additional $1,182,250 of common stock subscription receivables in the accompanying balance sheet. These subscriptions were paid on July 20, 2000. The proceeds from the private placement will be used to build and install production facilities, and for development drilling and completion activities. Item 3. DEFAULTS UPON SENIOR SECURITIES NONE 11 12 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On May 23, 2000, an annual meeting of the stockholders of the Company was held. The holders of 18,985,920 shares of common stock were present in person or represented by proxy at the meeting. At the meeting, the stockholders took the following actions: (a) Election of Directors The stockholders elected the following persons to serve as directors of the Company until the next annual meeting of stockholders, or until their successors are duly elected and qualified:
NUMBER OF NUMBER OF NAME VOTES FOR VOTES WITHHELD ---- --------- -------------- Charles T. Goodson 18,910,072 75,848 Alfred J. Thomas, II 18,718,959 266,961 Ralph J. Daigle 18,718,959 266,961 Robert R. Brooksher 18,898,872 87,048 Daniel G. Fournerat 18,719,059 265,961 William W. Rucks, IV 18,718,959 266,961 Jay B. Langner 18,718,945 266,975 Francisco A. Garcia 18,718,924 266,996 E. Wayne Nordberg 18,718,959 266,961
(b) Amendment of the 1998 Stock Incentive Plan The Stockholders voted to increase the number of shares of common stock reserved under the 1998 Stock Incentive Plan by 600,000 to an aggregate of 2,400,000 as follows:
Number of Votes For Number of Votes Against Number of Votes Withheld ------------------- ----------------------- ------------------------ 16,794,670 2,156,901 14,902
Item 5. OTHER INFORMATION NONE. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 10.1 Employment Agreement dated May 8, 2000 between PetroQuest Energy, Inc. and Michael O. Aldridge. 10.2 Termination Agreement dated May 8, 2000 between PetroQuest Energy, Inc. and Michael O. Aldridge. 10.3 Indemnification Agreement dated August 11, 2000 between PetroQuest Energy, Inc. and Michael O. Aldridge. 27.1 Financial data schedule 12 13 (b) Reports on Form 8-K: The Company filed an amended Form 8-K on April 5, 2000 regarding the initial funding of a private placement of 5 million units in August 1999. The Company filed a Form 8-K on July 21, 2000, reporting that funding of a private placement of 4.89 million shares of common stock at a purchase price of $2.50 per share for a total consideration of $12,225,000 before fees and expenses occurred. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PETROQUEST ENERGY, INC. Date: August 11, 2000 By: /s/ Michael O. Aldridge ------------------------ Michael O. Aldridge Chief Financial Officer and Secretary (Authorized Officer and Principal Financial and Accounting Officer) 13 14 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------ ----------- 10.1 Employment Agreement dated May 8, 2000 between PetroQuest Energy, Inc. and Michael O. Aldridge. 10.2 Termination Agreement dated May 8, 2000 between PetroQuest Energy, Inc. and Michael O. Aldridge. 10.3 Indemnification Agreement dated August 11, 2000 between PetroQuest Energy, Inc. and Michael O. Aldridge. 27.1 Financial data schedule
EX-10.1 2 ex10-1.txt EXECUTIVE EMPLOYMENT AGREEMENT-MICHAEL ALDRIDGE 1 EXHIBIT 10.1 EXECUTIVE EMPLOYMENT AGREEMENT THIS AGREEMENT is made and entered into this 8th day of May, 2000 between PetroQuest Energy, Inc., a Delaware corporation having its principal executive office at 400 E. Kaliste Saloom Road, Suite 3000, Lafayette, Louisiana 70508 (hereinafter referred to as the "Company"), and Michael O. Aldridge (hereinafter referred to as the "Employee"). WITNESSETH: WHEREAS, the Company desires to employ the Employee in an executive capacity and the Employee desires to enter the Company's employ. NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Employee hereby agree as follows: 1. Certain Definitions. As used in this Agreement, the following terms have the meanings prescribed below: Affiliate is used in this Agreement to define a relationship to a person or entity and means a person or entity who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such person or entity. Annual Bonus shall have the meaning assigned thereto in Section 4.2 hereof. Base Salary shall have the meaning assigned thereto in Section 4.1 hereof. Beneficial Owner shall have the meaning assigned thereto in Rule 13(d)-3 under the Exchange Act; provided, however, and without limitation, that any individual, corporation, partnership, group, association or other person or entity that has the right to acquire any Voting Stock at any time in the future, whether such right is (a) contingent or absolute or (b) exercisable presently or at any time in the future, pursuant to any agreement or understanding or upon the exercise or conversion of rights, options or warrants, or otherwise, shall be the Beneficial Owner of such Voting Stock. Cause shall have the meaning assigned thereto in Section 5.3 hereof. Common Stock means the Company's common stock, par value $.001 per share. Confidential Information shall have the meaning assigned thereto in Section 8.2 hereof. 2 Date of Termination means the earliest to occur of (i) the date of the Employee's death, (ii) the date on which the Employee terminates this Agreement for any reason or (iii) the date of receipt of the Notice of Termination, or such later date as may be prescribed in the Notice of Termination in accordance with Section 5.5 hereof. Disability means an illness or other disability which prevents the Employee from discharging his responsibilities under this Agreement for a period of 180 consecutive calendar days, or an aggregate of 180 calendar days in any calendar year, during the Employment Period, all as determined in good faith by the Board of Directors of the Company (or a committee thereof). Effective Date means the date of execution hereof. Employee means Michael O. Aldridge, whose business address is 400 E. Kaliste Saloom Road, Suite 3000, Lafayette, Louisiana 70508. Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the Securities and Exchange Commission thereunder, all as in effect from time to time during the Employment Period. Company means PetroQuest Energy, Inc., a Delaware corporation, the principal executive office of which is located at 400 E. Kaliste Saloom Road, Suite 3000, Lafayette, Louisiana 70508. Employment Period shall have the meaning assigned thereto in Section 3 hereof. Initial Term shall have the meaning assigned thereto in Section 3 hereof. Notice of Termination shall have the meaning assigned thereto in Section 5.5 hereof. Termination Agreement means the Termination Agreement dated as of May 8, 2000 between the Company and the Employee. Unexpired Term shall have the meaning assigned thereto in Section 6.3(c) hereof. Voting Stock means all outstanding shares of capital stock of the Company entitled to vote generally in an election of directors; provided, however, that if the Company has shares of Voting Stock entitled to more or less than one vote per share, each reference to a proportion of the issued and outstanding shares of Voting Stock shall be deemed to refer to the proportion of the aggregate votes entitled to be cast by the issued and outstanding shares of Voting Stock. Without Cause shall have the meaning assigned thereto in Section 5.4 hereof. 2 3 2. General Duties of Company and Employee. 2.1 The Company agrees to employ the Employee, and the Employee agrees to accept employment by the Company and to serve the Company as Senior Vice President, Chief Financial Officer and Secretary, and shall also serve as a director of the Company. The authority, duties and responsibilities of the Employee shall be consistent with those of executive officers in a public company with a similar title, and such other or additional duties as may from time to time be assigned to the Employee by the Board of Directors (or a committee thereof) and agreed to by the Employee. While employed hereunder, the Employee shall devote full time and attention during normal business hours to the affairs of the Company and use his best efforts to perform faithfully and efficiently his duties and responsibilities. The Employee may (i) serve on corporate, civic or charitable boards or committees, (ii) deliver lectures, fulfill speaking engagements or teach at educational institutions and (iii) manage personal investments, so long as such activities do not significantly interfere with the performance of the Employee's duties and responsibilities. 2.2 The Employee agrees and acknowledges that he owes a fiduciary duty of loyalty, fidelity and allegiance to act at all times in the best interests of the Company and to do no act and to make no statement, oral or written, which would injure Company's business, its interests or its reputation. 2.3 The Employee agrees to comply at all times during the Employment Period with all applicable policies, rules and regulations of the Company, including, without limitation, the Company's Code of Ethics and the Company's policy regarding trading in the Common Stock, as each is in effect from time to time during the Employment Period. 3. Term. Unless sooner terminated pursuant to other provisions hereof, the Employee's period of employment under this Agreement shall be a period of three years beginning on the Effective Date (the "Initial Term"). After the expiration of the Initial Term, the Employee's period of employment under this Agreement shall be automatically renewed for successive one-year terms on each anniversary of the Effective Date (the Initial Term and any and all renewals thereof are referred to herein collectively as the "Employment Period"). 4. Compensation and Benefits. 4.1 Base Salary. As compensation for services to the Company, the Company shall pay to the Employee until the Date of Termination an annual base salary of $180,000 (the "Base Salary"). The Board of Directors (or a committee thereof), in its discretion, may increase the Base Salary based upon relevant circumstances. The Base Salary shall be payable in equal semi-monthly installments or in accordance with the Company's established policy, subject only to such payroll and withholding deductions as may be required by law and other deductions applied generally to employees of the Company for insurance and other employee benefit plans. 4.2 Bonus. In addition to the Base Salary, the Employee may be awarded, for each fiscal year until the Date of Termination, an annual bonus (either pursuant to a bonus or incentive plan or program of the Company or otherwise) in an amount to be determined by the Board of Directors (or 3 4 a committee thereof), in its sole discretion (the "Annual Bonus"). Each such Annual Bonus shall be payable at a time to be determined by the Board of Directors (or a committee thereof) in its sole discretion. 4.3 Vacation. Until the Date of Termination, the Employee shall be entitled to five weeks paid vacation during each one year period commencing on the Effective Date (the "Vacation Time"). 4.4 Incentive, Savings and Retirement Plans. Until the Date of Termination, the Employee shall be eligible to participate in and shall receive all benefits under all executive incentive, savings and retirement plans (including 401(k) plans) and programs currently maintained or hereinafter established by the Company for the benefit of its executive officers and/or employees. 4.5 Welfare Benefit Plan. Until the Date of Termination, the Employee and/or the Employee's family, as the case may be, shall be eligible to participate in and shall receive all benefits under each welfare benefit plan of the Company currently maintained or hereinafter established by the Company for the benefit of its employees. Such welfare benefit plans may include, without limitation, medical, dental, disability, group life, accidental death and travel accident insurance plans and programs. 