SCHEDULE 14A INFORMATION
(RULE 14A-101)
Proxy Statement Pursuant to Section 14(A) of the Securities
Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ]Confidential, for Use of the
Commission Only (as permitted
[ ] Definitive Proxy Statement by Rule 14a-6(e)(2))
[ ] Definitive additional materials
[ ] Soliciting material pursuant to
Rule 14a-11(c) or Rule 14a-12
PANACO, INC.
________________________________________________________________________________
(Name of Registrant as Specified in Its Articles of Incorporation)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identity the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
PANACO INC.
1050 West Blue Ridge Boulevard
PANACO Building
Kansas City, Missouri 64145-1216
Annual Meeting - October 6, 1998
September 4, 1998
Dear Fellow Shareholder:
You are cordially invited to attend the 1998 Annual Meeting of
Shareholders of PANACO, Inc. to be held at 9:00 a.m., Tuesday, October 6, 1998,
at the Doubletree Hotel - Allen Center, 400 Dallas Street, Houston, Texas 77002
in the Granger A Room. Your Board of Directors and management look forward to
greeting personally those shareholders able to attend.
At this Annual Meeting, as more fully set forth in the accompanying
Notice of Annual Meeting and Proxy Statement, shareholders are being asked to
elect three directors to serve for a three year term, to amend the Certificate
of Incorporation to increase the number of authorized shares, to amend the
Certificate of Incorporation to allow shareholders to call special and annual
meetings, and to ratify the selection of KPMG LLP as independent accountants for
the year 1998.
It is very important that your shares are represented and voted at the
Annual Meeting, so we request your cooperation in promptly signing, dating and
mailing the enclosed WHITE proxy card in the envelope provided for your
convenience.
On behalf of your Board of Directors.
Sincerely,
/s/ Larry M. Wright
-------------------------
Larry M. Wright, Chairman
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PLEASE SIGN, DATE AND MAIL PROMPTLY
THE ENCLOSED WHITE PROXY CARD
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PANACO INC.
1050 West Blue Ridge Boulevard
PANACO Building
Kansas City, Missouri 64145-1216
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders:
The 1998 Annual Meeting of Shareholders of PANACO, Inc. (the "Company")
will be held at the Doubletree Hotel - Allen Center, 400 Dallas Street, Houston,
Texas 77002 in the Granger A Room, on Tuesday, October 6, 1998, at 9:00 a.m. for
the following purposes:
1. To elect three directors for a three-year term ending in 2001;
2. To amend the Certificate of Incorporation to increase the authorized
capital stock;
3. To amend the Certificate of Incorporation to allow shareholders owning 25%
or more of the Company's Common Stock to call (i) special meetings or (ii)
an annual meeting if such annual meeting has not been called by June 1 of
any year;
4. To ratify the appointment of KPMG LLP as independent accountants to audit
the financial statements of the Company for the year 1998; and
5. To act upon such other matters as may properly come before the Annual
Meeting.
Only shareholders of record at the close of business on August 24, 1998
will be entitled to notice of and to vote at the Annual Meeting and any
adjournment thereof. Please note that attendance at the Annual Meeting will be
limited to shareholders (or their authorized representatives) as of August 24,
1998, the record date, and to guests of the Company.
YOUR VOTE IS IMPORTANT
The vote of each shareholder is important, regardless of the number of
shares held. Whether or not you plan to attend the Annual Meeting, please sign,
date and mail the accompanying proxy card promptly in the enclosed postage-paid
envelope. PLEASE NOTE THAT YOUR VOTE CANNOT BE COUNTED UNLESS YOU SIGN AND
RETURN THE PROXY CARD OR ATTEND THE MEETING AND VOTE IN PERSON. ACCORDINGLY, YOU
ARE URGED TO RETURN YOUR WHITE PROXY CARD AT YOUR EARLIEST CONVENIENCE.
Thank you for your cooperation and support.
/s/ Todd R. Bart
------------------------
Todd R. Bart, Secretary
September 4, 1998
PANACO INC.
1050 West Blue Ridge Boulevard
PANACO Building
Kansas City, Missouri 64145-1216
PROXY STATEMENT
This Proxy Statement and the accompanying form of proxy are being
mailed to shareholders on or about September 4, 1998 in connection with the
solicitation of proxies by the Board of Directors of PANACO, Inc. (the
"Company") for use at the 1998 Annual Meeting of the Shareholders to be held at
9:00 a.m. on Tuesday, October 6, 1998, and at any postponement or adjournment
thereof (the "Annual Meeting").
At the Annual Meeting, shareholders will be asked to: (i) elect three
directors for a three-year term ending in 2001; (ii) amend the Certificate of
Incorporation to increase the authorized capital stock; (iii) amend the
Certificate of Incorporation to allow shareholders owning 25% or more of the
Company's Common Stock to call a special meeting or an annual meeting if such
annual meeting is not called by June 1 of any year; (iv) consider and ratify the
appointment of KPMG LLP as independent accountants to audit the financial
statements of the Company for the year 1998; and (v) act upon such other matters
as may properly come before the Annual Meeting.
On the record date, August 24, 1998, the outstanding voting securities
of the Company consisted of 23,963,563 shares of the Company's Common Stock, par
value $.01 per share ("Common Stock"), all of one class. Each share of Common
Stock has one vote on each matter presented for action at the Annual Meeting.
Voting
Shares of Common Stock can be voted at the Annual Meeting only if the
shareholder is represented by proxy or is present in person. A shareholder
giving a proxy in the accompanying form retains the power to revoke it by a
later dated appointment or by giving notice of revocation to the Company in
writing or in open meeting. Any such notices should be directed to Todd R. Bart,
Secretary of the Company, at the address set forth above. Shares of Common Stock
for which proxies are properly executed and returned prior to the Annual Meeting
will be voted in accordance with the instructions contained therein, or in the
absence of contrary instructions, such shares will be voted (1) to elect the
director nominees named herein, (2) to amend the Certificate of Incorporation to
increase the authorized capital, (3) to amend the Certificate of Incorporation
to allow shareholders to call special and annual meetings, and (4) to ratify the
appointment of KPMG LLP as independent accountants of the Company for the year
1998.
The holders of a majority of the Common Stock entitled to vote must be
present in person or by proxy at the Annual Meeting to constitute a quorum for
the purposes of transacting business at the Annual Meeting. Directors are
elected by a plurality of the votes present or represented by proxy at the
Annual Meeting and entitled to vote on the election of directors.
Broker non-votes and abstentions will not be counted for purposes of
determining whether any proposal has been approved and will be included in
computing the number of shares present for purposes of determining the presence
of a quorum for the Annual Meeting. Because directors are elected by a plurality
of votes, abstentions and broker non-votes will not have an impact on the
election of directors.
Ratification of the appointment of KPMG LLP requires the affirmative
vote of a majority of the outstanding Common Stock present in person or by proxy
at the Annual Meeting and broker non-votes and abstentions will have the effect
of a vote against ratification.
Amending the Certificate of Incorporation to increase the Company's
authorized capital requires the affirmative vote of a majority of the
outstanding Common Stock and broker non-votes and abstentions will have the
effect of a vote against the amendment.
