UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K/A
(Amendment
No. 1)
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(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31, 2007.
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Commission file
number: 0-17371
QUEST RESOURCE
CORPORATION
(Exact Name of Registrant as
Specified in Its Charter)
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Nevada
(State or Other Jurisdiction
of
Incorporation or Organization)
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90-0196936
(I.R.S. Employer
Identification No.)
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210 Park Avenue, Suite 2750
Oklahoma City, Oklahoma
(Address of Principal
Executive Offices)
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73102
(Zip
Code)
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Registrants
Telephone Number, including area code:
405-600-7704
Securities
Registered Pursuant to Section 12(b) of the Exchange
Act:
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Title of Each
Class
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Name of Each Exchange on
Which Registered
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Common Stock
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Nasdaq Global Market
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Series B Junior Participating Preferred Stock Purchase Rights
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Nasdaq Global Market
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Securities
Registered Pursuant to Section 12(g) of the Exchange
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
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No
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Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the
Act. Yes
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No
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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
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No
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(§229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this
Form 10-K
or any amendment to this
Form 10-K.
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Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer
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Accelerated
filer
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Non-accelerated
filer
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(Do not check if a smaller reporting company)
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Smaller reporting
company
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes
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No
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The aggregate market value of the voting stock held by
non-affiliates computed by reference to the last reported sale
of the registrants common stock on June 29, 2007, the
last business day of the registrants most recently
completed second fiscal quarter, at $11.68 per share was
$230,212,426. This figure assumes that only the directors and
officers of the registrant, their spouses and controlled
corporations were affiliates. There were 23,455,427 shares
outstanding of the registrants common stock as of
March 4, 2008.
DOCUMENTS
INCORPORATED BY REFERENCE
None.
EXPLANATORY
NOTE
This Amendment No. 1 on
Form 10-K/A
(this Amendment) to the Annual Report on
Form 10-K,
originally filed with the Securities and Exchange Commission
(the SEC) on March 10, 2008 (the Original
Filing), of Quest Resource Corporation (the
Company) is being filed for the sole purpose of
including Items 10, 11, 12, 13 and 14 (the
Part III Information) that the Company had
planned to incorporate by reference from its definitive proxy
statement relating to the Companys 2008 Annual Meeting of
Stockholders (the Proxy Statement). This information
is being included in this Amendment because the Companys
definitive proxy statement will not be filed within
120 days after the end of the Companys 2007 fiscal
year. The listing of the definitive proxy statement on the cover
page of this Amendment as a document incorporated by reference
has been deleted. No other information in the Original Filing,
other than the filing of related certifications to the
Part III Information, is amended hereby. Except for the
foregoing, this Amendment speaks as of the filing date of the
Original Filing and does not update or discuss any other Company
developments after the date of the Original Filing.
PART III
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ITEM 10.
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DIRECTORS,
EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE
GOVERNANCE.
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Directors
and Executive Officers
Our Directors and Executive Officers are as follows:
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Term of
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Name
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Age
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Positions Held
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Office Since
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Jerry D. Cash
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Chairman, Chief Executive Officer, President and Director
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2002
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James B. Kite, Jr.
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Director
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2002
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N. Malone Mitchell, 3rd
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Director
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2007
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William H. Damon III
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Director
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2007
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John C. Garrison
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Director
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1998
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Jon H. Rateau
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Director
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2005
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David E. Grose
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Chief Financial Officer
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2004
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David C. Lawler
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Chief Operating Officer
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2007
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Richard E. Muncrief
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President and Chief Operating Officer of Quest Midstream GP, LLC
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2007
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Richard Marlin
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Executive Vice President, Engineering
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2004
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David W. Bolton
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Executive Vice President, Land
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2006
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Steven Hochstein
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Executive Vice President, Exploration and Resource Development
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2007
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Bryan Simmons
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Executive Vice President, Acquisitions and Divestures
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2007
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Jack Collins
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Executive Vice President, Investor Relations
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2007
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Mr. Cash has been active in the oil and gas exploration and
development business for over 25 years. Mr. Cash has
been the Chairman of the Board since November 2002, when Quest
acquired STP Cherokee, Inc. Mr. Cash has been Chief
Executive Officer since September 2004. From November 2002 until
September 2004, he was Co-Chief Executive Officer and from
November 2002 until June 2004, he was Chief Financial Officer.
In 1987, Mr. Cash formed STP, Inc. and as President
directed that company in the identification and realization of
numerous oil, gas and CBM exploration projects. In November
2002, Mr. Cash transferred substantially all of the assets
of STP, Inc. to STP Cherokee and sold STP Cherokee to Quest.
From 1980 to 1986, Mr. Cash worked for Bodard &
Hale Drilling Company while pursuing a petroleum engineering
degree at Oklahoma State University and the University of
Oklahoma. During this period, Mr. Cash drilled several
hundred wells throughout Oklahoma. A long-time resident of
Oklahoma, Mr. Cash maintains an active role in several
charitable organizations.
Mr. Kite is the Chief Executive Officer of Boothbay Royalty
Company, an independent investment company with its primary
concentration in the field of oil and gas exploration and
production based in Oklahoma City, Oklahoma, which he founded in
1977. He has served as its Chief Executive Officer, President
and Treasurer since its inception. Mr. Kite spent several
years in the commercial banking industry with an emphasis in
credit and loan review prior to his involvement in the oil and
gas industry. Mr. Kite presently is a director of The All
Souls Anglican Foundation and the St. Anthony Hospital
Foundation. Mr. Kite earned a bachelors of business
administration in finance from the University of Oklahoma.
Mr. Mitchell has been principally engaged as a venture
capitalist since December 2006. Prior to December 2006,
Mr. Mitchell was employed by Riata Energy Inc., k/n/a
SandRidge Energy, Inc., which he founded in 1984. He served as
operations manager until 1989, when he assumed the roles of
Chief Executive Officer and Chairman, which positions he held
until June 2006. Mr. Mitchell was President and COO from
June 2006 until December 2006.
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Prior to his involvement with Riata, he worked in the oil field
services industry and was employed in his familys ranching
and aviation businesses. Mr. Mitchell graduated from
Oklahoma State University in 1983 with a Bachelor of Science
degree.
Mr. Damon has over 30 years of professional experience
specializing in engineering design and development of power
generation and projects. Since January 2008, he has served as
Senior Vice President and National Director of Power Consulting
for HDR, Inc., which recently purchased the
engineering-consulting firm, Cummins & Barnard, Inc.,
which was focused on power generation development and
engineering projects for electric utilities, independent power
producers, large industrial and institutional clients throughout
the United States. Mr. Damon served as the Chief Executive
Officer of Cummins & Barnard and had been its
principal and co-owner from 1990 to January 2008, and with his
new role within HDR will lead the project development and
strategic consulting business for coal, natural gas and
renewable fired power projects. He previously worked for
Consumers Power Company, Gilbert-Commonwealth, Inc. and
Alternative Energy Ventures. He also held board seats on a
minerals and wind turbine company, MKBY, and a
start-up
construction company that was recently sold to Aker Kvaerner
Songer in which he was also a founding member. Mr. Damon
graduated from Michigan State University with a B.S. in
Mechanical Engineering and continued graduate studies at both
Michigan State University and the University of Michigan.
Mr. Garrison brings expertise in public company activities
and issues. Mr. Garrison served as our Treasurer from 1998
to September 2001. Mr. Garrison has been a self-employed
Certified Public Accountant in public practice providing
financial management and accounting services to a variety of
businesses for over thirty years. He currently serves as the
Chief Financial Officer of Empire Energy Corporation
International and has served in that position since August 2007.
He has also been a director of Empire Energy since 1999. From
July 2004 to June 2007, Mr. Garrison was the Chief
Financial Officer of ICOP Digital, Inc. Mr. Garrison holds
a bachelors degree in Accounting from Kansas State
University.
Mr. Rateau is currently the Vice President of New Energy,
Global Primary Products Growth, Alcoa, Inc., where he is
responsible for developing and acquiring energy positions/assets
worldwide in support of Alcoas smelting and refining
activities, and has been at Alcoa, Inc. since 1996.
Mr. Rateau has served in his present capacity at Alcoa
since September 2007. Prior to that, he was Vice President of
Business Development, Primary Metals from March 2001 to
September 2007 and Vice President of Energy
Management & Services, Primary Metals from November
1997 to March 2001. Before joining Alcoa, Mr. Rateau held a
number of managerial positions with National Steel Corporation
from 1981 to 1996. He brings expertise in business acquisitions
and divestitures, capital budgets and project management, energy
contracting, and applied research of complex technology and
processes. Mr. Rateau holds an M.B.A. from Michigan State
University and received a B.S. in Industrial Engineering from
West Virginia University.
Mr. Grose has been Chief Financial Officer since June 2004.
Mr. Grose has 25 years of financial experience,
primarily in the exploration, production, and drilling sectors
of the oil and gas industry. Mr. Grose also has significant
knowledge and expertise in capital development and in the
acquisition of oil and gas companies. From January 2004 to June
2004, Mr. Grose was Chief Financial Officer for Avalon
Corrections, Inc., a corrections company. From June 2002 until
December 2003, he was Chief Financial Officer for Oxley
Petroleum Company. From April 1999 to December 2001, he was
Chief Financial Officer for a telecommunications company. From
July 1997 to April 1999 Mr. Grose was Chief Financial
Officer for Bayard Drilling Technologies, Inc. Prior to that,
Mr. Grose was employed by Alexander Energy Corporation from
March 1980 to February 1997, in various positions, most recently
as Chief Financial Officer. Mr. Grose earned a B.A. in
Political Science from Oklahoma State University in 1974 and an
MBA from the University of Central Oklahoma in 1977.
Mr. Lawler has served as Chief Operating Officer since May
2007. He has worked in the oil and gas industry for more than
16 years in various management and engineering positions
including production, drilling, project management and
facilities. Prior to joining us, Mr. Lawler was employed by
Shell Exploration & Production Company from May 1997
to May 2007 and in his most recent assignment, served as
Engineering and Operations Manager for multiple assets along the
U.S. Gulf Coast from January 2005 to May 2007. These assets
included Shells prolific gas producing assets located in
South Texas as well as offshore sour gas production facilities
near Mobile Bay, Alabama and the Yellowhammer Sulfur Recovery
Plan located in Coden, Alabama. Prior to his role as Operations
Manager, Mr. Lawler progressed through technical and
leadership assignments at Shell, including Executive
Support/Staff Business Analyst (March 2003 to December
2004) and drilling engineering team leader
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(May 1997 to February 2003). Prior to joining Shell,
Mr. Lawler was employed by Conoco, Inc. and Burlington
Resources in various domestic engineering and operations
positions. Mr. Lawler graduated from the Colorado School of
Mines in 1990 with a bachelors of science degree in
petroleum engineering and earned his Masters in Business
Administration from Tulane University in 2003.
Mr. Muncrief serves as the President and Chief Operating
Officer of Quest Midstream GP, LLC. He has served in this role
since September 2007 and has over 27 years of oil and gas
experience. Prior to joining us, he held numerous technical,
operational and leadership positions with Burlington Resources,
recently acquired by Conoco Phillips. Most recently, from March
2006 to May 2007, he served as the Operations Manager for Conoco
Phillips, San Juan Basin, including upstream and mid-stream
operations which represented 10% of Conoco Phillips worldwide
production, and from April 2000 to March 2006, Mr. Muncrief
served as the General Manager of Operations
San Juan for Burlington Resources. Mr. Muncrief earned
his Bachelor of Science degree from Oklahoma State University in
1980 and is a member of the American Petroleum Institute and the
Society of Petroleum Engineers.
Mr. Marlin has served as Executive Vice
President Engineering since September 2004. He also
was our Chief Operations Officer from February 2005 through July
2006. He was our engineering manager from November 2002 to
September 2004. Prior to that, he was the engineering manager
for STP from 1999 until STPs acquisition by Quest in
November 2002. Prior to that, he was employed by Parker and
Parsley Petroleum as the Mid-Continent Operations Manager for
12 years. Mr. Marlin has more than 32 years
industry experience involving all phases of drilling and
production in more than 14 states. His experience also
involved primary and secondary operations along with the design
and oversight of gathering systems that move as much as
175 MMcf/d.
He is a registered Professional Engineer holding licenses in
Oklahoma and Colorado. Mr. Marlin earned a B.S. in
Industrial Engineering and Management from Oklahoma State
University in 1974. Mr. Marlin was a Director of the
Mid-Continent Coal Bed Methane Forum.
Mr. Bolton has served as Executive Vice
President Land since May 2006. Prior to that, he was
a Land Manager for Continental Land Resources, LLC, an Oklahoma
based oil and gas lease broker from May 2004 to May 2006. Prior
to that, Mr. Bolton was a landman for Continental Land
Resources from April 2001 to May 2004. He was an independent
landman from 1995 to April 2001. Mr. Bolton is a Certified
Professional Landman with over 17 years of experience in
various aspects of the oil and gas industry, and has worked
extensively throughout Oklahoma, Texas, and Kansas.
Mr. Bolton holds a Bachelor of Liberal Studies degree from
the University of Oklahoma, attended the Oklahoma City
University School of Law, and is a member of American
Association of Petroleum Landmen, Oklahoma City Association of
Petroleum Landmen, the American Bar Association, and the Energy
Bar Association.
Mr. Hochstein joined us in January of 2006 as Manager of
New Ventures. He then served as Executive Vice
President Exploration/A&D from March 2007 to
December 2007 and has served as Executive Vice
President Exploration and Resource Development since
December 2007. While serving as Manager of New Ventures,
Mr. Hochstein led resource assessment efforts for several
acquisition projects and was responsible for generating two new
resource plays for us. In his new role, Mr. Hochstein will
continue to develop new opportunities for us and oversee all
geologic and reservoir engineering functions. Before joining us,
Mr. Hochstein served for two years as a partner in Rockport
Energy, a small E&P company. Prior to that he worked for
El Paso Corporation in its coalbed methane division,
serving as technical manager (January 2001 to August 2001),
Director of Coalbed Methane (August 2001 to February
2003) and Vice President of CBM/Mid Continent and Rockies
(February 2003 to April 2004). Prior to that,
Mr. Hochstein worked for Sonat Exploration Co. from August
1981 to January 2001 in various positions, most recently as
Manager of Geoscience. Mr. Hochstein has more than
25 years of industry experience and more than 10 years
of unconventional resource experience. Mr. Hochstein holds
a Bachelor of Science in Geologic Sciences from the University
of Texas, Austin, and is a member of the American Association of
Petroleum Geologists.
