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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): January 8, 1998
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.)
14811 ST. MARY'S LANE
SUITE 148
HOUSTON, TEXAS 77079
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (281) 496-1352
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ITEM 5. OTHER EVENTS.
On January 8, 1998, Carrizo Oil & Gas, Inc., a Texas corporation
(the "Company"), consummated the transactions contemplated by the Stock
Purchase Agreement dated January 8, 1998 (the "Purchase Agreement") among the
Company, Enron Capital & Trade Resources Corp., a Delaware corporation
("Enron"), and Joint Energy Development Investments II, a Delaware limited
partnership ("JEDI II"). Such transactions included (i) the payment by Enron
and JEDI II of an aggregate purchase price of $30,000,000, (ii) the sale of
75,000 shares of 9% Series A Preferred Stock, par value $.01 per share, of the
Company (the "Preferred Stock"), the terms of which are set forth in the
Statement of Resolution Establishing Series of Shares designated 9% Series A
Preferred Stock (the "Statement of Resolution"), to Enron and 225,000 shares of
Preferred Stock to JEDI II, (iii) the grant of warrants (the "Warrants") to
purchase 250,000 and 750,000 shares of the common stock, par value $.01 per
share, of the Company (the "Common Stock"), the terms of which are set forth in
Warrant Certificates issued to each of Enron and JEDI II, at an exercise price
of $11.50 per share to Enron and JEDI II, respectively, and (iv) the execution
and delivery of the Shareholders' Agreement dated January 8, 1998 (the
"Shareholders' Agreement") among the Company, S.P. Johnson IV, Frank A. Wojtek,
Steven A. Webster, Paul B. Loyd, Jr., Douglas A.P. Hamilton, DAPHAM Partnership
L.P., the Douglas A.P. Hamilton 1997 GRAT, Enron and JEDI II. The Company
agreed in the Purchase Agreement to use the proceeds of the Enron and JEDI II
investment for oil and natural gas exploration and development activities in
Texas and Louisiana, the payment of dividends on the Preferred Stock and the
payment of fees and expenses. In connection with transactions, the Company
paid a fee of $1,000,000 to an affiliate of Enron.
The descriptions of the Purchase Agreement, the Statement of
Resolution, the Shareholders' Agreement and the Warrant Certificates set forth
herein do not purport to be complete and are qualified in their entirety by the
provisions of each of the Purchase Agreement, the Statement of Resolution, the
Shareholders' Agreement and the Warrant Certificates, a copy of each of which
have been filed as Exhibit 99.1, Exhibit 4.1, Exhibit 99.2 and Exhibit 4.2
hereto, respectively, and which are incorporated by reference herein.
THE PURCHASE AGREEMENT
In addition to providing for the foregoing transactions, the Purchase
Agreement provides that, for so long as Enron, JEDI II and their respective
affiliates hold more than 51% of the Preferred Stock, Enron is generally
entitled to designate persons employed by Enron or a subsidiary of Enron Corp.
to attend meetings of the Board of Directors of the Company as observers and to
receive certain written information and reports distributed to the Board of
Directors. The Purchase Agreement includes provisions that are intended to
limit Enron's and JEDI II's obligations or liability to the Company including
those that provide that, to the fullest extent permitted by law, Enron, JEDI II
and their respective affiliates are not restricted from engaging in any
business activity, regardless of whether such activity is in direct or indirect
competition with the Company and are not required to offer any business
opportunity to the Company.