Amending the Certificate of Incorporation with respect to the calling
of special and annual meetings requires the affirmative vote of two-thirds of
the outstanding Common Stock and broker non-votes and abstentions will have the
effect of a vote against the amendment.
YOUR VOTE IS IMPORTANT. Please sign, date and promptly mail your proxy
card so that a quorum may be represented at the Annual Meeting.
BOARD OF DIRECTORS
General Information
The Board of Directors has the responsibility for establishing broad
corporate policies and for the overall performance and governance of the
Company, although it is not involved in day-to-day operating details. Directors
are kept informed of the Company's business by various reports and documents, as
well as by operating and financial reports presented at Board and committee
meetings by the Chairman and other officers.
Meetings of the Board of Directors are regularly held each quarter and
following the Annual Meeting. Additional meetings, including meetings by
telephone conference call, of the Board may be called whenever needed. The Board
of Directors of the Company held eleven meetings in 1997, six of which were
meetings by telephone conference call. During that period, each incumbent
director attended at least 75% of the total number of meetings of the Board of
Directors.
Committees of the Board
The committees established by the Board of Directors to assist it in
the discharge of its responsibilities are described below.
Audit Committee. The Audit Committee has three members, none of whom is
an employee of the Company. The Audit Committee meets with management to
consider the adequacy of the internal controls of the Company and the
objectivity of its financial reporting. The Audit Committee recommends to the
Board the appointment of the independent accountants, subject to ratification by
the shareholders at the Annual Meeting. The independent accountants periodically
meet alone with the Committee and have unrestricted access to the Committee.
Members of the Audit Committee are Mark Barrett, Donald Chesser, James Kreamer
and Harold First. The Audit Committee met once in 1997.
Compensation Committee. The Compensation Committee has three members, none
of whom is an employee of the Company. It makes recommendations to the Board
with respect to the compensation of senior management of the Company and the
PANACO, Inc. Long Term Incentive Plan (the "Long Term Incentive Plan"). Members
of the Compensation Committee are A. Theodore Stautberg, Mark Barrett and Harold
First. The Compensation Committee met once in 1997.
Executive Committee. The Board also established an Executive Committee
in August 1998 to review and report to the full Board on various issues
regarding operations of the Company. The Executive Committee consists of three
members, one of whom shall be the Chief Executive Officer of the Company. The
Executive Committee shall automatically be abolished after the 1999 annual
meeting of shareholders of the Company unless continued by a vote of the
majority of the Board. Members of the Executive Committee are Larry Wright
(C.E.O.), Leonard Tallerine and Harold First.
Compensation of Directors
Restricted Stock. Non-employee directors are compensated for their
services with shares of the Company's Common Stock, receiving $1,000 in Common
Stock for attending Board of Directors meetings, $500 in Common Stock for
attending committee meetings (not including Executive Committee meetings) and
$200 in Common Stock for participating in telephone meetings. Officers of the
Company who serve as directors do not receive additional compensation for
serving on the Board of Directors or a committee thereof. Directors are
reimbursed for travel expenses incurred in attending Board of Directors or
committee meetings.
Each newly elected non-employee director of the Company will, on the
day after the first meeting of the Board of Directors at which that director is
in attendance, automatically be granted a restricted stock award of the number
of shares of Common Stock that have a value of $10,000, which will be calculated
based on the average trading price of the Common Stock during the 60 days
immediately preceding the date of grant. These restricted stock awards will vest
over two years, with one-third vesting six months following the date of grant,
another one-third vesting on the first anniversary of the date of grant, and the
last one-third vesting on the second anniversary of the date of grant so long as
the non-employee director remains a director of the Company through those
vesting dates. Each non-employee director will be entitled to vote each share
subject to these restricted stock awards from the date of grant until the shares
are forfeited, if ever.
Fees. Non-employee members of the Executive Committee are paid $7,500
per month for their services on that committee.No fees were paid to any director
during 1997.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to beneficial
ownership of the Company's Common Stock by (a) each officer and director of the
Company, (b) all officers and directors of the Company as a group, and (c) each
person who beneficially owns 5% or more of the Common Stock as of August 24,
1998. Except as set forth in footnote (c) below, each shareholder has sole
voting and sole investment power over all shares.
Shares Owned Beneficially(a)
Directors and Executive Officers Number Percent
Larry M. Wright; President, Chief Executive Officer and
Chairman of the Board 1,067,614 4.46%
Robert G. Wonish; Sr. Vice President-Operations 74,083 .31
William J. Doyle; Vice President-Exploitation 16,287 .07
Todd R. Bart; Chief Financial Officer and Secretary 39,023 .16
Larry W. Miller; Treasurer -- --
Barbara A. Whitton; Vice President-Marketing 764 --
Mark C. Licata; Director 1,607,123 6.71
A. Theodore Stautberg, Jr.; Director 7,236 .03
Donald W. Chesser; Director 3,669 .02
Leonard C. Tallerine, Jr.; Director 1,549,815 6.46
James B. Kreamer; Director 53,228 .22
Michael Springs; Director 5,269 .02
Mark C. Barrett; Director 4,977 .02
Harold First; Director 4,225 .02
All Directors and Officers as a group (14 persons) 4,433,313 18.50%
Beneficial Owners of 5% or more (excluding persons named above)
Shares Owned Beneficially
Number Percent
Carl C. Icahn (b)
% Icahn Associates Corp.
767 Fifth Avenue, 47th Floor
New York, NY 10153 3,030,000 12.64%
R. B. Haave Associates, Inc. .
36 Grove Street
New Canaan, CT 06840 1,715,700 7.16
Richard A. Kayne (c)
% Kayne Anderson Investment Management, Inc.
1800 Avenue of the Stars, #200
Los Angeles, CA 90067 1,757,576 7.33
Croft-Leominster, Inc.
207 East Redwood Street, Suite 802
Baltimore, Maryland 21202 1,669,100 6.97
- - --------------
(a) Includes 480,000 currently exercisable options to purchase shares, at $4.45
per share, held by the following: Mr. Wright-400,000; Mr. Wonish-40,000;
Mr. Doyle-10,000 and Mr. Bart-30,000. These options are exercisable any
time before June 20, 2000. However, the holder may not dispose of the
shares acquired upon exercise for a period of three years and must remain
an employee of PANACO during that three-year period. Otherwise, the shares
may be reacquired by PANACO at the person's cost, thereby denying them the
benefit of the option.
(b) Mr. Icahn is the sole stockholder of Riverdale Investors Corp. Inc., the
general partner of High River Limited Partnership, the record holder of
these shares.
(c) The reported shares are owned by seven investment accounts (including four
investment limited partnerships, two insurance companies and an offshore
corporation), managed, with discretion to purchase or sell securities, by
KAIM Non-Traditional, L.P., a registered investment adviser. The four
investment limited partnerships beneficially own 1,466,667 shares that are
issuable upon the exercise of warrants which expire on December 31, 1998.
