SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): February 20, 2002
CARRIZO OIL & GAS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 000-22915 76-0415919
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation) File Number) Identification No.)
14701 ST. MARY'S LANE
SUITE 800
HOUSTON, TEXAS 77079
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (281) 496-1352
ITEM 5. OTHER EVENTS.
On February 20, 2002, Carrizo Oil & Gas, Inc., a Texas
corporation (the "Company"), consummated the transactions (the "Financing")
contemplated by a Securities Purchase Agreement dated February 20, 2002 (the
"Securities Purchase Agreement") among the Company, Mellon Ventures, L.P.
("Mellon") and Steven A. Webster (excluding the Company, the "Investors"). Such
transactions included (i) the payment by the Investors of an aggregate purchase
price of $6,000,000, (ii) the sale of 60,000 shares of Series B Convertible
Participating Preferred Stock (the "Series B Preferred Stock") the terms of
which are set forth in the Statement of Resolution Establishing Series of Shares
designated Series B Convertible Participating Preferred Stock (the "Statement of
Resolution") and which include the right to convert such shares into Common
Stock, par value $0.01 (the "Common Stock") of the Company (the "Underlying
Shares") at a price of $5.70 per share, subject to adjustments and (iii) the
sale of warrants (the "Warrants") to purchase up to 252,632 shares of the
Company's Common Stock (the "Warrant Shares") at the exercise price of $5.94 per
share, subject to adjustments, to the Investors pursuant to the terms of Warrant
Agreement dated February 20, 2002 (the "Warrant Agreement") among the Company,
Mellon, and Steven A. Webster, (v) the execution of the Shareholders' Agreement
dated February 20, 2002 (the "Shareholders' Agreement") among the Company,
Mellon, Paul B. Loyd, Jr., Douglas A.P. Hamilton, Steven A. Webster, S.P.
Johnson IV, Frank A. Wojtek and DAPHAM Partnership, L.P., and (vi) the execution
of the Registration Rights Agreement dated February 20, 2002 ("Registration
Rights Agreement") among the Company, Mellon and Steven A. Webster.
THE SECURITIES PURCHASE AGREEMENT
The Securities Purchase Agreement includes certain
representations and warranties by the Company. The Company is obligated to
indemnify the Investors for breaches of representations and warranties contained
in the Securities Purchase Agreement or in other documents furnished in
connection with the Securities Purchase Agreement and for certain third-party
claims. Mellon invested $4,000,000 and Mr. Webster, the Company's Chairman of
the Board, invested $2,000,000 in the Financing. The Company expects the
proceeds to be used to fund the Company's ongoing exploration and development
program, to fund working capital and for general corporate purposes.
STATEMENT OF RESOLUTION
The Statement of Resolution establishes a series of 150,000
shares (60,000 of which are initially being issued to the Investors under the
Purchase Agreement) of the Company's preferred stock, designated as Series B
Convertible Participating Preferred Stock with designations, preferences,
limitations and relative rights, voting, redemption and other rights that
include the following:
Dividends. Holders of Series B Preferred Stock are entitled to
receive cumulative dividends on each share of Series B Preferred Stock, payable
semi-annually. Dividends will be paid, at the option of the Company, (i) in cash
at the rate of $8.00 per year or (ii) by issuing
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additional shares of Series B Preferred Stock at the annual rate of 0.10 of a
share of Series B Preferred Stock on each share of Series B Preferred Stock as
converted.
In addition to the foregoing, if the Corporation declares a
cash dividend on the Common Stock of the Corporation, the holders of shares of
Series B Preferred Stock shall be entitled to receive for each share of Series B
Preferred Stock a cash dividend in the amount of the cash dividend that would be
received by a holder of the Common Stock into which such share of Series B
Preferred Stock is convertible on the record date for such cash dividend.