Mr. Simmons joined us in January 2006 as New Ventures
Manager and assumed his new position as Executive Vice
President Acquisitions & Divestitures
(A&D) in December 2007. In this role, Mr. Simmons
leads our A&D efforts. Prior to joining us,
Mr. Simmons was a partner in a private E&P company
developing properties in south Texas and south Louisiana from
January 2003 to December 2005. Prior to that, Mr. Simmons
spent 22 years with Sonat Exploration and El Paso
Corporation in various and executive positions, most recently as
Vice President of the
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Rocky Mountain Division and Vice President and Chief Engineer.
Mr. Simmons holds a Bachelor of Science Degree in
Structural Engineering from Texas A&M University and is a
member of the Society of Petroleum Engineers.
Mr. Collins has served as Executive Vice
President Investor Relations since December 2007.
Mr. Collins has more than 11 years of experience
providing analysis and advice to oil and gas industry investors.
Prior to joining us, he worked for A.G. Edwards &
Sons, Inc., a national, full-service brokerage firm, from 1999
to 2007 in various positions, most recently as a Securities
Analyst, where he was responsible for initiating the firms
coverage of the high yield U.S. energy stock sector
(E&P partnerships and U.S. royalty trusts). As an
Associate Analyst (2001 to 2005) and Research Associate
(1999 to 2001) at A.G. Edwards, he assisted senior analysts
in coverage of the independent E&P and oilfield service
sectors of the energy industry. Mr. Collins holds a
Bachelors degree in Economics with a Business Emphasis from the
University of Colorado at Boulder.
Board of
Directors
Our Board of Directors is currently divided among three classes
as follows:
Class I John C. Garrison and Jon H. Rateau;
Class II N. Malone Mitchell 3rd and
William H. Damon III; and
Class III Jerry D. Cash and James B.
Kite, Jr.
The term of each class of directors expires at each annual
meeting of stockholders, with the terms of Messrs. Mitchell
and Damon expiring in 2008, the terms of Messrs. Cash and
Kite expiring in 2009 and the terms of Messrs. Garrison and
Rateau expiring in 2010.
Corporate
Governance
Audit
Committee
The Board of Directors has established a separately designated
standing Audit Committee. The purposes of the Audit Committee
are to oversee and review (i) the integrity of all
financial information provided to any governmental body or the
public and (ii) the integrity and adequacy of the our
auditing, accounting and financial reporting processes and
systems of internal control for financial reporting and
disclosure controls and procedures.
The following three directors are members of the Audit
Committee: John Garrison, Chair, Malone Mitchell and Jon Rateau.
The Board of Directors has determined that each of the Audit
Committee members are independent, as that term is defined under
the enhanced independence standards for audit committee members
in the Securities Exchange Act of 1934 and rules thereunder, as
amended, as incorporated into the listing standards of the
Nasdaq Global Market. The Board of Directors has determined that
Mr. Garrison is an audit committee financial
expert, as that term is defined in the rules promulgated
by the Securities and Exchange Commission pursuant to the
Sarbanes-Oxley Act of 2002.
The Audit Committee performs its functions and responsibilities
pursuant to a written charter adopted by our Board of Directors,
which is published on our Internet website at www.qrcp.net under
the heading Corporate Governance.
Code
of Ethics
We have adopted a Code of Business Conduct and Ethics for
Directors, Officers and Employees (Code of Ethics),
which addresses conflicts of interests, that is applicable to
our principal executive officer, principal financial officer and
principal accounting officer. The Code of Ethics describes the
types of transactions that may be subject to the review,
approval or ratification of the Audit Committee or the chief
compliance officer. Any waiver of any provision of our Code of
Ethics for a member of our Board of Directors, an executive
officer, or a senior financial or accounting officer must be
approved by our Audit Committee, and any such waiver will be
promptly disclosed as required by law or Nasdaq rule.
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A copy of our Code of Business Conduct is available on our
internet website at www.qrcp.net under the heading Corporate
Governance. We will also provide a copy of the Code of Ethics,
without charge, to any stockholder who requests it. Requests
should be addressed in writing to: Corporate Secretary at Quest
Resource Corporation, 210 Park Avenue, Suite 2750, Oklahoma
City, OK 73102. We intend to post any amendment to or waiver
from the Code of Ethics that applies to executive officers or
directors on our website.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors
and executive officers, and persons who own more than 10% of a
registered class of our equity securities, to file with the SEC
initial reports of ownership and reports of changes in ownership
of our equity securities. Directors, executive officers and
greater than 10% stockholders are required by SEC regulations to
furnish us with copies of all Section 16(a) forms they file.
To our knowledge, based solely on a review of Forms 3, 4, 5
and amendments thereto furnished to us and written
representations that no other reports were required, during and
for the fiscal year ended December 31, 2007, all
Section 16(a) filing requirements applicable to our
directors, executive officers and greater than 10% beneficial
owners were complied with in a timely manner, except for the
following:
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Grants of bonus shares were not timely reported by Jerry Cash
(6,913 shares), David Grose (4,753 shares), Richard
Marlin (2,750 shares) and David Bolton (1,479 shares).
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David Bolton did not timely report his disposition of
9,000 shares of common stock, which were sold to cover tax
withholding obligations arising from the vesting of a bonus
share award.
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ITEM 11.
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EXECUTIVE
COMPENSATION.
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Compensation
Discussion and Analysis
Compensation
Philosophy
Our compensation philosophy is to manage Named Executive Officer
(defined below) total compensation at the median level
(50
th
percentile)
relative to companies with which we compete for talent (which
are primarily peer group companies). The Compensation Committee
of our Board of Directors (the Committee) compares
compensation levels with a selected cross-industry group of
other natural gas and oil exploration and production companies
of similar size to establish a competitive compensation package.
Role
of the Compensation Committee
The Committee is responsible for reviewing and approving all
aspects of compensation for the Named Executive
Officers listed on page 13 (the Named Executive
Officers). In meeting this responsibility, the
Committees policy is to ensure that Named Executive
Officer compensation complies with all applicable rules and
regulations and is designed to achieve three primary objectives:
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attract and retain well-qualified executives who will lead us
and achieve superior performance;
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tie annual incentives to achievement of specific, measurable
short-term corporate goals; and
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align the interests of management with those of the stockholders
to encourage achievement of increases in stockholder value.
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The Committee retained the independent compensation consulting
firm of Towers Perrin (T-P) in February 2007 to:
(i) assist the Committee in formulating our compensation
policies for 2007 and future years; (ii) provide advice to
the Committee concerning specific compensation packages and
appropriate levels of Named Executive Officers and Board
members compensation; (iii) provide advice about
competitive levels of compensation and marketplace trends in the
oil and gas industry; and (iv) review and recommend changes
in our compensation system and programs. As described below, T-P
compiled competitive salary data for thirteen peer group
companies and assisted the Committee in its benchmarking
efforts, among other things. T-P met with members of our
management and had a conference call with the Committee in order
to gather information about us and our business.
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Role
of Management in Compensation Process
Each year the Committee asks our Chief Executive Officer and
Chief Financial Officer to present a proposed compensation plan
for the fiscal year beginning January 1 and ending December 31
(each, a Plan Year), along with supporting and
competitive market data. For 2007, T-P assisted our management
in providing this competitive market data, primarily through
published salary surveys. The compensation amounts presented to
the Committee for the 2007 Plan Year were determined based upon
the Chief Executive Officers negotiations with the Named
Executive Officers (taking into account the T-P competitive
data). The Committee then met with the Chief Executive Officer
to review the proposal and establish the compensation plan, with
members of T-P participating by telephone.
The Committee monitors the performance of our Named Executive
Officers throughout the Plan Year against the targets set for
each performance measure. At the end of the Plan Year, the
Committee meets with the Chief Executive Officer and Chief
Financial Officer to review the final results compared to the
established performance goals before determining the Named
Executive Officers compensation levels for the Plan Year.
During this meeting, the Committee also establishes the Named
Executive Officer compensation plan for the upcoming Plan Year,
based on the Chief Executive Officers recommendations. In
general, the plan must be established within the first
90 days of a Plan Year. However, during 2007, the Committee
established a new management incentive plan for Quest Midstream
GP, LLC employees, which was not finalized until the fourth
quarter of 2007.
In addition, during 2007, we hired a number of new executive
officers, including David Lawler who was one of the Named
Executive Officers for 2007. The compensation packages for these
new executive officers were negotiated between the Chief
Executive Officer and the executive officers (taking into
account the T-P competitive data). The Committee then met with
the Chief Executive Officer to review and approve the proposed
compensation packages.
Performance
Peer Group
In 2007, the Committee retained T-P as its independent
compensation consultant to advise the Committee on matters
related to the Named Executive Officers compensation
program. To assist the Committee in its benchmarking efforts,
T-P provided a compensation analysis and survey data for a peer
group of companies that are similar in scale and scope to us.
With the assistance of T-P, the Committee selected a peer group
consisting of the following thirteen publicly traded
U.S. exploration and production companies: ATP
Oil & Gas Corp., Brigham Exploration, Carrizo
Oil & Gas Inc., Edge Petroleum, Gastar Exploration,
GMX Resources, Goodrich Petroleum, Linn Energy, McMoRan
Exploration, Parallel Petroleum, Toreador Resources Corp., and
Warren Resources. In general, peer group companies were
U.S. energy companies in the exploration and production
sector which had annual revenues ranging from $30 million
to $175 million.
Elements
of Executive Compensation Program
Our compensation program for Named Executive Officers consists
of the following components:
Base Salary:
Base salaries for all Named
Executive Officers are established base on their scope of
responsibilities, taking into account competitive market
compensation paid by other companies in our peer group. The
Committee considers the median salary range for each Named
Executive Officers counterpart, but makes adjustments to
reflect differences in job descriptions and scope of
responsibilities for each Named Executive Officer and to reflect
the Committees philosophy that each Named Executive
Officers total compensation should be at the median level
(50th percentile) relative to our peer group. The Committee
annually reviews base salaries for Named Executive Officers and
makes adjustments from time to time to realign their salaries,
after taking into account individual performance,
responsibilities, experience, autonomy, strategic perspectives
and marketability, as well as the recommendations of the Chief
Executive Officer.
As part of the Committees review of our compensation
policies during the first quarter of 2007, the Committee
determined, in consultation with T-P, that the base salaries for
our Named Executive Officers were below the median levels for
our peer group. As a result, the base salaries of the Named
Executive Officers were significantly increased.
Management Annual Incentive Plans:
In 2006,
the Committee established the Quest Resource Corporation
Management Annual Incentive Plan, which we refer to as the
QRC Bonus Plan. In December 2006, we formed Quest
Midstream Partners, L.P. (Quest Midstream) to own
and operate our natural gas gathering pipeline
7
network. In connection with the formation of Quest Midstream,
the decision was made to have the executive officers and
employees that primarily work on our midstream operations be
employed by Quest Midstream GP, LLC, our subsidiary that is the
general partner of Quest Midstream. In addition, beginning in
2007, the executive officers and employees of Quest Midstream GP
no longer participated in the QRC Bonus Plan. Instead, the
Committee established the Quest Midstream Partners, L.P.
Management Annual Incentive Plan, which we refer to as the
QMP Bonus Plan. We refer to the QMP Bonus Plan and
the QRC Bonus Plan together as the Bonus Plans. The
QRC Bonus Plan is intended to recognize value creation by
providing competitive incentives for meeting and exceeding
annual financial and operating performance measurement targets
related to our exploration and production operations and the QMP
Bonus Plan is intended to recognize value creation by providing
competitive incentives for meeting and exceeding annual
financial and operating performance measurement targets related
to our midstream operations.
Management level executive officers and employees that primarily
work in our midstream operations participate in the QMP Bonus
Plan and all of our other management level executive officers
and employees participate in the QRC Bonus Plan. For 2007,
Mr. Hoover was the only Named Executive Officer that
participated in the QMP Bonus Plan.
By providing market-competitive bonus awards, the Committee
believes the Bonus Plans support the attraction and retention of
Named Executive Officer talent critical to achieving our
strategic business objectives. The Bonus Plans put a significant
portion of total compensation at risk by linking potential
annual compensation to our achievement of specific performance
goals during the year, which creates a direct connection between
the executives pay and our financial performance.
The awards under the QRC Bonus Plan were paid in a combination
of stock and cash for 2006. For 2007, awards under the Bonus
Plans were payable solely in cash. The Committee anticipates
that future annual bonus awards will also be paid only in the
form of cash awards. The Committee made this change because of
the roll out of the long-term equity incentive plan described
below.
Each year the Committee will establish goals during the first
quarter of the calendar year. However, since 2007 was the first
year for the QMP Bonus Plan, the performance goals were not
finalized until the fourth quarter of 2007. The 2007 performance
goals for each Bonus Plan are described below. The amount of the
bonus payable to each participant varies based on the percentage
of the performance goals achieved and the employees
position with the company. More senior ranking management
personnel are entitled to bonuses that are potentially a higher
percentage of their base salaries, reflecting the
Committees philosophy that higher ranking employees should
have a greater percentage of their overall compensation at risk.
