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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
CARRIZO OIL & GAS, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO OF CARRIZO OIL & GAS, INC.]
April 18, 2001
Dear Fellow Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Carrizo Oil & Gas, Inc. (the "Company") to be held at 10:00 a.m. on Friday, May
18, 2001, at the Omni Houston Hotel Westside, 13210 Katy Freeway, Houston,
Texas.
This booklet includes the notice of the meeting and the proxy statement,
which contains information about the Board and its committees and personal
information about the nominees for the Board. Other matters on which action is
expected to be taken during the meeting are also described.
We hope you will find it convenient to attend in person. Whether or not you
expect to attend, to assure representation at the meeting and the presence of a
quorum, please date, sign and promptly mail the enclosed proxy in the return
envelope provided.
A copy of the Company's 2000 Annual Report to Shareholders is also
enclosed.
Sincerely,
/s/ S.P. JOHNSON IV
S.P. JOHNSON IV
Chief Executive Officer
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CARRIZO OIL & GAS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 18, 2001
To The Shareholders of
Carrizo Oil & Gas, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Carrizo
Oil & Gas, Inc. (the "Company") will be held at the Omni Houston Hotel Westside,
13210 Katy Freeway, Houston, Texas, on Friday, May 18, 2001, at 10:00 a.m. for
the following purposes:
(1) to elect eight members to the Board of Directors for the ensuing
year;
(2) to approve the appointment of Arthur Andersen LLP as independent
public accountants of the Company for the fiscal year ending
December 31, 2001; and
(3) to transact such other business as may properly come before the
meeting.
The Company has fixed the close of business on April 12, 2001, as the
record date for determining shareholders entitled to notice of, and to vote at,
such meeting or any adjournment thereof.
You are cordially invited to attend the meeting in person. Even if you plan
to attend the meeting, you are requested to mark, sign, date and return the
accompanying proxy as soon as possible.
By Order of the Board of Directors
/s/ FRANK A. WOJTEK
FRANK A. WOJTEK
Secretary
April 18, 2001
14701 St. Mary's Lane, Suite 800
Houston, TX 77079
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CARRIZO OIL & GAS, INC.
14701 ST. MARY'S LANE, SUITE 800
HOUSTON, TEXAS 77079
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Carrizo Oil & Gas, Inc., a Texas
corporation (the "Company"), to be voted at the 2001 Annual Meeting of
Shareholders (the "Annual Meeting") to be held at the Omni Houston Hotel
Westside, 13210 Katy Freeway, Houston, Texas on Friday, May 18, 2001, at 10:00
a.m., and any and all adjournments thereof.
This statement and the accompanying form of proxy are first being mailed to
shareholders on or about the week of April 18, 2001. In addition to the
solicitation of proxies by mail, regular officers and employees of the Company
may, without additional compensation, solicit the return of proxies by mail,
telephone, telegram or personal contact. The Company will pay the cost of
soliciting proxies in the accompanying form. The Company will reimburse brokers
or other persons holding stock in their names or in the names of their nominees
for their reasonable expenses in forwarding proxy material to beneficial owners
of stock.
VOTING SECURITIES
Shareholders of record as of April 12, 2001, the record date for
determining persons entitled to notice of, and to vote at, the Annual Meeting,
are entitled to vote on all matters at the Annual Meeting and at any
adjournments thereof. On that date, the issued and outstanding capital stock of
the Company consisted of 14,058,061 shares of Common Stock, par value $0.01 per
share (the "Common Stock"). No other class of stock is outstanding. Each share
of Common Stock is entitled to one vote on each matter submitted to a vote of
shareholders. Cumulative voting is not allowed. The holders of a majority of the
shares entitled to vote at the Annual Meeting, represented in person or by
proxy, constitute a quorum for the transaction of business at the Annual
Meeting.
All duly executed proxies received prior to the Annual Meeting will be
voted in accordance with the choices specified thereon and, in connection with
any other business that may properly come before the meeting, in the discretion
of the persons named in the proxy. As to any matter for which no choice has been
specified in the proxy, the shares represented thereby will be voted by the
persons named in the proxy, to the extent applicable, (1) for the election as a
director of each nominee listed herein; (2) for the appointment of Arthur
Andersen LLP as independent public accountants of the Company for the fiscal
year ending December 31, 2001; and (3) in the discretion of the persons named in
the proxy in connection with any other business that may properly come before
the meeting. A shareholder giving a proxy may revoke it at any time before it is
voted at the Annual Meeting by delivering written notice to the Secretary of the
Company or by delivering a properly executed proxy bearing a later date. A
shareholder who attends the Annual Meeting may, if he or she wishes, vote by
ballot at the Annual Meeting and that vote will cancel any proxy previously
given. Attendance at the Annual Meeting will not in itself, however, constitute
the revocation of a proxy.
Proxies indicating shareholder abstentions will be counted for purposes of
determining whether there is a quorum at the Annual Meeting, but will not be
voted on any matter and therefore will have the same effect as a vote against a
matter, except in the case of director elections, which are determined by a
plurality of votes cast, as to which those abstentions will have no effect.
Shares represented by "broker nonvotes" (i.e., shares held by brokers or
nominees for which instructions have not been received from the beneficial
owners or persons entitled to vote and for which the broker or nominee does not
have discretionary power to vote on a particular matter) will be counted for
purposes of determining whether there is a quorum at the Annual Meeting, but
will not be voted on any matter, and thus will be disregarded in the calculation
of "votes cast" with respect to that matter (even though those shares may be
considered as entitled to vote or be voted on other matters). Votes cast by
proxy or in person at the Annual Meeting will be counted by the persons
appointed as election inspectors for the Annual Meeting.
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SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The table below sets forth information concerning (i) the only persons
known by the Company, based on statements filed by such persons pursuant to
Section 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), to own beneficially in excess of 5% of the Common Stock as of
February 28, 2001, and (ii) the shares of Common Stock beneficially owned, as of
February 28, 2001, by each director, the Chief Executive Officer and the four
other executive officers who were serving at the end of the Company's last
fiscal year and by all executive officers and directors collectively. Except as
indicated, each individual has sole voting power and sole investment power over
all shares listed opposite his name.
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
--------------------------------
PERCENT
OF COMMON
STOCK(2)
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER OF SHARES (ROUNDED)
- --------------------------------------- ------------------- ---------
Directors and Executive Officers:
S. P. Johnson IV..................................... 756,749(3) 5.0%
Frank A. Wojtek...................................... 1,167,887(3) 8.2%
George Canjar........................................ 160,492 1.1%
Brad Fisher.......................................... 23,332 *
Kendall A. Trahan.................................... 96,962 *
Steven A. Webster.................................... 1,820,426(3)(4) 12.8%
Douglas A. P. Hamilton............................... 734,507(3)(5) 5.2%
Paul B. Loyd, Jr. ................................... 1,555,467(3) 11.0%
Christopher C. Behrens............................... 5,120,577(3)(6) 31.5%
Arnold L. Chavkin.................................... 5,120,577(3)(6) 31.5%
F. Gardner Parker.................................... 30,000 *
Executive Officers and Directors as a Group (11
persons).......................................... 16,586,976 86.7%
DAPHAM Partnership, L.P.............................. 395,960(3)(7) 2.8%
The Douglas A.P. Hamilton 1997 GRAT.................. 200,000(8) 1.4%
JP Morgan Partners................................... 5,117,244(3)(9) 31.5%
Mellon Ventures, L.P................................. 639,655(3)(10) 4.5%
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* Less than one percent.
(1) Except as described in note 3 below or otherwise noted and pursuant to
applicable community property laws, each shareholder has sole voting and
investment power with respect to the shares beneficially owned. The
business address of each director and executive officer other than Messrs.
Behrens and Chavkin is c/o Carrizo Oil & Gas, Inc., 14701 St. Mary's Lane,
Suite 800, Houston, Texas 77079. The business address of Messrs. Behrens
and Chavkin is 1221 6th Avenue of the Americas, 39th Floor, New York, New
York 10020.
(2) The table includes shares of Common Stock that can be acquired through the
exercise of options, warrants or convertible securities within 60 days of
February 28, 2001 as follows: Mr. Johnson -- 41,667, Mr. Wojtek -- 16,667,
Mr. Canjar -- 160,492, Mr. Fisher -- 23,332, Mr. Trahan -- 96,962, Mr.
Webster -- 130,338, Mr. Hamilton -- 97,005, Mr. Loyd -- 97,005, Mr.
Behrens -- 2,211,485, Mr. Chavkin -- 2, 211,485, all officers and directors
as a group -- 5,086,438, JP Morgan Partners -- 2,208,152, and Mellon
Ventures, L.P. -- 276,019. The percent of the class owned by each person
has been computed assuming the exercise of all options, warrants and
convertible securities deemed to be beneficially owned by that person, and
assuming that no options, warrants or convertible securities held by any
other person have been exercised. The table excludes the following options
that are not exercisable within 60 days of February 28, 2001 as follows:
Mr. Johnson -- 83,333, Mr. Wojtek -- 33,333, Mr. Canjar -- 18,333, Mr.