KAIM Non-Traditional, L.P. is the sole or managing general partner of three
of the limited partnerships and a co-general partner of the fourth. Richard
A. Kayne is the controlling shareholder of the corporate owner of Kayne,
Anderson Investment Management, Inc., the sole general partner of KAIM
Non-Traditional, L.P. Mr. Kayne is also the managing general partner of one
of the limited partnerships and a limited partner of each of the limited
partnerships. KAIM Non-Traditional, L.P. is an investment manager of the
offshore corporation. Mr. Kayne is a director of one of the insurance
companies. All shares have shared voting and investment power.
KAIM Non-Traditional, L.P. disclaims beneficial ownership of the shares
reported, except for those shares attributable to it by virtue of its
general partner interests in the limited partnerships. Mr. Kayne disclaims
beneficial ownership of the shares reported, except those shares held by
him or attributable to him by virtue of his limited and general partner
interests in the limited partnerships and by virtue of his indirect
interest in the interest of KAIM Non-Traditional, L.P. in the limited
partnerships.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors and persons who
own more than ten percent of a registered class of the Company's equity
securities to file initial statements of beneficial ownership (Form 3) and
statements of changes in beneficial ownership (Forms 4 or 5) of Common Stock
with the SEC. Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all such forms
they file.
Based solely on a review of the copies of the forms that it received,
and on written representations from certain reporting persons that no additional
forms were required, the Company believes that its officers, directors and
greater than ten-percent beneficial owners complied with all of these filing
requirements in 1997.
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ELECTION OF DIRECTORS
(Item 1 on Proxy Card)
================================================================================
The Board of Directors of the Company presently consists of nine
members, eight of whom are independent, non-employees of the Company. Pursuant
to a Board resolution adopted in August 1998, the number of directors
constituting the full Board of Directors was reduced from eleven (11) to nine
(9). The Company's Certificate of Incorporation requires that the directors be
divided into three classes, with an equal number of directors in each class when
possible. Due to an imbalance in the number of directors for Class III caused by
the resignation of H. James Maxwell and the reduction in the number of
directors, James B. Kreamer agreed to move from a Class I Director to a nominee
for Class III Director to balance the classes. At each annual meeting of
shareholders, directors constituting a class are elected to hold office until
the third annual meeting of shareholders following their election. The term of
the present Class III Directors expires in 1998. The Board of Directors has
nominated Donald W. Chesser, James B. Kreamer and Mark C. Licata for re-election
as directors in Class III to serve until the 2001 annual meeting of
shareholders. The three remaining directors in Class I continue to serve until
the 1999 annual meeting of shareholders and the three directors in Class II
continue to serve until the 2000 annual meeting of shareholders. The directors
of each class will serve until their respective successors are elected and
qualified.
It is intended that shares of Common Stock represented by the
accompanying form of proxy will be voted for the election of the nominees,
unless contrary instructions are indicated as provided on the proxy card. If you
do not wish your shares to be voted for a particular nominee, you may so
indicate on the proxy card. The shares of Common Stock vote as a single class
for the election of directors. If one or more of the nominees should at the time
of the meeting be unavailable or unable to serve as a candidate, the shares
represented by the proxies will be voted to elect the remaining nominees and any
substitute nominee or nominees designated by the Board of Directors. The Board
of Directors knows of no reason why any of the nominees will be unavailable or
unable to serve.
For each director of the Company, including those nominated for
election, following is a brief description of each nominee or director's
principal occupation and business experience during the last five years,
directorships of publicly held companies presently held by any nominee or
director, age, and certain other information. When indicating the tenure with
the Company of each director, the "Company" means the present corporation
(post-August 1992) and Pan Petroleum MLP ("PAN") (pre-September 1992).
Class III Directors and Nominees
Donald W. Chesser, age 59. Mr. Chesser, a Director of the Company since
1992, received his B.B.A. in Accounting from Texas Tech University in 1963 and
has served with several certified public accounting firms since that time,
including eight years with Elmer Fox and Company. From 1977 to 1981, he was with
IMCO Enterprises, Inc. Since 1982 he has been a shareholder and President of
Chesser & Company, P.A., a certified public accounting firm. He is also
President of Financial Advisors, Inc., a registered investment advisor.
James B. Kreamer, age 59. Mr. Kreamer, a Director of the Company since
1993, received his B.S. Degree in Business from the University of Kansas in 1963
and has been active in investment banking since that time. Since 1982 he has
managed his personal investments. Mr. Kreamer is currently a director for
Tengasco, Inc.
Mark C. Licata, age 47. Mr. Licata, a Director of the Company since 1997,
received a Bachelor of Business Administration and Accounting (1972) and a law
degree (1976) from the University of Texas. He was employed in the private
practice of law from 1976 through 1985 and then served as President and Chief
Operating Officer of Vista Host, Inc. and later as President and Chief Operating
Officer of the publicly held McFaddin Ventures, Inc. In 1988, Mr. Licata
returned to the practice of law in Houston with Looper, Reed, Mark & McGraw,
where he remained until he joined Goldking as President in 1996. In 1997 Mr.
Licata was appointed a Director, following the Company's acquisition of
Goldking, and has returned to the practice of law in Houston with Looper, Reed,
Mark & McGraw.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE ELECTION OF THE CLASS III NOMINEES.
Class III Director
Todd R. Bart, age 34. Mr. Bart received his B.B.A. in Accounting from
Abilene Christian University in 1987. He worked in the energy industry with
Pennzoil Company from 1987 to 1990 and the public accounting firm of Arthur
Andersen and Company from 1990 until 1992. From 1992 to 1995 he worked for
Yellow Freight System, Inc., a trucking company, in financial accounting and
reporting. He joined the Company as Controller in 1995 and was elected Chief
Financial Officer and Secretary in 1996. He received his C.P.A. designation in
Texas in 1990 and in Kansas in 1993, and is a member of the A.I.C.P.A. Due to
reduction in the size of the Board, Mr. Bart will not be standing for
re-election.
Class I Directors
A. Theodore Stautberg, Jr., age 52. Mr. Stautberg, a Director of the
Company since 1993, has since 1981 been the President and a director of Triumph
Resources Corporation and its parent company, Triumph Oil and Gas Corporation of
New York. Triumph engages in the oil and natural gas business, assists others in
financing energy transactions, and serves as general partner of Triumph
Production L.P. Mr. Stautberg is also the president of Triumph Securities
Corporation and BT Energy Corporation. Prior to forming Triumph in 1981, Mr.
Stautberg was a Vice President of Butcher & Singer, Inc., an investment-banking
firm, from 1977 to 1981. From 1972 to 1977, Mr. Stautberg was an attorney with
the Securities and Exchange Commission. Mr. Stautberg is a graduate of the
University of Texas and the University of Texas School of Law.
Michael Springs, age 48. Mr. Springs, a Director of the Company since 1996,
graduated from the Medical Field Service School, Brooke Hospital, San Antonio,
Texas in 1971 and the University of Missouri, Kansas City, in 1969 with a degree
in Business. He is the President and founder of Ortho-Care, Inc. of Kansas City,
Missouri and Ortho-Care Southeast of Charlotte, North Carolina. Ortho-Care, Inc.
is a manufacturer of orthopedic fracture management and sports medicine
products, and holds a number of patents in the field. Mr. Springs is also
controlling partner in Ortho-Implants, a distributor of total joint replacement
prosthesis.