Each executive officer and key employee that participates in the
Bonus Plans has a target bonus percentage expressed as a
percentage of base salary based on his or her level of
responsibility. The performance criteria for 2007 includes
minimum performance thresholds required to earn any incentive
compensation, as well as maximum payouts geared towards
rewarding extraordinary performance, thus, actual awards can
range from 0% (if performance is below 60% of target) to 100% of
base salary for our most senior executives (if performance is
150% of target). For 2007, the potential bonus amounts for each
of Messrs. Cash, Grose, Lawler and Hoover were as follows:
If we achieved an average of our financial goals of 60%, their
incentive awards would be 22% of base salary. If we achieved an
average of our financial goals of 100%, their incentive awards
would be 42% of base salary. If we achieved an average of our
financial goals of 150%, their incentive awards would be 99% of
base salary. For 2007, the potential bonus amounts for each of
the other Named Executive Officers were as follows: If we
achieved an average of our financial goals of 60%, their
incentive awards would be 7% of base salary. If we achieved an
average of our financial goals of 100%, their incentive awards
would be 27% of base salary. If we achieved an average of our
financial goals of 150%, their incentive awards would be 73.5%
of base salary.
After the end of the Plan Year, the Committee determines to what
extent we and the participants have achieved the performance
measurement goals. The Committee calculates and certifies in
writing the amount of each participants bonus based upon
the actual achievements and computation formulae set forth in
the applicable Bonus Plan. The Committee has no discretion to
increase the amount of any Named Executive Officers bonus
as so determined, but may reduce the amount of or totally
eliminate such bonus, if it determines, in its absolute and sole
discretion that such reduction or elimination is appropriate in
order to reflect the Named Executive Officers
8
performance or unanticipated factors. The performance period
(Incentive Period) with respect to which target
awards and bonuses may be payable under the Bonus Plans will
generally be the fiscal year beginning on January 1 and ending
on December 31, but the Committee has the authority to
designate different Incentive Periods.
QRC Bonus Plan 2007 Performance
Goals.
The Committee increased the 2007
performance targets for the QRC Bonus Plan from the 2006 levels.
The Committee eliminated pipeline operating expense
as a performance measure in 2007, because the midstream pipeline
operations were dropped into Quest Midstream in December 2006.
The Committee established the 2007 performance targets and
percentages of goals achieved for each of the five corporate
financial goals described below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Goal Achieved
|
|
|
|
50%
|
|
|
100%
|
|
|
150%
|
|
|
Performance Measure
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (earnings before interest, taxes, depreciation and
amortization)
|
|
$
|
34,000,000
|
|
|
$
|
54,000,000
|
|
|
$
|
74,000,000
|
|
Lease operating expense (excluding gross production taxes and ad
valorem taxes)
|
|
$
|
1.31/Mcf
|
|
|
$
|
1.23/Mcf
|
|
|
$
|
1.15/Mcf
|
|
Finding and development cost
|
|
$
|
1.67/Mcf
|
|
|
$
|
1.50/Mcf
|
|
|
$
|
1.33/Mcf
|
|
Year end proved reserves
|
|
|
193.5 Bcfe
|
|
|
|
215 Bcfe
|
|
|
|
236.5 Bcfe
|
|
Production
|
|
|
16.2 Bcfe
|
|
|
|
18.0 Bcfe
|
|
|
|
19.8 Bcfe
|
|
Each of the five corporate financial goals were equally
weighted. The amount of the incentive bonus varies depending
upon the average percentage of the financial goals achieved. For
amounts between 50% and 100% and between 100% and 150%, linear
interpolation is used to determine the Percentage of Goal
Achieved. For amounts below 50%, the Percentage of
Goal Achieved is determined using the same scale as
between 50% and 100%. For amounts in excess of 150%, the
Percentage of Goal Achieved is determined using the
same scale as between 100% and 150%. For 2007, no incentive
awards were payable under the QRC Bonus Plan if the average
percentage of the financial goals achieved was less than 60%.
Additionally, no additional incentive awards were payable if the
average percentage of the financial goals achieved exceeds 150%.
For 2007, the average percentage of the financial goals achieved
under the QRC Bonus Plan was 100%.
Mr. Lawler commenced employment as our chief operating
officer in April 2007, and Mr. Lawler received a pro rata
portion equal to approximately 73% of the bonus for 2007.
QMP Bonus Plan 2007 Performance
Goals.
During the fourth quarter of 2007, the
Committee established the 2007 performance targets and
percentages of goals achieved for each of the five partnership
financial goals described below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Goal Achieved
|
|
|
|
50%
|
|
|
100%
|
|
|
150%
|
|
|
Performance Measure
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (earnings before interest, taxes, depreciation and
amortization)
|
|
$
|
10,687,000
|
|
|
$
|
15,586,000
|
|
|
$
|
20,485,000
|
|
Pipeline operating expense
|
|
$
|
14,711,000
|
|
|
$
|
16,345,000
|
|
|
$
|
17,980,000
|
|
Return on invested capital
|
|
|
5.81
|
%
|
|
|
8.58
|
%
|
|
|
11.35
|
%
|
Distributable cash flow/common unit
|
|
$
|
0.00
|
|
|
$
|
2.68
|
|
|
$
|
5.94
|
|
Distributable cash flow/unit
|
|
$
|
0.00
|
|
|
$
|
1.36
|
|
|
$
|
3.01
|
|
The goals of EBITDA and return on invested capital were each
weighted at 30%, the goal of distributable cash flow/unit was
weighted at 20%, and the goals of pipeline operating expense and
distributable cash flow/common unit were each weighted at 10%.
For 2007, no incentive awards were payable under the QMP Bonus
Plan if the average percentage of the financial goals achieved
was less than 60%. Additionally, no additional incentive awards
were payable if the average percentage of the financial goals
achieved exceeded 105%. For 2007, the average percentage of the
financial goals achieved for the QMP Bonus Plan was
approximately 70%.
9
Richard A. Hoover served as President of Quest Midstream GP
until September 2007. Richard E. Muncrief replaced
Mr. Hoover in that position in September 2007.
Mr. Hoover received 75% of the incentive bonus amount
payable for 2007, and Mr. Muncrief received a pro rata
portion equal to approximately 28% of the incentive bonus
payable for 2007.
Productivity Gain Sharing Payments:
A one-time
cash payment equal to 10% of an individuals monthly base
salary is earned during each month that our CBM production rate
increases by 1,000 Mcf/day over the prior record. All of
our employees are eligible to receive productivity gain sharing
payments. The purpose of these payments is to incentivize all
employees, including Named Executive Officers, to continually
and immediately focus on production. The Named Executive
Officers received payments equal to approximately 1.6 additional
months of base salary as a result of this plan, as follows:
Jerry Cash $69,167; David Grose $46,458;
David Lawler $26,583; David Bolton $31,875;
Richard Marlin $35,113; and Richard
Hoover $37,104. Our management believes this
incentive plan is unique to us and is not used by the peer group
companies. As a result, the Committee believes these
productivity payments help us attract and retain talented and
highly motivated Named Executive Officers.
Discretionary Bonus Plan:
At the discretion of
the Committee, cash bonuses or deferred compensation plan
contributions may be paid to an executive officer. The purposes
of such bonuses are to recognize a unique circumstance or
performance beyond a contemplated level. The Committee evaluates
such awards within the context of our overall performance. The
determination of the type and amount of each discretionary bonus
is based upon the recommendation of the Chief Executive Officer,
as well as the individual performance and contribution of the
executive officer to our performance.
Equity
Awards
The Committee believes that the long-term performance of our
executive officers is achieved through ownership of stock-based
awards, such as stock options, which expose executive officers
to the risks of downside stock prices and provide an incentive
for executive officers to build shareholder value.
Omnibus Stock Award Plan.
Our 2005 Omnibus
Stock Award Plan (the Omnibus Plan) provides for
grants of non-qualified stock options, restricted shares, bonus
shares, deferred shares, stock appreciation rights, performance
units and performance shares. Currently, the total number of
shares that may be issued under the Omnibus Plan is 2,200,000.
The Omnibus Plan also permits the grant of incentive stock
options. The objectives of the Omnibus Plan are to strengthen
key employees and non-employee directors commitment
to our success, to stimulate key employees and
non-employee directors efforts on our behalf and to help
us attract new employees with the education, skills and
experience we need and retain existing key employees. All of our
equity awards consisting of our common stock are issued under
the Omnibus Plan.
Long-Term Incentive Plan.
For 2007, the
Committee added a new long-term incentive plan for our executive
officers under the Omnibus Plan. The new plan is intended to
encourage participants to focus on our long-term performance and
provide an opportunity for our executive officers to increase
their stake in us through grants of restricted stock pursuant to
the terms of the Omnibus Plan. The Committee designed the
long-term incentive plan to:
|
|
|
|
|
enhance the link between the creation of stockholder value and
long-term incentive compensation;
|
|
|
|
provide an opportunity for increased equity ownership by
executive officers; and
|
|
|
|
maintain a competitive level of total compensation.
|
The Committee determined the level of awards based on market
data provided by T-P and the recommendations of the Chief
Executive Officer (which in some cases were based on
negotiations with executive officers). Award levels vary among
participants based on their position within the Company. The
awards are subject to the terms of an Award Agreement which
outlines a vesting schedule (at the conclusion of each year of
service, one-third of the award amount vests with the entire
award vested at the end of three years) which is expected to
help retain executive officers as any unvested awards are
forfeited if that individual terminates his employment without
good reason. There are no additional performance criteria that
must be met in order for the award to be earned. The vesting
schedule for the awards accelerates if an executive officer is
terminated without cause by us or for good reason by the
executive officer.
10
Quest Midstream Equity Awards.
During 2007,
the Committee also made selected grants of bonus common units to
certain of our executive officers and key employees that perform
services primarily for Quest Midstream. The grants were intended
to encourage participants to focus on Quest Midstreams
long-term performance and provide an opportunity for the
participating employees to have an ownership stake in Quest
Midstream through grants of bonus common units. The Committee
granted the awards to:
|
|
|
|
|
enhance the link between the creation of unitholder value and
long-term incentive compensation;
|
|
|
|
provide an opportunity for increased equity ownership in Quest
Midstream by participating employees; and
|
|
|
|
maintain a competitive level of total compensation.
|
The Committee determined the level of awards based on market
data provided by T-P and the recommendations of the Chief
Executive Officer (which in some cases were based on
negotiations with executive officers). Award levels vary among
participants based on their position within Quest Midstream. The
awards are subject to the terms of an Award Agreement which
outlines a vesting schedule which is expected to help retain
executive officers as any unvested awards are forfeited if that
individual terminates his employment without good reason. There
are no additional performance criteria that must be met in order
for the award to be earned. The vesting schedule for the awards
accelerates if an executive officer is terminated without cause
by us or for good reason by the executive officer. Executive
officers are entitled to distribution equivalents on the bonus
common units prior to vesting. During 2007, Mr. Hoover was
the only Named Executive Officer to receive a grant of Quest
Midstream bonus common units.
Quest Energy Partners Long Term Incentive
Plan.
In July 2007, we formed Quest Energy
Partners, L.P. (Quest Energy) to own and operate our
Cherokee Basin assets and to acquire, exploit and develop oil
and natural gas properties in the Cherokee Basin. On
November 14, 2007, Quest Energys general partner,
Quest Energy GP, LLC, adopted the Quest Energy Partners, L.P.
Long-Term Incentive Plan for employees, consultants and
directors of Quest Energy GP and any of its affiliates who
perform services for Quest Energy. The long-term incentive plan
consists of the following securities of Quest Energy: options,
restricted units, phantom units, unit appreciation rights,
distribution equivalent rights, other unit-based awards and unit
awards. The purpose of awards under the long-term incentive plan
is to provide additional incentive compensation to employees
providing services to Quest Energy, and to align the economic
interests of such employees with the interests of Quest
Energys unitholders. The total number of common units
available to be awarded under the long-term incentive plan is
2,115,950. Common units cancelled, forfeited or withheld to
satisfy exercise prices or tax withholding obligations will be
available for delivery pursuant to other awards. The plan is
administered by the Committee, provided that administration may
be delegated to such other committee as appointed by Quest
Energy GPs board of directors. To date, no awards have
been made under this plan other than to the independent
directors of Quest Energy GP.
Benefits
Our employees, including the Named Executive Officers, who meet
minimum service requirements are entitled to receive medical,
dental, life and long-term disability insurance benefits for
themselves (and beginning the first of the following month after
90 days of employment, 50% coverage for their dependents).
Our Named Executive Officers also participate along with other
employees in our 401(k) plan and other standard benefits. Our
401(k) plan provides for matching contributions by us and
permits discretionary contributions by us of up to 10% of a
participants eligible compensation. Such benefits are
provided equally to all employees, other than where benefits are
provided pro rata based on the respective Named Executive
Officers salary (such as the level of disability insurance
coverage).
Perquisites
We believe our executive compensation program described above is
generally sufficient for attracting talented executives and that
providing large perquisites is neither necessary nor in the
stockholders best interests. Certain perquisites are
provided to provide job satisfaction and enhance productivity.
For example, we provide an automobile for Mr. Cash and
Mr. Marlin and provided an automobile for Mr. Hoover
to use when visiting our headquarters in Oklahoma City. On
occasion family members and acquaintances have accompanied
Mr. Cash on
11
business trips made on private charter flights. The Named
Executive Officers also are eligible to receive gym club
memberships. Mr. Lawler received reimbursement of certain
relocation expenses in connection with his move to Oklahoma City.
Ownership
Guidelines (Stock Ownership Policy)
Our Board of Directors, upon the Committees
recommendation, has adopted a Stock Ownership Policy for our
corporate officers and directors (Guideline Owners)
to ensure that they have a meaningful economic stake in us. The
guidelines are designed to satisfy an individual Guideline
Owners need for portfolio diversification, while
maintaining management stock ownership at levels high enough to
assure our stockholders of managements commitment to value
creation.
The Committee will annually review each Guideline Owners
compensation and stock ownership levels to confirm if
appropriate or make adjustments. The Committee requires that the
Guideline Owners have direct ownership of our common stock in at
least the follow amounts:
|
|
|
|
|
CEO
five times base salary
|
|
|
|
Directors
four times cash compensation
(including committee fees)
|
|
|
|
Direct CEO Reports
two and one-half times
base salary
|
|
|
|
Corporate Officers (vice president or higher and controller)
one and one-half times base salary.
|
A corporate officer has five years to comply with the ownership
requirement from the later of: (a) February 1, 2007 or
(b) the date the individual was appointed to a position
noted above. A director has five years to comply with the
ownership requirement from the later of:
(a) January 1, 2008 or (b) the date the
individual was appointed to be a director. If a corporate
officer is promoted to a position with a higher stock ownership
salary multiple, the corporate officer will have five years from
the date of the change in position to reach the higher expected
stock ownership salary multiple, but still must meet the prior
expected stock ownership salary multiple within the original
five years of the date first appointed to such prior position or
February 1, 2007, whichever is later.