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In addition, pursuant to the Purchase Agreement, the Company granted
the holders ("Holders") of shares of Common Stock received upon exercise of the
Warrants (the "Warrant Shares") registration rights with respect to the Warrant
Shares. Holders holding no less than 333,000 Warrant Shares may demand that
the Company effect two registrations under the Securities Act of 1933, as
amended (the "Securities Act"), for the sale of all or part of the Warrant
Shares held by such Holder or Holders. One of such demand registrations may be
for a shelf registration and one may be for an underwritten registration. The
Holders also have rights to require the Company to include their Warrant Shares
in connection with registrations by the Company of shares of Common Stock. The
registration rights may be assigned or transferred provided that (i) the
transfer is effected in accordance with applicable securities laws, (ii) the
assignee or transferee acquires at least 100,000 Warrant Shares and (iii) the
Holder notifies the Company of the transfer or assignment. The registration
rights terminate as to any Holder at such time as such Holder may sell under
Rule 144 in a three-month period all Warrant Shares then held by such Holder
(assuming the cashless exercise of any Common Stock underlying Warrants).
Registration expenses, other than underwriting expenses, are to be paid by the
Company.
The Purchase Agreement includes certain representations, warranties
and covenants by the parties. The Company and the Purchasers are each
obligated to indemnify the other for breaches of representations, warranties
and covenants contained in the Purchase Agreement or in the other documents
furnished in connection with the Purchase Agreement.
STATEMENT OF RESOLUTION
The Statement of Resolution establishes a series of 500,000 shares
(300,000 of which are initially being issued to Enron and JEDI II under the
Purchase Agreement) of the Company's preferred stock, designated as 9% Series A
Preferred Stock with preferences, limitations and relative rights that include
the following:
Dividends. Holders of Preferred Stock are entitled to receive
cumulative dividends at the rate of $9.00 per year on each share of Preferred
Stock, payable quarterly. Dividends will be paid, at the option of the
Company, (i) in cash or (ii) until and including the January 15, 2002 dividend
due date, by issuing additional shares of Preferred Stock at the annual rate of
0.09 of a share of Preferred Stock on each share of Preferred Stock.
Redemption. The Preferred Stock is required to be redeemed by the
Company (i) on January 8, 2005, or (ii) after a request for redemption from the
holders of at least 30,000 shares of the Preferred Stock (or, if fewer than
such number of shares of Preferred Stock are outstanding, all of the
outstanding shares of Preferred Stock) and the occurrence of the following
events: (a) the Company has failed at any point in time to declare and pay any
two dividends in the amount then due and payable on or before the date the
second of such dividends is due and such dividends remain unpaid at such time,
(b) the Company breaches certain other covenants concerning the payment of
dividends or other distributions on or redemption or acquisition of shares of
its capital stock ranking at parity with or junior to the Preferred Stock, (c)
for two consecutive fiscal quarterly periods the
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quarterly Cash Flow (as defined below) of the Company is less than the amount
of the dividends accrued in respect to the Preferred Stock, (d) the Company
fails to pay certain amounts due on indebtedness for borrowed money or there
has otherwise been an acceleration of such indebtedness for borrowed money, (e)
there is a violation of the Shareholders' Agreement that is not waived or (f)
the Company sells, leases, exchanges or otherwise disposes of all or
substantially all of its property and assets which transaction does not provide
for the redemption of the Series A Preferred Stock. "Cash Flow" means net
income prior to preferred dividends and accretion (i) plus (to the extent
included in net income prior to preferred dividends and accretion) depreciation,
depletion and amortization and other non-cash charges and losses on the sale of
property (ii) minus non-cash income items and required principal payments on
indebtedness for borrowed money with a maturity from the original date of
incurrence of such indebtedness of six months or greater (excluding voluntary
prepayments and refinancings, but including prepayments (other than in
connection with refinancings) which would otherwise be due under such
indebtedness within a 60-day period following the date of such prepayment).
Once an event giving rise to the right to have shares of Preferred
Stock redeemed has occurred, holders of shares of Preferred Stock may elect to
have all or any portion of their shares of Preferred Stock redeemed by
requesting redemption within 45 days of receipt of notice of the occurrence of
the event from the Company. If a holder does not so elect, such holder may
make a request for redemption each year within 30 days following the date of
filing by the Company with the Securities and Exchange Commission of its Annual
Report on Form 10-K or its Quarterly Report on Form 10-Q with respect to the
first six months of its fiscal year, unless the Company fails to make any such
filing on or before March 31 with respect to such Annual Report and August 15
with respect to such Quarterly Report, in which case a request may be made any
time from and after such dates until 30 days following the date the Company
makes such filing.