4.6 Reimbursement of Expenses. The Employee may from time to time until the Date of Termination incur various business expenses customarily incurred by persons holding positions of like responsibility, including, without limitation, travel, entertainment and similar expenses incurred for the benefit of the Company, and will receive a Company credit card for use for such expenses. Subject to the Company's policy regarding the reimbursement of such expenses as in effect from time to time during the Employment Period, which does not necessarily allow reimbursement of all such expenses, the Company shall reimburse the Employee for such expenses from time to time, at the Employee's request, and the Employee shall account to the Company for all such expenses. 4.7 Life Insurance. The Company shall provide to the Executive life insurance on terms that are mutually agreeable to the Company and the Executive. 4.8 Relocation. The Company and the Executive agree that, the Company will provide to Executive reimbursement for reasonable out of pocket moving expenses, not to exceed $50,000, incurred in connection with relocating from Houston, Texas to Lafayette, Louisiana. The Company and the Executive further agree that if the Executive is asked to relocate from Lafayette, Louisiana to Houston, Texas, the Company will provide to Executive reimbursement for out of pocket moving expenses incurred in connection with such move, and it will also reimburse the Executive for any loss incurred by the Executive on the sale of his personal residence in Lafayette, Louisiana, with such loss being calculated on the basis of the difference between the Executive's actual costs less the net sales price. 4 5 5. Termination. 5.1 Death. This Agreement shall terminate automatically upon the death of the Employee. 5.2 Disability. The Company may terminate this Agreement, upon written notice to the Employee delivered in accordance with Sections 5.5 and 12.1 hereof, upon the Disability of the Employee. 5.3 Cause. The Company may terminate this Agreement, upon written notice to the Employee delivered in accordance with Sections 5.5 and 12.1 hereof, for Cause. For purposes of this Agreement, "Cause" means (i) the conviction of the Employee of a felony (which, through lapse of time or otherwise, is not subject to appeal), (ii) the Employee's willful refusal, without proper legal cause, to perform his duties and responsibilities as contemplated in this Agreement or (iii) the Employee's willful engaging in activities which would (A) constitute a breach of any term of this Agreement, the Company's Code of Ethics, the Company's policies regarding trading in the Common Stock or reimbursement of business expenses or any other applicable policies, rules or regulations of the Company, or (B) result in a material injury to the business, condition (financial or otherwise), results of operations or prospects of the Company or its Affiliates (as determined in good faith by the Board of Directors of the Company or a committee thereof). 5.4 Without Cause. The Company may terminate this Agreement Without Cause, upon written notice to the Employee delivered in accordance with Sections 5.5 and 12.1 hereof. For purposes of this Agreement, the Employee will be deemed to have been terminated "Without Cause" if the Employee is terminated by the Company for any reason other than Cause, Disability or death. 5.5 Notice of Termination. Any termination of this Agreement by the Company for Cause, Without Cause or as a result of the Employee's Disability shall be communicated by Notice of Termination to the Employee given in accordance with this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee's employment under the provision so indicated and (iii) specifies the termination date, if such date is other than the date of receipt of such notice (which termination date shall not be more than 15 days after the giving of such notice). 6. Obligations of Company upon Termination. 6.1 Cause by Employee. If this Agreement shall be terminated either by the Company for Cause or by the Employee for any reason, the Company shall pay to the Employee, in a lump sum in cash within 30 days after the Date of Termination, the aggregate of the Employee's Base Salary (as in effect on the Date of Termination) through the Date of Termination, if not theretofore paid, and, in the case of compensation previously deferred by the Employee, all amounts of such compensation 5 6 previously deferred and not yet paid by the Company. All other obligations of the Company and rights of the Employee hereunder shall terminate effective as of the Date of Termination. 6.2 Death or Disability. (a) Subject to the provisions of this Section 6.2, if this Agreement is terminated as a result of the Employee's death or Disability, the Company shall pay to the Employee or his estate, in equal semi-monthly installments, the Employee's Base Salary (as in effect on the Date of Termination) for 12 months after such Date of Termination. The Company may purchase insurance to cover all or any part of the obligation contemplated in the foregoing sentence, and the Employee agrees to submit to a physical examination to facilitate the procurement of such insurance. (b) Whenever compensation is payable to the Employee hereunder during a period in which he is partially or totally disabled, and such Disability would (except for the provisions hereof) entitle the Employee to Disability income or salary continuation payments from the Company according to the terms of any plan or program presently maintained or hereafter established by the Company, the Disability income or salary continuation paid to the Employee pursuant to any such plan or program shall be considered a portion of the payment to be made to the Employee pursuant to this Section 6.2 and shall not be in addition hereto. If Disability income is payable directly to the Employee by an insurance company under the terms of an insurance policy paid for by the Company, the amounts paid to the Employee by such insurance company shall be considered a portion of the payment to be made to the Employee pursuant to this Section 6.2 and shall not be in addition hereto. 6.3 Without Cause. If this Agreement shall be terminated by the Company Without Cause: (a) the Company shall pay to the Employee, in a lump sum in cash within 30 days after the Date of Termination, the aggregate of the following amounts: (1) if not theretofore paid, the Employee's Base Salary (as in effect on the Date of Termination) through the Date of Termination; and (2) in the case of compensation previously deferred by the Employee, all amounts of such compensation previously deferred and not yet paid by the Company; (b) the Company shall, promptly upon submission by the Employee of supporting documentation, pay or reimburse to the Employee any costs and expenses (including moving and relocation expenses) paid or incurred by the Employee which would have been payable under Section 4.5 of this Agreement if the Employee's employment had not terminated; and 6 7 (c) for the 12-month period commencing on the Date of Termination, the Company shall continue benefits to the Employee and/or the Employee's family at least equal to those which would have been provided to them under Section 4.4 if the Employee's employment had not been terminated; and (d) the Company shall pay to the Employee, in equal semi-monthly installments, the Employee's Base Salary (as in effect on the Date of Termination) for 12 months after the Date of Termination. 6.4 Termination of Employment Following a Change in Control. Notwithstanding the provisions of Section 6.3 hereof to the contrary, if the Employee's employment by the Company is terminated by the Company in accordance with the terms of Section 4 of the Termination Agreement and the Employee is entitled to benefits provided in Section 5 of the Termination Agreement, the Company shall pay to the Employee, in a lump sum in cash within 30 days after the Date of Termination, the aggregate of the Employee's Base Salary (as in effect on the Date of Termination) through the Date of Termination, if not theretofore paid, and, in the case of compensation previously deferred by the Employee, all amounts of such compensation previously deferred and not yet paid by the Company. Except with respect to the obligations set for forth in the Termination Agreement, notwithstanding any provisions herein to the contrary, all other obligations of the Company and rights of the Employee hereunder shall terminate effective as of the Date of Termination. 7. Employee's Obligation to Avoid Conflicts of Interest. 7.1 In keeping with the Employee's fiduciary duties to the Company, the Employee agrees that he shall not knowingly become involved in a conflict of interest with the Company, or upon discovery thereof, allow such a conflict to continue. The Employee further agrees to disclose to the Company, promptly after discovery, any facts or circumstances which might involve a conflict of interest with the Company. 7.2 The Company and the Employee recognize that it is impossible to provide an exhaustive list of actions or interests which constitute a "conflict of interest." Moreover, the Company and the Employee recognize that there are many borderline situations. In some instances, full disclosure of facts by the Employee to the Company is all that is necessary to enable the Company to protect its interests. In others, if no improper motivation appears to exist and the Company's interests have not suffered, prompt elimination of the outside interest will suffice. In still others, it may be necessary for the Company to terminate the employment relationship. The Company and the Employee agree that the Company's determination as to whether or not a conflict of interest exists shall be conclusive. The Company reserves the right to take such action as, in its judgment, will end the conflict of interest. 7.3 In this connection, it is agreed that any direct or indirect interest in, connection with or benefit from any outside activities, particularly commercial activities, which interest might in any way adversely affect the Company or its Affiliates, involves a possible conflict of interest. 7 8 Circumstances in which a conflict of interest on the part of the Employee would or might arise, and which should be reported immediately to the Company, include, but are not limited to, the following: (a) Ownership of a material interest in any lender, supplier, contractor, subcontractor, customer or other entity with which the Company does business. (b) Acting in any capacity, including director, officer, partner, consultant, employee, distributor, agent or the like, for any lender, supplier, contractor, subcontractor, customer or other entity with which the Company does business. (c) Acceptance, directly or indirectly, of payments, services or loans from a lender, supplier, contractor, subcontractor, customer or other entity with which the Company does business, including, without limitation, gifts, trips, entertainment or other favors of more than a nominal value, but excluding loans from publicly held insurance companies and commercial or savings banks at market rates of interest. (d) Use of information or facilities to which the Employee has access in a manner which will be detrimental to the Company's interests, such as use for the Employee's own benefit of know_how or information developed through the Company's business activities. (e) Disclosure or other misuse of information of any kind obtained through the Employee's connection with the Company. (f) Acquiring or trading in, directly or indirectly, oil and gas properties or interests for his own account or the account of his Affiliates without the prior written consent of the Board of Directors. 