Until a Guideline Owner achieves the applicable stock ownership
salary multiple, the following applies:
|
|
|
|
|
Restricted Stock/Bonus Share Awards.
Upon
vesting of a restricted stock or bonus share award, the
Guideline Owner is required to hold the net profit shares until
the applicable Stock Ownership Guideline is met.
|
|
|
|
Exercise of Options.
Upon exercise of a stock
option, the Guideline Owner is required to hold net profit
shares (less any shares used to pay the exercise price for the
shares) until the applicable Stock Ownership Guideline is met.
|
|
|
|
Reporting of Taxes upon Vesting/Exercise.
The
Guideline Owner must report to the Corporate Secretary the
number of shares required by such Guideline Owner to pay the
applicable taxes upon the vesting of restricted stock or bonus
share awards or exercise of stock options in excess of the
minimum statutory taxes and any shares used to pay the exercise
price of any options.
|
Notwithstanding the foregoing, corporate officers are not
required to hold bonus shares that were originally granted prior
to January 1, 2007 or any bonus shares awarded pursuant to
the 2006 management annual incentive plan. In addition,
Mr. Grose is not required to hold the 70,000 unrestricted
shares awarded to him in connection with the execution of his
employment agreement on April 9, 2007.
Required Ownership Shares.
Upon reaching the
required stock ownership salary multiple, the Guideline Owner
must certify to the Corporate Secretary that the ownership
requirements have been met and the Corporate Secretary must
confirm such representation and record the number of shares
required to be held by the Guideline Owner based on the closing
price of the shares and the corporate officers current
salary level or the directors current compensation level
on the day prior to certification by the Guideline Owner (the
Required Ownership Shares).
The Guideline Owner will not be required to accumulate any
shares in excess of the Required Ownership Shares so long as the
Required Ownership Shares are held by the Guideline Owner,
regardless of changes in the
12
price of the shares. However, the Guideline Owner may only sell
shares held prior to certification if, after the sale of shares,
the Guideline Owner will (a) still own a number of shares
equal to at least the Required Ownership Shares or
(b) still be in compliance with the stock ownership salary
multiple as of the day the shares are sold based on current
share price and salary level.
Annual Review.
The Committee will review all
Required Ownership Shares levels of the Guideline Owners covered
by the Policy on an annual basis. Deviations from the Stock
Ownership Policy can only be approved the Committee and then
only because of a personal hardship.
Policy
Regarding Hedging Stock Ownership
The Board of Directors, upon the Committees
recommendation, adopted a policy that prohibits Named Executive
Officers from speculating in our stock, which includes, but is
not limited to, the following: short selling (profiting if the
market price of the stock decreases); buying or selling publicly
traded options, including writing covered calls; taking out
margin loans against stock options; and hedging or any other
type of derivative arrangement that has a similar economic
effect without the full risk or benefit of ownership.
Compensation
Recovery Policies
The Board maintains a policy that it will evaluate in
appropriate circumstances whether to seek the reimbursement of
certain compensation awards paid to a Named Executive Officer if
such person(s) engage in misconduct that caused or partially
caused a restatement of financial results, in accordance with
section 304 of the Sarbanes-Oxley Act of 2002. If
circumstances warrant, we will seek to claw back appropriate
portions of the Named Executive Officers compensation for
the relevant period, as provided by law.
Tax
and Accounting Considerations
U.S. federal tax laws (Section 162(m) of the Internal
Revenue Code of 1986, as amended) impose a limitation on our
U.S. income tax deductibility of Named Executive Officer
compensation, unless it is performance-based under
the tax rules. The Committee is concerned about the tax aspects
of restricted stock and bonus share grants because they are not
currently performance-based awards. The Committee will evaluate
and consider possible performance elements for future awards.
The Committee, however, does not believe the failure of Named
Executive Officers equity awards to qualify as performance based
awards to have a material impact on the Company at this time.
13
Executive
Compensation and Other Information
The table below sets forth information concerning the annual and
long-term compensation paid to or earned by the Chief Executive
Officer, the Chief Financial Officer, the three other most
highly compensated executive officers who were serving as
executive officers as of December 31, 2007 and Richard
Hoover, who was one or our most highly compensated executive
officers for 2007, but was not serving as an executive officer
as of December 31, 2007 (the Named Executive
Officers).
Summary
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Incentive Plan
|
|
All Other
|
|
|
Name and Principal Position
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Awards(1)
|
|
Compensation(2)
|
|
Compensation(3)
|
|
Total
|
|
Jerry D. Cash
|
|
|
2007
|
|
|
$
|
525,000
|
|
|
$
|
1,200
|
|
|
$
|
1,814,239
|
|
|
$
|
182,367
|
|
|
$
|
46,913
|
(4)
|
|
$
|
2,569,719
|
|
Chairman of the Board,
|
|
|
2006
|
|
|
$
|
400,000
|
|
|
$
|
1,300
|
|
|
$
|
14,000
|
|
|
$
|
165,333
|
|
|
$
|
89,308
|
|
|
$
|
669,941
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David E. Grose
|
|
|
2007
|
|
|
$
|
350,000
|
|
|
$
|
1,200
|
|
|
$
|
1,066,130
|
|
|
$
|
124,658
|
|
|
$
|
15,550
|
|
|
$
|
1,557,538
|
|
Chief Financial Officer
|
|
|
2006
|
|
|
$
|
275,000
|
|
|
$
|
1,200
|
|
|
$
|
233,485
|
|
|
$
|
113,667
|
|
|
$
|
43,193
|
|
|
$
|
666,545
|
|
David Lawler(6)
|
|
|
2007
|
|
|
$
|
268,739
|
|
|
$
|
1,200
|
|
|
$
|
435,494
|
|
|
$
|
27,783
|
|
|
$
|
4,148
|
|
|
$
|
737,364
|
|
Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Marlin
|
|
|
2007
|
|
|
$
|
248,000
|
|
|
$
|
1,200
|
|
|
$
|
254,720
|
|
|
$
|
80,863
|
|
|
$
|
20,550
|
|
|
$
|
605,333
|
|
Executive VP Engineering
|
|
|
2006
|
|
|
$
|
247,500
|
|
|
$
|
1,000
|
|
|
$
|
228,505
|
|
|
$
|
77,550
|
|
|
$
|
48,156
|
|
|
$
|
602,711
|
|
David Bolton
|
|
|
2007
|
|
|
$
|
225,000
|
|
|
$
|
1,200
|
|
|
$
|
298,980
|
|
|
$
|
57,038
|
|
|
$
|
14,325
|
|
|
$
|
596,543
|
|
Executive VP Land
|
|
|
2006
|
|
|
$
|
100,961
|
|
|
$
|
1,000
|
|
|
$
|
67,174
|
|
|
$
|
39,588
|
|
|
$
|
13,485
|
|
|
$
|
222,208
|
|
Richard Hoover
|
|
|
2007
|
|
|
$
|
273,280
|
|
|
$
|
|
|
|
$
|
753,208
|
(7)
|
|
$
|
60,236
|
|
|
$
|
157,762
|
(5)
|
|
$
|
1,244,486
|
|
Executive VP Midstream
|
|
|
2006
|
|
|
$
|
128,510
|
|
|
$
|
1,000
|
|
|
$
|
217,864
|
|
|
$
|
43,757
|
|
|
$
|
43,243
|
|
|
$
|
434,374
|
|
|
|
|
(1)
|
|
Includes expense related to bonus shares, restricted stock and,
for Mr. Hoover, bonus common units of Quest Midstream,
granted under employment agreements. Expense for the bonus
shares, restricted stock and Quest Midstream bonus common units
is computed in accordance with the provisions of Statement of
Financial Accounting Standards No. 123 (Revised)
(SFAS No. 123R) and represents the grant date
fair value, which for our common stock was determined by
utilizing the closing stock price on the date of grant, with
expense being recognized ratably over the requisite service
period. Also includes equity portion of the QRC Bonus Plan award
earned for 2006. Twenty-five percent of the bonus shares vested
in March 2007 at the time the Committee determined the amount of
the awards based upon 2006 performance and the remaining portion
vests and will be paid in March of each of the next three years.
|
|
(2)
|
|
Represents the Bonus Plan awards earned for 2007 and paid in
2008 and productivity gain sharing bonus payments earned and
paid in 2007.
|
|
(3)
|
|
Company matching and profit sharing contribution under the
401(k) savings plan and life insurance premiums. Salary shown
above has not been reduced by pre-tax contributions to the
company-sponsored 401(k) savings plan. For 2007, Company
matching contributions and profit sharing contribution amounts
were as follows: Mr. Cash $15,500,
Mr. Grose $15,500, Mr. Lawler
$4,131, Mr. Marlin $20,500,
Mr. Bolton $14,275, and
Mr. Hoover $20,500.
|
|
(4)
|
|
In addition to the items described in (3) above, also
includes expenses related to a company provided automobile
($30,712) and benefits for gym services. On occasion, family
members and acquaintances have accompanied Mr. Cash on
business trips made on private charter flights at no incremental
cost to us.
|
|
(5)
|
|
In addition to the items described in (3) above, also
includes (i) $5,983 of commuting expenses for
Mr. Hoovers airfare, auto rental and lodging while in
the Oklahoma City corporate office, until we opened our Houston
office during year 2007, (ii) $63,694 of distribution
equivalents paid on the Quest Midstream bonus common units
granted to him and (iii) $88,085 representing cash amounts
paid to him and the value of unvested equity awards
|
14
|
|
|
|
|
that vested pursuant to his settlement agreement in excess of
the amount reported in the Stock Awards column. See
the description of Mr. Hoovers settlement agreement
below for additional information.
|
|
|
|
(6)
|
|
Mr. Lawlers employment as our chief operating officer
commenced on April 10, 2007.
|
|
(7)
|
|
Mr. Hoover forfeited 37,500 Quest Midstream bonus common
units and 5,000 bonus shares of our common stock in connection
with the settlement agreement entered into in connection with
the termination of his employment during 2007.
|
Grants
of Plan-Based Awards in 2007
No stock options were granted to any of our Named Executive
Officers during the year ended December 31, 2007.
This table discloses the actual number of restricted stock
awards granted during the last fiscal year and the grant date
fair value of these awards and the estimated payouts under
non-equity incentive plan awards.
Grants of
Plan-Based Awards in 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of
|
|
Fair Value
|
|
|
|
|
|
|
Estimated Future Payouts Under Non-Equity Incentive Plan
Awards
|
|
Stock or
|
|
of Stock And
|
|
|
Approval
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Units
|
|
Option
|
Name
|
|
Date
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
Awards
|
|
Jerry Cash
|
|
|
3/30/07
|
|
|
|
4/2/07
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
493,080
|
|
|
$
|
4,329,242
|
|
|
|
|
|
|
|
|
|
(2)
|
|
$
|
115,500
|
|
|
$
|
220,500
|
|
|
$
|
525,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
|
|
|
|
|
$
|
69,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Grose
|
|
|
3/30/07
|
|
|
|
4/2/07
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105,000
|
|
|
$
|
921,900
|
|
|
|
|
3/30/07
|
|
|
|
3/30/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,000
|
(4)
|
|
$
|
641,900
|
|
|
|
|
|
|
|
|
|
(2)
|
|
$
|
77,000
|
|
|
$
|
147,000
|
|
|
$
|
350,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
|
|
|
|
|
$
|
46,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Lawler
|
|
|
4/10/07
|
|
|
|
4/10/07
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105,000
|
|
|
$
|
926,100
|
|
|
|
|
|
|
|
|
|
(2)
|
|
$
|
63,800
|
|
|
$
|
121,800
|
|
|
$
|
290,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
|
|
|
|
|
$
|
26,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Marlin
|
|
|
2/23/07
|
|
|
|
3/21/07
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
|
|
$
|
388,800
|
|
|
|
|
|
|
|
|
|
(2)
|
|
$
|
17,360
|
|
|
$
|
66,960
|
|
|
$
|
182,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
|
|
|
|
|
$
|
35,113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dave Bolton
|
|
|
2/23/07
|
|
|
|
3/07/07
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
|
|
$
|
360,450
|
|
|
|
|
|
|
|
|
|
(2)
|
|
$
|
15,750
|
|
|
$
|
60,750
|
|
|
$
|
165,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
|
|
|
|
|
$
|
31,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Hoover
|
|
|
2/23/07
|
|
|
|
2/24/07
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
$
|
1,387,500
|
|
|
|
|
|
|
|
|
|
(2)
|
|
$
|
75,350
|
|
|
$
|
143,850
|
|
|
$
|
342,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
|
|
|
|
|
$
|
37,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Represents equity awards granted in connection with the
execution of the Named Executive Officers employment
agreements in 2007. Grant date is the date the employment
agreements were executed. Except for Messrs. Lawler and
Hoover, one-third of each award vests on March 16, 2008,
2009 and 2010. For Mr. Lawler, 15,000 shares were
immediately vested and 30,000 shares vested on May 1 of
each of 2008, 2009 and 2010. For Mr. Hoover, the award was
for bonus common units of Quest Midstream and 25,000 bonus
common units vested on the later of January 1 of each of 2008,
2009 and 2010 or a liquidity event as defined in his
employment agreement.
|
15
|
|
|
(2)
|
|
Represents an award under our Bonus Plans for 2007. On
March 5, 2008, the Committee determined the amount of the
award payable for 2007 based upon 2007 performance. The amount
for Mr. Lawler is pro-rated based on his employment
commencement date in 2007. The amount for Mr. Hoover is pro
rated based on the terms of the settlement agreement entered
into in connection with the termination of his employment. See
Compensation Discussion and Analysis Elements
of Executive Compensation Program Management Annual
Incentive Plans for a discussion of the performance
criteria applicable to these awards.
|
|
(3)
|
|
Represents amount payable under our productivity gain sharing
bonus program.
|
|
(4)
|
|
Award was immediately vested.
|
Equity
Awards Outstanding at Fiscal Year-End 2007
The following table shows unvested stock awards outstanding for
the Named Executive Officers as of December 31, 2007.