Leonard C. Tallerine, Jr., age 48. Mr. Tallerine, a Director of the Company
since 1997, graduated from Rice University's Advanced Management Institute and
holds undergraduate and graduate degrees in accounting from the University of
Houston. Mr. Tallerine practiced as a CPA with Price Waterhouse and KPMG from
1972 through 1980, specializing in oil and natural gas tax issues. From 1981
through 1986, he served as co-managing and general partner of Paso Grande
Investment, Ltd., an oil and natural gas real estate holding company and served
as Chairman of the Texas Guaranty National Bank from 1983 to 1986. In 1987, he
founded the Union Companies and in 1991 became Chairman and Chief Executive
Officer of Goldking. In July 1997 Mr. Tallerine was appointed a Director,
following the Company's acquisition of Goldking.
Class II Directors
Larry M. Wright, age 54. Mr. Wright, a Director of the Company since
1992, received his B.S. Degree in Chemical Engineering from the University of
Oklahoma in 1966. From 1966 to 1976 he was with Union Oil Company of California
(UNOCAL). From 1976 to 1980, he was with Texas International Petroleum
Corporation, ultimately as division operations manager. From 1980 to 1981, he
was with what is now Trans Texas Gas Company as Vice President-Exploration and
Production. From 1981-1982, he was Senior Vice President of Operations for Texas
International Petroleum Corporation, and, from 1983 to 1985, he was Executive
Vice President of Funk Fuels Corp., a subsidiary of Funk Exploration. From 1985
to 1993, Mr. Wright was an independent consultant to the Company and its
predecessors. From 1993 to 1997, he served as Executive Vice President of the
Company and from October 1997 to August 1998, he served as President and Chief
Operating Officer. Mr. Wright was elected Chairman of the Board and Chief
Executive Officer of the Company in August 1998.
Mark C. Barrett, age 47. Mr. Barrett, a Director of the Company since 1996,
received his B.S. Degree in Business Administration/Accounting in 1972 and is
licensed to practice as a Certified Public Accountant in both Kansas and
Missouri. He was a partner in the firm Drees Dunn Lubow and Company from 1974
until 1981. He founded Barrett & Associates, a certified public accounting firm,
in 1981 and is the president and majority shareholder in that firm. His firm
served as the Company's independent public accountants from 1985 to 1995.
Harold First, age 62. Mr. First, a Director of the Company since 1997, has
been self-employed as a financial consultant since 1993. From 1990 to 1993 he
was Chief Financial Officer of Icahn Holding Corp. and also served as Senior
Vice President of Trans World Airlines, Inc. from 1992 to 1993. Mr. First is
currently a director of Cadus Pharmaceutical Corp. and Tele-Save Holdings, Inc.
He was nominated for election to the Board of Directors pursuant to an agreement
with shareholder Carl C. Icahn.
Certain Relationships and Related Transactions
A. Theodore Stautberg, Jr., is an officer, director and beneficial
shareholder of Triumph Securities Corporation ("Triumph Securities"), which
provided certain services in connection with the 1997 offering of Common Stock.
In connection with the services so provided, Triumph Securities received
$268,906, representing .8% of the 6.8% underwriters discount.
Mark C. Barrett's CPA firm, Barrett and Associates, served as the Company's
independent accountants for the years 1985 through 1995. During 1996 his CPA
firm was paid $53,400 for accounting services related to the audit of the fiscal
year 1995. Mr. Barrett's firm has provided advice on tax matters during 1997.
Former officers and directors H. James Maxwell and Bob F. Mallory are the
partners in 1050 Blue Ridge Building Partnership, which owns a 5,200 square foot
office building at 1050 West Blue Ridge Boulevard, Kansas City, Missouri, which
it currently leases to the Company on a triple net basis for $4,000 per month
for a term of ten years, expiring in 2003. The lease was approved by the Board
of Directors, which determined that the rate was as good or better than that
which could be obtained from a non-affiliated party. In August 1998, the Company
negotiated an agreement with the Partnership to terminate the lease effective
December 31, 1998. In consideration for such early termination and release of
the Company, the Company has agreed to pay the Partnership $24,000 and to convey
certain personal property to the Partnership.
Larry M. Wright exercised warrants to purchase 90,000 shares of Common
Stock in July 1997, at an exercise price of $2.00 per share and 160,000 shares
of Common Stock in October 1997 at an exercise price of $2.375 per share, for an
aggregate of $560,000. The warrants were originally granted to Mr. Wright in
1991.
Michael Springs and Mark C. Barrett, were each issued restricted stock
awards of 2,447 shares of Common Stock upon their election to the Board of
Directors in 1996. Harold First was likewise issued 2,315 shares of Common Stock
upon his election to the Board of Directors in October 1997.
In connection with the Goldking Acquisition, Mark C. Licata and Leonard C.
Tallerine, Jr. were paid a total of $27,539,000, including 1,606,146 and
1,548,784 shares of restricted Common Stock respectively, issued at the closing
on July 31, 1997. Messrs. Licata and Tallerine have certain rights to require
the Company to register such Common Stock for resale. Messrs. Licata and
Tallerine were the sole beneficial owners of Goldking. After the Senior Note
offering, $6,000,000 in promissory notes, received by Messrs. Licata and
Tallerine as a portion of the acquisition consideration, were paid by the
Company. During 1998, Looper, Reed, Mark & McGraw, a law firm in which Mr.
Licata is currently of counsel, received fees from the Company for various legal
services.
On October 8, 1996 the Company borrowed $17,000,000 from lenders advised by
Kayne, Anderson Investment Management, Inc. ("Kayne Anderson"). Of this amount,
$8,500,000 was repaid on March 6, 1997 from the proceeds of the Company's public
offering of Common Stock. The Company paid certain expenses, including legal
fees, of those lenders in 1996 and 1997. During the first quarter of 1996,
lenders advised by Kayne Anderson exercised warrants issued to them in
connection with the 1993 subordinated notes, and receiving 816,526 shares of
Common Stock. Those shares were sold during 1997. In October 1997, $8,500,000 in
1996 Tranche A Convertible Subordinated Notes due October 8, 2003, convertible
into 2,060,606 shares of Common Stock on the basis of $4.125 per share, were
prepaid by the Company. Warrants to purchase 2,060,606 shares of Common Stock at
a price of $4.125 per share, which may be exercised until December 31,1998, were
issued as part of the terms of the prepayment.
H. James Maxwell has previously been granted options under the Company's
Long-Term Incentive Plan, to acquire 600,000 shares of Common Stock at $4.45 per
share. While under the terms of the Long-Term Incentive Plan, Mr. Maxwell's
unexercised options would have expired upon his resignation, the Company has
agreed to allow Mr. Maxwell's options to continue until their stated expiration
date of June 20, 2000.