8. Employee's Confidentiality Obligation. 8.1 The Employee hereby acknowledges, understands and agrees that all Confidential Information is the exclusive and confidential property of the Company and its Affiliates which shall at all times be regarded, treated and protected as such in accordance with this Section 8. The Employee acknowledges that all such Confidential Information is in the nature of a trade secret. 8.2 For purposes of this Agreement, "Confidential Information" means information, which is used in the business of the Company or its Affiliates and (i) is proprietary to, about or created by the Company or its Affiliates, (ii) gives the Company or its Affiliates some competitive business advantage or the opportunity of obtaining such advantage or the disclosure of which could be detrimental to the interests of the Company or its Affiliates, (iii) is designated as Confidential Information by the Company or its Affiliates, is known by the Employee to be considered confidential by the Company or its Affiliates, or from all the relevant circumstances should reasonably be assumed by the Employee to be confidential and proprietary to the Company or its Affiliates, or (iv) is not generally known by non-Company personnel. Such Confidential Information includes, without 8 9 limitation, the following types of information and other information of a similar nature (whether or not reduced to writing or designated as confidential): (a) Internal personnel and financial information of the Company or its Affiliates, information regarding oil and gas properties including reserve information, vendor information (including vendor characteristics, services, prices, lists and agreements), purchasing and internal cost information, internal service and operational manuals, and the manner and methods of conducting the business of the Company or its Affiliates; (b) Marketing and development plans, price and cost data, price and fee amounts, pricing and billing policies, bidding, quoting procedures, marketing techniques, forecasts and forecast assumptions and volumes, and future plans and potential strategies (including, without limitation, all information relating to any oil and gas prospect and the identity of any key contact within the organization of any acquisition prospect) of the Company or its Affiliates which have been or are being discussed; (c) Names of customers and their representatives, contracts (including their contents and parties), customer services, and the type, quantity, specifications and content of products and services purchased, leased, licensed or received by customers of the Company or its Affiliates; and (d) Confidential and proprietary information provided to the Company or its Affiliates by any actual or potential customer, government agency or other third party (including businesses, consultants and other entities and individuals). 8.3 As a consequence of the Employee's acquisition or anticipated acquisition of Confidential Information, the Employee shall occupy a position of trust and confidence with respect to the affairs and business of the Company and its Affiliates. In view of the foregoing and of the consideration to be provided to the Employee, the Employee agrees that it is reasonable and necessary that the Employee make each of the following covenants: (a) At any time during the Employment Period and thereafter, the Employee shall not disclose Confidential Information to any person or entity, either inside or outside of the Company, other than as necessary in carrying out his duties and responsibilities as set forth in Section 2 hereof, without first obtaining the Company's prior written consent (unless such disclosure is compelled pursuant to court orders or subpoena, and at which time the Employee shall give notice of such proceedings to the Company). (b) At any time during the Employment Period and thereafter, the Employee shall not use, copy or transfer Confidential Information other than as necessary in carrying out his duties and responsibilities as set forth in Section 2 hereof, without first obtaining the Company's prior written consent. 9 10 (c) On the Date of Termination, the Employee shall promptly deliver to the Company (or its designee) all written materials, records and documents made by the Employee or which came into his possession prior to or during the Employment Period concerning the business or affairs of the Company or its Affiliates, including, without limitation, all materials containing Confidential Information. 9. Disclosure of Information, Ideas, Concepts, Improvements, Discoveries and Inventions. As part of the Employee's fiduciary duties to the Company, the Employee agrees that during his employment by the Company and for a period of three years following the Date of Termination, the Employee shall promptly disclose in writing to the Company all information, ideas, concepts, improvements, discoveries and inventions, whether patentable or not, and whether or not reduced to practice, which are conceived, developed, made or acquired by the Employee, either individually or jointly with others, and which relate to the business, products or services of the Company or its Affiliates, irrespective of whether the Employee used the Company's time or facilities and irrespective of whether such information, idea, concept, improvement, discovery or invention was conceived, developed, discovered or acquired by the Employee on the job, at home, or elsewhere. This obligation extends to all types of information, ideas and concepts, including information, ideas and concepts relating to new types of services, corporate opportunities, acquisition prospects, the identity of key representatives within acquisition prospect organizations, prospective names or service marks for the Company's business activities, and the like. 10. Ownership of Information, Ideas, Concepts, Improvements, Discoveries and Inventions, and all Original Works of Authorship. 10.1 All information, ideas, concepts, improvements, discoveries and inventions, whether patentable or not, which are conceived, made, developed or acquired by the Employee or which are disclosed or made known to the Employee, individually or in conjunction with others, during the Employee's employment by the Company and which relate to the business, products or services of the Company or its Affiliates (including, without limitation, all such information relating to corporate opportunities, research, financial and sales data, pricing and trading terms, evaluations, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customers' organizations or within the organization of acquisition prospects, marketing and merchandising techniques, and prospective names and service marks) are and shall be the sole and exclusive property of the Company. Furthermore, all drawings, memoranda, notes, records, files, correspondence, manuals, models, specifications, computer programs, maps and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries and inventions are and shall be the sole and exclusive property of the Company. 10.2 In particular, the Employee hereby specifically sells, assigns, transfers and conveys to the Company all of his worldwide right, title and interest in and to all such information, ideas, concepts, improvements, iscoveries or inventions, and any United States or foreign applications for 10 11 patents, inventor's certificates or other industrial rights which may be filed in respect thereof, including divisions, continuations, continuations-in_part, reissues and/or extensions thereof, and applications for registration of such names and service marks. The Employee shall assist the Company and its nominee at all times, during the Employment Period and thereafter, in the protection of such information, ideas, concepts, improvements, discoveries or inventions, both in the United States and all foreign countries, which assistance shall include, but shall not be limited to, the execution of all lawful oaths and all assignment documents requested by the Company or its nominee in connection with the preparation, prosecution, issuance or enforcement of any applications for United States or foreign letters patent, including divisions, continuations, continuations-in-part, reissues and/or extensions thereof, and any application for the registration of such names and service marks. 10.3 In the event the Employee creates, during the Employment Period, any original work of authorship fixed in any tangible medium of expression which is the subject matter of copyright (such as, videotapes, written presentations on acquisitions, computer programs, drawings, maps, architectural renditions, models, manuals, brochures or the like) relating to the Company's business, products or services, whether such work is created solely by the Employee or jointly with others, the Company shall be deemed the author of such work if the work is prepared by the Employee in the scope of his employment; or, if the work is not prepared by the Employee within the scope of his employment but is specially ordered by the Company as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation or as an instructional text, then the work shall be considered to be work made for hire, and the Company shall be the author of such work. If such work is neither prepared by the Employee within the scope of his employment nor a work specially ordered and deemed to be a work made for hire, then the Employee hereby agrees to sell, transfer, assign and convey, and by these presents, does sell, transfer, assign and convey, to the Company all of the Employee's worldwide right, title and interest in and to such work and all rights of copyright therein. The Employee agrees to assist the Company and its Affiliates, at all times, during the Employment Period and thereafter, in the protection of the Company's worldwide right, title and interest in and to such work and all rights of copyright therein, which assistance shall include, but shall not be limited to, the execution of all documents requested by the Company or its nominee and the execution of all lawful oaths and applications for registration of copyright in the United States and foreign countries. 11. Employee's Non-Competition Obligation. 11.1 (a) Until the Date of Termination, the Employee shall not, acting alone or in conjunction with others, directly or indirectly, in any of the business territories in which the Company or any of its Affiliates is presently or from time to time during the Employment Period conducting business, invest or engage, directly or indirectly, in any business which is competitive with that of the Company or accept employment with or render services to such a competitor as a director, officer, agent, employee or consultant, or take any action inconsistent with the fiduciary relationship of an employee to his employer; provided, however, that the beneficial ownership by the Employee of up to three percent of the Voting 11 12 Stock of any corporation subject to the periodic reporting requirements of the Exchange Act shall not violate this Section 11.1(a). (b) In addition to the other obligations agreed to by the Employee in this Agreement, the Employee agrees that until the Date of Termination, he shall not at any time, directly or indirectly, (i) induce, entice or solicit any employee of the Company to leave his employment, (ii) contact, communicate or solicit any customer or acquisition prospect of the Company derived from any customer list, customer lead, mail, printed matter or other information secured from the Company or its present or past employees or (iii) in any other manner use any customer lists or customer leads, mail, telephone numbers, printed material or other information of the Company relating thereto. 