Market value is based on the closing market price of our common
stock on December 31, 2007 ($7.17 a share).
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
Market Value
|
|
|
|
Number of
|
|
|
of Shares
|
|
|
|
Shares or
|
|
|
or Units
|
|
|
|
Units That
|
|
|
of Stock That
|
|
|
|
Have Not
|
|
|
Have Not
|
|
|
|
Vested
|
|
|
Vested
|
|
|
Jerry Cash(1)
|
|
|
498,264
|
|
|
$
|
3,572,553
|
|
David Grose(2)
|
|
|
108,564
|
|
|
$
|
778,404
|
|
David Lawler(3)
|
|
|
90,000
|
|
|
$
|
645,300
|
|
Richard Marlin(4)
|
|
|
59,064
|
|
|
$
|
423,489
|
|
Dave Bolton(5)
|
|
|
66,110
|
|
|
$
|
474,009
|
|
Richard Hoover
|
|
|
|
|
|
$
|
|
|
|
|
|
(1)
|
|
166,088 shares vest on each of March 16, 2008, 2009
and 2010.
|
|
(2)
|
|
36,188 shares vest on each of March 16, 2008, 2009 and
2010.
|
|
(3)
|
|
30,000 shares vest on each of May 1, 2008, 2009 and
2010.
|
|
(4)
|
|
15,688 shares vest on each of March 16, 2008, 2009 and
2010. 12,000 shares vest on April 4, 2008.
|
|
(5)
|
|
15,370 shares vest on each of March 16, 2008, 2009 and
2010. 20,000 shares vest on October 5, 2008.
|
Stock
Vested in 2007
The following table sets forth certain information regarding
stock awards vested during 2007 for the Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Stock Awards
|
|
|
|
|
|
|
Shares of
|
|
|
Number of QMP
|
|
|
|
|
|
|
Common Stock
|
|
|
Common Units
|
|
|
|
|
|
|
Acquired on
|
|
|
Acquired on
|
|
|
Value Realized on
|
|
|
|
Vesting
|
|
|
Vesting
|
|
|
Vesting
|
|
Name
|
|
(#)
|
|
|
(#)
|
|
|
($)
|
|
|
Jerry Cash
|
|
|
1,728
|
|
|
|
|
|
|
$
|
16,813
|
|
David Grose
|
|
|
119,188
|
|
|
|
|
|
|
$
|
1,159,018
|
|
David Lawler
|
|
|
15,000
|
|
|
|
|
|
|
$
|
145,950
|
|
Richard Marlin
|
|
|
24,688
|
|
|
|
|
|
|
$
|
240,214
|
|
David Bolton
|
|
|
20,370
|
|
|
|
|
|
|
$
|
206,600
|
|
Richard Hoover
|
|
|
35,000
|
|
|
|
37,500
|
|
|
$
|
1,059,650
|
|
For purposes of the above table, the amount realized upon
vesting is determined by multiplying the number of shares of
stock or units by the market value of the shares or units on the
date the shares were issued to the Named Executive Officer.
16
Director
Compensation for 2007
The following table discloses the cash, equity awards and other
compensation earned, paid or awarded, as the case may be, to
each of our directors during the fiscal year ended 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
|
|
|
|
|
|
|
or Paid
|
|
|
Option
|
|
|
|
|
|
|
in Cash
|
|
|
Awards
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
James Kite
|
|
$
|
39,500
|
|
|
$
|
44,864
|
(2)
|
|
$
|
84,364
|
|
Jon Rateau
|
|
$
|
33,500
|
|
|
$
|
44,864
|
(2)
|
|
$
|
78,364
|
|
John Garrison
|
|
$
|
33,000
|
|
|
$
|
44,864
|
(2)
|
|
$
|
77,864
|
|
Malone Mitchell
|
|
$
|
26,500
|
|
|
$
|
52,655
|
(3)
|
|
$
|
79,155
|
|
William Damon
|
|
$
|
23,000
|
|
|
$
|
52,655
|
(3)
|
|
$
|
75,655
|
|
|
|
|
(1)
|
|
Represents the dollar amount recognized for financial statement
reporting purposes for 2007 in accordance with FAS 123R.
|
|
(2)
|
|
In October 2005, Messrs. Kite, Rateau, and Garrison each
received a grant of an option for 50,000 shares of common
stock. Options for 10,000 shares were immediately vested
and the options for the remaining 40,000 shares vest 10,000
per year over the next four years; provided that the director is
still serving on the board of directors at the time of the
vesting of the stock options. As of March 19, 2008, 30,000
of these options were vested for each of Messrs., Kite, Rateau
and Garrison. Each option has a term of 10 years and an
exercise price of $10.00 per share. The FAS 123R grant date
fair value of each option award was $229,000.
|
|
(3)
|
|
In August 2007, Messrs. Mitchell and Damon each received a
grant of an option for 50,000 shares of common stock.
Options for 10,000 shares were immediately vested and the
options for the remaining 40,000 shares vest 10,000 per
year over the next four years; provided that the director is
still serving on the board of directors at the time of the
vesting of the stock options. As of March 19, 2008, 10,000
of these options were vested for each of Messrs. Mitchell
and Damon. Each option has a term of 10 years and an
exercise price of $10.05 per share. The FAS 123R grant date
fair value of each option award was $263,000.
|
In addition to the option awards described above, all of our
non-employee directors received the following cash compensation
for the fiscal year ended 2007:
|
|
|
|
|
annual director fee of $20,000 per year (the fees for
Messrs. Damon and Mitchell were pro rated for 2007 based on
their length of service); and
|
|
|
|
$2,000 for each board meeting attended in person and $500 for
each telephonic board meeting.
|
Beginning January 1, 2008, our non-employee directors will
receive an annual director fees of $50,000, but will not receive
any separate fees for attending meetings of the Board of
Directors. The chairman of the Audit Committee will receive an
additional $7,500 and the chairmen of the Compensation and
Nominating Committees will each receive an additional
$5,000. Additionally, our non-employee directors will be awarded
a grant of 10,000 shares of our common stock immediately
following each annual meeting of our stockholders; provided,
however, that if a director has been awarded a prior grant of
restricted shares that vests over time, the number of restricted
shares vesting in that calendar year will be subtracted from the
10,000 shares granted after the annual meeting of our
stockholders.
In March 2008, the Board of Directors approved the exchange of
each unvested stock option for one-half of a share of restricted
common stock of the Company, with the same vesting schedule as
their unvested options. The directors made the decision to
exchange the stock options for shares of restricted stock in
order to more closely align the interests of the directors with
those of the stockholders. The directors also believed that the
recent trend in director compensation was to grant awards of
restricted stock rather than stock options. The exchange ratio
was determined based on market data provided by T-P. As a result
of the exchange, Messrs. Kite, Rateau and Garrison each
received 10,000 shares of our restricted common stock and
Messrs. Damon and Mitchell each received 20,000 shares
of our restricted common stock. 5,000 of these shares vest each
year over the next two years for Messrs. Kite, Rateau and
Garrison and over the next four years for Damon and Mitchell.
17
Employment
Contracts
Each of the Named Executive Officers has an employment
agreement. Except as described below, the employment agreements
for each of the Named Executive Officers are substantially
similar and were entered into with us (or in the case of
Mr. Hoover, our subsidiary Quest Midstream GP,
LLC) during 2007. The employment agreements for
Messrs. Cash and Grose replaced their existing employment
agreements. In connection with the termination of
Mr. Hoovers employment in September 2007,
Mr. Hoovers employment agreement was terminated and
we entered into a settlement agreement with him, which is
described below. Accordingly, the following description of the
employment agreements of the Named Executive Officers omits
Mr. Hoovers former employment agreement.
Each of these agreements has an initial term of three years (the
Initial Term). Upon expiration of the Initial Term,
each agreement will automatically continue for successive
one-year terms, unless earlier terminated in accordance with the
terms of the agreement. The positions, base salary and number of
restricted shares of our common stock granted under each of the
employment agreements is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Shares of
|
|
|
|
|
|
Base
|
|
|
Restricted
|
|
Name
|
|
Position
|
|
Salary
|
|
|
Stock
|
|
|
Jerry Cash
|
|
Chief Executive Officer
|
|
$
|
525,000
|
|
|
|
493,080
|
|
David Grose
|
|
Chief Financial Officer
|
|
$
|
350,000
|
|
|
|
105,000
|
|
David Lawler
|
|
Chief Operating Officer
|
|
$
|
290,000
|
|
|
|
90,000
|
|
David Bolton
|
|
Executive Vice President Land
|
|
$
|
225,000
|
|
|
|
45,000
|
|
Richard Marlin
|
|
Executive Vice President Engineering
|
|
$
|
248,000
|
|
|
|
45,000
|
|
One-third of the restricted shares vest on each of the first
three anniversary dates of each employment agreement. In
addition, Mr. Grose and Mr. Lawler received 70,000 and
15,000 unrestricted shares, respectively, of our common stock in
connection with the execution of their employment agreements.
Each executive is eligible to participate in all of our
incentive bonus plans that are established for our executive
officers. If we terminate an executives employment without
cause (as defined below) or if an executive
terminates his employment agreement for Good Reason (as defined
below), in each case after notice and cure periods
|
|
|
|
|
the executive will receive his base salary for the remainder of
the term,
|
|
|
|
we will pay the executives health insurance premium
payments for the duration of the COBRA continuation period
(18 months) or until he becomes eligible for health
insurance with a different employer,
|
|
|
|
the executive will receive his pro rata portion of any annual
bonus and other incentive compensation to which he would have
been entitled; and
|
|
|
|
his unvested shares of restricted stock will vest (which vesting
may be deferred for six months if necessary to comply with
Section 409A of the Internal Revenue Code).
|
Under each of the employment agreements, Good Reason means:
|
|
|
|
|
our failure to pay the executives salary or annual bonus
in accordance with the terms of the agreement (unless the
payment is not material and is being contested by us in good
faith);
|
|
|
|
if we require the executive to be based anywhere other than
Oklahoma City, Oklahoma;
|
|
|
|
a substantial reduction in the executives duties or
responsibilities; or
|
|
|
|
the executive no longer has the title specified above.
|
18
For purposes of the employment agreements, cause
includes the following:
|
|
|
|
|
any act or omission by the executive that constitutes gross
negligence or willful misconduct;
|
|
|
|
theft, dishonest acts or breach of fiduciary duty that
materially enrich the executive or materially damage us or
conviction of a felony,
|
|
|
|
any conflict of interest, except those consented to in writing
by us;
|
|
|
|
any material failure by the executive to observe our work rules,
policies or procedures;
|
|
|
|
failure or refusal by the executive to perform his duties and
responsibilities required under the employment agreements, or to
carry out reasonable instruction, to our satisfaction;
|
|
|
|
any conduct that is materially detrimental to our operations,
financial condition or reputation; or
|
|
|
|
any material breach of the employment agreement by the executive.
|
The following summarizes potential maximum payments that an
executive could receive upon a termination of employment without
cause or for Good Reason, actual amounts are likely to be less.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base
|
|
|
Unvested Equity
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Salary(1)
|
|
|
Compensation(2)
|
|
|
Bonus(3)
|
|
|
Benefits(4)
|
|
|
Total
|
|
|
Jerry Cash
|
|
$
|
1,575,000
|
|
|
$
|
3,572,553
|
|
|
$
|
338,625
|
|
|
$
|
9,183
|
|
|
$
|
5,495,361
|
|
David Grose
|
|
$
|
1,050,000
|
|
|
$
|
778,404
|
|
|
$
|
225,750
|
|
|
$
|
13,701
|
|
|
$
|
2,067,855
|
|
David Lawler
|
|
$
|
870,000
|
|
|
$
|
645,300
|
|
|
$
|
187,050
|
|
|
$
|
13,701
|
|
|
$
|
1,716,051
|
|
Richard Marlin
|
|
$
|
744,000
|
|
|
$
|
423,489
|
|
|
$
|
122,760
|
|
|
$
|
9,183
|
|
|
$
|
1,299,432
|
|
David Bolton
|
|
$
|
675,000
|
|
|
$
|
474,009
|
|
|
$
|
111,375
|
|
|
$
|
13,701
|
|
|
$
|
1,274,085
|
|
|
|
|
(1)
|
|
Assumes full three years of salary is paid. Actual amount paid
will be equal to the remaining base salary payable under the
agreement.
|
|
(2)
|
|
Assumes all equity awards are unvested on the date of
termination. For purposes of this table, we have used the number
of unvested shares as of December 31, 2007 and the closing
price of our common stock on that date ($7.17).
|
|
(3)
|
|
Represents target amounts payable under our Bonus Plans and
productivity gain sharing payments for 2008. Assumes a full
years bonus (i.e., if employment were terminated on
December 31 of a year). Actual payment would be pro-rated based
on the number of days in the year during which the executive was
employed.
|
|
(4)
|
|
Represents 18 months of insurance premiums at current rates.
|
In general, base salary payments will be paid to the executive
in equal installments on our regular payroll dates, with the
installments commencing six months after the executives
termination of employment (at which time the executive will
receive a lump sum amount equal to the monthly payments that
would have been paid during such six month period). However, the
payments may be commenced immediately if an exemption under
Internal Revenue Code § 409A is available. If the
executives employment is terminated without cause within
two years after a change in control (as defined below), then the
base salary payments will be paid in a lump sum six months after
termination of employment.