The Preferred Stock also may be redeemed at the option of the Company
at any time in whole or in part.
All redemptions are at a price per share, together with dividends
accumulated and unpaid to the date of redemption as follows: (i) if the
redemption occurs within 12 months of the date of initial issuance of Preferred
Stock, $104.50 per share; (ii) if the redemption occurs after 12 months from
but within 24 months of the date of initial issuance of the Preferred Stock,
$102.25 per share; (iii) if the redemption occurs after 24 months from but
within 36 months of the date of initial issuance of the Preferred Stock
$101.125 per share; and (iv) if the redemption occurs after 36 months from the
date of initial issuance of the Preferred Stock, $100.00 per share.
Voting. Holders of the 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 Preferred Stock have the right to approve, by the
affirmative vote of the holders of a majority of the shares of Preferred Stock,
a merger or share exchange where Carrizo is the surviving entity and (i) the
voting power of the number of voting shares outstanding
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immediately after the merger exceeds by more than 30 percent the voting power
of the total number of voting shares of Carrizo outstanding immediately before
the merger; or (ii) the number of participating shares outstanding immediately
after the merger exceeds by more than 30 percent the total number of
participating shares of Carrizo outstanding immediately before the merger.
If, and only if, the Company fails to redeem the required number of
shares of Preferred Stock pursuant to clauses (a) through (d) of the first
paragraph under "--Redemption" above, the number of directors constituting the
Board of Directors will be expanded and the holders of the Preferred Stock will
have the right, voting separately as a class, to elect a majority of the board.
These voting rights continue only until such time as the shares of Preferred
Stock presented for redemption and required to be redeemed have been redeemed
or all necessary funds have been set aside for payment.
If, and only if, the Company fails to redeem the required number of
shares of Preferred Stock pursuant clause (e) of the first paragraph under
"--Redemption" above, the number of directors constituting the Board of
Directors will be expanded by the number equal to the difference between (i)
the whole number nearest to the quotient of (A) the number of directors then
constituting the Board of Directors (unless such number is less than two, in
which case the number of directors then constituting the Board of Directors
will be deemed to be two) divided by (B) 0.73 and (ii) the number of directors
then constituting the Board of Directors, and the holders of shares of
Preferred Stock have the right, voting separately as a class, to elect the
directors to fill such newly created directorships. These voting rights
continue only until such time as the shares of Preferred Stock presented for
redemption and required to be redeemed have been redeemed or all necessary
funds have been set aside for payment.
In addition, holders of the Preferred Stock have the right to
approve any authorization or issuance, or increase in the authorized amount of
(i) any stock ranking senior to the Preferred Stock or ranking on a parity with
the Preferred Stock and (ii) any security convertible into or exchangeable or
exercisable for stock of such class.
Holders of 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 holders
of Shares of Preferred Stock entitled to vote thereon (unless a higher
percentage is required by law or the Amended and Restated Articles of
Incorporation of the Company) is required for any of these actions. The
Statement of Resolution sets forth such provisions as they currently exist
under the TBCA with respect to certain amendments to the Company's Articles of
Incorporation and certain mergers.
The terms of the 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 of the Company (a "Liquidation"), before
any distribution of assets is made to the
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holders of any Junior Stock (as defined below) of the Company, the holder of
each share of Preferred Stock then outstanding will be entitled to be paid out
of the assets of the Company available for distribution to its shareholders, an
amount equal to the amount set forth below plus all dividends accumulated and
unpaid on such share on the date fixed for the distribution of assets of the
Company to the holders of Preferred Stock: (i) if the Liquidation occurs
within 12 months of the date of initial issuance of Preferred Stock, $104.50
per share; (ii) if the Liquidation occurs after 12 months from but within 24
months of the date of initial issuance of the Preferred Stock, $102.25 per
share; (iii) if the Liquidation occurs after 24 months from but within 36
months of the date of initial issuance of the Preferred Stock $101.125 per
share; and (iv) if the Liquidation occurs after 36 months from the date of
initial issuance of the Preferred Stock, $100.00 per share.