Fisher -- 26,668, Mr. Trahan -- 17,333, Mr. Webster -- 79,168, Mr.
Hamilton -- 12,501, Mr. Loyd -- 12,501, Mr. Behrens -- 9,167 and Mr.
Chavkin -- 9,167.
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(3) Pursuant to a Shareholders Agreement dated December 15, 1999, among the
Company, S.P. Johnson IV, Frank A. Wojtek, Steven A. Webster, Douglas A.P.
Hamilton, Paul B. Loyd, Jr., DAPHAM Partnership, L.P., JP Morgan Partners
and Mellon Ventures, L.P., certain shareholders of the Company may be
deemed to have formed a group pursuant to Rule 13d-5(b)(1) promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Nothing herein shall constitute an affirmance that any such group exists;
however, such group could be deemed to have beneficial ownership, for
purposes of Sections 13(d) and 13(g) of the Exchange Act, of all equity
securities of the Company beneficially owned by such parties. Such parties
would, as of February 28, 2001 be deemed to beneficially own an aggregate
of 12,187,895 shares (72%). Each party to the Shareholders Agreement listed
above disclaims beneficial ownership of any common stock owned by the other
parties to the Shareholders Agreement.
(4) Shares shown include 1,725,228 shares of Common Stock owned by Mr. Webster
and 56,866 shares owned by Cerrito Partners, of which Mr. Webster is one of
three general partners and could be deemed to share voting and dispositive
power with the other general partners. However, Mr. Webster does not admit
to having such power and disclaims the beneficial ownership of the Common
Stock held by Cerrito Partners.
(5) Shares shown do not include (i) 395,960 shares of Common Stock beneficially
owned by DAPHAM Partnership, L.P., the limited partner of which is a
charitable remainder trust of which Mr. Hamilton, his wife and children are
among the beneficiaries, (ii) 200,000 shares of Common Stock beneficially
owned by the Douglas A.P. Hamilton 1997 GRAT, of which Mr. Hamilton is the
sole beneficiary until October 2002, and (iii) 143,472 shares of Common
Stock beneficially owned by certain trusts established for the benefit of
Mr. Hamilton's children, and for each of which Mr. Hamilton's wife serves
as trustee. Mr. Hamilton disclaims beneficial ownership of all of such
shares.
(6) Shares shown include 5,117,244 shares beneficially owned by JP Morgan
Partners (formerly CB Capital Investors L.L.C.). Mr. Behrens and Mr.
Chavkin may be deemed to have beneficial ownership of such shares because
they are general partners of Chase Capital Partners, which is a member and
the investment manager of JP Morgan Partners. Each of Mr. Behrens and Mr.
Chavkin disclaim beneficial ownership of all such shares, except to the
extent of any pecuniary interest they may have therein.
(7) The address of DAPHAM Partnership, L.P. is 462 Broadway, Second Floor, New
York, New York 10013.
(8) The address of the Douglas A.P. Hamilton 1997 GRAT is 900 Third Avenue, New
York, New York 10022, and its trustee is Mr. Kim E. Baptiste.
(9) The name of CB Capital Investors, LLC was changed to JP Morgan Partners as
part of a business combination effective January 1, 2001. The address of JP
Morgan Partners is 1221 6th Avenue of the Americas, 39th Floor, New York,
New York 10020.
(10) The address of Mellon Ventures, L.P. is 5 Radnor Corporate Center, 100
Matsonford Road, Suite 170, Radnor, Pennsylvania 19087.
PROPOSAL I
ELECTION OF DIRECTORS
The persons designated as proxies in the enclosed proxy card intend, unless
the proxy is marked with contrary instructions, to vote for the following
nominees as directors to serve until the 2002 Annual Meeting of Shareholders and
until their successors have been duly elected and qualified: Mr. S.P. Johnson
IV; Mr. Frank A. Wojtek; Mr. Steven A. Webster; Mr. Douglas A.P. Hamilton; Mr.
Paul B. Loyd, Jr.; Mr. Arnold L. Chavkin; Mr. Christopher C. Behrens and Mr. F.
Gardner Parker. The Board of Directors has no reason to believe that any nominee
for election as a director will not be a candidate or will be unable to serve,
but if for any reason one or more of these nominees is unavailable as a
candidate or unable to serve when election occurs, the persons designated as
proxies in the enclosed proxy card, in the absence of contrary instructions,
will in their discretion vote the proxies for the election of any of the other
nominees or for a
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substitute nominee or nominees, if any, selected by the Board of Directors. The
affirmative vote of a plurality of the votes cast by holders entitled to vote in
the election of directors at the Annual Meeting is required for the election of
each nominee for director. Pursuant to the Shareholders Agreement dated December
15, 1999, the number of directors constituting the Board was set at seven. The
number was expanded to eight with the addition of F. Gardner Parker.
NOMINEES
The following sets forth information concerning the eight nominees for
election as directors at the Annual Meeting, including information as to each
nominee's age as of April 1, 2001, position with the Company and business
experience during the past five years.
S. P. Johnson IV, age 45, has served as the President, Chief Executive
Officer and a director of the Company since December 1993. Prior to that time,
he worked 15 years for Shell Oil Company. His managerial positions included
Operations Superintendent, Manager of Planning and Finance and Manager of
Development Engineering. Mr. Johnson is a Registered Petroleum Engineer and has
a B.S. in Mechanical Engineering from the University of Colorado.
Frank A. Wojtek, age 45, has served as the Chief Financial Officer, Vice
President, Secretary, Treasurer and a director of the Company since 1993. In
addition, from 1992 to 1997, Mr. Wojtek was the Assistant to the Chairman of the
Board of Reading & Bates Corporation (an offshore drilling company). Mr. Wojtek
also holds the positions of Vice President and Secretary/Treasurer for Loyd &
Associates, Inc. (a private financial consulting and investment banking firm).
Mr. Wojtek held the positions of Vice President and Chief Financial Officer of
Griffin-Alexander Drilling Company from 1984 to 1987, Treasurer of
Chiles-Alexander International Inc. from 1987 to 1989 and Vice President and
Chief Financial Officer of India Offshore Inc. from 1989 to 1992, all of which
are companies in the offshore drilling industry. Mr. Wojtek is a Certified
Public Accountant and holds a B.B.A. in Accounting with Honors from the
University of Texas.
Steven A. Webster, age 49, has been the Chairman of the Board of the
Company since June 1997 and has been a director of the Company since 1993. Mr.
Webster serves as the Managing Director of Global Energy Partners, an affiliate
of DLJ Merchant Banking Partners, which makes private equity investments in the
energy business. From December 1997 to May 1999, Mr. Webster was the CEO and
President of R&B Falcon Corporation, an offshore drilling contractor, and prior
to that, was Chairman & CEO of Falcon Drilling Company, which he founded in
1988. Mr. Webster is also a director of Grey Wolf, Inc. (an onshore drilling
company), Geokinetics, Inc. (a seismic acquisition and geophysical services
company) and Brigham Exploration Company (oil and gas exploration company), as
well as various private companies. He is also a trust manager of Camden Property
Trust (a real estate investment trust). Mr. Webster holds an M.B.A. degree from
Harvard Business School.
Christopher C. Behrens, age 40, has been a director of the Company since
December 1999. Mr. Behrens is a General Partner of JP Morgan Partners (formerly
Chase Capital Partners), the private equity investment affiliate of JP Morgan
Chase & Co. From 1990 to 1994, Mr. Behrens was a Vice President in the Chase
Manhattan Corporation's Merchant Banking Group. Mr. Behrens is a director of
Portola Packaging and Patina Oil & Gas Corporation, as well as various private
companies.
Arnold L. Chavkin, age 49, has been a director of the Company since
December 1999. Mr. Chavkin has been General Partner of JP Morgan Partners
(formerly Chase Capital Partners) since January 1992. Prior to joining JP Morgan
Partners, he was a member of Chemical Bank's merchant banking group and a
generalist in its corporate finance group specializing in mergers and
acquisitions and private placements for the energy industry. His experience
prior to Chemical Bank included corporate development for Freeport McMoRan as
well as positions with Gulf and Western Industries and Arthur Young & Co. Mr.
Chavkin is a Certified Public Accountant. He received his B.A. and M.B.A.
degrees from Columbia University. Mr. Chavkin is also a director of American
Tower Corporation, Better Minerals & Aggregates, Carolina Broadband, Crown Media
Holdings, Inc., Encore Acquisition Partners, HDFC Bank, and Triton PCS, Inc. He
serves on the Advisory Investment Boards of Richina Group, the India Private
Equity Fund and the Asia Development Partners Fund.
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Douglas A. P. Hamilton, age 54, has been a director of the Company since
1993. Mr. Hamilton, a private investor, has been an active investor in the oil
and gas business since 1985. Mr. Hamilton has since 1979 been the President of
Anatar Investments, Inc., a diversified investment capital firm with active
investments in oil and gas and offshore contract drilling and is a co-owner of
the French Culinary Institute, a cooking school in New York City. Mr. Hamilton
has a degree from the University of North Carolina and completed the PMD program
at Harvard Business School.