Under the employment agreements, a change in control
is generally defined as:
|
|
|
|
|
the acquisition by any person or group of our common stock that,
together with shares of common stock held by such person or
group, constitutes more than 50% of the total voting power of
our common stock;
|
|
|
|
any person or group acquires (or has acquired during the
12-month
period ending on the date of the most recent acquisition by such
person or group) ownership of our common stock possessing 35% or
more of the total voting power of our common stock;
|
|
|
|
a majority of members of our board of directors being replaced
during any
12-month
period by directors whose appointment or election is not
endorsed by a majority of the members of our board of directors
prior to the date of the appointment or election; or
|
19
|
|
|
|
|
any person or group acquires (or has acquired during the
12-month
period ending on the date of the most recent acquisition by such
person or group) assets from us that have a total gross fair
market value equal to or more than 40% of the total gross fair
market value of all of our assets immediately prior to the
acquisition or acquisitions.
|
The pro rata portion of any annual bonus or other compensation
to which the executive would have been entitled for the year
during which the termination occurred will be paid at the time
bonuses are paid to all employees, or if later, six months after
the executives termination of employment (unless an
exception to Internal Revenue Code § 409A applies).
If the executive is unable to render services as a result of
physical or mental disability, we may terminate his employment,
and he will receive a lump-sum payment equal to one years
base salary and all compensation and benefits that were accrued
and vested as of the date of termination. If necessary to comply
with Internal Revenue Code § 409A, the payment may be
deferred for six months.
Each of the employment agreements also provides for one-year
restrictive covenants of non-solicitation in the event the
executive terminates his own employment or is terminated by us
for cause. Our obligation to make severance payments is
conditioned upon the executive not competing with us during the
term that severance payments are being made.
Settlement
Agreement With Richard Hoover
On September 19, 2007, Quest Midstream GP terminated the
employment agreement with Richard Hoover, the president of Quest
Midstream GP, and accordingly, terminated Mr. Hoovers
employment with Quest Midstream GP. On November 8, 2007, we
and Quest Midstream GP entered into a Settlement and Release
Agreement with Mr. Hoover to resolve any disputes between
us and Mr. Hoover related to:
(i) Mr. Hoovers employment agreement,
(ii) Mr. Hoovers employment with Quest Midstream
GP or (iii) the termination of Mr. Hoovers
employment with Quest Midstream GP. According to the terms of
the Settlement and Release Agreement, Mr. Hoover is
entitled to a pro rata portion in the amount of 75% of any
incentive bonus payable for 2007. One half of his base salary
under the employment agreement will be paid out in equal
installments over the remaining term of his employment agreement
in accordance with the provisions of the agreement. Quest
Midstream GP also agreed to reimburse Mr. Hoover his health
insurance premium payments for the longer of one year or until
he becomes eligible for health insurance with a different
employer.
In addition, Mr. Hoover became vested in 5,000 shares
of our common stock and 37,500 Quest Midstream common units. The
Quest Midstream common units are to be delivered to
Mr. Hoover in two tranches of 18,750 units. The first
tranche of Quest Midstream common units is to be delivered upon
the later of a liquidity event or April 1, 2008, and the
second tranche is to be delivered upon the later of a liquidity
event or April 1, 2009. For these purposes, a
liquidity event means an initial public offering of
the Quest Midstream common units or a sale in a single
transaction of all or substantially all of the assets of Quest
Midstream or the partnership interests in Quest Midstream.
Quest Midstream also agreed to pay distribution equivalents to
Mr. Hoover on 75,000 Quest Midstream common units for the
third quarter of 2007 and on the 37,500 Quest Midstream common
units, mentioned above, for the fourth quarter of 2007 and for
each quarter thereafter until those common units are issued and
delivered to Mr. Hoover. Mr. Hoover will be subject to
a one-year non-compete restriction limited to the Cherokee Basin
region.
Compensation
Committee Interlocks and Insider Participation
None of the persons who served on our Compensation Committee
during the last completed fiscal year (Jon H. Rateau,
John C. Garrison, James B. Kite, Jr., William H. Damon III)
(i) was an officer or employee of the Company during the
last fiscal year or (ii) had any relationship requiring
disclosure under Item 404 of
Regulation S-K.
Except for Mr. Garrison, who previously served as our
Treasurer from 1998 to 2001, none of the persons who served on
our Compensation Committee during the last completed fiscal year
was formerly an officer of the Company.
None of our executive officers, during the last completed fiscal
year, served as a (i) member of the compensation committee
of another entity, one of whose executive officers served on our
Compensation Committee; (ii) director of another entity,
one of whose executive officers served on our Compensation
Committee; or
20
(iii) member of the compensation committee of another
entity, one of whose executive officers served as our director.
Compensation
Committee Report
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis set forth above with
management, and based on such review and discussions, the
Compensation Committee has recommended to the Board of Directors
of the Company that such Compensation Discussion and Analysis be
included in the Companys Annual Report on
Form 10-K
and the Companys Proxy Statement.
Jon H. Rateau, Chairman
William H. Damon III
James B. Kite, Jr.
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
The following table sets forth information as of April 23,
2008 concerning the shares of our common stock beneficially
owned by (i) each person known by us, solely by reason of
our examination of Schedule 13D and 13G filings made with
the SEC and by information voluntarily provided to us by certain
stockholders, to be the beneficial owner of 5% or more of our
outstanding common stock (ii) each of our directors,
(iii) each of the executive officers named in the summary
compensation table and (iv) all current directors and
executive officers as a group. Except for Messrs. Hoover
and Mitchell, none of our directors or executive officers own
any common units of Quest Midstream or Quest Energy, which
ownership is disclosed in the footnotes to this table. If a
person or entity listed in the following table is the beneficial
owner of less than one percent of the securities outstanding,
this fact is indicated by an asterisk in the table.
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
Shares of
|
|
Percent
|
|
|
Quest Resource
|
|
of Class
|
|
|
Corporation
|
|
of Quest
|
|
|
Common
|
|
Resource
|
|
|
Stock
|
|
Corporation
|
|
|
Beneficially
|
|
Common
|
Name and Address of Beneficial Owner
|
|
Owned(1)
|
|
Stock
|
|
Advisory Research, Inc.(2)
|
|
|
2,779,791
|
|
|
|
11.8
|
%
|
180 North Stetson, Suite 5500
Chicago, IL 60601
|
|
|
|
|
|
|
|
|
Jerry D. Cash(3)
210 Park Avenue, Suite 2750
Oklahoma City, OK 73102
|
|
|
1,791,973
|
|
|
|
7.6
|
%
|
Heartland Advisors, Inc. and William J. Nasgovitz(4)
789 North Water Street
Milwaukee, WI 53202
|
|
|
1,734,300
|
|
|
|
7.4
|
%
|
James B. Kite, Jr.(5)(6)
|
|
|
946,157
|
|
|
|
4.2
|
%
|
David Grose(7)
|
|
|
158,703
|
|
|
|
*
|
|
David C. Lawler(8)
|
|
|
105,000
|
|
|
|
*
|
|
John C. Garrison(5)
|
|
|
96,053
|
|
|
|
*
|
|
David W. Bolton(9)
|
|
|
76,606
|
|
|
|
*
|
|
Richard Marlin(10)
|
|
|
73,346
|
|
|
|
*
|
|
Jon H. Rateau(5)(11)
|
|
|
30,000
|
|
|
|
*
|
|
Richard A. Hoover(12)
|
|
|
22,090
|
|
|
|
*
|
|
N. Malone Mitchell, 3rd (13)(14)
|
|
|
13,220
|
|
|
|
*
|
|
William H. Damon III(13)(15)
|
|
|
10,000
|
|
|
|
*
|
|
All Directors and Executive Officers as a Group (14 Persons)
|
|
|
3,497,671
|
|
|
|
15.4
|
%
|
21
|
|
|
(1)
|
|
The number of securities beneficially owned by the entities
above is determined under rules promulgated by the SEC and the
information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, beneficial
ownership includes any securities as to which the individual has
sole or shared voting power or investment power and also any
securities that the individual has the right to acquire within
60 days through the exercise of any option or other right.
The inclusion herein of such securities, however, does not
constitute an admission that the named equityholder is a direct
or indirect beneficial owner of such securities. Unless
otherwise indicated, each person or entity named in the table
has sole voting power and investment power (or shares such power
with his or her spouse) with respect to all securities listed as
owned by such person or entity.
|
|
(2)
|
|
Advisory Research, Inc. (ARI) is the general partner
and investment manager of Advisory Research Micro Cap Value
Fund, L.P. (Advisory Micro Cap) (which owns
1,503,421 shares of our common stock) and Advisory Research
Energy Fund, L.P. (Advisory Energy) (which owns
1,046,829 shares of our common stock) and is registered
under the Investment Advisers Act of 1940. By virtue of
investment management agreements with each of Advisory Micro
Cap, Advisory Energy, and other discretionary client funds, ARI
is deemed to have beneficial ownership over the
2,779,791 shares.
|
|
(3)
|
|
Includes (i) 1,200 shares of our common stock owned by
Mr. Cashs wife, Sherry J. Cash,
(ii) 7,678 shares held in Mr. Cashs
retirement account (Mr. Cash does not have voting rights
with respect to the shares held in his profit sharing retirement
account) and (iii) 328,720 restricted shares, which are
subject to vesting. Mr. Cash disclaims beneficial ownership
of the shares owned by Sherry J. Cash. In addition,
Mr. Cash is entitled to receive 3,456 bonus shares upon
satisfaction of certain vesting requirements. Mr. Cash does
not have the ability to vote these bonus shares. Of the
1,791,973 shares of our common stock beneficially owned by
Mr. Cash, 848,458 have been pledged to secure a personal
loan.
|
|
(4)
|
|
Heartland Advisors, Inc. (Heartland) is the
investment adviser to clients that own a total of
1,734,300 shares of our common stock and is an investment
company registered under the Investment Company Act of 1940, as
amended. Mr. Nasgovitz is the President and principal
shareholder of Heartland. None of Heartlands clients owns
more than 5% of our outstanding shares of common stock.
Heartland and Mr. Nasgovitz each disclaim beneficial
ownership to these shares.
|
|
(5)
|
|
Includes options to acquire 30,000 shares of our common
stock that are immediately exercisable.
|
|
(6)
|
|
Includes 916,157 shares of our common stock owned by McKown
Point LP, a Texas Limited Partnership. Easterly Family
Investments LLC is the sole general partner of McKown Point LP.
Easterly Family Investments LLC is wholly owned by the Virginia
V. Kite GST Exempt Trust for James B. Kite, Jr. Mr. Kite
and Bank of Texas, N.A. are the trustees of the Virginia V. Kite
GST Exempt Trust for James B. Kite, Jr. Easterly Family
Investments LLC, the Virginia V. Kite GST Exempt Trust for James
B. Kite, Jr. and James B. Kite, Jr. may be deemed to have
beneficial ownership of the shares owned by McKown Point LP. In
addition, Mr. Kite is entitled to receive 10,000 bonus
shares upon satisfaction of certain vesting requirements.
Mr. Kite does not have the ability to vote these bonus
shares.
|
|
(7)
|
|
Includes (i) 3,281 shares of our common stock held in
Mr. Groses retirement account (Mr. Grose does
not have voting rights with respect to these shares) and
(ii) 70,000 restricted shares, which are subject to
vesting. In addition, Mr. Grose is entitled to receive
2,376 bonus shares upon satisfaction of certain vesting
requirements. Mr. Grose does not have the ability to vote
these bonus shares.
|
|
(8)
|
|
Includes 60,000 restricted shares, which are subject to vesting.
|
|
(9)
|
|
Includes 50,000 restricted shares, which are subject to vesting.
In addition, Mr. Bolton is entitled to receive 740 bonus
shares upon satisfaction of certain vesting requirements.
Mr. Bolton does not have the ability to vote these bonus
shares.
|
|
(10)
|
|
Includes (i) 8,258 shares held in
Mr. Marlins retirement account (Mr. Marlin does
not have voting rights with respect to the these shares) and
(ii) 30,000 restricted shares, which are subject to
vesting. In addition, Mr. Marlin is entitled to receive
1,376 bonus shares upon satisfaction of certain vesting
requirements. Mr. Marlin does not have the ability to vote
these bonus shares.
|
|
(11)
|
|
Mr. Rateau is also entitled to receive 10,000 bonus shares
upon satisfaction of certain vesting requirements.
Mr. Rateau does not have the ability to vote these bonus
shares.
|
22
|
|
|
(12)
|
|
Mr. Hoover is entitled to receive 37,500 bonus units of
Quest Midstream upon the occurrence of certain events.
Mr. Hoover does not have the ability to vote these bonus
units.
|
|
(13)
|
|
Includes options to acquire 10,000 shares of our common
stock that are immediately exercisable.
|
|
(14)
|
|
Mr. Mitchell is also entitled to receive 20,000 bonus
shares upon satisfaction of certain vesting requirements.
Mr. Mitchell does not have the ability to vote these bonus
shares. Dalea Partners owns 300,000 common units of Quest
Midstream, which represents 3.5% of the total common units of
Quest Midstream. Mr. Mitchell is a partner of Dalea
Partners and may be deemed to have beneficial ownership of the
common units.
|
|
(15)
|
|
Mr. Damon is also entitled to receive 20,000 bonus shares
upon satisfaction of certain vesting requirements.
Mr. Damon does not have the ability to vote these bonus
shares.
|
Equity
Compensation Plans
The table below sets forth information concerning compensation
plans under which equity securities are authorized for issuance
as of the fiscal year ended December 31, 2007.