In connection with the election of Larry M. Wright to the position of
Chairman of the Board and Chief Executive Officer, the Board of Directors
authorized the Company to enter into an Employment Agreement with Mr. Wright for
a term of three (3) years, whereby in the event Mr. Wright is terminated after
the first year, he is entitled to receive salary payments for an additional 24
months, and upon termination by the Company at any time, Mr. Wright is entitled
to full vesting of any outstanding options.
Former officers and directors H. James Maxwell and Bob F. Mallory are
personal guarantors of the Company's obligation to plug the wells and remove the
platforms on the West Delta properties acquired from Conoco, Arco (now Vastar),
Texaco and Oxy in 1991. In connection with Mr. Maxwell's resignation, the
Company has agreed to use reasonable efforts to cause Mr. Maxwell and Mr.
Mallory to be released from such guarantee.
Employees of the Company are eligible to receive stock awards, stock
options, stock appreciation rights, and performance units pursuant to the
Company's Long-Term Incentive Plan.
The Company has several procedures, provisions, and plans designed to
reduce the likelihood of a change in the management or voting control of the
Company without the consent of the incumbent Board of Directors. These
provisions may have the effect of strengthening the ability of officers and
directors of the Company to continue as officers and directors of the Company
despite changes in share ownership of the Company.
EXECUTIVE COMPENSATION
Summary Compensation Table.
The following table sets forth certain information concerning the
annual compensation paid to the Company's Chief Executive Officer and each
executive officer whose compensation exceeded $100,000 during 1997.
Long-Term Incentive Plan
---------------------------------------------------------
Annual Compensation Awards Payouts
------------------------------------ Restricted Securities All
Stock Underlying LTIP Other
Position Year Salary ($) Bonus ($) Award(s)($) Options (#) Payouts($) Comp.(a)($)
---------- ---- --------- ---------- ---------- ------------ ---------- ------------
H. James Maxwell(b) 1997 215,100 21,400 0 600,000 0 22,500
Chairman and Chief 1996 166,900 0 0 0 0 22,500
Executive Officer 1995 153,500 0 0 24,615 0 22,500
Larry M. Wright(c) 1997 205,500 20,500 0 400,000 0 22,500
President 1996 160,300 0 0 0 0 22,500
1995 147,300 0 0 0 0 22,100
Edward A. Bush(d) 1997 121,523 0 0 20,000 0 18,200
Senior Vice President 1996 9,231 0 0 0 0 0
Robert G. Wonish 1997 117,100 12,800 20,000 40,000 0 19,500
Senior Vice President 1996 100,200 0 0 0 0 15,000
1995 92,100 0 0 0 0 13,800
- - ----------
(a) The "other compensation" represents contributions to the accounts of
the employees under the Company's Employee Stock Ownership Plan.
(b) Mr. Maxwell resigned from his position as Chairman and Chief Executive
Officer in August 1998.
(c) Mr. Wright was elected as Chairman and Chief Executive Officer in August
1998.
(d) Mr. Bush joined the Company in December 1996 and resigned in July 1998.
Option Grants in Last Fiscal Year
Number of Percent of
Securities total options
Underlying granted to Exercise or Market price Per Share
Options employees Base price at date Expiration Grant Date
Name Granted in fiscal year ($/Share) of grant($) Date Value($)(a)
- - ---------------- --------- -------------- --------- ----------- -------- -------------
H. James Maxwell 600,000 50% $4.45 $4.38 6/20/00 $1.42
Larry M. Wright 400,000 33% $4.45 $4.38 6/20/00 $1.42
Edward A. Bush 20,000 2% $4.45 $4.38 6/20/00 $1.42
Robert G. Wonish 40,000 3% $4.45 $4.38 6/20/00 $1.42
- - ------
(a) The per share grant date value was calculated on the date of the grant
using the Black-Scholes Modified American Option Pricing Model. This model
uses historical data to forecast future trends and economic research has
shown that it may not be indicative of future results. The following
assumptions were used in the model for calculating the value: expected
volatility-38.4%, risk free rate of return-6.1%, dividend yield-0%, term to
exercise-date of expiration (3 years).
Aggregate Option and Warrant Exercises.
The following table provides information relating to the number and value
of Common Stock subject to options exercised during 1997 or held by the named
executive officers as of December 31, 1997.
Aggregated Warrant and Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
Number of
Securities underlying Value of unexercised
Shares Unexercised options In-the-money
Acquired Value At fiscal year-end (#) At fiscal year-end ($)
Name On Exercise(#) Realized($)(a) Exercisable/Unexercisable Exercisable/Unexercisable
- - ------------------ -------------- -------------- ------------------------- -------------------------
H. James Maxwell 0 0 600,000/0 0/0
Larry M. Wright 250,000 568,000 400,000/0 0/0
Edward A. Bush 0 0 20,000/0 0/0
Robert G. Wonish 0 0 40,000/0 0/0
- - ----------
(a) Value realized is calculated based upon the difference between the options
exercise price and the market price of the Common Stock on the date of
exercise multiplied by the number of shares to which the exercise price
relates.
Objectives and Approach
The overall goals of the Company's executive compensation program are: (i)
to encourage and provide an incentive to its executive officers to achieve the
Company's strategic business and financial goals, both short-term and long-term,
and thereby enhance shareholder value, (ii) to attract and retain well-qualified
executive officers and (iii) to reward individuals for outstanding job
performance in a fair and equitable manner when measured not only with respect
to the Company's internal performance goals but also the Company's performance
in comparison to its peers. The components of the Company's executive
compensation are salary, incentive bonuses and awards under its Long Term
Incentive Plan and Employee Stock Ownership Plan, each of which assists in
achieving the program's goals.
Long Term Incentive Plan
The Company's Long-Term Incentive Plan provides for the granting, to
certain officers and key employees of the Company and its participating
subsidiaries, of incentive awards in the form of stock options, stock
appreciation rights ("SARS"), stock, and cash awards. The Long-Term Incentive
Plan is administered by a committee of independent members of the Board of
Directors (the "Plan Committee") with respect to awards to certain executive
officers of the Company but may be administered by the Board of Directors with
respect to any other awards. Except for certain automatic awards, the Plan
Committee has discretion to select the employees to be granted awards, to
determine the type, size, and terms of the awards, to determine when awards will
be granted, and to prescribe the form of the instruments evidencing awards.
Options, which include nonqualified stock options and incentive stock
options, are rights to purchase a specified number of shares of Common Stock at
a price fixed at the time the option is granted. Payment may be made with cash
or other Common Stock owned by the optionee or a combination of both. Options
are exercisable at the time and on the terms that the Plan Committee determines.
The payment of the option price can be made either in cash or by the person
exercising the option turning in to the Company, Common Stock presently owned by
him, which would be valued at the then current market price. SARs are rights to
receive a payment, in cash or Common Stock or both, based on the value of the
Common Stock. A stock award is an award of Common Stock or denominated in Common
Stock. Cash awards are generally based on the extent to which pre-established
performance goals are achieved over a pre-established period but may also
include individual bonuses paid for previous, exemplary performance. The Plan
Committee determines performance objectives and award levels before the
beginning of each plan year.