Paul B. Loyd, Jr., age 54, has been a director of the Company since 1993.
Mr. Loyd was Chairman of the Board and Chief Executive Officer of Reading &
Bates from 1991 to 1997 and Chairman and Chief Executive Officer of R&B Falcon
Corporation from 1999 to 2001 until its merger with Transocean Sedco Forex Inc.
in January 2001. Mr. Loyd has been the principal of Loyd & Associates, Inc., a
financial consulting firm, since 1989. Mr. Loyd was Chief Executive Officer and
a director of Chiles-Alexander International, Inc. from 1987 to 1989, President
and a director of Griffin-Alexander Drilling Company, from 1984 to 1987, and
prior to that, a director and Chief Financial Officer of Houston Offshore
International, all of which are companies in the offshore drilling industry. Mr.
Loyd is also a director of Transocean Sedco Forex Inc., Frontier Petroleum
Company, Enterprise Oil PLC and is a member of the Board of Trustees of Southern
Methodist University. Mr. Loyd served as President of the Company from its
inception in September 1993 until December 1993. Mr. Loyd holds an M.B.A. degree
from Harvard Business School.
F. Gardner Parker, age 59, has been a director of the Company since 2000. A
native of Bryan, Texas, F. Gardner Parker is a graduate of the University of
Texas. After receiving the title of CPA he worked with Ernst & Young (formerly
Ernst & Ernst) for fourteen years, seven of which he served as partner. Since
1994 he has served as Chairman of the Board of Computer Control Systems. He also
is currently the Chairman of the Board of Overpar, Inc, a real estate management
company; and OHA General Partners, a privately held fiduciary. He is the lead
Managing Trustee with Camden Property Trust, a New York Stock Exchange REIT, and
also serves on the Board of Gillman Automobile Dealerships, Associated Building
Services, Net Near U Communications, MCS Technologies, Camp Longhorn, Inc., NII
Communications, Inc., and Arena Power. He served as Chairman of the Executive
Committee of the Board of Directors of USLD Communications, a NASDAQ company,
until it was sold to another public company in 1998.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
Directors not employed by the Company or any of its subsidiaries ("Outside
Directors") received an annual retainer of $7,500 through December 31, 1998.
Effective January 1, 1999, the Board of Directors suspended the payment of the
retainer. Effective January 1, 2001, the Compensation Committee proposed and the
Board of Directors approved a $1,000 per year annual retainer to be paid to each
Outside Director plus compensation of $3,000 per meeting attended ($1,000 if
attended via telephone). It is expected that additional compensation will be
paid to members of the Board of Directors who serve on committees. The Board of
Directors has not yet determined the amount of this additional compensation.
Directors who are also employees of the Company receive no payment for serving
as directors. All directors are reimbursed for travel and lodging expenses of
attending meetings. Under the Company's Incentive Plan (the "Incentive Plan"),
Messrs. Webster, Hamilton and Loyd, the then-current Outside Directors, were
granted options to purchase 10,000 shares of Common Stock at an exercise price
per share of $11.00 in connection with the Company's initial public offering in
August 1997 (the "IPO"). Thereafter, each additional Outside Director will be
automatically granted nonqualified options to purchase 10,000 shares of Common
Stock on the date that person first becomes an Outside Director of the Company.
On December 15, 1999 options to purchase 10,000 shares were granted to each of
Messrs. Behrens and Chavkin at the price of $1.75 per share, the fair market
value on the date of the grant. On June 13, 2000 an option to purchase 10,000
shares was granted to Mr. Parker at the price of $6.3125 per share, the fair
market value on the date of the grant. In addition, each Outside Director
serving on the day after the date of the annual meeting of shareholders will
automatically be granted options to purchase an additional 2,500 shares of
Common Stock, subject to the availability for issuance of those shares under the
Incentive Plan. During the fiscal year ended December 31, 2000, options to
purchase 2,500 shares were granted to each of Messrs. Webster, Hamilton, Loyd,
Behrens and Chavkin at an exercise price per share of $5.1719. Each option
granted to an Outside Director will (i) have a ten-year term,
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(ii) have an exercise price equal to the fair market value of a share of Common
Stock on the date of grant and (iii) become exercisable in cumulative annual
increments of one-third of the total number of shares of Common Stock subject
thereto, beginning on the first anniversary of the date of grant. Effective
February 17, 2000, the Company issued new options in replacement for all
previously outstanding director options that were "out of the money" on such
date, and the prior "out of the money" options were terminated. The new director
options have an exercise price of $2.25 per share, have a term of ten years from
the date of grant and become exercisable in 33% increments in each of the three
years following the date of grant. This repricing was approved by the
shareholders at the 2000 Annual Meeting. The options granted to Outside
Directors in the fiscal year ended December 31, 1999 were not "out of the money"
and therefore not repriced.
Under the terms of the Company's February 2000 repricing program (the
"Repricing") (see discussion under "Option Repricing" below), the Company issued
new options in replacement of all previously outstanding Outside Director
options that were "out of the money" on such date, and the prior "out of the
money" options were terminated. As a result, a total of 137,500 new Outside
Director options were issued, each with an exercise price of $2.25 per share, a
term of ten years from date of grant, and exercisable in 33% increments in each
of the three years following the date of the grant. The amendment to the plan
that clarified the implementation of this Repricing was approved by the
shareholders at the 2000 Annual Meeting. The options granted to Outside
Directors in the fiscal year ended December 31, 2000 were not "out of the money"
and therefore were not repriced.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company held three meetings during the fiscal
year ended December 31, 2000, and transacted business on four occasions during
the fiscal year by unanimous written consent.
The Board of Directors has an Audit Committee which, during the fiscal year
ended December 31, 2000, consisted of Messrs. Loyd, Chavkin and Parker. The
function of the Audit Committee is to meet with the internal financial staff of
the Company and the independent public accountants engaged by the Company to
review (i) the scope and findings of the annual audit, (ii) quarterly financial
statements, (iii) accounting policies and procedures and the Company's financial
reporting, and (iv) the internal controls employed by the Company. The Audit
Committee also recommends to the Board of Directors the independent public
accountants to be selected to audit the Company's annual financial statements,
and reviews the fees charged for audits and for any nonaudit engagements. The
Committee's findings and recommendations are reported to management and the
Board of Directors for appropriate action. The Audit Committee met once during
fiscal 2000.
The Board of Directors has a Compensation Committee which, during the
fiscal year ended December 31, 2000, consisted of Messrs. Parker, Hamilton and
Behrens. The function of the Compensation Committee is to consider and act upon
management's recommendations to the Board of Directors on salaries, bonuses and
other forms of compensation for the Company's executive officers and certain
other key employees. The Compensation Committee has been appointed by the Board
of Directors to administer the Company's stock option plans (subject in some
cases to action by the full Board). The Compensation Committee held one meeting
during fiscal 2000.
The Board of Directors has a Budget Committee, consisting of Mr. Johnson
and Mr. Wojtek, whose function is to consider matters relating to the Company's
drilling program and the Company's budget and related matters. The Budget
Committee's actions are advisory only and not binding on the Board unless the
Board decides otherwise.
The Board of Directors does not have a standing Nominating Committee.
During the fiscal year ended December 31, 2000, each director attended at
least 75% of the aggregate of the total number of Board of Directors' meetings
and of meetings of committees of the Board of Directors on which he served.
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SECTION 16(a) REPORTING DELINQUENCIES
Section 16(a) of the Exchange Act requires that the Company's executive
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, file reports of ownership
and changes of ownership with the Securities and Exchange Commission (the
"SEC"). Officers, directors and greater than 10% shareholders are required by
SEC regulation to furnish the Company with copies of all such forms they file.
Based solely on its review of the copies of such forms received by the
Company, and on written representations by the Company's officers and directors
regarding their compliance with the filing requirements, the Company believes
that during the fiscal year ended December 31, 2000, all reports required by
Section 16(a) to be filed by its directors, officers and greater than 10%
beneficial owners were filed on a timely basis, except that each of Mr. Behrens,
Mr. Chavkin, Mr. Hamilton and Mr. Loyd was late in filing a Form 5 reporting a
grant of 2,500 options in 2000.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the annual, long-term and total compensation
for (i) the Company's Chief Executive Officer for the fiscal years ended
December 31, 2000, 1999 and 1998 and (ii) its other four executive officers, for
the fiscal years ended December 31, 2000, 1999 and 1998 (collectively, the
"Named Executives").