Equity
Compensation Plan Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Securities to be
|
|
|
|
|
|
|
|
|
|
Issued Upon
|
|
|
Weighted-Average
|
|
|
Number of Securities
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Remaining Available
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
for Future Issuance
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
Under Equity
|
|
Plan Category
|
|
and Rights(a)
|
|
|
and Rights(b)
|
|
|
Compensation Plans
|
|
|
Equity compensation plans approved by security holders(1)
|
|
|
100,000
|
|
|
$
|
10.05
|
|
|
|
1,746,684(3
|
)
|
Equity compensation plans not approved by security holders(2)
|
|
|
150,000
|
|
|
$
|
10.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
250,000
|
|
|
$
|
10.00
|
|
|
|
1,746,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Consists of 50,000 options issued to two of our non-employee
directors (Messrs. Malone and Damon) in August 2007. For
each director, 10,000 of the options were immediately vested and
the 10,000 of the remaining options vest on the first four
anniversaries of the date of grant. The options have a term of
10 years and an exercise price of $10.05 per share.
|
|
(2)
|
|
Consists of 50,000 options issued to three of our non-employee
directors (Messrs. Kite, Garrison and Rateau) in October
2005. For each director, 10,000 of the options were immediately
vested and the 10,000 of the remaining options vest on the first
four anniversaries of the date of grant. The options have a term
of 10 years and an exercise price of $10.00 per share.
|
|
(3)
|
|
Amount includes 14,944 unvested and unissued shares awarded
under our management incentive plan that are subject to
forfeiture.
|
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
|
Related
Transactions
No director, executive officer or stockholder who is known to us
to own of record or beneficially more than five percent of our
common stock, or any member of the immediate family of such
director, executive officer or stockholder, had a direct or
indirect material interest in any transaction since the
beginning of fiscal year ended December 31, 2007, or any
currently proposed transaction, in which we or one of our
subsidiaries is a party and the amount involved exceeds $120,000.
Policy
Regarding Transactions with Related Persons
We do not have a formal, written policy for the review, approval
or ratification of transactions between us and any director or
executive officer, nominee for director, 5% stockholder or
member of the immediate family of any such
23
person that are required to be disclosed under Item 404(a)
of
Regulation S-K.
However, our policy is that any activities, investments or
associations of a director or officer that create, or would
appear to create, a conflict between the personal interests of
such person and our interests must be assessed by our Chief
Financial Officer or the Audit Committee.
Director
Independence
Our Board of Directors has determined that each of our
directors, except Mr. Cash, is an independent director, as
defined in the applicable rules and regulations of The NASDAQ
Global Market, including Rule 4200(a)(15) of the
Marketplace Rules of the NASDAQ Stock Market LLC.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES.
|
Audit and
Non-Audit Fees
The following table lists fees paid to Murrell, Hall,
McIntosh & Co., PPLP, for services rendered for the
years ended December 31, 2006 and 2007.
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
Audit Fees(1)
|
|
$
|
244,065
|
|
|
$
|
354,738
|
|
Audit-Related Fees(2)
|
|
|
7,000
|
|
|
|
3,100
|
|
Tax Fees(3)
|
|
|
84,888
|
|
|
|
117,891
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
335,953
|
|
|
$
|
475,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Audit Fees include fees billed and expected to be billed for
services performed to comply with Generally Accepted Auditing
Standards (GAAS), including the recurring audit of the
Companys consolidated financial statements for such period
included in the Annual Report on
Form 10-K
and for the reviews of the consolidated quarterly financial
statements included in the Quarterly Reports on
Form 10-Q
filed with the Securities and Exchange Commission. This category
also includes fees for audits provided in connection with
statutory filings or procedures related to audit of income tax
provisions and related reserves, consents and assistance with
and review of documents filed with the SEC.
|
|
(2)
|
|
Audit-Related Fees include fees for services associated with
assurance and reasonably related to the performance of the audit
or review of the Companys financial statements. This
category includes fees related to assistance in financial due
diligence related to Mergers and acquisitions, consultations
regarding Generally Accepted Accounting Principles, reviews and
evaluations of the impact of new regulatory pronouncements,
general assistance with implementation of Sarbanes-Oxley Act of
2002 requirements and audit services not required by statute or
regulation. This category also includes audits of pension and
other employee benefit plans, as well as the review of
information systems and general internal controls unrelated to
the audit of the financial statements.
|
|
(3)
|
|
Tax fees consist of fees related to the preparation and review
of the Companys federal and state income tax returns and
tax consulting services.
|
The Audit Committee has concluded the provision of the non-audit
services listed above as Audit-Related Fees and
Tax Fees is compatible with maintaining the
auditors independence.
All services to be performed by the independent public
accountants must be pre-approved by the Audit Committee, which
has chosen not to adopt any pre-approval policies for enumerated
services and situations, but instead has retained the sole
authority for such approvals.
24
PART IV
|
|
ITEM 15.
|
EXHIBITS,
FINANCIAL STATEMENT SCHEDULES.
|
(a)(1) and (2)
Financial Statements and Financial
Statement Schedules
.
Financial statements and
financial statement schedules are incorporated by reference to
Item 8 of the Original Filing.
(a)(3)
Index to Exhibits
.
Exhibits
requiring attachment pursuant to Item 601 of
Regulation S-K
are listed in the Index to Exhibits beginning on page 27 of
this Amendment that is incorporated herein by reference.
25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized this 29th day of April, 2008.
Quest Resource Corporation
Jerry D. Cash
Chief Executive Officer
26
INDEX TO
EXHIBITS
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
2
|
.1*
|
|
Amended and Restated Agreement and Plan of Merger, dated as of
February 6, 2008, by and among the Company, Pinnacle Gas
Resources, Inc., and Quest MergerSub, Inc. (incorporated herein
by reference to Exhibit 2.1 to the Companys Current Report
on Form 8-K filed on February 6, 2008).
|
|
2
|
.2*
|
|
Support Agreement, dated as of October 15, 2007, by and between
the Company and certain stockholders of Pinnacle Gas Resources,
Inc. (incorporated herein by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K filed on October 16,
2007).
|
|
2
|
.3*
|
|
Amendment of October 2007 Support Agreement (incorporated herein
by reference to Exhibit 10.2 to the Companys Current
Report on Form 8-K filed on February 6, 2008).
|
|
2
|
.4*
|
|
Support Agreement, dated as of February 6, 2008, by and between
Pinnacle Gas Resources, Inc. and certain stockholders of the
Company (incorporated herein by reference to Exhibit 10.4 to the
Companys Current Report on Form 8-K filed on February 6,
2008).
|
|
3
|
.1*
|
|
The Companys Restated Articles of Incorporation
(incorporated herein by reference to Exhibit 3.1 to the
Companys Registration Statement on Form 8-A12/G (Amendment
No. 2) filed on December 7, 2005).
|
|
3
|
.2*
|
|
Certificate of Designations for Series B Junior Participating
Preferred Stock (incorporated herein by reference to Exhibit 3.1
to the Companys Current Report on Form 8-K filed on June
1, 2006).
|
|
3
|
.3*
|
|
Amendment to the Companys Restated Articles of
Incorporation (incorporated herein by reference to Exhibit 3.1
to the Companys Current Report on Form 8-K filed on June
6, 2006).
|
|
3
|
.4*
|
|
The Second Amended and Restated Bylaws of the Company
(incorporated herein by reference to Exhibit 3.1 to the
Companys Current Report on Form 8-K filed on October 18,
2005).
|
|
3
|
.5*
|
|
First Amendment to the Second Amended and Restated Bylaws
(incorporated herein by reference to Exhibit 3.1(b) to the
Companys Current Report on Form 8-K filed on October 17,
2007).
|
|
4
|
.1**
|
|
Specimen of certificate for shares of Common Stock.
|
|
4
|
.2*
|
|
Rights Agreement dated as of May 31, 2006, between the Company
and UMB Bank, n.a., which includes as Exhibit A, the Certificate
of Designations Preferences and Rights of Series B Preferred
Stock, as Exhibit B, the Form of Rights Certificate, and as
Exhibit C, the Summary of Rights to Purchase Preferred Stock
(incorporated herein by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K filed on June 1, 2006).
|
|
10
|
.1*
|
|
Non-Competition Agreement by and between the Company, Quest
Cherokee, LLC, Cherokee Energy Partners LLC, Quest Oil &
Gas Corporation, Quest Energy Service, Inc., STP Cherokee, Inc.,
Ponderosa Gas Pipeline Company, Inc., Producers Service
Incorporated and J-W Gas Gathering, L.L.C., dated as of the 22nd
day of December, 2003 (incorporated herein by reference to
Exhibit 10.6 to the Companys Current Report on Form 8-K
filed on January 6, 2004).
|
|
10
|
.2**
|
|
Summary of Director Compensation Arrangements.
|
|
10
|
.3*
|
|
Management Annual Incentive Plan (incorporated herein by
reference to Appendix B to the Companys Proxy Statement
filed on May 3, 2006).
|
|
10
|
.4*
|
|
The Companys Amended and Restated 2005 Omnibus Stock Award
Plan (incorporated herein by reference to Exhibit 10.4 to the
Companys Current Report on Form 8-K filed on February 6,
2008).
|
|
10
|
.5*
|
|
The Company Bonus Compensation Plan (incorporated herein by
reference to Exhibit 10.1 to the Companys Current Report
on Form 8-K filed on May 21, 2007).
|
|
10
|
.6*
|
|
Form of the Companys 2005 Omnibus Stock Award Plan
Nonqualified Stock Option Agreement (incorporated herein by
reference to Exhibit 10.8 to the Companys Registration
Statement on Form S-1 filed on December 12, 2005).
|
|
10
|
.7*
|
|
Form of the Companys 2005 Omnibus Stock Award Plan Bonus
Shares Award Agreement (incorporated herein by reference to
Exhibit 10.9 to the Companys Registration Statement on
Form S-1 filed on December 12, 2005).
|
|
10
|
.8*
|
|
Form of Indemnification Agreement with Directors and Executive
Officers (incorporated herein by reference to Exhibit 10.11 to
the Companys Annual Report on Form 10-K filed on March 31,
2006).
|
27
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
10
|
.9*
|
|
Purchase Agreement dated as of December 22, 2006, by and among
Quest Midstream Partners, L.P., Quest Midstream GP, LLC, the
Company, Alerian Opportunity Partners IV, LP, Swank MLP
Convergence Fund, LP, Swank Investment Partners, LP, The Cushing
MLP Opportunity Fund I, LP, The Cushing GP Strategies Fund,
LP, Tortoise Capital Resources Corporation, Huizenga Opportunity
Partners, LP and HCM Energy Holdings, LLC (incorporated herein
by reference to Exhibit 10.1 to the Companys Current
Report on Form 8-K filed on December 29, 2006).
|
|
10
|
.10*
|
|
Purchase Agreement, dated as of October 16, 2007, by and among
Quest Midstream Partners, L.P., Quest Midstream GP, LLC, the
Company, Alerian Opportunity Partners IX, L.P., Bel Air MLP
Energy Infrastructure Fund, LP, Tortoise Capital Resources
Corporation, Tortoise Gas and Oil Corporation, Dalea Partners,
LP, Hartz Capital MLP, LLC, ZLP Fund, L.P., KED MME Investment
Partners, LP, Eagle Income Appreciation Partners, L.P., Eagle
Income Appreciation II, L.P., Citigroup Financial Products,
Inc., and The Northwestern Mutual Life Insurance Company
(incorporated herein by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K filed on November 2,
2007).
|
|
10
|
.11*
|
|
Amended and Restated Investors Rights Agreement, dated as
of November 1, 2007, by and among Quest Midstream Partners,
L.P., Quest Midstream GP, LLC, the Company, Alerian Opportunity
Partners IV, L.P., Swank MLP Convergence Fund, LP, Swank
Investment Partners, LP, The Cushing MLP Opportunity
Fund I, LP, The Cushing GP Strategies Fund, LP, Tortoise
Capital Resources Corporation, Alerian Opportunity Partners IX,
L.P., Bel Air MLP Energy Infrastructure Fund, LP, Tortoise Gas
and Oil Corporation, Dalea Partners, LP, Hartz Capital MLP, LLC,
ZLP Fund, L.P., KED MME Investment Partners, LP, Eagle Income
Appreciation Partners, L.P., Eagle Income Appreciation II, L.P.,
Citigroup Financial Products, Inc., and The Northwestern Mutual
Life Insurance Company (incorporated herein by reference to
Exhibit 10.2 to the Companys Current Report on Form 8-K
filed on November 2, 2007).
|
|
10
|
.12*
|
|
Second Amended and Restated Agreement of Limited Partnership of
Quest Midstream Partners, L.P., dated as of November 1, 2007, by
and among Quest Midstream GP, LLC, the Company, Alerian
Opportunity Partners IV, L.P., Swank MLP Convergence Fund, LP,
Swank Investment Partners, LP, The Cushing MLP Opportunity
Fund I, LP, The Cushing GP Strategies Fund, LP, Tortoise
Capital Resources Corporation, Alerian Opportunity Partners IX,
L.P., Bel Air MLP Energy Infrastructure Fund, LP, Tortoise Gas
and Oil Corporation, Dalea Partners, LP, Hartz Capital MLP, LLC,
ZLP Fund, L.P., KED MME Investment Partners, LP, Eagle Income
Appreciation Partners, L.P., Eagle Income Appreciation II, L.P.,
Citigroup Financial Products, Inc., and The Northwestern Mutual
Life Insurance Company (incorporated herein by reference to
Exhibit 10.3 to the Companys Current Report on Form 8-K
filed on November 2, 2007).
|
|
10
|
.13*
|
|
Omnibus Agreement dated as of December 22, 2006, by and among
the Company, Quest Midstream GP, LLC, Bluestem Pipeline, LLC and
Quest Midstream Partners, L.P. (incorporated herein by reference
to Exhibit 10.3 to the Companys Current Report on Form 8-K
filed on December 29, 2006).
|
|
10
|
.14*
|
|
Registration Rights Agreement dated as of December 22, 2006, by
and among Quest Midstream Partners, L.P., Alerian Opportunity
Partners IV, LP, Swank MLP Convergence Fund, LP, Swank
Investment Partners, LP, The Cushing MLP Opportunity
Fund I, LP, The Cushing GP Strategies Fund, LP, Tortoise
Capital Resources Corporation, Huizenga Opportunity Partners, LP
and HCM Energy Holdings, LLC (incorporated herein by reference
to Exhibit 10.4 to the Companys Current Report on Form 8-K
filed on December 29, 2006).