Unless all accrued dividends on the Series B Preferred Stock
shall have been paid and a sum sufficient for the payment thereof set apart, no
dividend shall be paid or declared, and no distribution shall be made, on any
Junior Stock and no redemption of any Junior Stock shall occur other than
dividends payable in Junior Stock and any payments in respect of fractional
shares of Series B Preferred Stock.
Redemption. The Series B Preferred Stock is required to be
redeemed by the Company at any time after the third anniversary of the initial
issuance of the Series B Preferred Stock (the "Issue Date") upon 90 days prior
written request from any holder at a price per share equal to Purchase
Price/Dividend Preference (as defined below).
The Company may redeem the Series B Preferred Stock (i)
through the first anniversary of the Issue Date of the Series B Preferred Stock
at a price per share equal to 120% of the Purchase Price/Dividend Preference;
(ii) from and after the first anniversary of the Issue Date through the second
anniversary of the Issue Date, at a price per share equal to 115% of the
Purchase Price/Dividend Preference; (iii) from and after the second anniversary
of the Issue Date through the third anniversary of the Issue Date, at a price
per share equal to 110% of the Purchase Price/Dividend Preference; and (iv)
after the third anniversary of the Issue Date, at a price per share equal to the
Purchase Price/Dividend Preference.
"Purchase Price/Dividend Preference" is defined to mean $100
plus all cumulative and accrued dividends (whether or not earned or declared)
accumulated and unpaid on such share of Series B Preferred Stock, through the
date the Company has paid or properly provided for the Redemption Price.
Voting. Holders of the Series B Preferred Stock generally have
no right to vote for directors or on other matters except in certain
circumstances described herein or as otherwise required by law.
The holders of Series B Preferred Stock have the right to
approve, by the affirmative vote of the holders of a majority of the outstanding
shares of Series B Preferred Stock, (i) the creation, authorization or issuance,
or any corporate transaction such as a merger or consolidation that results in
the creation or issuance of, any class or series of stock ranking senior to the
Series B Preferred Stock ("Prior Stock") or ranking on a parity with the Series
B Preferred Stock ("Parity Stock"), (ii) any corporate transaction such as a
merger or consolidation, or any amendment to the Articles of Incorporation, that
would result in (A) an increase or decrease of the aggregate number of
authorized shares of Series B Preferred Stock, or (B) a change in the
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designations, preferences, limitations or relative rights of the shares of
Series B Preferred Stock; (iii) any change in the Company's Articles of
Incorporation or bylaws, as then in effect, that adversely affects the rights,
preferences or privileges of the Series B Preferred Stock; (iv) any material
change in the nature of the Company's business from a company engaged (whether
directly or through holdings in other entities) in the exploration,
exploitation, development and production of oil and natural gas and related
activities; or (v) the issuance of any shares of Series B Preferred Stock except
as dividends on the outstanding Series B Preferred Stock or pursuant to the
Securities Purchase Agreement.
Holders of Series B Preferred Stock also have the right to
vote as a class in a number of other circumstances as are required by Texas
Business Corporation Act ("TBCA"). The affirmative vote of the holders of a
majority of the shares of Series B Preferred Stock entitled to vote thereon is
generally is required for any of these actions. Under the Shareholders
Agreement, the holders of the Series B Preferred Stock have agreed to vote such
shares in favor of certain of these actions.
The terms of the Series B Preferred Stock, including the
voting rights thereof, could have the effect of delaying, deferring or
preventing a takeover attempt of the Company.