11.2 (a) If this Agreement is terminated either by the Company for Cause or by the Employee for any reason, then for a period of one year following the Date of Termination, the Employee shall not, acting alone or in conjunction with others, directly or indirectly, in any of the business territories in which the Company or any of its Affiliates is presently or at the Date of Termination conducting business, invest or engage, directly or indirectly, in any business which is competitive with that of the Company as of the Date of Termination or accept employment with or render services to such a competitor as a director, officer, agent, employee or consultant, or take any action inconsistent with the fiduciary relationship of an employee to his employer; provided, however, that the beneficial ownership by the Employee of up to three percent of the Voting Stock of any corporation subject to the periodic reporting requirements of the Exchange Act shall not violate this Section 11.2(a). (b) In addition to the other obligations agreed to by the Employee in this Agreement, the Employee agrees that if this Agreement is terminated either by the Company for Cause or by the Employee for any reason, then for a period of one year following the Date of Termination, he shall not at any time, directly or indirectly, (i) induce, entice or solicit any employee of the Company to leave his employment, (ii) contact, communicate or solicit any customer or acquisition prospect of the Company derived from any customer list, customer lead, mail, printed matter or other information secured from the Company or its present or past employees or (iii) in any other manner use any customer lists or customer leads, mail, telephone numbers, printed material or other information of the Company relating thereto. 11.3 If this Agreement is terminated either by the Company Without Cause, then the Employee shall not be subject to any non-competition obligation. 12. Miscellaneous. 12.1 Notices. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be deemed to have been given when delivered by hand or mailed by registered or certified mail, return receipt requested, as follows (provided that notice of change of address shall be deemed given only when received): 12 13 If to the Company to: 400 E. Kaliste Saloom Road Suite 3000 Lafayette, Louisiana 70508 If to the Employee to: 400 E. Kaliste Saloom Road Suite 3000 Lafayette, Louisiana 70508 or to such other names or addresses as the Company or the Employee, as the case may be, shall designate by notice to the other party hereto in the manner specified in this Section 12.1. 12.2 Waiver of Breach. The waiver by any party hereto of a breach of any provision of this Agreement shall neither operate nor be construed as a waiver of any subsequent breach by any party. 12.3 Assignment. This Agreement shall be binding upon and inure to the benefit of the Company, its successors, legal representatives and assigns, and upon the Employee, his heirs, executors, administrators, representatives and assigns; provided, however, the Employee agrees that his rights and obligations hereunder are personal to him and may not be assigned without the express written consent of the Company. 12.4 Entire Agreement; No Oral Amendments. This Agreement, together with any exhibit attached hereto and any document, policy, rule or regulation referred to herein, replaces and merges all previous agreements and discussions relating to the same or similar subject matter between the Employee and the Company and constitutes the entire agreement between the Employee and the Company with respect to the subject matter of this Agreement. This Agreement may not be modified in any respect by any verbal statement, representation or agreement made by any employee, officer, or representative of the Company or by any written agreement unless signed by an officer of the Company who is expressly authorized by the Company to execute such document. 12.5 Enforceability. If any provision of this Agreement or application thereof to anyone or under any circumstances shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions or applications of this Agreement which can be given effect without the invalid or unenforceable provision or application. 12.6 Jurisdiction; Arbitration. The laws of the State of Louisiana shall govern the interpretation, validity and effect of this Agreement without regard to the place of execution or the place for performance thereof. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration located in Houston, Texas administered by the American Arbitration Association in accordance with its applicable arbitration rules, and the judgment 13 14 on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof, which judgment shall be binding upon the parties hereto. 12.7 Injunctive Relief. The Company and the Employee agree that a breach of any term of this Agreement by the Employee would cause irreparable damage to the Company and that, in the event of such breach, the Company shall have, in addition to any and all remedies of law, the right to any injunction, specific performance and other equitable relief to prevent or to redress the violation of the Employee's duties or responsibilities hereunder. IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first written above. PETROQUEST ENERGY, INC. By: /s/ Charles T. Goodson ---------------------------------------- Name: Charles T. Goodson -------------------------------------- Title President and Chief Executive Officer -------------------------------------- EMPLOYEE: By: /s/ Michael O. Aldridge ---------------------------------------- Michael O. Aldridge 14 EX-10.2 3 ex10-2.txt TERMINATION AGREEMENT - MICHAEL O. ALDRIDGE 1 EXHIBIT 10.2 TERMINATION AGREEMENT THIS TERMINATION AGREEMENT, dated as of May 8, 2000 is made and entered into by and between PetroQuest Energy, Inc., a Delaware corporation with its principal office at 400 E. Kaliste Saloom Road, Suite 3000, Lafayette, Louisiana 70508 (the "Company"), and Michael O. Aldridge ("Executive"). R E C I T A L S A. Company desires to enter into an agreement with Executive whereby severance benefits will be paid to Executive on a change in control of the Company and consequent actual or constructive termination of Executive's employment. B. This Agreement sets forth the severance benefits which the Company agrees that it will pay to the Executive if Executive's employment with the Company terminates under one of the circumstances described herein following a Change in Control of the Company. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained herein, the parties hereto agree as follows: 1. Term of Agreement. This Agreement shall be effective immediately on the date hereof and shall continue in effect through December 31, 2003; provided, however, that commencing on January 1, 2004 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless not later than September 30 of the preceding year, the Company shall have given notice that it does not wish to extend this Agreement; provided, further, that notwithstanding any such notice by the Company not to extend, this Agreement shall automatically be extended for 24 months beyond the term provided herein if a Change in Control, as defined in Section 3 of this Agreement, has occurred during the term of this Agreement. 2. Effect on Employment Rights. This Agreement is not part of any employment agreement that the Company and Executive may have entered. Nothing in this Agreement shall confer upon Executive any right to continue in the employ of the Company or interfere with or restrict in any way the rights of the Company, which are hereby expressly reserved, to terminate for any reason, with or without cause. Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a potential change in control of the Company (as defined below), Executive will remain in the employ of the Company during the pendency of any such potential change in control and for a period of one year after the occurrence of an actual Change in Control. For this purpose, a "potential change in 2 control of the Company" shall be deemed to have occurred if (a) the Company enters into an agreement the consummation of which would result in the occurrence of a Change in Control, (b) any person (including the Company) publicly announces an intention to take or consider taking action which if consummated would constitute a Change in Control or (c) the Board of Directors of the Company (the "Board") adopts a resolution to the effect that a potential change in control of the Company has occurred. 3. Change in Control. For purposes of this Agreement, a "Change in Control" of the Company shall be deemed to have occurred if any of the events set forth in any one of the following paragraphs shall occur: (a) any "person" (as defined in section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as such term is modified in sections 13(d) and 14(d) of the Exchange Act), excluding the Company or any of its subsidiaries, a trustee or any fiduciary holding securities under an employee benefit plan of the Company of any of its subsidiaries, an underwriter temporarily holding securities pursuant to an offering of such securities or a corporation owned, directly or indirectly, by stockholders of the Company in substantially the same proportions as their ownership of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (b) during any period of not more than two consecutive years, individuals who at the beginning of much period constitute the Board and any new director (other than a director designated by a Person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c) or (d) of this paragraph) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (c) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holder of securities under an employee benefit plan of the Company, at least 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person acquires more than 50% of the combined voting power of the Company's then outstanding securities; or 2 3 (d) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. Notwithstanding the foregoing, if any transaction described under paragraphs (a), (c) and (d) of this Section 3 results in consideration to the Company or the shareholders of the Company, as the case may be, from such transaction with a value (as determined in good faith by the Compensation Committee of the Board) of less than $1.00 per share (subject to adjustment for stock splits and combination and stock dividends after the date hereof), no Change in Control will be deemed to occur unless such transaction is approved by persons holding not less than two-thirds of the combined voting power of the Company's voting securities entitled to vote on such transaction. In addition, no Change in Control shall be deemed to occur if there is consummated any transaction or series of integrated transactions immediately following which, in the judgment of the Compensation Committee of the Board, the holders of the Company's Common Stock immediately prior to such transaction or series of transactions continue to have the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately prior to such transaction or series of transactions. 