Ranking and Certain Covenants. The 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 Preferred Stock, the terms of such other
series provide otherwise. So long as any shares of Preferred Stock are
outstanding, (i) no dividends in cash, securities or other property may be
declared, paid or set aside for payment or any other distribution made upon any
Junior Stock (defined to include all stock ranking junior to the Preferred
Stock, including the Common Stock) (other than dividends or distributions in
Junior Stock or dividends of rights to purchase preferred or common stock of
the type commonly known as "poison pill rights"; provided that such poison pill
rights are not triggered solely as a result of the exercise of the rights and
remedies under the Statement of Resolution, Stock Purchase Agreement,
Shareholders' Agreement and/or Warrant Certificates); and (ii) except for
redemptions, purchases or acquisitions of Preferred Stock, no parity stock may
be (A) redeemed pursuant to a sinking fund or otherwise (unless all the parity
stock is redeemed or a pro rata redemption is made from all holders of parity
stock, the amount allocable to each series of such parity stock being
determined on the basis of the aggregate liquidation preference of the
outstanding shares of each series and the shares of each series are to be
redeemed only on a pro rata basis) or (B) purchased or otherwise acquired for
any consideration by the Company; and (iii) no Junior Stock may be redeemed or
acquired for consideration except by conversion into or exchange for other
Junior Stock; provided however that the Company shall be entitled to pay in
cash such sum as may be required to eliminate fractional shares.
Holders of Preferred Stock have no preemptive rights to purchase or
subscribe for securities of the Company. There is no sinking fund established
for the Preferred Stock.
SHAREHOLDERS' AGREEMENT
Each of S.P. Johnson IV, Frank A. Wojtek, Steven A. Webster, Paul B.
Loyd, Jr., Douglas A.P. Hamilton, DAPHAM Partnership L.P. and the Douglas A.P.
Hamilton 1997 GRAT (the "Major Shareholders") have agreed with the Company,
Enron and JEDI II that it shall not (without the consent of Enron or, if Enron,
JEDI II and their respective affiliates do not beneficially
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own the largest outstanding amount of Preferred Stock that is then beneficially
owned by any shareholder, then only with the consent of the holders of a
majority of the shares of Preferred Stock) transfer, assign, donate, sell,
devise, encumber or in any other manner alienate (collectively "Transfer") any
of the Common Stock deemed under the Shareholders' Agreement to be beneficially
owned by it as of the date of the Shareholders' Agreement (783,085 shares;
1,273,721 shares; 1,371,016 shares; 1,396,756 shares; 800,796 shares; 395,960
shares; and 200,000 shares, respectively, representing approximately 60.0% of
the issued and outstanding shares of Common Stock as of the date of the
Shareholders' Agreement) except as provided below.