Liquidation. In the event of any voluntary or involuntary
dissolution, liquidation or winding up or a Sale (as defined below) of the
Company (a "Liquidation"), before any distribution of assets is made to the
holders of any Junior Stock (as defined below) of the Company, the holder of
each share of Series B Preferred Stock then outstanding will be entitled to be
paid out of the assets of the Company available for distribution to its
shareholders, the greater of the following amounts per share of Series B
Preferred Stock: (i) $100 in cash plus all cumulative and accrued dividends
(whether or not earned or declared) accumulated and unpaid on such share,
through the date fixed for the distribution of assets of the Company to the
holders of Series B Preferred Stock, or (ii) the liquidation distribution, if
any, payable in such Liquidation with respect to each share of Common Stock
distributed pro rata to the holders of the Series B Preferred Stock, any Parity
Stock and the Common Stock on an as-converted basis (assuming the conversion of
all Series B Preferred Stock and Parity Stock (if convertible into Common Stock)
at the time such liquidation distribution is paid to a holder of such Common
Stock). For purposes hereof, "Sale" shall mean and shall be deemed to have
occurred at such time as any of the following occurs: (x) certain mergers that
constitute a "Change of Control" (as defined herein); or (y) the sale, transfer
or other disposition by the Company of all or substantially all of the assets of
the Company to another entity.
Conversion. The holders of the Series B Preferred Stock have
the right, at each holders' option, to convert all or a portion of such Series B
Preferred Stock into the number of fully paid and nonassessable shares of Common
Stock (calculated as to each conversion to the nearest 1/100th of a share)
obtained by dividing (i) the product of (A) $100 plus all cumulative and accrued
dividends (whether or not earned or declared) accumulated and unpaid on such
share through the date of surrender of such share of Series B Preferred Stock
multiplied by (B) each share of Series B Preferred Stock to be converted by (ii)
the Conversion Price (as defined below). "Conversion Price" is defined to mean
the conversion price per share of the Common
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Stock into which the Series B Preferred Stock is convertible, as such Conversion
Price may be adjusted pursuant to the Statement of Resolution. The initial
Conversion Price is $5.70.
The Conversion Price is subject to adjustment in certain
circumstances, including (a) if the Company pays a dividend in Common Stock or
grants certain rights to purchase securities, (b) if the Company 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, (c) if the Company pays
certain dividends or makes certain distributions to all holders of its Common
Stock of any shares of capital stock of the Company or its subsidiaries (other
than Common Stock) or evidences of its indebtedness or assets, including all
equity and debt, subject to certain exceptions, and subsection (d) if, subject
to certain exclusions, the Company sells or issues Common Stock, options or
convertible securities without consideration or with a consideration per share
of Common Stock less than the Conversion Price, including in the first year a
"full ratchet" adjustment for issuances in excess of $5 million; provided,
however, that the Conversion Price as adjusted according to this (d) will not be
less than $4.75, appropriately adjusted for stock splits, reverse stock splits
and similar recapitalizations (the "Floor Price").
Change of Control. Upon the occurrence of certain events
constituting a "Change of Control", the Company is required to make a offer to
each holder of Series B Preferred Stock to repurchase all or any part of such
holder's Series B Preferred Stock at an offer price per share of Series B
Preferred Stock in cash equal to 105% of the Change of Control Purchase Price
(as defined below) including (a) any persons becoming the beneficial owners of
more than 50% of the Company; (b) during any period of two consecutive years, a
majority of the Board of Directors changes; (c) the merger of consolidation of
the Company except for certain mergers or consolidations in which the
shareholders of the Company prior to the transaction retain a majority of the
voting stock of the surviving entity; and (d) the sale of all or substantially
all of the assets of the Company, subject to certain exceptions for the
foregoing matters. "Change of Control Purchase Price" is defined to mean $100
plus all cumulative and accrued dividends (whether or not earned or declared)
accumulated and unpaid on such share of Series B Preferred Stock through the
date of payment of the Change of Control Purchase Price.
Ranking and Certain Covenants. The Series B Preferred Stock
ranks senior to the Common Stock and all other series of the Company's preferred
stock (none of which are issued and outstanding as of the date hereof) as to the
payment of dividends, as to payments upon redemption and as to the distribution
of assets upon liquidation, dissolution or winding up unless, after the approval
of the holders of a majority of the shares of Series B Preferred Stock, the
terms of such other series provide otherwise.
SHAREHOLDERS' AGREEMENT
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. and Mellon (the "Shareholders") have agreed to cause
certain transfers to be bound by the Shareholders' Agreement.