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
NAME AND ------------------------- OTHER ANNUAL STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) OPTIONS(#) COMPENSATION($)(2)
- ------------------ ---- -------------- -------- ------------------ ------------ ------------------
S.P. Johnson IV 2000 $225,925 $22,680 -- 125,000 $593.40
President and Chief 1999 $200,375(3) -- -- -- $862.60
Executive Officer 1998 $210,000 -- -- -- $ 2,615
Frank A. Wojtek 2000 $161,375 $16,200 -- 50,000 $524.40
Chief Financial Officer, 1999 $143,125(3) -- -- -- $874.60
Vice President, Secretary 1998 $150,000 -- -- 10,000 $ 2,573
and Treasurer
George Canjar 2000 $161,375 $16,200 -- -- $524.40
Vice President of 1999 $143,125(3) -- -- 15,000 $874.60
Exploration and 1998 $150,000 -- -- 25,000 $ 2,573
Development
Kendall A. Trahan 2000 $145,238 $14,580 -- -- $462.36
Vice President of Land 1999 $128,812.50(3) -- -- 13,500 $821.76
1998 $135,000 -- -- 25,000 $ 2,447
Brad Fisher 2000 $124,225 $18,000 -- 50,000 $317.40
Vice President of
Operations
- ---------------
(1) For the fiscal years 1998, 1999 and 2000 the Named Executives did not
receive any annual compensation not properly categorized as salary or bonus,
except for certain perquisites and other personal benefits which are not
shown because the aggregate amount of such compensation, if any, for each
Named Executive during each of those fiscal years did not exceed the lesser
of $50,000 or 10% of total salary and bonus reported for that Named
Executive.
(2) For fiscal year 2000, all other compensation consists of life insurance
premiums of $593.40, $524.40, $524.40, $462.36 and $317.40 for Mr. Johnson,
Mr. Wojtek, Mr. Canjar, Mr. Trahan and Mr. Fisher, respectively. For the
fiscal year 1999, other compensation consists of contributions of $175,
$250, $250, and $225 by the Company under its 401(k) plan for Mr. Johnson,
Mr. Wojtek, Mr. Canjar and Mr. Trahan, respectively, and life insurance
premiums of $687.60, $624.60, $624.60 and $596.76 for Mr. Johnson, Mr.
Wojtek, Mr. Canjar and Mr. Trahan, respectively. For the fiscal year 1998,
all other
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compensation consists of contributions of $2,195, $2,195, $2,195 and $2,195
by the Company under its 401(k) Plan for Mr. Johnson, Mr. Wojtek, Mr. Canjar
and Mr. Trahan, respectively, and life insurance premiums of $420, $378,
$378 and $252 for Mr. Johnson, Mr. Wojtek, Mr. Canjar and Mr. Trahan,
respectively.
(3) The Compensation Committee reduced each of the Named Executives' salaries by
10% effective February 1, 1999. However, in December 1999 50% of the portion
of the salary that was reduced was paid to each Named Executive. On March
31, 2000, the remaining 50% of the portion of the salary that was reduced
was paid to each Named Executive, consisting of $9,625, $6,875, $6,875 and
$6,187.50 to Mr. Johnson, Mr. Wojtek, Mr. Canjar and Mr. Trahan,
respectively.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to stock options
granted during fiscal 2000 to the Named Executives.
POTENTIAL REALIZABLE
VALUES AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(1)(2)
OPTIONS/SARS EMPLOYEES IN EXERCISE PRICE --------------------
NAME GRANTED FISCAL YEAR ($/SHARE)(1) EXPIRATION DATE 5%($) 10%($)
- ---- ------------ ------------ -------------- --------------- -------- ---------
S. P. Johnson IV...... 25,000 5.9% $3.1406 -- 54,985 144,485
Frank A. Wojtek....... 0 0 -- -- -- --
George Canjar......... 0 0 -- -- -- --
Kendall A. Trahan..... 0 0 -- -- -- --
Brad Fisher........... 0 0 -- -- -- --
- ---------------
(1) The exercise price of the options granted is equal to or greater than the
market value of the Company's Common Stock on the date of grant.
(2) Potential realizable value of each grant assumes that the market price of
the underlying security (based upon the value of the Common Stock on the
date of grant) appreciates at annualized rates of 5% and 10% over the term
of the award. Actual gains, if any, on stock option exercises are dependent
on the future performance of Common Stock and overall market conditions.
There can be no assurance that the amounts reflected on this table will be
achieved.
OPTION REPRICING: COMPENSATION COMMITTEE REPORT ON REPRICING
In February 2000, the Company reviewed the stock options issued under the
Incentive Plan and held by the Named Executives which were "out of the money"
(an exercise price higher than the market price of the Common Stock). The
Company concluded that in light of the disparity between the exercise price of
such options and the then current market price of the Common Stock, the options
no longer provided the desired incentive to option holders. The Company offered
to issue replacement options for all options held by such Named Executives that
were "out of the money" on February 17, 2000, subject to the approval of the
optionee. Pursuant to the Repricing, 170,000 outstanding options issued under
the Incentive Plan held by the Named Executives were voluntarily terminated, and
a total of 170,000 new options, each with an exercise price of $2.25 per share
and a term of ten years from the date of grant, were issued. The new options are
exercisable in 33% increments in each of the three years following the date of
the grant. The table below sets forth certain information concerning the new
options issued in the Repricing for each of the Named Executives during 2000.
The options granted to Messrs. Canjar, Fisher and Trahan during fiscal 1999 were
not "out of the money" and therefore were not repriced. The options granted to
Messrs. Canjar and Trahan prior to the IPO that were not issued under the
Incentive Plan, consisting of 138,825 and 83,295 shares respectively, were not
repriced. Except pursuant to the Repricing, no repricing of options has occurred
since the Company's
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inception in 1993. Options held by Outside Directors were subject to repricing
on terms consistent with those of the repricing of the options held by the Named
Executives. See "Compensation of Outside Directors".
The Compensation Committee
Christopher C. Behrens
Douglas A.P. Hamilton
F. Gardner Parker
TEN YEAR OPTION REPRICING TABLE
EXERCISE LENGTH OF
NUMBER OF PRICE OF ORIGINAL
SECURITIES MARKET PRICE ORIGINAL OPTION TERM
UNDERLYING OF STOCK AT OPTIONS AT NEW REMAINING AT
ORIGINAL OPTIONS TIME OF TIME OF EXERCISE DATE OF
NAME DATE REPRICED(#) REPRICING($)(1) REPRICING($) PRICE($) REPRICING
- ---- ---------- ---------------- --------------- ------------ -------- ------------
S. P. Johnson, IV.............. 02/17/2000 100,000 2.1875 11.00 2.25 78 months
Frank A. Wojtek................ 02/17/2000 40,000 2.1875 11.00 2.25 78 months
02/17/2000 10,000 2.1875 6.4375 2.25 90 months
Brad Fisher.................... 02/17/2000 20,000 2.1875 6.00 2.25 90 months
- ---------------
(1) The closing price of the Common Stock on February 17, 2000.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the unexercised
options to purchase the Common Stock held by the Named Executives at December
31, 2000.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END($)(2)
ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
S. P. Johnson IV......... -- -- -- 100,000 -- 837,110
Frank A. Wojtek.......... -- -- -- 50,000 -- 343,750
George Canjar............ -- -- 160,492 18,333 847,426 93,665
Kendall A. Trahan........ 7,500 27,861 96,962 17,333 599,422 86,520
Brad Fisher.............. 10,000 44,562 -- 70,000 -- 486,250
- ---------------
(1) Value realized is calculated based on the difference between the option
exercise price and the closing market price of the Company's Common Stock on
the date of exercise, multiplied by the number of shares underlying the
options.
(2) Value of unexercised in-the-money options is calculated based upon the
difference between the option price and the closing price of the Company's
Common Stock at fiscal year-end, multiplied by the number of shares
underlying the options. The closing price of the Company's Common Stock, as
reported on the NASDAQ Stock Market on December 31, 2000, was $9.125.
As described above, the Company offered to reprice all "out of the money"
options issued pursuant to the Incentive Plan and held by the Named Executives
in February 2000. As a result of this repricing, the new options granted in the
repricing were unexercisable and, among other things, the exercise price of
these new options was lower than the options they replaced. The options granted
to Messrs. Canjar and Trahan during fiscal 1999 were not "out of the money" and
therefore not repriced. The options granted to Messrs. Canjar and Trahan prior
to the IPO that were not issued under the Incentive Plan, consisting of 138,825
and 83,295 underlying shares respectively, were not repriced.
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CERTAIN TRANSACTIONS
Repurchase of Preferred Stock
On December 15, 1999, the Company consummated the transactions (the "Enron
Repurchase") contemplated by the Stock and Warrant Purchase Agreement dated
December 1, 1999 ("Enron Purchase Agreement") among the Company and Enron North
America Corp. ("ENA"), Joint Energy Development Investments II Limited
Partnership ("JEDI II") and Sundance Assets, L.P. ("Sundance") (ENA, JEDI II and
Sundance, collectively, the "Enron Parties"). Such transactions included (i) the
payment to the Enron Parties of an aggregate purchase price of $12,000,000 and
other fees, (ii) the repurchase of all the outstanding shares of the Company's
9% Series A Preferred Stock, (iii) the repurchase of 750,000 previously
outstanding warrants to purchase the Company's Common Stock held by the Enron
Parties and (iv) the amendment of the terms of 250,000 warrants (the "Retained
Enron Warrants") to purchase the Company's Common Stock retained by the Enron
Parties. The exercise price of the Retained Enron Warrants was reduced from
$11.50 per share to $4 per share as contemplated by the Enron Purchase
Agreement.