4. Termination of Employment Following a Change in Control. Executive shall be entitled to the benefits provided in Section 5 hereof upon the subsequent termination of Executive's employment by the Company within two years after a Change in Control which occurs during the term of this Agreement, provided such termination is (a) by the Company other than for cause, as defined below, or (b) by Executive for Good Reason, as defined below. Executive shall not be entitled to the benefits of Section 5, any other provision hereof to the contrary notwithstanding, if Executive's employment terminates: (i) pursuant to Executive retiring at age 65, (ii) by reason of Executive's total and permanent disability, or (iii) by reason or Executive's death. As used herein, "total and permanent disability" means a condition which prevents Executive from performing to a significant degree the essential duties of his or her position and is expected to be of long-term duration or result in death. A determination of total and permanent disability must be based on competent medical evidence. (a) Cause. (i) Definition. Termination by the Company of Executive's employment for Cause shall mean termination upon Executive's willful engaging in misconduct which is demonstrably and materially injurious to the Company and its subsidiaries taken as a whole. No act, or failure to act, on Executive's part shall be considered "willful" unless done, or omitted to be done, by Executive not in good faith and without reasonable belief that Executive's action or omission was in the best interest of the Company or its subsidiaries. Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative 3 4 vote of not less than three quarters of the entire membership of the Board at a meeting of the Board called and held for the purpose of making a determination of whether Cause for termination exists (after reasonable notice to Executive and an opportunity for Executive to be heard before the Board), finding that in the good faith opinion of the Board Executive was guilty of misconduct as set forth above in this subsection 4(a)(i) and specifying the particulars thereof in detail. (ii) Remedy by Executive. If the Company gives Executive a Notice of Termination which states that the basis for terminating Executive's employment is Cause, Executive shall have ten days after receipt of such Notice to remedy the facts and circumstances which provided Cause. The Board (or any duly authorized Committee thereof) shall make a good faith reasonable determination immediately after such ten-day period whether such facts and circumstances have been remedied and shall communicate such determination in writing to Executive. If the Board determines that an adequate remedy has not occurred, then the initial Notice of Termination shall remain in effect. (b) Good Reason. After a Change in Control, Executive may terminate employment with the Company at any time during the term of this Agreement if Executive has made a good faith reasonable determination that Good Reason exists for this termination. (i) Definition. For purposes of this Agreement, "Good Reason" shall mean any of the following actions, if taken without the express written consent of Executive: A. any material change by the Company in Executive's functions, duties, or responsibilities which change would cause Executive's position with the Company to become of less dignity, responsibility, importance, or scope from the position and attributes that applied to Executive immediately prior to the Change in Control; B. any significant reduction in Executive's base salary, other than a reduction effected as part of an across-the-board reduction affecting all executive employees of the Company; C. any material failure by the Company to comply with any of the provisions of this Agreement (or of any employment agreement between the parties); D. the Company's requiring Executive to be based at any office or location more than 45 miles from the home at which the Executive resides on the date immediately preceding the Change in Control, except for travel reasonably required in the performance of Executive's responsibilities and 4 5 commensurate with the amount of travel required of Executive prior to the Change in Control; or E. any failure by the Company to obtain the express assumption of this Agreement by any successor or assign of the Company. Executive's right to terminate employment for Good Reason pursuant to this subsection 4(b)(I) shall not be affected by Executive's incapacity due to physical or mental illness. (ii) Remedy by Company. If Executive gives the Company a Notice of Termination which states that the basis for Executive's termination of employment is Good Reason, the Company shall have ten days after receipt of such Notice to remedy the facts and circumstances which provided Good Reason. Executive shall make a good faith reasonable determination immediately after such ten-day period whether such facts and circumstances have been remedied and shall communicate such determination in writing to the Company. If Executive determines that adequate remedy has not occurred, then the initial Notice of Termination shall remain in effect. (iii) Determination by Executive Presumed Correct. Any determination by Executive pursuant to this Section 4(b) that Good Reason exists for Executive's termination of employment and that adequate remedy has not occurred shall be presumed correct and shall govern unless the party contesting the determination shows by a clear preponderance of the evidence that it was not a good faith reasonable determination. (iv) Severance Payment Made Notwithstanding Dispute. Notwithstanding any dispute concerning whether Good Reason exists for termination of employment or whether adequate remedy has occurred, the Company shall immediately pay to Executive, as specified in Section 5, any amounts otherwise due under this Agreement. Executive may be required to repay such amounts to the Company if any such dispute is finally determined adversely to Executive. (c) Notice of Termination. Any termination of Executive's employment by the Company or by Executive hereunder shall be communicated by a Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a written notice which shall indicate the specific termination provisions in this Agreement relied upon any which sets forth (i) in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (ii) the date of Executive's termination of employment, which shall be no earlier than 10 days after such Notice is received by the other party. Any purported termination of the Executive's employment by the Company which is not effected pursuant to a Notice of Termination satisfying the requirements of this Agreement shall not be effective. In the case 5 6 of a termination for Cause, the Notice of Termination shall also satisfy the requirements set forth in Section 4(a)(i). 5. Severance Payment Upon Termination of Employment. If Executive's employment with the Company is terminated during the term of this Agreement and after a Change in Control (a) by the Company other than for Cause, or (b) by Executive for Good Reason, then Executive shall be entitled to the following: (a) Lump-Sum Severance Payment. In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to two (2) (or, if less, the number of years, including fractions, from the date of Termination until the Executive would have reached age sixty-five (65)) times the sum of (a) the Executive's Annual Base Salary in effect on date of termination and (b) the Executive's most recent Annual Bonus. if the most recent Annual Bonus was a stock option or a stock grant, the value of the bonus will be deemed to be the number of option shares times the closing price of the Company's Common Stock for the 20 trading days prior to Termination. (b) Continued Benefits. For a twenty-four (24) month period (or, if less, the number of months from the Date of Termination until the Executive would have reached age sixty-five (65)) after the Date of Termination, the Company shall provide the Executive with life insurance, health, disability and other welfare benefits ("Welfare Benefits") substantially similar in all respects to those which the Executive is receiving immediately prior to the Notice of Termination (without giving effect to any reduction in such benefits subsequent to the Potential Change in Control preceding the Change in Control or the Change in Control which reduction constitutes or may constitute God Reason). Benefits otherwise receivable by an Executive pursuant to this Section shall be reduced to the extent substantially similar benefits are actually received by or made available to the Executive by any other employer during the same time period for which such benefits would be provided pursuant to this Section at a cost to the Executive that is commensurate with the cost incurred by the Executive immediately prior to the Executive's Date of Termination (without giving effect to any increase in costs paid by the Executive after the Potential Change in Control preceding the Change in Control or the Change in Control which constitutes or may constitute Good Reason); provided, however, that if the Executive becomes employed by a new employer which maintains a medical plan that either (i) does not cover the Executive or a family member or dependent with respect to a preexisting condition which was covered under the applicable Company medical plan, or (ii) does not cover the Executive or a family member or dependent for a designated waiting period, the Executive's coverage under the applicable Company medical plan shall continue (but shall be limited in the event of noncoverage due to a preexisting condition, to such preexisting condition) until the earlier of the end of the applicable period of noncoverage under the new employer's plan or the second anniversary of the Executive's Date of Termination. The Executive agrees to report to the Company any coverage and benefits actually received by the Executive or made available to the Executive 6 7 from such other employer(s). The Executive shall be entitled to elect to change his level of coverage and/or his choice of coverage options (such as Executive only or family medical coverage) with respect to the Welfare Benefits to be provided by the Company to the Executive to the same extent that actively employed senior executives of the Company are permitted to make such changes; provided, however, that in the event of any such changes the Executive shall pay the amount of any cost increase that would actually be paid by an actively employed executive of the Company by reason of making the same change in his level of coverage or coverage options. (c) Gross-Up Payment. In the event that the Executive becomes entitled to the Severance Benefits or any other benefits or payments under this Agreement (other than pursuant to this Section) by reason of the accelerated vesting of stock options thereunder (together, the "Total Benefits"), and in the event that any of the Total Benefits will be subject to the Excise Tax, the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive, after 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 for by this Section, shall be equal to the Total Benefits. For purposes of determining whether any of the Total Benefits will be subject to the Excise Tax and the amount of such Excise Tax, (i) any other payments or benefits received or to be received by the Executive in connection with a Change in Control or the Executive's termination of employment (whether pursuant to the terms of this Agreement or any other agreement, plan or arrangement with the Company, any Person whose actions result in a Change in Control or any Person affiliated with the Company or such Person) shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Cod, and all "excess parachute payments" within the meaning the Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel ("Tax Counsel") selected by the Company's independent auditors and acceptable to the Executive, such other payments or benefits (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the Base Amount, or are otherwise not subject to the Excise Tax, (ii) the amount of the Total Benefits which shall be treated as subject to the Excise Tax shall be equal to the lesser of (A) the total amount of the Total Benefits