The Long-Term Incentive Plan allows for the satisfaction of a participant's
tax withholding with respect to an award by the withholding of Common Stock
issuable pursuant to the award or the delivery by the participant of previously
owned Common Stock, in either case valued at the fair market value, subject to
limitations the Plan Committee may adopt.
Awards granted pursuant to the Long-Term Incentive Plan may provide that,
upon a change of control of the Company, (a) each holder of an option will be
granted a corresponding SAR (b) all outstanding SARs and stock options become
immediately and fully vested and exercisable in full, and (c) the restriction
period on any restricted stock award shall be accelerated and the restriction
shall expire.
The Long-Term Incentive Plan provides for the issuance of a maximum number
of shares of Common Stock equal to 20% of the total number of shares of Common
Stock outstanding from time to time. Unexercised SARs, unexercised options,
restricted stock, and performance units under the Long-Term Incentive Plan are
subject to adjustment in the event of a stock dividend, stock split,
recapitalization or combination of the Company, merger or similar transaction
and are not transferable except by will and by the laws of descent and
distribution. Except when a participant's employment terminates as a result of
death, disability, or retirement under an approved retirement plan or following
a change in control in certain circumstances, an award generally may be
exercised (or the restriction thereon may lapse) only if the participant is an
officer, employee, or director of the Company, or subsidiary at the time of
exercise or lapse or, in certain circumstance, if the exercise or lapse occurs
within 180 days after employment is terminated.
Under the Company's Long-Term Incentive Plan all full time employees share
a bonus equal to no less than 1% of the Company's cash flow, in accordance with
GAAP, exclusive of extraordinary and non-recurring items. The bonuses will be
paid to all full time (1,000 + hours) employees at the time of delivery of the
independent audit. The bonuses are allocated to the full time employees based
upon their salary at December 31. Former Goldking employees received
proportionate participation for 1997, based upon their five months employment
with the Company.
The Long-Term Incentive Plan may be amended by the Board of Directors. No
grants or awards may be made under the Long-Term Incentive Plan after the tenth
anniversary of the plan. No shareholder approval will be sought for amendments
to the Long-Term Incentive Plan except as required by law (including Rule 16b-3
under the Exchange Act) or the rules of any national securities exchange on
which the Common Stock are then listed.
Employee Stock Ownership Plan
In 1994, the Company adopted the PANACO, Inc. Employee Stock Ownership
Plan ("ESOP"). Pursuant to the terms of the ESOP, the Company may contribute up
to fifteen percent (15%) of the participant's annual compensation to the ESOP.
ESOP assets are allocated in accordance with a formula based on participant
compensation. In order to participate in the ESOP, a participant must complete
at least one thousand hours of service to the Company within twelve consecutive
months. A participant's interest in the ESOP becomes one hundred percent vested
after three years of service to the Company. Benefits are distributed from the
ESOP at such time as a participant retires, dies or terminates service with the
Company in accordance with the terms and conditions of the ESOP. Benefits may be
distributed in cash or in shares of Common Stock. No participant contributions
are allowed to be made to the ESOP.
Company contributions to the ESOP may be in the form of Common Stock or
cash. Cash contributions may be used, at the discretion of the Board of
Directors, to purchase Common Stock in the open market or from the Company at
prevailing prices. The allocation of ESOP assets is determined by a formula
based on participant compensation. Participation in the ESOP requires completion
of more than one thousand (1,000) hours of service to the Company. The ESOP is
intended to satisfy any applicable requirements of the Internal Revenue Code of
1986 and the Employee Retirement and Income Security Act of 1974. The Company
has been advised that its contributions to the ESOP will be deductible for
Federal Income Tax purposes, and the participants will not recognize income on
their allocated share of ESOP assets until such assets are distributed. As of
December 31, 1997, the ESOP owned of record 77,618 shares of Common Stock. Such
Common Stock is owned beneficially by the employees of the Company.
CEO Compensation
In establishing the annual compensation of the Chief Executive Officer,
the Compensation Committee considers the performance of the Company and the
Chief Executive Officer, including his leadership and effectiveness in
identifying opportunities for growth and increased profitability and
implementing the Company's strategic plan. While overall corporate performance
is considered, the CEO's compensation is determined by a subjective evaluation
of his individual performance.
In establishing the annual compensation of former Chief Executive
Officer H. James Maxwell in 1997, the Compensation Committee took into account
Mr. Maxwell's contribution to the growth of the Company in determining his
compensation, and the role he played in the numerous acquisitions made by the
Company since 1991.
Pursuant to the Long-Term Incentive Plan, on June 18, 1997, Mr. Maxwell
was granted stock options to purchase 600,000 shares at $4.45 per share, above
the then current market price. The Compensation Committee and the Board believe
that it is important for the Chief Executive Officer to own and maintain a
significant stake in the Company, thereby aligning his interests with those of
the Company's shareholders.
Furthermore, the Compensation Committee has undertaken a review of the
appropriate measures of corporate and management performance and has recommended
the establishment of a 1998 performance bonus program for Mr. Wright, the
current Chief Executive Officer. The Compensation Committee has recommended, and
the Board has adopted, a performance bonus payable two-thirds (2/3) in stock and
one-third (1/3) in cash if specific cash flow per share goals and share price
goals (measured as a multiple cash flow per share) are achieved during 1998.
This performance bonus, if the specified goals are met, could range from 10% to
50% of base salary. In the future, the Board intends to tie Mr. Wright's
compensation to his ability to enhance and maximize shareholder value, unifying
Mr. Wright's and shareholder interests.
COMPENSATION COMMITTEE
A. Theodore Stautberg, Jr.
Mark C. Barrett
Harold First
James Kreamer
PERFORMANCE GRAPHS
The following performance graph compares the annual change of the
cumulative total shareholder return, assuming reinvestment of dividends, of an
assumed $100 investment on January 1, 1993 in (1) Common Shares, (2) the NASDAQ
Market Index and (3) a peer group of all crude petroleum and natural gas
exploration and production companies (SIC Code 1311) listed on NASDAQ.
[GRAPHIC OMITTED]
PANACO, Inc NASDAQ MARKET PEER GROUP INDEX
12/92 100 100 100
12/93 150 119.95 132.16
12/94 228.57 125.94 174.02
12/95 253.57 163.35 184.81
12/96 278.57 202.99 280.57
12/97 228.57 248.3 257.15
8/21/98 128.57 279.49 154.77
================================================================================
AMENDMENT CERTIFICATE OF INCORPORATION TO INCREASE
AUTHORIZED SHARES
(Item 2 on Proxy Card)
================================================================================
On August __, 1998, the Board of Directors adopted a resolution
approving a proposal to amend the Article numbered FIFTH of the Company's
Certificate of Incorporation to increase the number of shares of capital stock
the Company is authorized to issue from 45,000,000 shares to 100,000,000 shares.