Sale of Common Stock, Notes and Warrants
Also on December 15, 1999, the Company consummated the transactions (the
"Financing") contemplated by a Securities Purchase Agreement dated December 15,
1999 (the "Securities Purchase Agreement") among the Company, CB Capital
Investors, L.P. ("Chase") (now J.P. Morgan Partners), Mellon Ventures, L.P.
("Mellon"), Paul B. Loyd, Jr., Douglas A.P. Hamilton and Steven A. Webster
(excluding the Company, the "Investors"). Such transactions included (i) the
payment by the Investors of an aggregate purchase price of $30,000,000, (ii) the
sale of an aggregate of $22,000,000 principal amount of 9% Senior Subordinated
Notes due 2007 (the "Notes") to the Investors, (iii) the sale of an aggregate of
3,636,364 shares of the Company's Common Stock for $2.20 per share to the
Investors, (iv) the sale of warrants (the "Warrants") to purchase up to
2,760,189 shares of the Company's Common Stock (the "Warrant Shares") at the
exercise price of $2.20 per share, subject to adjustments, to the Investors, (v)
the execution of the Shareholders Agreement dated December 15, 1999 (the
"Shareholders Agreement") among the Company, Chase, Mellon, Paul B. Loyd, Jr.,
Douglas A.P. Hamilton, Steven A. Webster, S.P. Johnson IV, Frank A. Wojtek and
DAPHAM Partnership, L.P., (vi) the execution and delivery of the Warrant
Agreement dated December 15, 1999 (the "Warrant Agreement") among the Company,
Chase, Mellon, Paul B. Loyd, Jr., Douglas A.P. Hamilton and Steven A. Webster,
(vii) the execution of the Registration Rights Agreement dated December 15, 1999
("Chase Registration Rights Agreement") among the Company, Chase and Mellon,
(viii) the execution of the Amended and Restated Registration Rights Agreement
dated December 15, 1999 ("Amended Founders Registration Rights Agreement") among
the Company, Paul B. Loyd, Jr., Douglas A.P. Hamilton, Steven A. Webster, S.P.
Johnson IV, Frank A. Wojtek and DAPHAM Partnership, L.P., and (ix) the execution
of a Compliance Sideletter dated December 15, 1999 among the Company, Chase and
Mellon (the "Compliance Sideletter").
In addition to providing for the foregoing transactions, the Securities
Purchase Agreement provides that the Notes will be subordinated and subject in
right of payment to the prior payment of the senior indebtedness of the Company,
which includes but is not limited to certain indebtedness under the Company's
senior credit facility with Compass Bank, certain indebtedness incurred pursuant
to borrowing base limitations supported by the Company's oil and gas properties,
certain purchase money indebtedness issued or incurred to finance consolidated
capital expenditures, and certain indebtedness incurred pursuant to the
financing of certain acquisitions or the development of the Company's oil and
gas properties with proved reserves.
The Warrants are exercisable at any time prior to the expiration date on
December 15, 2007 for the purchase of an aggregate of 2,760,189 shares of Common
Stock at an exercise price of $2.20 per share, subject to certain adjustments.
Each Warrant may be exercised by cash payment or on a "cashless basis" by
utilizing the average market price during the 4-day trading period preceding the
date of exercise.
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The number and kind of Warrant Shares issued and the exercise price are
subject to adjustment in certain circumstances, including (a) if the Company
pays a dividend in Common Stock or distributes shares of its Common Stock,
subdivides, splits or reclassifies its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or combines its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, (b) if the Company
issues shares of Common Stock or securities exercisable or exchangeable for or
convertible into shares of Common Stock for no consideration or for less than
the market value ( as specified in the Warrant) of the Common Stock, subject to
certain exceptions, (c) if the Company distributes any of its equity securities
(other than Common Stock or options) to the holders of the Common Stock on a pro
rata basis, (d) if the Company engages in a consolidation, merger or business
combination, sells all of its assets to another person or entity, or enters into
certain capital reorganizations or reclassifications of the capital stock of the
Company or (e) the Company takes certain other actions affecting its Common
Stock.
Chase required that the Company's outside directors, Messrs. Loyd, Hamilton
and Webster, invest an aggregate of at least $3,000,000 in the Financing and
each invested $1,000,000 in the Financing. As part of the Financing, an
aggregate fee of $405,000 was paid to Chase and Mellon.
Of the approximately $29,000,000 net proceeds of the Financing, $12,060,000
was used to fund the Enron Repurchase and related expenses, $2,025,000 was used
to repay a bridge loan extended to the Company by its outside directors,
$3,000,000 was used to repay other indebtedness, and the Company expects the
remaining proceeds to be used to fund the Company's ongoing exploration and
development program and general corporate purposes.
Under the Shareholders Agreement each of S.P. Johnson IV, Frank A. Wojtek,
Paul B. Loyd, Jr., Douglas A.P. Hamilton, Steven A. Webster, DAPHAM Partnership,
L.P., Chase and Mellon (the "Shareholders") have agreed not to transfer shares
of the Common Stock or the Warrants to a competitor of the Company and have
agreed to cause certain transferees to be bound by the Shareholders Agreement.
The Shareholders Agreement provides that so long as Chase owns at least 15%
of the Common Stock of the Company (with percentage ownerships being determined
as specified in the Shareholders Agreement), the Shareholders agree to vote
their shares to cause the number of directors constituting the Board of
Directors to be seven and to cause the election of two directors to be nominated
by Chase. The Shareholders have agreed, so long as Chase owns at least 7.5% of
the Common Stock (with percentage ownerships being determined as specified in
the Shareholders Agreement) of the Company but less than 15%, to vote their
shares to cause the number of directors constituting the Board of Directors to
be seven and to cause the election of one director to be nominated by Chase. The
Shareholders have also agreed if at any time after December 15, 2004, Chase then
owns at least 15% of the Common Stock (with percentage ownerships being
determined as specified in the Shareholders Agreement) that, unless there shall
have occurred certain completed or proposed sale transactions involving the
Company or there has occurred a specified minimum public float of Common Stock,
then Chase has the right to designate two additional members to the Board and
the size of the Board shall be increased accordingly. The Shareholders have
agreed to vote their shares in accordance with such arrangement. The Company,
upon Board approval, was entitled to increase the size of the Board by one
additional member at any time after the first shareholders meeting following the
Financing, and, as such, approved the addition to the Board of Mr. Gardner in
fiscal 2000. If the Company at any other time increases the size of the Board of
Directors, the Shareholders have agreed to take action, including the voting of
their securities, to cause to be elected the number of directors nominated by
Chase necessary to maintain the applicable proportion of directors nominated by
Chase to the Board of Directors.
Pursuant to the Shareholders Agreement, Messrs. Christopher Behrens and
Arnold Chavkin were appointed to the Company's Board of Directors.
For so long as Chase is entitled to designate a director, at least one such
director is required to be a member of each committee of the Company's Board of
Directors and the board of directors of any subsidiary of the Company. The
Company has, in connection with the Shareholders Agreement, established a Budget
Committee of the Board of Directors that will consider matters relating to the
Company's drilling program, the Company's budget and related matters. In certain
circumstances in which Chase is entitled to name a
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director and such directorship is vacant, Chase may instead appoint one or more
Board observers in lieu of directors.
The Company agreed in the Shareholders Agreement to limit the maximum
number of common stock equivalents issuable under the Company's equity incentive
plans to 2.5 million shares and equivalents (including any shares and
equivalents issued or issuable as of the date of the Shareholders Agreement).
The Shareholders have also agreed in the Shareholders Agreement to
cooperate with the Company in complying with the terms of the Compliance
Sideletter (described below), including by voting in favor of actions taken to
remedy certain regulatory problems.
If S.P. Johnson IV, Frank A. Wojtek, Paul B. Loyd, Jr., Douglas A.P.
Hamilton, Steven A. Webster, DAPHAM Partnership L.P. or certain transferees
thereof (each a "Founder Shareholder") desires to make certain transfers of
shares of Common Stock that are not Public Sales (as determined in the
Shareholders Agreement), such Founder Shareholder must allow Mellon and any
Shareholder who holds at least 10% of the Common Stock of the Company and is not
a Founder Shareholder (collectively, the "Significant Shareholders") the option
also to include shares in the transfer. If the prospective transferee is
unwilling or unable to acquire all such shares, then the transferring Founder
Shareholder may either cancel the proposed transfer or allocate on a
proportional basis the number of shares the prospective transferee is willing to
acquire among the transferring Founder Shareholder and the Significant
Shareholders.
Under the Shareholders Agreement, the Company has granted to the
Significant Shareholders rights to purchase certain (i) equity securities, (ii)
debt securities, (iii) options, warrants and other rights to acquire each of
such securities and (iv) common stock equivalents convertible into or
exchangeable for equity securities issuable by the Company, provided that
securities issued pursuant to equity incentive plans, securities issued in
certain public offerings, securities issued as consideration in a merger,
business combination or acquisition, certain securities issued upon conversion
of other securities, the Warrant Shares, and certain distributions of securities
are all excluded from this right.