|
|
10
|
.15*
|
|
First Amendment to Registration Rights Agreement, dated as of
November 1, 2007, by and among Quest Midstream Partners, L.P.,
the Company, Alerian Opportunity Partners IV, L.P., Swank MLP
Convergence Fund, LP, Swank Investment Partners, LP, The Cushing
MLP Opportunity Fund I, LP, The Cushing GP Strategies Fund,
LP, Tortoise Capital Resources Corporation, Alerian Opportunity
Partners IX, L.P., Bel Air MLP Energy Infrastructure Fund, LP,
Tortoise Gas and Oil Corporation, Dalea Partners, LP, Hartz
Capital MLP, LLC, ZLP Fund, L.P., KED MME Investment Partners,
LP, Eagle Income Appreciation Partners, L.P., Eagle Income
Appreciation II, L.P., Citigroup Financial Products, Inc., and
The Northwestern Mutual Life Insurance Company (incorporated
herein by reference to Exhibit 10.4 to the Companys
Current Report on Form 8-K filed on November 2, 2007).
|
28
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
10
|
.16*
|
|
Contribution, Conveyance and Assumption Agreement dated as of
December 22, 2006, but effective as of December 1, 2006, by and
among Quest Midstream Partners, L.P., Quest Cherokee, LLC, Quest
Midstream GP, LLC, the Company, Bluestem Pipeline, LLC, and the
other subsidiaries of the Company designated therein
(incorporated herein by reference to Exhibit 10.5 to the
Companys Current Report on Form 8-K filed on December 29,
2006).
|
|
10
|
.17*
|
|
Midstream Services and Gas Dedication Agreement between Bluestem
Pipeline, LLC and the Company entered into on December 22, 2006,
but effective as of December 1, 2006 (incorporated herein by
reference to Exhibit 10.6 to the Companys Current Report
on Form 8-K filed on December 29, 2006).
|
|
10
|
.18*
|
|
Amendment No. 1 to the Midstream Services and Gas Dedication
Agreement, dated as of August 9, 2007, by and between the
Company and Bluestem Pipeline, LLC (incorporated herein by
reference to Exhibit 10.1 to the Companys Current Report
on Form 8-K filed on August 13, 2007).
|
|
10
|
.19*
|
|
Assignment and Assumption Agreement, dated as of November 15,
2007, by and among the Company, Quest Energy Partners, L.P. and
Bluestem Pipeline, LLC (incorporated herein by reference to
Exhibit 10.5 to the Companys Current Report on Form 8-K
filed on November 21, 2007).
|
|
10
|
.20*
|
|
Amended and Restated Limited Liability Company Agreement of
Quest Midstream GP, LLC (incorporated herein by reference to
Exhibit 10.8 to the Companys Current Report on Form 8-K
filed on December 29, 2006).
|
|
10
|
.21*
|
|
Employment Agreement dated April 2, 2007 between the Company and
Jerry D. Cash (incorporated herein by reference to Exhibit 10.1
to the Companys Current Report on Form 8-K filed on April
10, 2007).
|
|
10
|
.22*
|
|
Employment Agreement dated April 2, 2007 between the Company and
David E. Grose (incorporated herein by reference to Exhibit 10.2
to the Companys Current Report on Form 8-K filed on April
10, 2007).
|
|
10
|
.23*
|
|
Employment Agreement dated April 10, 2007 between the Company
and David Lawler (incorporated herein by reference to Exhibit
10.1 to the Companys Current Report on Form 8-K filed on
April 13, 2007).
|
|
10
|
.24*
|
|
Employment Agreement dated March 7, 2007 between the Company and
David Bolton (incorporated herein by reference to Exhibit 10.6
to the Companys Quarterly Report on Form 10-Q filed on May
10, 2007).
|
|
10
|
.25*
|
|
Employment Agreement dated March 5, 2007 between the Company and
Steve Hochstein (incorporated herein by reference to Exhibit
10.6 to the Companys Quarterly Report on Form 10-Q filed
on May 10, 2007).
|
|
10
|
.26**
|
|
Amendment to Employment Agreement effective December 1, 2007
between the Company and Steve Hochstein.
|
|
10
|
.27*
|
|
Employment Agreement dated September 19, 2007 between Quest
Midstream GP, LLC and Richard E. Muncrief (incorporated herein
by reference to Exhibit 10.1 to the Companys Current
Report on Form 8-K filed on September 25, 2007).
|
|
10
|
.28**
|
|
Employment Agreement dated December 3, 2007 between the Company
and Jack T. Collins.
|
|
10
|
.29**
|
|
Employment Agreement dated March 22, 2007 between the Company
and Bryan T. Simmons and Amendment to Employment Agreement
effective December 1, 2007.
|
|
10
|
.30**
|
|
Employment Agreement dated March 21, 2007 between the Company
and Richard Marlin.
|
|
10
|
.31*
|
|
Office Lease dated May 31, 2007 between the Company and Oklahoma
Tower Realty Investors, L.L.C. (incorporated herein by reference
to Exhibit 10.5 to the Companys Quarterly Report on Form
10-Q filed on June 30, 2007).
|
|
10
|
.32*
|
|
Amended and Restated Credit Agreement, dated as of November 1,
2007, by and among Quest Midstream Partners, L.P., Bluestem
Pipeline, LLC, Royal Bank of Canada, RBC Capital Markets and the
Lenders party thereto (incorporated herein by reference to
Exhibit 10.5 to the Companys Current Report on Form 8-K
filed on November 2, 2007).
|
|
10
|
.33*
|
|
First Amendment to the Amended and Restated Credit Agreement,
dated as of November 1, 2007 among Quest Midstream Partners,
L.P., Bluestem Pipeline, LLC, Royal Bank of Canada and certain
guarantors.
|
|
10
|
.34*
|
|
Guaranty by Quest Kansas General Partner, L.L.C., Quest Kansas
Pipeline, L.L.C., and Quest Pipeline (KPC) in favor of Royal
Bank of Canada, dated as of November 1, 2007 (incorporated
herein by reference to Exhibit 10.9 to the Companys
Quarterly Report on Form 10-Q filed on November 9, 2007).
|
29
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
10
|
.35*
|
|
Pledge and Security Agreement by Quest Kansas General Partner,
L.L.C. in favor of Royal Bank of Canada, dated as of November 1,
2007 (incorporated herein by reference to Exhibit 10.10 to the
Companys Quarterly Report on Form 10-Q filed on November
9, 2007).
|
|
10
|
.36*
|
|
Pledge and Security Agreement by Quest Kansas Pipeline, L.L.C.
in favor of Royal Bank of Canada, dated as of November 1, 2007
(incorporated herein by reference to Exhibit 10.11 to the
Companys Report on Form 10-Q filed on November 9, 2007).
|
|
10
|
.37*
|
|
Pledge and Security Agreement by Quest Pipelines (KPC) in favor
of Royal Bank of Canada, dated as of November 1, 2007
(incorporated herein by reference to Exhibit 10.12 to the
Companys Quarterly Report on Form 10-Q filed on November
9, 2007).
|
|
10
|
.38*
|
|
Amended and Restated Pledge and Security Agreement by Bluestem
Pipeline, LLC in favor of Royal Bank of Canada, dated as of
November 1, 2007 (incorporated herein by reference to Exhibit
10.13 to the Companys Quarterly Report on Form 10-Q filed
on November 9, 2007).
|
|
10
|
.39*
|
|
Amended and Restated Pledge and Security Agreement by Quest
Midstream Partners, L.P. in favor of Royal Bank of Canada, dated
as of November 1, 2007 (incorporated herein by reference to
Exhibit 10.14 to the Companys Quarterly Report on Form
10-Q filed on November 9, 2007).
|
|
10
|
.40*
|
|
Settlement and Release Agreement dated November 8, 2007 between
Quest Midstream GP, LLC, the Company and Richard Andrew Hoover
(incorporated herein by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K filed on November 15,
2007).
|
|
10
|
.41*
|
|
First Amended and Restated Agreement of Limited Partnership of
Quest Energy Partners, L.P., dated November 15, 2007, by and
between the Company and Quest Energy GP, LLC (incorporated
herein by reference to Exhibit 3.1 to Quest Energy Partners,
L.P.s Current Report on Form 8-K (File No. 001-33787)
filed on November 21, 2007).
|
|
10
|
.42*
|
|
Contribution, Conveyance and Assumption Agreement, dated as of
November 15, 2007, by and among Quest Energy Partners, L.P.,
Quest Energy GP, LLC, the Company, Quest Cherokee, LLC, Quest
Oil & Gas, LLC, and Quest Energy Service, LLC (incorporated
herein by reference to Exhibit 10.1 to the Companys
Current Report on Form 8-K filed on November 21, 2007).
|
|
10
|
.43*
|
|
Omnibus Agreement, dated as November 15, 2007, by and among
Quest Energy Partners, L.P., Quest Energy GP, LLC and the
Company (incorporated herein by reference to Exhibit 10.2 to the
Companys Current Report on Form 8-K filed on November 21,
2007).
|
|
10
|
.44*
|
|
Management Services Agreement, dated as of November 15, 2007, by
and among Quest Energy GP, LLC, Quest Energy Partners, L.P. and
Quest Energy Service, LLC (incorporated herein by reference to
Quest Energy Partners, L.P.s Current Report on Form 8-K
filed on November 21, 2007).
|
|
10
|
.45*
|
|
Amended and Restated Credit Agreement, dated as of November 15,
2007, by and among the Company, as the Initial Co-Borrower,
Quest Cherokee, LLC, as the Borrower, Quest Energy Partners,
L.P., as a Guarantor, Royal Bank of Canada, as Administration
Agent and Collateral Agent, KeyBank National Association, as
Documentation Agent, and the lenders from time to time party
thereto (incorporated herein by reference to Exhibit 10.3 to the
Companys Current Report on Form 8-K filed on November 21,
2007).
|
|
10
|
.46*
|
|
Credit Agreement, dated as of November 15, 2007, by and among
the Company, as the Borrower, Royal Bank of Canada, as
Administrative Agent and Collateral Agent, and the lenders from
time to time party thereto (incorporated herein by reference to
Exhibit 10.4 to the Companys Current Report on Form 8-K
filed on November 21, 2007).
|
|
10
|
.47*
|
|
Loan Transfer Agreement, dated as of November 15, 2007, by and
among the Company, Quest Cherokee, LLC, Quest Oil & Gas,
LLC, Quest Energy Service, Inc., Quest Cherokee Oilfield
Service, LLC, Guggenheim Corporate Funding, LLC, Wells Fargo
Foothill, Inc., and Royal Bank of Canada (incorporated herein by
reference to Exhibit 10.6 to the Companys Current Report
on Form 8-K filed on November 21, 2007).
|
|
10
|
.48*
|
|
Guaranty for Credit Agreement by Quest Oil & Gas, LLC and
Quest Energy Service, LLC in favor of Royal Bank of Canada,
dated as of November 15, 2007 (incorporated herein by reference
to Exhibit 10.7 to the Companys Current Report on Form 8-K
filed on November 21, 2007).
|
30
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
10
|
.49*
|
|
Pledge and Security Agreement for Credit Agreement by Quest
Energy Service, LLC for the benefit of Royal Bank of Canada,
dated as of November 15, 2007 (incorporated herein by reference
to Exhibit 10.8 to the Companys Current Report on Form 8-K
filed on November 21, 2007).
|
|
10
|
.50*
|
|
Pledge and Security Agreement for Credit Agreement by Quest Oil
& Gas, LLC for the benefit of Royal Bank of Canada, dated
as of November 15, 2007 (incorporated herein by reference to
Exhibit 10.9 to the Companys Current Report on Form 8-K
filed on November 21, 2007).
|
|
10
|
.51*
|
|
Pledge and Security Agreement for Credit Agreement by the
Company for the benefit of Royal Bank of Canada, dated as of
November 15, 2007 (incorporated herein by reference to Exhibit
10.10 to the Companys Current Report on Form 8-K filed on
November 21, 2007).
|
|
10
|
.52*
|
|
Guaranty for Amended and Restated Credit Agreement by Quest
Energy Partners, L.P. in favor of Royal Bank of Canada, dated as
of November 15, 2007 (incorporated herein by reference to
Exhibit 10.11 to the Companys Current Report on Form 8-K
filed on November 21, 2007).
|
|
10
|
.53*
|
|
Guaranty for Amended and Restated Credit Agreement by Quest
Cherokee Oilfield Service, LLC in favor of Royal Bank of Canada,
dated as of November 15, 2007 (incorporated herein by reference
to Exhibit 10.12 to the Companys Current Report on Form
8-K filed on November 21, 2007).
|
|
10
|
.54*
|
|
Pledge and Security Agreement for Amended and Restated Credit
Agreement by Quest Energy Partners, L.P. for the benefit of
Royal Bank of Canada, dated as of November 15, 2007
(incorporated herein by reference to Exhibit 10.13 to the
Companys Current Report on Form 8-K filed on November 21,
2007).
|
|
10
|
.55*
|
|
Pledge and Security Agreement for Amended and Restated Credit
Agreement by Quest Cherokee Oilfield Service, LLC for the
benefit of Royal Bank of Canada, dated as of November 15, 2007
(incorporated herein by reference to Exhibit 10.14 to the
Companys Current Report on Form 8-K filed on November 21,
2007).
|
|
10
|
.56*
|
|
Pledge and Security Agreement for Amended and Restated Credit
Agreement by Quest Cherokee, LLC for the benefit of Royal Bank
of Canada, dated as of November 15, 2007 (incorporated herein by
reference to Exhibit 10.15 to the Companys Current Report
on Form 8-K filed on November 21, 2007).
|
|
12
|
.1**
|
|
Statement regarding computation of ratios.
|
|
21
|
.1*
|
|
List of Subsidiaries (incorporated herein by reference to
Exhibit 21.1 to the Companys Registration Statement on
Form S-4 filed on February 7, 2008).
|
|
23
|
.1**
|
|
Consent of Cawley, Gillespie & Associates, Inc.
|
|
23
|
.2**
|
|
Consent of Murrell, Hall, McIntosh & Co., PLLP.
|
|
31
|
.1
|
|
Certification by Chief Executive Officer pursuant to Rule
13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
31
|
.2
|
|
Certification by Chief Financial Officer pursuant to Rule
13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
32
|
.1**
|
|
Certification by Chief Executive Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
|
|
32
|
.2**
|
|
Certification by Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
|
|
|
|
*
|
|
Incorporated by reference
|
|
**
|
|
Previously filed
|
31
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