The amendment will affect the authorized number of shares of Preferred Stock, by
increasing such number from 5,000,000 to 10,000,000. The amendment will also
increase the number of authorized shares of Common Stock from 40,000,000 to
90,000,000. A majority of the Board of Directors determined that the amendment
is advisable and directed that it be considered at the Annual Meeting. The
affirmative vote of a majority of the outstanding shares of Common Stock of the
Company is required to approve the proposed amendment.
The full text of the proposed amendment to the first paragraph of
Article FIFTH of the Certificate of Incorporation is as follows:
FIFTH: The total number of shares that the corporation shall have
authority to issue is 100,000,000 shares of capital stock, classified
as (i) 10,000,000 shares of preferred stock, par value $.01 per share
("Preferred Stock"), and (ii) 90,000,000 shares of common stock, par
value $.01 per share ("Common Stock").
Purpose and Effect of Increasing the Number of Authorized Shares of Common Stock
The proposed increase in the authorized capital stock has been
recommended by the Board of Directors to assure that an adequate supply of
authorized but unissued shares is available for general corporate needs, such as
future stock dividends, stock splits and employee benefit plans. The additional
authorized shares of Common and Preferred Stock could also be used for such
purposes as raising additional capital for the operations of the Company or
financing the acquisition of other businesses. The terms of any series of
Preferred Stock to be issued, other than pursuant to the Company's Shareholders
Rights Plan, will be dependent largely upon market conditions and other factors
existing at the time of the issuance and sale. There are currently no plans or
arrangements relating to the issuance of any of the additional shares of Common
Stock or Preferred Stock other than the Shareholders Rights Plan. Such shares
would be available for issuance without further action by the shareholders,
unless required by the Company's Articles or Bylaws, NASDAQ rule, contract or by
applicable law.
Under Article FIFTH of the Company's Certificate of Incorporation, the
Board of Directors has the authority to issue authorized shares of the Preferred
Stock and series and to fix the number, designation, relative rights,
preferences and limitations of the shares of such series, subject to applicable
law and the provisions of Article FIFTH. The authority of the Board includes the
right to fix for each series the dividend rate, redemption price, liquidation
rights, sinking fund provisions, conversion rights, and voting rights. The
relative rights and limitations of the Common and Preferred Stock would remain
unchanged under the amendment. The holders of the Common and Preferred Stock do
not have preemptive rights.
As of August 24, 1998, the Company had 23, 963,563 shares of Common
Stock issued and outstanding; no shares of Preferred Stock have been issued. In
addition, approximately 3,220,606 shares of Common Stock were reserved for
issuance under the Company's long-term incentive plan and for outstanding
warrants. Thus, as of August 24, 1998, there were approximately 12,815,831
authorized shares of Common Stock unissued and not reserved for issuance.
The issuance of additional shares of capital stock by the Company may
potentially have an anti-takeover effect by making it more difficult to obtain
shareholder approval of various actions, such as a merger or removal of
management. Issuance of shares of Preferred Stock could also make it more
difficult to obtain shareholder approval of such actions as a merger, Bylaw
changes, removal of a director, or amendment to the Articles, particularly in
light of the power of the Board of Directors to specify certain rights and
preferences of the Preferred Stock, such as voting rights, without shareholder
approval. All series of the Preferred Stock having voting rights and the Common
Stock would vote together as one class, unless otherwise required by law. The
holders of Preferred Stock would generally be entitled to vote separately as a
class upon a proposed amendment of the Certificate of Incorporation or other
corporate action, such as a merger, which would effect an exchange,
reclassification or cancellation of all or a portion of such Preferred Stock or
otherwise might affect the preferences or relative rights of the Preferred
Stock.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR SUCH AMENDMENT
================================================================================
AMENDMENT OF THE CERTIFICATE OF INCORPORATION
TO ALLOW SHAREHOLDERS TO CALL MEETINGS
(Item 3 on Proxy Card)
================================================================================
Description of the Proposed Amendment and Vote Required.
On August 11, 1998, the Board of Directors adopted a resolution approving a
proposal to amend the Company's Certificate of Incorporation to allow
shareholders owning 25% or more of the outstanding shares of Common Stock to
call (i) a special meeting of the shareholders or (ii) an annual meeting of the
shareholders if such annual meeting has not been called by June 1 of any year.
The Company's Certificate of Incorporation currently does not allow the
shareholders to call a special meeting, and specifically reserves that power
exclusively to the Board of Directors. The Company's By-laws currently contain a
similar restriction. The Board of Directors determined that the amendment is
advisable and directed that it be considered a the Annual Meeting of
Shareholders to be held on October 6, 1998. The affirmative vote of two-thirds
of the outstanding shares of Common Stock is required to approve the proposed
amendment.
The proposed amendment to the Certificate of Incorporation will require
replacing the first sentence in ARTICLE NINTH with the following language:
NINTH: Special meetings of the common stockholders of the Corporation,
and any proposals to be considered at such meetings, may be called and
proposed at any time and from time to time by stockholders owning 25%
or more of the Corporations's total outstanding common stock. In the
event the Corporation does not hold an annual meeting by June 1 of any
year, stockholders owning 25% or more of the Corporation's outstanding
common stock may call such annual meeting at a time specified by the
stockholders proposing the meeting.
Purpose and Effect of Amendment.
The purpose of the proposed amendment is to provide shareholders who
individually or as a group represent a substantial ownership interest with an
increased ability to voice their concerns and raise issues with the Company's
management and other shareholders. Under the present guidelines, the majority of
the membership of the Board has sole discretion over when to hold meetings, and
can limit the shareholders= ability to take action in a timely manner. The Board
of Directors has determined that a minimum threshold of 25% or more of the
Common Stock, is an appropriate threshold of ownership interest to have the
power to call a meeting.
Additionally, the Company has recently held its annual meetings over
nine months after the fiscal year end. The Board of Directors has determined
that such a practice is not in the best interests of the Company's shareholders
and feels it is important that shareholders have the power in future years to
ensure that the annual meeting is held in a more timely fashion.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE "FOR" THE APPROVAL OF THE AMENDMENT.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(Item 4 on Proxy Card)
Subject to shareholder ratification, the Board of Directors, upon
recommendation of the Audit Committee, has appointed the firm of KPMG LLP as
independent accountants to audit the financial statements of the Company for the
year 1998. If the shareholders do not ratify this appointment, other independent
accountants will be appointed by the Board upon recommendation of the Audit
Committee.
For the fiscal year ended December 31, 1997, Arthur Andersen LLP acted
as the Company's independent public accountant to audit the Company's financial
statements.
One or more members of the firm of KPMG LLP will attend the Annual
Meeting, will have an opportunity to make a statement and will be available to
answer questions as appropriate.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR SUCH RATIFICATION.
Changes in Independent Accountants
In large part because of the Company's rapid growth, in 1996, the
Company made the decision to change to a national accounting firm. On September
3, 1996, Barrett & Associates resigned as independent accountants for the
Company. The independent accountants= reports on the financial statements of the
Company for the two fiscal years and ended December 31, 1994 and December 31,
1995 did not contain an adverse opinion or a disclaimer of opinion and the
reports were not qualified or modified as to uncertainty, audit scope or
accounting principles.