The Shareholders Agreement terminates upon the first to occur of (a) notice
of termination by holders of 50% of the shares held by Chase or Mellon (and
certain of their transferees), (b) certain sale transactions involving the
Company or (c) the time neither Chase nor Mellon (or certain of their
transferees) owns more than 7 1/2% of the Common Stock.
Additional information concerning the Notes, the Warrants, the Shareholders
Agreement and the transactions relating to the Securities Purchase Agreement may
be found in the Company's Current Report on Form 8-K dated December 15, 1999,
including the exhibits to that document.
Guarantee of Term Loan, Directors' Bridge Loan
Douglas A.P. Hamilton, Paul B. Loyd, Jr. and Steven A. Webster, each of
whom is a director of the Company, have guaranteed the term loan portion of the
credit facility with Compass Bank. As of February 28, 2001, the total
outstanding borrowings under the term loan were $4,380,000. These directors have
also provided collateral ("the Collateral"), primarily in the form of marketable
securities, to secure the borrowing base portion of the Company's credit
facility. As of March 1, 2001, the aggregate amount of this collateral was
approximately $3.3 million. This collateral was provided in connection with the
deferral of principal payments due under the borrowing base facility until July
1, 1999. In consideration for providing such collateral, and to secure an
incremental $700,000 advance made under the facility on September 20, 1999, the
Company assigned such Directors an aggregate 1.0% overriding royalty interest
proportionately reduced to the Company's interest in the Huebner #1 and Fondren
Letulle #1 wells. In November 1999, Messrs. Hamilton, Webster and Loyd provided
a bridge loan in the amount of $2,000,000 to the Company, secured by certain oil
and natural gas properties. This bridge loan bore interest at 14% per annum.
Also in consideration for the bridge loan, the Company assigned to Messrs.
Hamilton, Webster and Loyd an aggregate 1.0% overriding royalty interest in the
Huebner #1 and Fondren Letulle #1 wells (combined with the prior assignment, a
2% overriding royalty interest), a .8794% interest in Neblett #1 (N. La Copita),
a 1.0466% interest in STS 104-5 #1, a 1.544% interest in USX Hematite #1, a 2.0%
interest in Huebner #2 and a 2.0% interest in
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Burkhart #1. On December 15, 1999 the bridge loan was repaid in its entirety
with proceeds from the Financing. The Company authorized release of the
Collateral on April 4, 2001.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation programs are designed to attract and
retain highly qualified executives and to motivate them to maximize shareholder
returns. The Company's executive compensation program is intended to provide
competitive compensation levels and incentive pay levels that vary based on
corporate and individual performance.
There are three basic components to the Company's current compensation
system: base pay; annual incentive compensation in the form of a cash bonus; and
long-term equity-based incentive compensation. Each component is addressed in
the context of individual and Company performance and competitive conditions. In
determining competitive compensation levels, the Company analyzes data that
includes information regarding the general oil and natural gas exploration and
production industry.
Actual individual awards and changes in remuneration to the individual
executives are determined by the Compensation Committee. The Chief Executive
Officer works with the Compensation Committee in the design of the plans and
makes recommendations to the Committee regarding the salaries and bonuses of
Company employees that report directly to him. Grants or awards of stock,
including stock options, are individually determined and administered by the
Compensation Committee.
Base Pay. Base pay is designed to be competitive with salary levels for
comparable executive positions at other oil and natural gas exploration and
production companies and the Compensation Committee reviews such comparable
salary information as one factor to be considered in determining the base pay
for the Company's executive officers. Other factors the Compensation Committee
considers in determining base pay for each of the executive officers are that
officer's responsibilities, experience, leadership, potential future
contribution, and demonstrated individual performance. The types and relative
importance of specific financial and other business objectives vary among the
Company's executives depending on their positions and the particular operations
and functions for which they are responsible. The Compensation Committee also
considers the Company's earnings levels and progress in implementing its
business strategy in establishing base salary increases for executives. The
employment contracts of the executive officers provide that base pay is to be
reviewed at least annually and will be increased at any time and from time to
time, and that any increase will be substantially consistent with increases in
base salary generally awarded in the ordinary course of business to executives
of the Company. Primarily as a result of the negative effect on the Company's
financial results of low oil and natural gas prices during 1998 and parts of
1999, each of the executive officers' base salary was reduced by 10%, effective
February 1, 1999. As a result of the positive effect on the Company's financial
results of higher oil and natural gas prices and the increased liquidity of the
Company at the end of 1999, the 10% reduction in salary was removed and 50% of
the value of the reduction was paid to each of the executive officers in
December 1999 and the other 50% was paid on March 31, 2000. As a result of the
positive effects on the Company's financial results of continued improvements in
oil and natural gas prices and production levels, each of the Named Executive
base salary was increased by 8% effective August 16, 2000.
Annual Bonus. The annual bonus is determined by the Compensation
Committee. The employment contracts with the executive officers contemplate
annual bonus awards in an amount comparable to the annual bonus of other Company
executives, taking into account the individual's position and responsibilities.
In addition, Mr. Canjar receives certain overriding royalty interests on
prospects he generates as a further incentive in his role as Vice President of
Exploration and Development. In light of the Company's financial results for
fiscal 2000, each of the Named Executives was awarded a bonus equal to 10
percent of their annual base pay.
Long-Term Equity-Based Compensation. To date, the Company has relied
primarily upon stock option awards to provide long-term incentives for
executives. Prior to the Company's IPO, the shareholders and the Board of
Directors of the Company approved the Company's Incentive Plan. The objectives
of the Incentive Plan are to (i) attract and retain the services of key
employees, qualified independent directors and qualified consultants and other
independent contractors and (ii) encourage a sense of proprietorship in and
stimulate
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the active interest of those persons in the development and financial success of
the Company by making awards designed to provide participants in the Incentive
Plan with proprietary interest in the growth and performance of the Company.
Long-term equity-based compensation is tied to shareholder return.
Under the Company's Incentive Plan, long-term incentive compensation
consists of stock options, which generally have a ten-year term and vest in 33%
increments in each of the three years following the date of the grant. The
exercise price of stock options granted is equal to or greater than the fair
market value of the Common Stock on the date of grant; accordingly, executives
receiving stock options are rewarded only if the market price of the Common
Stock appreciates. Stock options are thus designed to align the interests of the
Company's executives with those of its shareholders by encouraging executives to
enhance the value of the Company and, hence, the price of the Common Stock and
each shareholder's return.
On April 28, 2000, the Company granted options to purchase 25,000 shares to
Mr. Johnson, at an exercise price per share of $3.1406. These options have a
ten-year term and vest in 33% increments in each of the three years following
the date of the grant.
The Company may periodically grant new options to provide continuing
incentive for future performance. In making the decision to grant additional
options, the Compensation Committee would expect to consider factors such as the
size of previous grants and the number of options held. In determining whether
to grant executive officers stock options under the Plan, the Compensation
Committee considers factors, including that executive's current ownership stake
in the Company, the degree to which increasing that ownership stake would
provide the executive with additional incentives for future performance, the
likelihood that the grant of those options would encourage the executive to
remain with the Company and the value of the executive's service to the Company.
Section 162(m) of the Internal Revenue Code. Section 162(m) of the
Internal Revenue Code of 1986, as amended, generally limits (to $1 million per
covered executive) the deductibility for federal income tax purposes of annual
compensation paid to a company's chief executive officer and each of its other
four most highly compensated executed officers. All options granted under the
Company's Incentive Plan in fiscal year 1999 are intended to qualify for an
exemption from the application of Section 162(m) of the Code, thereby preserving
the deductibility for federal income tax purposes of compensation that may be
attributable to the exercise of such options.
Compensation of the Chief Executive Officer. The Compensation Committee
based the compensation of the Company's Chief Executive Officer, Mr. Johnson, on
the same considerations described above for other executive officers. Consistent
with its decision to award bonuses to the other executive officers, the
Compensation Committee awarded Mr. Johnson a bonus during 2000 equal to 10% of
his annual base pay. Like the other executive officers, Mr. Johnson's base
salary was reduced by 10%, effective February 1, 1999. As a result of the
positive effect on the Company's financial results of higher oil and natural gas
prices and the increased liquidity of the Company at the end of 1999, the 10%
reduction in Mr. Johnson's salary was removed and 50% of the value of the
reduction was paid to him in December 1999 and the other 50% was paid on March
31, 2000. As a result of the positive effects on the Company's financial results
of continued improvements in oil and natural gas prices and production levels,
Mr. Johnson's base salary was increased by 8% effective August 16, 2000.
Executive compensation is an evolving field. The Compensation Committee
monitors trends in this area, as well as changes in law, regulation and
accounting practices, that may affect either its compensation practices or its
philosophy. Accordingly, the Committee reserves the right to alter its approach
in response to changing conditions.
The Compensation Committee
Christopher C. Behrens
Douglas A.P. Hamilton
F. Gardner Parker
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EMPLOYMENT ARRANGEMENTS
The Company has entered into employment agreements with each executive
officer listed below. While the employment agreements were not amended, each of
the officers' base salary increased by 8 percent, effective August 16, 2000. The
following chart shows the annual base salaries that the executive officers
listed therein are currently being paid by the Company.