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The Shareholders' Agreement provides that if the holders of at
least 51% of the Common Stock then outstanding approve a merger, Sale of the
Company or sale of all or substantially all of the assets of the Company (an
"Approved Sale"), each holder of Series B Preferred Stock will consent to, vote
for and raise no objection against the Approved Sale as a holder of Series B
Preferred Stock if the consummation of such Approved Sale will constitute a
Change of Control (as defined above) or the Approved Sale is a reincorporation
merger, subject to certain conditions.
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
"tag-along rights" whereby Mellon has 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 Mellon.
Under the Shareholders' Agreement, the Company has granted to
Mellon and Mr. Webster preemptive 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 Underlying Shares, pay-in-kind
dividends of Series B Preferred Stock and certain distributions of securities
are all excluded from this right.
The preemptive rights and tag-along rights under the
Shareholders' Agreement terminate upon the first to occur of (a) notice of
termination by holders of 50% of the Common Stock issuable upon conversion of
the Series B Preferred Stock and exercise of the Warrants, (b) certain sale
transactions involving the Company or (c) the time Mellon (or certain of its
transferees) owns less than 50% of the shares issuable upon conversion of the
Series B Preferred Stock and exercise of the Warrants.
WARRANT AGREEMENT
The Warrants are exercisable at any time prior to the
expiration date on February 20, 2007 for the purchase of an aggregate of 252,632
shares of Common Stock at an exercise price of $5.94 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 Agreement) of the
Common Stock, subject to certain exceptions, provided that adjustments under
this clause may not result in the exercise price falling below the Floor Price,
(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.
REGISTRATION RIGHTS AGREEMENT
The Registration Rights Agreement provides registration rights
with respect to the shares of Common Stock issuable upon the conversion of the
Series B Preferred Stock and the exercise of the Warrants held by Mellon and Mr.
Webster (the "Investor Registrable Securities"). The Company may be required to
effect one demand registration, subject to certain conditions and limitations. A
shareholder owning not less than 51% of the then-outstanding shares of Investor
Registrable Securities issuable upon conversion of the Series B Preferred Stock
purchased by Mellon and upon exercise of the Warrants issued to Mellon (the
"Mellon Registrable Shares") may demand that the Company effect a registration
under the Securities Act for the sale of not less than 5% of the shares of
Mellon Registrable Securities then outstanding. The holders of the registration
rights also have limited rights to require the Company to include their shares
of Common Stock in connection with certain other offerings registered by the
Company. The registration rights will terminate as to any holder of Investor
Registrable Securities at such time as such holder may sell under Rule 144(k)
all Investor Registrable Securities then held by such holder. This agreement
requires the investor parties to this agreement to agree to certain lock-up
restrictions in connection with certain public offerings registered by the
Company.
OTHER
The Company agreed in a Compliance Sideletter with Mellon to,
among other things, use commercially reasonable efforts to assist Mellon in
remedying or preventing certain regulatory problems of Mellon that may be
asserted by the Small Business Administration, the Federal Reserve Board, the
Controller of Currency or any other governmental regulatory agency concerned
with the regulation of banks or financial services institutions. These actions
include without limitation, assisting in facilitating certain transfers, and
permitting Mellon to exchange voting securities for similar non-voting
securities. The Company also agreed with Mellon to comply with certain small
business administration and other regulations and to provide information
relating thereto to Mellon.
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In connection with the Financing, each of the Company's
executive officers entered into an amendment to his employment agreement that
provides that nothing in the Shareholders' Agreement or in the transactions
contemplated by the Securities Purchase Agreement will constitute a "Change of
Control" within the meaning of such term in each such employee's employment
agreement.
Each of the Company's six directors who have indemnification
agreements entered into an amendment to such indemnification agreement that
provides that nothing in the Shareholders' Agreement or in the transactions
contemplated by the Securities Purchase Agreement will constitute a "Change of
Control" within the meaning of such term in each such director's indemnification
agreement.