During the Company's fiscal years ending December 31, 1994 and December
31, 1995, and subsequent interim period ending September 3, 1996, there were no
disagreements with Barrett & Associates on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure
which, if not resolved to the satisfaction of Barrett & Associates, would have
caused Barrett & Associates to make a reference to the subject matter of the
disagreements in connection with their report. During the Company's fiscal years
ending December 31, 1994 and 1995, and the subsequent interim period ending
September 3, 1996, there did not occur any event listed in paragraphs
(a)(1)(v)(A) through (D) of Regulation S-K, Item 304.
Effective September 5, 1996, the Company engaged Arthur Andersen LLP as
independent auditors to audit the Company's financial statements for the fiscal
years ending December 31, 1996 and 1997. During the Company's fiscal years
ending December 31, 1994 and December 31, 1995, and the subsequent interim
period ending on September 5, 1996, neither the Company nor any person acting on
behalf of the Company consulted Arthur Andersen LLP regarding (i) either the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of opinion that might be rendered on the
Company's financial statements or (ii) any matter that was either the subject of
a disagreement (as defined in paragraphs (a)(1)(iv) of Regulation S-K, Item 304
and the related instructions) or a reportable event (as described in paragraph
(a)(1)(v) of Regulation S-K, Item 304).
On June 11, 1998, Arthur Andersen LLP informed the Company that it
declined to stand for re-election as independent accountants of the Company at
its 1998 Annual Meeting. Effective August 25, 1998, the Company engaged KPMG LLP
as independent accountants to audit the Company's financial statements for the
fiscal year 1998. The decision to engage KPMG LLP was recommended and approved
by the Audit Committee. During the Company's fiscal years ending December 31,
1996 and December 31, 1997 and the subsequent interim period ending on June 11,
1998, there were no disagreements with Arthur Andersen LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure which, if not resolved to the satisfaction of Arthur Andersen
LLP, would have caused Arthur Andersen LLP to make a reference to the subject
matter of the disagreements in connection with their report. During the
Company's fiscal years ending December 31, 1996 and 1997, and the subsequent
interim period ending June 11, 1998, there did not occur any event listed in
paragraphs (a)(1)(v)(A) through (D) of Regulation S-K, Item 304.
In addition, during this same period, neither the Company nor any
person acting on behalf of the Company consulted KPMG LLP regarding (i) either
the application of accounting principles to a specified transaction, either
completed or proposed, or the type of opinion that might be rendered on the
Company's financial statements or (ii) any matter that was either the subject of
a disagreement (as defined in paragraphs (a)(1)(iv) of Regulation S-K, Item 304
and the related instructions) or a reportable event (as described in paragraph
(a)(1)(v) of Regulation S-K, Item 304).
At the time this Proxy Statement was released for printing on September
4, 1998, the Company knew of no other matters which might be presented for
action at the meeting. If any other matters properly come before the meeting, it
is intended that the Common Stock represented by proxies will be voted with
respect thereto in accordance with the judgment of the persons voting them.
ADDITIONAL INFORMATION
The costs of soliciting proxies will be borne by the Company. In
addition to this solicitation by mail, directors, officers and regular employees
of the Company may solicit proxies in person or by telephone, telegraph and
other electronic means, with no additional compensation to be paid to such
individuals for their efforts. Brokers, nominees, fiduciaries and other
custodians will be requested to forward soliciting material to the beneficial
owners of shares and will be reimbursed for their expenses.
SHAREHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
The Board of Directors has set the date for the Company's 1999 Annual
Meeting of Shareholders for May 11, 1999. Shareholder proposals intended to be
considered for inclusion in next year's proxy statement should be sent to
Investor Relations, PANACO, Inc.,1100 Louisiana, Suite 5110, Houston, Texas
77002-5220, and must be received by March 1, 1999. Any such proposal must comply
with Rule 14a-8 promulgated by the Securities and Exchange Commission pursuant
to the Securities Exchange Act of 1934, as amended.
FINANCIAL STATEMENTS AVAILABLE
Financial statements for the Company were included in the Company's
Annual Report on Form 10-K ("Form 10-K") as filed with the Securities and
Exchange Commission for the year 1997. A copy of the Form 10-K is being provided
to all shareholders as of the record date together with the Company's proxy
materials. Additional copies of the Form 10-K will be furnished without charge,
on request directed to Investor Relations, PANACO, Inc., 1050 West Blue Ridge
Boulevard, PANACO Building, Kansas City, Missouri 64145-1216.
By order of the Board of Directors
/s/ Todd R. Bart
Todd R. Bart
Secretary
September 4, 1998
PANACO, INC.
Kansas City, Missouri
This Proxy is solicited on behalf of the Board of Directors of PANACO,
Inc. for the Annual Meeting on Tuesday, October 6, 1998.
The undersigned hereby appoints Larry M. Wright and Todd R. Bart, or
either of them, proxies for the undersigned, each with full power of
substitution to attend the Annual Meeting of Shareholders of PANACO, Inc. to be
held on October 6, 1998 at 9:00 a.m., Central Time, and at any adjournments
thereof, and to vote as specified in this Proxy all the shares of stock of the
Company which the undersigned would be entitled to vote if personally present.
The undersigned hereby revokes any previous proxies with respect to the matters
covered by this Proxy.
PANACO'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 1,
PROPOSAL 2, PROPOSAL 3 AND PROPOSAL 4.
1. ELECTION OF DIRECTORS
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) listed below
Donald W. Chesser James B. Kreamer Mark C. Licata
(INSTRUCTION: To withhold authority to vote for any individual nominee, mark
"FOR" above and write the name(s) of that nominee(s) with respect to whom you
wish to withhold authority to vote here.)
- - --------------------------------------------------------------------------------
TO BE SIGNED AND DATED ON THE REVERSE SIDE.
2. Amendment to Certificate of Incorporation to increase authorized capital.
RESOLVED, that Article Fifth of the Company's Certificate of
Incorporation be hereby amended to increase the authorized capital of the
Company from 45,000,000 shares to 100,000,000 shares.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Amendment to Certificate of Incorporation to allow shareholders to call
special and annual meetings.
RESOLVED, that Article Ninth of the Company's Certificate of
Incorporation be hereby amended to allow shareholders owning 25% or more of the
Company's Common Stock to call a special meeting or an annual meeting if an
annual meeting is not called by June 1 of any year.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Appointment of Independent Accountants
RESOLVED, that the firm of KPMG LLP be ratified as independent
accountants to audit the financial statements of the Company for the year 1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting. This Proxy when properly
executed will be voted in the manner directed herein. If no direction is made,
this Proxy will be voted FOR Proposal 1, FOR Proposal 2, and FOR Proposal 3.
Please sign exactly as your name appears on this card. Joint
Owners should each sign personally. Corporation proxies
should be signed in corporate name by an authorized
officer. Executors, administrators, trustees or
guardians should give their title when signing.
Date ____________________________, 1998
Signature______________________________
______________________________
PLEASE SIGN, DATE AND PROMPTLY MAIL YOUR PROXY
IN THE ENCLOSED ENVELOPE PROVIDED