NAME AND CURRENT POSITION ANNUAL SALARY
- ------------------------- -------------
S. P. Johnson IV............................................ $226,800
President and Chief Executive Officer
Frank A. Wojtek............................................. $162,000
Vice President and Chief Financial Officer
George Canjar............................................... $162,000
Vice President of Exploration and Development
Kendall A. Trahan........................................... $145,800
Vice President of Land
Brad Fisher................................................. $129,600
Vice President of Operations
Each of the employment agreements also provided for the initial grants of
stock options for Messrs. Johnson and Wojtek and revisions to previously granted
stock options for Messrs. Canjar and Trahan. The agreement with Mr. Canjar also
includes a provision that entitles him to an undivided 0.5% overriding royalty
interest, proportionately reduced to the Company's working interest, in all oil,
gas and other minerals that may be produced and saved from prospects generated
by Mr. Canjar.
Each of the employment agreements of Mr. Johnson, Mr. Wojtek, Mr. Trahan
and Mr. Canjar has an initial three-year term provided that at the end of the
second year of such initial term and on every day thereafter, the term of each
such employment agreement will automatically be extended for one day, such that
the remaining term of the agreement shall never be less than one year. Under
each agreement, both the Company and the employee may terminate the employee's
employment at any time. Upon termination of employment on account of disability
or if employment is terminated by the Company for any reason (except under
certain limited circumstances defined as "for cause" in the agreement), or if
employment is terminated either (x) by the employee subsequent to a change of
control (as defined and including certain terminations prior to a change of
control if caused by a person involved in precipitating a change of control) or
(y) by reason of death during a sixty day period following the elapse of one
year after such a change of control ("window period") or with good reason (as
defined), under the agreement the employee will generally be entitled to (i) an
immediate lump sum cash payment equal to 150% (375% if termination occurs after
a change of control) of his annual base salary that would have been payable for
the remainder of the term of the applicable agreement discounted at 6%, (ii)
continued participation in all the Company's welfare benefit plans and continued
life insurance and medical benefits coverage and (iii) the immediate vesting of
any stock options or restricted stock previously granted to such employee and
outstanding as of the time immediately prior to the date of his termination, or
a cash payment in lieu thereof (the "Cash Election"). Provided that the
Performance Shares vest only if the termination of employment is by the employee
with good reason or during a window period or is by the Company without cause,
then in the event of a Cash Election, the employee, in the case of Messrs.
Canjar and Trahan, will receive in exchange for any or all compensatory awards
that are either denominated in or payable in Common Stock, including options and
restricted stock, an amount in cash equal to the excess of (x) the highest price
per share (as defined below) over (y) the exercise or purchase price, if any, of
such awards. The Term "Highest Price Per Share" generally means the highest
price per share that can be determined to have been paid or agreed to be paid
for any share of Common Stock by certain classes of persons, including (1) a
beneficial owner of 10% or more of the outstanding voting stock of the Company
and (2) a person who has any material involvement in proposing or effectuating a
change of control (as defined). If employment terminates due to death of the
employee and other than in a window period, the Company will pay a sum equal to
the amount of the employee's annual base salary for the remaining term of
15
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the agreement, reduced by the amount payable under any life insurance policies
to the extent that such amounts are attributable to premiums paid by the
Company. The salaries in each of these agreements are subject to periodic review
and provide for increases consistent with increases in base salary generally
awarded to other executives of the Company. Each agreement entitles the employee
to participate in all of the Company's incentive, savings, retirement and
welfare benefit plans in which other executive officers of the Company
participate. The agreements each provide for an annual bonus in an amount
comparable to the annual bonus of other Company executives, taking into account
the individual's position and responsibilities.
AUDIT COMMITTEE REPORT
The Audit Committee's purpose is to assist the Board of Directors in its
oversight of the Company's internal controls and financial statements and the
audit process. The Board of Directors, in its business judgment, has determined
that all members of the Audit Committee are "independent," as required by
applicable standards of the Nasdaq Stock Market. The Audit Committee operates
pursuant to a written charter adopted by our Board of Directors; a copy of the
current Audit Committee charter is attached to this proxy statement as Appendix
A.
Management is responsible for the preparation, presentation and integrity
of the Company's financial statements, accounting and financial reporting
principles and internal controls and procedures designed to assure compliance
with accounting standards and applicable laws and regulations. The independent
auditors are responsible for performing an independent audit of the consolidated
financial statements in accordance with generally accepted auditing standards.
In performing its oversight role, the Audit Committee has reviewed and
discussed the audited financial statements with management and the independent
auditors. The Audit Committee has also discussed with the independent auditors
the matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as currently in effect. The Audit Committee
has received the written disclosures and the letter from the independent
auditors required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, as currently in effect.
Based on the reports and discussions described in this report, and subject
to the limitations on the role and responsibilities of the Audit Committee
referred to below and in the Charter, the Audit Committee recommended to the
Board of Directors that the audited financial statements be included in the
Annual Report on Form 10-K for the fiscal year ended December 31, 2000.
The members of the Audit Committee are not professionally engaged in the
practice of auditing or accounting and are not experts in the fields of
accounting or auditing, including in respect of auditor independence. Members of
the Audit Committee rely, without independent verification, on the information
provided to them and on the representations made by management and the
independent auditors. Accordingly, the Audit Committee's oversight does not
provide an independent basis to determine that management has maintained
appropriate accounting and financial reporting principles or appropriate
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Furthermore, the Audit
Committee's considerations and discussions referred to above do not assure that
the audit of the Company's financial statements has been carried out in
accordance with generally accepted auditing standards, that the financial
statements are presented in accordance with generally accepted accounting
principles or that the independent auditors are in fact "independent."
The Audit Committee
F. Gardner Parker
Paul B. Loyd, Jr.
Arnold L. Chavkin
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PERFORMANCE GRAPH
The following graph presents a comparison of the yearly percentage change
in the cumulative total return on the Common Stock over the period from August
6, 1997, the date of the Company's initial public offering, to December 31,
2000, with the cumulative total return of the S&P 500 Index and of the American
Stock Exchange Natural Resource Industry Index of publicly traded companies over
the same period. The graph assumes that $100 was invested on August 6, 1997, in
the Common Stock at its initial public offering price of $11.00 per share and in
each of the other two indices and the reinvestment of all dividends, if any.
The graph is presented in accordance with SEC requirements. Shareholders
are cautioned against drawing any conclusions from the data contained therein,
as past results are not necessarily indicative of future financial performance.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG CARRIZO OIL & GAS, INC., THE S&P
500 INDEX AND THE AMERICAN STOCK
EXCHANGE NATURAL RESOURCE
INDUSTRY INDEX
[PERFORMANCE GRAPH]
- --------------------------------------------------------------------------------
S & P AMEX C O & G
- --------------------------------------------------------------------------------
08/06/97 100 100 100
09/30/97 99 107 136
12/31/97 101 91 72
03/31/98 115 84 66
06/30/98 118 75 50
09/30/98 106 64 25
12/31/98 128 59 13
03/31/99 134 65 10
06/30/99 143 74 18
09/30/99 134 79 18
12/31/99 153 80 18
03/31/00 156 88 35
06/30/00 151 96 55
09/30/00 150 104 127
12/31/00 137 112 83
* $100 Invested on August 6, 1997 in Stock or Index
(Including Reinvestment of Dividends).
17
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PROPOSAL 2
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed, and recommends the approval of the
appointment of, Arthur Andersen LLP, who have been the Company's auditors since
1997, as independent public accountants for the fiscal year ending December 31,
2001. Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting and will be given the opportunity to make a statement, if they
desire to do so, and to respond to appropriate questions.
Unless shareholders specify otherwise in the proxy, proxies solicited by
the Board of Directors will be voted by the persons named in the proxy at the
Annual Meeting to ratify the selection of Arthur Andersen LLP as the Company's
auditors for 2001. The affirmative vote of a majority of the votes cast at the
Annual Meeting will be required for ratification.
PRINCIPAL AUDITOR FEES
During 2000, Carrizo Oil & Gas, Inc. retained its principal auditor, Arthur
Andersen LLP, to provide services in the following categories and amounts:
DESCRIPTION AMOUNT
- ----------- -------
Audit Fees.................................................. $98,318
Financial Information Systems Design and Implementation
Fees...................................................... $ --
All Other Fees(1)........................................... $ 5,401
- ---------------
(1) Other fees primarily related to consulting, tax compliance and consulting,
due diligence activities related to acquisitions or other activities, work
performed in connection with registration statements and various statutory
or other audits.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP.