reduced by the amount of such Total Benefits that in the opinion of Tax Counsel are not parachute payments, or (B) the amount of excess parachute payments within the meaning of Section 280G(b)(1) (after applying clause (i), above), and (iii) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the 7 8 Executive's residence on the Date of Termination, net of the reduction in federal income taxes which could be obtained from deduction of such state and local taxes (calculated by assuming that any reduction under Section 68 of the Code in the amount of itemized deductions allowable to the Executive applies first to reduce the amount of such state and local income taxes that would otherwise be deductible by the Executive). In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of the Executive's employment, the Executive shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax, federal, state and local income taxes and FICA and Medicare withholding taxes imposed on the portion of the Gross-Up Payment being repaid by the Executive to the extent that such repayment results in a reduction in Excise Tax, FICA and Medicare withholding taxes and/or federal, state or local income taxes) plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of the Executive's employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment, determined as previously described, to the Executive in respect to such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess) at the time that the amount of such excess is finally determined. (d) Timing of Payments. The payments provided for in Sections 5(a) and 5(c) shall be made not later than the fifth (5th) day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code from the firth (5th) day following the Date of Termination to the payment of such remainder) as soon as the amount thereof can be determined but in no event later than the thirtieth (30th) day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5th) business day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code from the fifth (5th) day following the Date of Termination to the repayment of such excess). 6. Reimbursement of Legal Costs. The Company shall pay to the Executive all legal fees and expenses incurred by the Executive as a result of a termination which entitles the Executive to any payments under this Agreement including all such fees and expenses, if any, incurred in contesting or disputing any Notice of Intent to Terminate under Section 4(a) hereof or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment 8 9 or benefit provide hereunder. Such payments shall be made within five (5) business days after delivery of the Executive's respective written requests for payment accompanied by such evidence of fees and expenses incurred as the Company reasonably may require. 7. Damages. Executive shall not be required to mitigate damages with respect to the amount of any payment provided under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided under this Agreement be reduced by retirement benefits, deferred compensation or any compensation earned by Executive as a result of employment by another employer. 8. Successor to Company. The Company shall require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to Executive, expressly, absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. A used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor or assign to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this section or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. 9. Heirs of Executive. This Agreement shall inure to the benefit of and be enforceable by Executive's personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive should die while any amounts are still payable to Executive hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive's devisee, legatee, or other designee or, if there be so much designee, to Executive's estate. 10. Arbitration. Any dispute, controversy or claim arising under or in connection with this Agreement, or the breach thereof, shall be settled exclusively by arbitration in accordance with the Rules of the American Arbitration Association then in effect. Judgment upon the award rendered by the arbitrator(s) may be entered in any court of competent jurisdiction. Any arbitration held pursuant to this section in connection with Executive's termination of employment shall take place in Houston, Texas at the earliest possible date. If any proceeding is necessary to enforce or interpret the terms of this Agreement, or to recover damages for breach thereof, the prevailing party shall be entitled to reasonable attorneys' fees and necessary costs and disbursements, not to exceed in the aggregate one percent (1%) of the net worth of the other party, in addition to any other relief to which he or it may be entitled. 11. Notice. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered by messenger or in person, or when mailed by United States registered mail, return receipt requested, postage prepaid, as follows: 9 10 If to the Company: 400 E. Kaliste Saloom Road Suite 3000 Lafayette, Louisiana 70508 Attention: President If to the Executive: Michael O. Aldridge 400 E. Kaliste Saloom Road Suite 3000 Lafayette, Louisiana 70508 or such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 12. General Provisions. (a) Executive's rights and obligations under this Agreement shall not be transferable by assignment or otherwise, nor shall Executive's rights be subject to encumbrance or subject to the claims of the Company's creditors. Nothing in this Agreement shall prevent the consolidation of the Company with, or its merger into, any other corporation, or the sale by the Company of all or substantially all of its properties or assets; and this Agreement shall inure to the benefit of, be binding upon and be enforceable by, any successor surviving or resulting corporation, or other entity to which such assets shall be transferred. This Agreement shall not be terminated by the voluntary or involuntary dissolution of the Company. (b) This Agreement and any Employment Agreement with Executive plus terms of any stock option plans or grants constitutes the entire agreement between the parties hereto in respect to the rights and obligations of the parties following a Change in Control. This Agreement supersedes and replaces all prior oral and written agreements, understandings, commitments, and practices between the parties (whether or not fully performed by Executive prior to the date hereof), which shall be of no further force or effect. (c) The provisions of this Agreement shall be regarded as divisible, and if any of said provisions or any part thereof are declared invalid or unenforceable by a court of competent jurisdiction, the validity and enforceability of the remainder of such provisions or parts thereof and the applicability thereof shall not be affected thereby. (d) This Agreement may not be amended or modified except by a written instrument executed by the Company and Executive. (e) This Agreement and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of Texas. 10 11 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. PetroQuest Energy, Inc., a Delaware Corporation By: /s/ Charles T. Goodson ---------------------------- Charles T. Goodson President and CEO /s/ Michael O. Aldridge ---------------------------- Executive 11 EX-10.3 4 ex10-3.txt INDEMNIFICATION AGREEMENT - MICHAEL O. ALDRIDGE 1 EXHIBIT 10.3 INDEMNIFICATION AGREEMENT This Indemnification Agreement is entered into August 11, 2000 and effective as of the 8th day of May, 2000 ("Agreement"), by and between PetroQuest Energy, Inc., a Delaware corporation ("Company"), and Michael O. Aldridge ("Indemnitee"): WHEREAS, highly competent persons have become more reluctant to serve corporations as directors, executive officers or in other capacities unless they are provided, with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to, and activities on behalf of, the corporation; WHEREAS, the Board of Directors of the Company (the "Board") has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons' serving the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, directors, officers and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the corporation or business enterprise itself; WHEREAS, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons; WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company's stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future; WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified; and WHEREAS, Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified; NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows: SECTION 1. Services by Indemnitee. Indemnitee agrees to serve as a director/executive officer of the Company and, as mutually agreed by Indemnitee and the Company, as a director, 2 officer, employee, agent or fiduciary of other corporations, partnerships, joint ventures, trusts or other enterprises (including, without limitation, employee benefit plans). Indemnitee may at any time and for any reason resign from any such position (subject to any other contractual obligation or any obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to continue Indemnitee in that position. This Agreement shall not be deemed an employment contract between the Company (or any of its subsidiaries) and Indemnitee. Indemnitee specifically acknowledges that Indemnitee's employment with the Company (or any of its subsidiaries), if any, is at will, and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment contract between Indemnitee and the Company (or any of its subsidiaries), other applicable formal severance policies duly adopted by the Board or, with respect to service as a director of the Company, by the Company's Certificate of incorporation, Bylaws and the General Corporation Law of the State of Delaware. Notwithstanding, the foregoing, this Agreement shall continue in force after Indemnitee has ceased to serve as an officer or director of the Company and no longer serves at the request of the Company as a director, officer, employee or agent of the Company or any subsidiary of the Company. SECTION 2. Indemnification--General. The Company shall indemnify, and advance Expenses (as hereinafter defined) to, Indemnitee (a) as provided in this Agreement and (b) to the fullest extent permitted by applicable law in effect on the date hereof and as amended from time to time. The rights of Indemnitee provided under the preceding sentence shall include, but shall not be limited to, the rights set forth in the other Sections of this Agreement. SECTION 3. Proceedings Other than Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in Section 2 and this Section 3 if, by reason of his Corporate Status (as hereinafter defined), he is, or is threatened to be made, a party to or a participant in any threatened, pending, or completed Proceeding (as hereinafter defined), other than a Proceeding by or in the right of the Company. Pursuant to this Section 3, the Company shall indemnify Indemnitee against, and shall hold Indemnitee harmless from and in respect of, all Expenses, judgments, penalties, fines (including excise taxes) and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal Proceeding, had no reasonable cause to believe his conduct was unlawful. SECTION 4. Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in Section 2 and this Section 4 if, by reason of his Corporate Status, he is, or is threatened to be made, a party to or a participant in any threatened, pending or completed Proceeding brought by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, the Company shall indemnify Indemnitee against, and shall hold Indemnitee harmless from and in respect of, all Expenses actually and reasonably incurred by him or on his behalf in connection with, and any amounts paid in settlement of, such Proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of 2 3 the Company. Notwithstanding the foregoing, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company if applicable law prohibits such indemnification; provided, however, if applicable law so permits, indemnification against such Expenses shall nevertheless be made by the Company in such event if and only to the extent that the Court of Chancery of the State of Delaware, or the court in which such Proceeding shall have been brought or is pending, shall determine. SECTION 5. Indemnification for Expenses of a Party Who Is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a party to (or a participant in) and is successful, on the merits or otherwise, in defense of any Proceeding, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in defense of such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter. SECTION 6. Indemnification for Expenses as a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. SECTION 7. Advancement of Expenses. The Company shall advance all reasonable Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding within ten (10) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it ultimately shall be determined, in accordance with this Agreement, that Indemnitee is not entitled to be indemnified against such Expenses. SECTION 8. Procedure for Determination of Entitlement to Indemnification. (a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification. (b) On written request by Indemnitee for indemnification pursuant to the first sentence of Section 8(a), a determination, if required by applicable law, with respect to Indemnitee's 3 4 entitlement thereto shall be made in the specific case: (i) if a Change in Control (as hereinafter defined) shall have occurred within two (2) years prior to the date of such written request, by Independent Counsel (as hereinafter defined) in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; or (ii) if a Change of Control shall not have occurred within two (2) years prior to the date of such written request, (A) by a majority vote of the Disinterested Directors (as hereinafter defined), even though less than a quorum of the Board, or (B) if there are no such Disinterested Directors, or if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee's entitlement to indemnification, including providing to such person, persons or entity on reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys' fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee's entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. (c) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 8(b), the Independent Counsel shall be selected as provided in this Section 8(c). If a Change of Control shall not have occurred within two (2) years prior to the date of Indemnitee's written request for indemnification pursuant to Section 8(a), the Independent Counsel shall be selected by the Board, and the Company shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected. If a Change of Control shall have occurred within two (2) years prior to the date of Indemnitee's written request for indemnification pursuant to Section 8(a), the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected in either event, Indemnitee or the Company, as the case may be, may, within ten (10) days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection. Such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in section 17, and the objection shall set forth with particularity the factual basis of such assertion. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within twenty (20) days after submission by Indemnitee of a written request for indemnification pursuant to Section 8(a), no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Court of Chancery or other court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other's selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the petitioned court or by such other person as the petitioned court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 8(b). The Company shall pay any and all 4 5 reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 8(b), and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 8(c), regardless of the manner in which such Independent Counsel was selected and appointed. If (i) Independent Counsel does not make any determination respecting Indemnitee's entitlement to indemnification hereunder within ninety (90) days after receipt by the Company of a written request therefor and (ii) any judicial proceeding or arbitration pursuant to Section 10(a)(iii) hereof is then commenced, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing). SECTION 9. Presumptions and Effect of Certain Proceedings. (a) In making a determination with respect to entitlement to indemnification hereunder, the Person, Persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 8(a), and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. (b) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or on a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful. (c) Any action taken by Indemnitee in connection with any employee benefit plan shall, if taken in good faith by Indemnitee and in a manner Indemnitee reasonably believed to be in the interest of the participants in or beneficiaries of that plan, be deemed to have been taken in a manner "not opposed to the best interests of the Company" for all purposes of this Agreement. SECTION 10. Remedies of Indemnitee. (a) In the event that (i) a determination is made pursuant to Section 8 that Indemnitee is not entitled to indemnification hereunder, (ii) advancement of Expenses is not timely made pursuant to Section 7, (iii) Independent Counsel is to determine Indemnitee's entitlement to indemnification hereunder, but does not make that determination within ninety (90) days after receipt by the Company of the request for that indemnification, (iv) payment of indemnification is not made pursuant to section 5 or 6 within ten (10) days after receipt by the Company of a written request therefor or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication from the Court of Chancery of his entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. 5 6 Indemnitee shall commence such Proceeding seeking an adjudication or an award in arbitration within one hundred eighty (180) days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 10(a); provided, however, that the foregoing clause shall not apply in respect of a proceeding brought by Indemnitee to enforce his rights under Section 5. (b) In the event that a determination shall have been made pursuant to Section 8(b) that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 10 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this section 10, the Company shall have the burden of proving that Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be. (c) If a determination shall have been made pursuant to Section 8(b) that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 10, absent (i) a misstatement by Indemnitee of a material fact, or an omission by Indemnitee of a material fact necessary to make Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law. (d) In the event that Indemnitee, pursuant to this Section 10, seeks a judicial adjudication of or an award in arbitration to enforce his rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company against, any and all expenses (of the types described in the definition of Expenses in Section 17) actually and reasonably incurred by him in such judicial adjudication or arbitration, but only if he prevails therein. If it shall be determined in said judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advancement of expenses sought, the expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated. SECTION 11. Non-Exclusivity; Survival of Rights; Insurance; Subrogation. (a) The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in Delaware law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. 6 7 (b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, Officer, employee or agent under such policy or policies. (c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights. (d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise. (e) The Company's obligation to indemnify or advance Expenses hereunder to Indemnitee with respect to Indemnitee's service at the request of the Company as a director, officer, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of Expenses from such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. SECTION 12. Duration of Agreement. This Agreement shall continue until and terminate upon the later of: (a) ten (10) years after the date that Indemnitee shall have ceased to serve as a director or officer of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which Indemnitee served on behalf of the Company; or (b) the final termination of any Proceeding then pending in respect of which Indemnitee is granted rights of indemnification or advancement of expenses hereunder and of any Proceeding commenced by Indemnitee pursuant to Section 10 relating thereto. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Indemnitee and his spouse (if Indemnitee resides in Texas or another community property state), heirs, executors and administrators, and this Agreement does not, and shall not be construed to confer any rights on any person that is not a party to this Agreement, other than Indemnitee's spouse, and his heirs, executors and assigns. SECTION 13. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable which is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including. without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or 7 8 unenforceable which is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby. SECTION 14. Exception to Right of Indemnification or Advancement of Expenses. Notwithstanding any other provision hereof, Indemnitee shall not be entitled to indemnification or advancement of Expenses under this Agreement with respect to any Proceeding brought by Indemnitee or any claim therein prior to a Change in Control, unless the bringing of such Proceeding or making of such claim shall have been approved by the Board of Directors. SECTION 15. Identical Counterparts. This Agreement may be executed in one or more counterparts by means of original or facsimile signatures, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement. SECTION 16. Headings. The headings of the Sections hereof are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof. SECTION 17. Definitions. For purposes of this Agreement: (a) "Acquiring Person" means any Person who or which, together with all Affiliates and Associates of such Person, is or are the Beneficial Owner of twenty-five percent (25%) or more of the shares of Common Stock then outstanding, but does not include any Exempt Person; provided, however, that a Person shall not be or become an Acquiring Person if such Person, together with its Affiliates and Associates, shall become the Beneficial Owner of twenty-five percent (25%) or more of the shares of Common Stock then outstanding solely as a result of a reduction in the number of shares of Common Stock outstanding due to the repurchase of Common Stock by the Company, unless and until such time as such Person or any Affiliate or Associate of such Person shall purchase or otherwise become the Beneficial Owner of additional shares of Common Stock constituting one percent (1%) or more of the then outstanding shares of Common Stock or any other Person (or Persons) who is (or collectively are) the Beneficial Owner of shares of Common Stock constituting one percent (1%) or more of the then outstanding shares of Common Stock shall become an Affiliate or Associate of such Person, unless, in either such