The Company also amended its Amended and Restated Bylaws (the
"Bylaws") to provide that nothing in the Shareholders' Agreement or in the
transactions contemplated by the Securities Purchase Agreement will constitute a
"Change of Control" within the meaning of such term in the bylaws.
The Company issued a press release dated February 22, 2002
describing certain of the matters described above.
DESCRIPTIONS OF CERTAIN DOCUMENTS
The descriptions of the Securities Purchase Agreement, the
Statement of Resolution, the Shareholders' Agreement, the Warrant Agreement, the
Registration Rights Agreement, the Compliance Sideletter, the form of amendment
to employment agreements, the form of amendment to the indemnification
agreements, the amendment to the Company's Amended and Restated Bylaws and the
press release do not purport to be complete and are qualified in their entirety
by provisions of each such agreement, copies of which have been filed as
Exhibits 99.1, 99.2, 99.3, 99.4, 99.5, 99.6, 99.9, 99.10, 4.1, 99.7, 99.8, 3.1
and 99.9, respectively, and which are incorporated by reference herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
3.1 Amendment No. 3 to the Company's Amended and Restated Bylaws.
99.1 Securities Purchase Agreement dated February 20, 2002 among
the Company, Mellon Ventures, L.P. and Steven A. Webster.
99.2 Statement of Resolution dated February 20, 2002 establishing
the Series B Convertible Participating Preferred Stock
providing for the designations, preferences, limitations and
relative rights, voting, redemption and other rights thereof.
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99.3 Shareholders' Agreement dated February 20, 2002 among the
Company, Mellon Ventures, L.P., Paul B. Loyd, Jr., Douglas
A.P. Hamilton, Steven A. Webster, S.P. Johnson IV, Frank A.
Wojtek and DAPHAM Partnership, L.P.
99.4 Warrant Agreement dated February 20, 2002 among the Company,
Mellon Ventures, L.P. and Steven A. Webster (including Warrant
Certificate).
99.5 Registration Rights Agreement dated February 20, 2002 among
the Company, Mellon Ventures, L.P. and Steven A. Webster.
99.6 Compliance Sideletter effective as of February 20, 2002
between the Company and Mellon Ventures, L.P.
99.7 Form of Amendment to Executive Officer Employment Agreement.
99.8 Form of Amendment to Director Indemnification Agreement.
99.9 Press Release of the Company dated February 22, 2002.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
CARRIZO OIL & GAS, INC.
By: /s/ FRANK A. WOJTEK
---------------------------------
Name: Frank A. Wojtek
Title: Vice President and Chief
Financial Officer
Date: February 26, 2002
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EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 Amendment No. 3 to the Company's Amended and Restated Bylaws.
99.1 Securities Purchase Agreement dated February 20, 2002 among the
Company, Mellon Ventures, L.P. and Steven A. Webster.
99.2 Statement of Resolution dated February 20, 2002 establishing the
Series B Convertible Participating Preferred Stock providing for
the designations, preferences, limitations and relative rights,
voting, redemption and other rights thereof.
99.3 Shareholders' Agreement dated February 20, 2002 among the
Company, Mellon Ventures, L.P., Paul B. Loyd, Jr., Douglas A.P.
Hamilton, Steven A. Webster, S.P. Johnson IV, Frank A. Wojtek
and DAPHAM Partnership, L.P.
99.4 Warrant Agreement dated February 20, 2002 among the Company,
Mellon Ventures, L.P. and Steven A. Webster (including Warrant
Certificate).
99.5 Registration Rights Agreement dated February 20, 2002 among the
Company, Mellon Ventures, L.P. and Steven A. Webster.
99.6 Compliance Sideletter dated February 20, 2002 between the
Company and Mellon Ventures, L.P.
99.7 Form of Amendment to Executive Officer Employment Agreement.
99.8 Form of Amendment to Director Indemnification Agreement.
99.9 Press Release of the Company dated February 22, 2002.
</Table>