OTHER BUSINESS
As of the date of this proxy statement, the Board of Directors is not
informed of any other matters, other than those above, that may be brought
before the meeting. The persons named in the enclosed form of proxy or their
substitutes will vote with respect to any such matters in accordance with their
best judgment.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Rule 14a-8 under the Securities Exchange Act of 1934, as amended, addresses
when a company must include a shareholder's proposal in its proxy statement and
identify the proposal in its form of proxy when the company holds an annual or
special meeting of shareholders. Under Rule 14a-8, proposals that shareholders
intend to have included in the Company's proxy statement and form of proxy for
the 2002 Annual Meeting of Shareholders must be received by the Company no later
than December 13, 2001. However, if the date of the 2002 Annual Meeting of
Shareholders changes by more than 30 days from the date of the 2002 Annual
Meeting of Shareholders, the deadline is a reasonable time before the Company
begins to print and mail its proxy materials, which deadline will be set forth
in a Quarterly Report on Form 10-Q or will otherwise be communicated to
shareholders. Shareholder proposals must also be otherwise eligible for
inclusion.
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If a shareholder desires to bring a matter before an annual or special
meeting and the proposal is submitted outside the process of Rule 14a-8, the
shareholder must follow the procedures set forth in the Company's Bylaws. The
Company's Bylaws provide generally that shareholders who wish to nominate
directors or to bring business before a shareholders' meeting must notify the
Company and provide certain pertinent information at least 80 days before the
meeting date (or within ten days after public announcement pursuant to the
Bylaws of the meeting date, if the meeting date has not been publicly announced
more than 90 days in advance). If the date of the 2002 Annual Meeting of
Shareholders is the same as the date of the 2001 Annual Meeting of Shareholders,
shareholders who wish to nominate directors or to bring business before the 2002
Annual Meeting of Shareholders must notify the Company no later than February
27, 2002.
By Order of the Board of Directors
/s/ FRANK A. WOJTEK
Frank A. Wojtek,
Secretary
Dated: April 18, 2001
Houston, Texas
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APPENDIX A
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE PURPOSE AND AUTHORITY
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibilities relating to the Company's
accounting, auditing and financial reporting practices and processes. Included
in those oversight responsibilities are:
- Monitoring the integrity of the Company's financial reporting process and
systems of internal controls regarding finance and accounting.
- Monitoring the independence and performance of the Company's outside
auditors and its internal auditing department.
- Providing avenues of communication among the outside auditors,
management, the internal auditing department, and the Board of Directors.
The outside auditors are ultimately accountable to the Audit Committee and
the Board of Directors as representatives of shareholders. The Audit Committee
and Board of Directors has the ultimate authority and responsibility to select,
evaluate and, where appropriate, replace the outside auditors (or nominate the
outside auditor to be proposed for shareholder approval). The Audit Committee
shall make recommendations to the full Board in connection with such selection,
evaluation, replacement or nomination of the outside auditors.
The Audit Committee has the power and authority of the Board of Directors
relating to the matters covered by this Charter, including the authority to
engage any resources it deems necessary in the performance of its duties. The
Audit Committee may request any officer or employee of the Company or the
Company's outside counsel or outside auditor to attend a meeting of the Audit
Committee or to meet with any members of, or consultants to, the Audit
Committee.
AUDIT COMMITTEE COMPOSITION AND MEETINGS
The Audit Committee shall consist of at least three Directors, none of whom
shall be an employee of the Company. Each member shall be free from any
relationship that, in the opinion of the Board of Directors, may interfere with
the exercise of his or her independence from management and the Company. Each
member shall be "independent" as defined from time to time by the listing
standards of The Nasdaq Stock Market ("Nasdaq") and by the applicable
regulations of the Securities and Exchange Commission (the "SEC"), and shall
meet any other applicable independence requirements of Nasdaq and the SEC. Each
member shall be (or shall become within a reasonable time after appointment)
financially literate, and at least one member shall have accounting or related
financial management expertise, as the Board of Directors interprets such
qualifications in its business judgment.
The Audit Committee shall meet at least two times annually, and more
frequently as the members deem it appropriate. All meetings of the Committee
will be held pursuant to the Bylaws of the Company with regard to notice and
waiver thereof, and written minutes of each meeting will be duly filed in the
Company records. Reports of meetings of the Audit Committee shall be made to the
Board of Directors at its next regularly scheduled meeting following the Audit
Committee meeting accompanied by any recommendations to the Board of Directors
approved by the Audit Committee.
AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
The Audit Committee's responsibilities are in the nature of oversight. It
is not the responsibility of the Audit Committee to plan or conduct audits or to
determine that the Company's financial statements are complete and accurate or
are in accordance with generally accepted accounting principles. The Company's
financial management is responsible for preparing the Company's financial
statements and the outside auditors
A-1
24
are responsible for auditing those statements. In carrying out its oversight
responsibilities, the Audit Committee is not providing any expert or special
assurances as to the Company's financial statements or the work of the outside
auditors. It is not the duty of the Audit Committee to conduct investigations,
to resolve any disagreements between management and the outside auditor, or to
assure compliance with any law or regulations.
The following functions are expected to be the common recurring activities
of the Audit Committee. These functions are set forth as guides with the
understanding that departures from them may be appropriate depending on the
circumstances.
REVIEW PROCEDURES
1. Review this Charter at least annually. If necessary, make recommendations to
the Board of Directors for amendment of the Charter.
2. Review the Company's annual audited financial statements prior to filing or
distribution. Review should include discussion with management and the
outside auditors of significant issues regarding accounting principles,
practices, and judgments and consideration with the outside auditors of the
matters required to be discussed by Statement of Accounting Standards (SAS)
No. 61. Based on its review, the Audit Committee shall make a recommendation
to the Board of Directors as to the inclusion of the Company's audited
financial statements in the Company's Annual Report on Form 10-K.
3. In consultation with the management, the outside auditors, and the internal
auditors, consider the integrity of the Company's financial reporting
processes and controls. Review significant findings prepared by the outside
auditors and the internal auditing department together with management's
responses.
4. As necessary, review with financial management and the outside auditors the
Company's quarterly financial statements prior to filing or distribution.
Discuss any significant changes to the Company's accounting principles and
any items required to be communicated by the outside auditors in accordance
with SAS 61. The Chairman of the Audit Committee may represent the entire
Audit Committee for purposes of this review.
OUTSIDE AUDITORS
5. The Audit Committee shall review the independence and performance of the
outside auditors and annually recommend to the Board of Directors the
appointment of the outside auditors or approve any discharge of auditors when
circumstances warrant.
6. Approve the plan and fees for the annual auditing engagement and approve
other significant professional services (including compensation) to be
provided by the outside auditors.
7. On an annual basis, the Audit Committee shall request from the outside
auditors a formal written statement delineating all relationships between the
outside auditor and the Company consistent with Independent Standards Board
Standard No. 1 and shall actively engage in a dialogue with the outside
auditors with respect to any disclosed relationships or services that may
impact the objectivity and independence of the outside auditor. The Audit
Committee shall take appropriate action or shall recommend that the full
Board take appropriate action to oversee the independence of the outside
auditors.
8. Discuss the results of the annual audit with the outside auditors.
9. Consider the outside auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
INTERNAL AUDIT DEPARTMENT (IF APPLICABLE)
10. Review the budget, plan, activities, and organizational structure of the
internal audit department, if applicable or as needed.
11. Review the appointment and replacement of the senior internal audit
executive.
A-2
25
12. Review significant reports prepared by the internal audit department
together with management's response and follow-up to these reports.
OTHER AUDIT COMMITTEE RESPONSIBILITIES
13. Annually prepare a report to be included in the Company's annual proxy
statement as required by the SEC.
14. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
15. Satisfy any other such duties as may be assigned to the Audit Committee,
from time to time, by the Board of Directors.
A-3
26
CARRIZO OIL & GAS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
MAY 18, 2001
P The undersigned hereby appoints S.P. Johnson IV and Frank A.
Wojtek, jointly and severally, proxies, with full power of
R substitution and with discretionary authority to vote all shares of
Common Stock that the undersigned is entitled to vote at the Annual
O Meeting of Shareholders of Carrizo Oil & Gas, Inc. (the "Company") to
be held on Friday, May 18, 2001, at the Omni Houston Hotel Westside,
X 13210 Katy Freeway, Houston, Texas at 10:00 a.m., or at any adjournment
thereof, hereby revoking any proxy heretofore given.
Y
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN. IN THE ABSENCE OF SPECIFIC DIRECTIONS TO THE CONTRARY,
THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, AND 3.
The undersigned hereby acknowledges receipt of the Notice of, and
Proxy Statement for, the aforesaid Annual Meeting.
1. ELECTION OF DIRECTORS, NOMINEES:
S.P. Johnson IV; Frank A. Wojtek; Steven A. Webster; Douglas A.P.
Hamilton; Paul B. Loyd, Jr.; Christopher C. Behrens; Arnold L.
Chavkin and F. Gardner Parker as directors, except as indicated
below.
[ ] FOR [ ] WITHHELD
For, except vote withheld from the following nominee(s):
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2. APPROVAL OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31,
2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. With discretionary authority as to such other matters as may properly
come before the meeting.
Date: ________________________, 2001
____________________________________
(Signature)
____________________________________
(Signature)
Sign exactly as name appears hereon.
(Joint owners should each sign. When
signing as attorney, executor,
officer, administrator, trustee, or
guardian, please give full title
as such).
PLEASE SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.