case, such Person, together with all Affiliates and Associates of such Person, is not then the Beneficial Owner of twenty-five percent (25%) or more of the shares of Common Stock then outstanding. (b) "Affiliate" has the meaning ascribed to that term in Exchange Act Rule 12b-2. (c) "Associate" means, with reference to any Person, (i) any corporation, firm, partnership, association, unincorporated organization or other entity (other than the Company or a subsidiary of the Company) of which that Person is an officer or 8 9 general partner (or officer or general partner of a general partner) or is, directly or indirectly, the Beneficial owner of 10% or more of any class of its equity securities, (ii) any trust or other estate in which that Person has a substantial beneficial interest or for or of which that Person serves as trustee or in a similar fiduciary capacity and (iii) any relative or spouse of that Person, or any relative of that spouse, who has the same home as that Person. (d) A specified Person is deemed the "Beneficial Owner" of, and is deemed to "beneficially own," any securities: (i) of which that Person or any of that Person's Affiliates or Associates, directly or indirectly, is the "beneficial owner" (as determined pursuant to Exchange Act Rule 13d-3) or otherwise has the right to vote or dispose of, including pursuant to any agreement, arrangement or understanding (whether or not in writing); provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own," any security under this subparagraph as a result of an agreement, arrangement or understanding to vote that security if that agreement, arrangement or understanding: (A) arises solely from a revocable proxy or consent given in response to a public (that is, not including a solicitation exempted by Exchange Act Rule 14a-2(b)(2)) proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the Exchange Act; and (B) is not then reportable by such Person on Exchange Act Schedule 13D (or any comparable or successor report); (ii) which that Person or any of that Person's Affiliates or Associates, directly or indirectly, has the right or obligation to acquire (whether that right or obligation is exercisable or effective immediately or only after the passage of time or the occurrence of an event) pursuant to any agreement, arrangement or understanding (whether or not in writing) or on the exercise of conversion rights, exchange rights, other rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own," securities tendered pursuant to a tender or exchange offer made by that Person or any of that Person's Affiliates or Associates until those tendered securities are accepted for purchase or exchange; or (iii) which are beneficially owned, directly or indirectly, by (A) any other Person (or any Affiliate or Associate thereof) with which the specified Person or any of the specified Person's Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy or consent as described in the proviso to subparagraph (i) of this definition) or disposing of any voting securities of the Company or (B) any group (as that 9 10 term is used in Exchange Act Rule 13d-5(b)) of which that specified Person is a member; PROVIDED, HOWEVER, that nothing in this definition shall cause a Person engaged in business as an underwriter of securities to be the "Beneficial Owner" of, or to "beneficially own," any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of forty (40) days after the date of that acquisition. For purposes of this Agreement, "voting" a security shall include voting, granting a proxy, acting by consent, making a request or demand relating to corporate action (including, without limitation, calling a stockholder meeting) or otherwise giving an authorization (within the meaning of Section 14(a) of the Exchange Act) in respect of such security. (e) "Change of Control" means the occurrence of any of the following events that occurs after the effective date of this Agreement: (i) any Person becomes an Acquiring Person; (ii) at any time the then Continuing Directors cease to constitute a majority of the members of the Board; (iii) a merger of the Company with or into, or a sale by the Company of its properties and assets substantially as an entirety to, another Person occurs and, immediately after that occurrence, any Person, other than an Exempt Person, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of twenty-five percent (25%) or more of the total voting power of the then outstanding Voting Shares of the Person surviving that transaction (in the case or a merger or consolidation) or the Person acquiring those properties and assets substantially as an entirety. (f) "Common Stock" means the common stock, par value $.001 per share, of the Company. (g) "Continuing Director" means at any time any individual who then (i) is a member of the Board and was a member of the Board as of the effective date of this Agreement or whose nomination for his first election, or that first election, to the Board following that date was recommended or approved by a majority of the then Continuing Directors (acting separately or as a part of any action taken by the Board or any committee thereof) and (ii) is not an Acquiring Person, an Affiliate or Associate of an Acquiring Person or a nominee or representative of an Acquiring Person or of any such Affiliate or Associate. (h) "Corporate Status" describes the status of a Person who is or was a director, officer, employee or agent of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the Company. For purposes of this Agreement, "serving at the request of the Company" includes any service by Indemnitee which imposes duties on, or involves services by, Indemnitee with respect to any employee benefit plan or its participants or beneficiaries. 10 11 (i) "Court of Chancery" means the Court of Chancery of the State of Delaware. (j) "Disinterested Director" means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee hereunder. (k) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (l) "Exempt Person" means (i), (A) the Company, any subsidiary of the Company, any employee benefit plan of the Company or of any subsidiary of the Company and (B) any Person organized, appointed or established by the Company for or pursuant to the terms of any such plan or for the purpose of funding any such plan or funding other employee benefits for employees of the Company or any subsidiary of the Company and (ii) Indemnitee, any Affiliate or Associate of Indemnitee or any group (as that term is used in Exchange Act Rule 13d-5(b)) of which Indemnitee or any Affiliate or Associate of Indemnitee is a member. (m) "Expenses" include all attorneys' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding and all interest or finance charges attributable to any thereof. Should any payments by the Company under this Agreement be determined to be subject to any federal, state or local income or excise tax, "Expenses" also shall include such amounts as are necessary to place Indemnitee in the same after-tax position (after giving effect to all applicable taxes) he would have been in had no such tax been determined to apply to such payments. (m) "Independent Counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five (5) years has been, retained to represent: (i) the Company, its Affiliates or Indemnitee in any matter material to either such party; or (ii) any other Party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing. the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee's rights under this Agreement. (n) "Person" means any natural person, sole proprietorship, corporation, partnership of any kind having a separate legal status, limited liability company, business trust, unincorporated organization or association, mutual company, joint 11 12 stock company, joint venture, estate, trust, union or employee organization or governmental authority. (o) "Proceeding" includes any action, suit, alternate dispute resolution mechanism, hearing or any other proceeding, whether civil, criminal, administrative, arbitrative, investigative or mediative, any appeal in any such action, suit, alternate dispute resolution mechanism, hearing or other proceeding and any inquiry or investigation that could lead to any such action, suit, alternate dispute resolution mechanism, hearing or other proceeding, except one (i) initiated by an Indemnitee pursuant to Section 10 to enforce his rights hereunder or (ii) pending on or before the date of this Agreement. (p) "Voting Shares" means: (i) in the case of any corporation, stock of that corporation of the class or classes having general voting power under ordinary circumstances to elect a majority of that corporation's board of directors; and (ii) in the case of any other entity, equity interests of the class or classes having general voting power under ordinary circumstances equivalent to the Voting Shares of a corporation. SECTION 18. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. SECTION 19. Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder; provided, however, failure to give such notice shall not deprive Indemnitee of his rights to indemnification and advancement of Expenses under this Agreement unless the Company is actually and materially prejudiced thereby. SECTION 20. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (a) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed or (b) mailed by certified or registered mail with postage prepaid, on the third (3rd) business day after the date on which it is so mailed: (a) If to Indemnitee, to: Michael O. Aldridge 400 E. Kaliste Saloom Rd., Suite 3000 Lafayette, Louisiana 70508 12 13 (b) If to the Company, to: PetroQuest Energy, Inc. 400 E. Kaliste Saloom Rd., Suite 3000 Lafayette, Louisiana 70508 Attention: Corporate Secretary or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case way be. SECTION 21. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all the circumstances of such Proceeding in order to reflect: (a) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (b) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s). SECTION 22. Governing Law; Submission to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 10(a), the Company and Indemnitee hereby irrevocably and unconditionally (a) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Court of Chancery and not in any other state or federal court in the United States of America or any court in any other country, (b) consent to submit to the exclusive jurisdiction of the Court of Chancery for purposes of any action or proceeding arising out of or in connection with this Agreement, (c) waive any objection to the laying of venue of any such action or proceeding in the Court of Chancery, and (d) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Court of Chancery has been brought in an improper or otherwise inconvenient forum. SECTION 23. Miscellaneous. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. When used in this Agreement, the words "herein," "hereof" and words of similar import shall refer to this Agreement as a whole and not to any provision of this Agreement, and the word "Section" refers to a Section of this Agreement, unless otherwise specified. 13 14 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. PETROQUEST ENERGY, INC. /s/ Charles T. Goodson ------------------------------------------- Charles T. Goodson, Chief Executive Officer INDEMNITEE /s/ Michael O. Aldridge ------------------------------------------- Michael O. Aldridge 14 EX-27 5 ex27.txt FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 10,691,000 0 9,005,000 0 0 19,696,000 69,357,000 37,671,000 52,162,000 18,192,000 0 0 0 29,930 30,887,000 52,162,000 6,902,000 7,010,000 0 5,335,000 0 0 9,000 1,666,000 0 1,666,000 0 0 0 1,666,000 .07 .07
-----END PRIVACY-ENHANCED MESSAGE-----