Each Major Shareholder may Transfer during each calendar year
beginning January 1, 1998 through and including 2001 up to 20% of the Common
Stock held by such Major Shareholder as of the date of the Shareholders'
Agreement and any portion of such shares permitted to be Transferred in prior
calendar years that were not so Transferred. Upon redemption of shares of
Preferred Stock, a proportionate number of shares of Common Stock held by each
Major Shareholder will be released from all transfer restrictions imposed by the
Shareholders' Agreement, which release will be in addition to other releases
from the transfer restrictions therein. Notwithstanding the foregoing, each
Major Shareholder has agreed to retain the final 20% of his holdings of Common
Stock until no shares of Preferred Stock remain outstanding. A partition of
shares of Common Stock held by a Major Shareholder between a Major Shareholder
and his spouse upon divorce and Transfers upon a Major Shareholder's death are
not Transfers that are restricted pursuant to the Shareholders' Agreement;
provided that the spouse or transferee, as a condition to the partition or
Transfer, agrees in writing to take such shares of Common Stock subject to the
terms of the Shareholders' Agreement. In addition, Transfers by a Major
Shareholder to his Family Group (as defined herein) are not restricted; provided
that the transferee has agreed in writing to be bound by the terms of the
Shareholders' Agreement. "Family Group" means, for purposes hereof, (i) the
spouse of a Major Shareholder or (b) certain trusts established solely for the
benefit of the Major Shareholder, the Major Shareholder's spouse or any of their
respective ancestors or descendants. Transfers back to a Major Shareholder from
his Family Group are permitted. Pledges of Common Stock are not restricted by
the Shareholders' Agreement, although attempts to realize upon the value of the
pledged Common Stock constitute Transfers and are therefore subject to the
limitations described above.
In addition, the Major Shareholders consented to certain
transactions contemplated by the Stock Purchase Agreement, including (i) the
adoption of the Statement of Resolution, (ii) the election of directors to the
Board of Directors by the holders of shares of Preferred Stock to the extent
provided in the Statement of Resolution, and (iii) the provisions allowing
Enron, JEDI II and their affiliates to engage in business activities that might
be, directly or indirectly, in competition with the Company.
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WARRANT CERTIFICATES
The Warrants are exercisable during the period beginning January 8,
1999 and ending January 8, 2005 for the purchase of an aggregate of 1,000,000
shares of Common Stock at an exercise price of $11.50 per share, subject to
certain adjustments. The Warrants are not transferable until January 8, 2000.
Each Warrant may be exercised by (i) paying the exercise price (A)
in cash or (B) by surrender to the Company of shares of Preferred Stock or (ii)
exercising the Warrant for a number of net warrant shares equal to (x) the
number of Warrant Shares issuable upon exercise of the Warrant multiplied by
the difference between the average market price of the Common Stock during the
20 trading day period preceding the date of exercise and the exercise price
divided by (y) the average market price of the Common Stock during the 20
trading day period preceding the date of exercise. In addition, with the
consent of the Company, the holder of the Warrant may receive a cash payment
equal to the number of Warrant Shares for which the Warrant is exercised
multiplied by the difference between the average market price of the Common
Stock during the 20 trading day period preceding the date of exercise and the
exercise price.
The number of Warrant Shares and exercise price are subject to
adjustment in certain circumstances, including (i) if the Company makes a
distribution of shares of Common Stock, subdivides or combines its outstanding
shares of Common Stock or issues any shares of its capital stock or distributes
other assets in a reclassification or reorganization of the Common Stock, (ii)
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 of the Common Stock, subject to
certain exceptions, and (iii) if the Company engages in a consolidation, merger
or business combination with, or sells all or substantially all of its assets
to, another corporation.
OTHER
In connection with the sale of Preferred Stock, each of the
Company's four executive officers entered into amendments to their employment
agreements that provide that the exercise by the holders of shares of Preferred
Stock of the rights and remedies, including voting rights to elect any
directors to the Board of Directors, as provided under the Basic Documents (as
such term is defined in the Stock Purchase Agreement), will not constitute a
"Change in Control" within the meaning of such term in each such employee's
employment agreement.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
4.1 Statement of Resolution Establishing Series of Shares designated 9% Series A Preferred Stock.
4.2 Warrant Certificates.
99.1 Stock Purchase Agreement dated January 8, 1998 among the Company, Enron Capital & Trade Resources
Corp. and Joint Energy Development Investments II Limited Partnership.
99.2 Shareholders' Agreement dated January 8, 1998 among the Company, S.P. Johnson IV, Frank A. Wojtek,
Steven A. Webster, Paul B. Loyd, Jr., Douglas A.P. Hamilton, DAPHAM Partnership, L.P., The Douglas
A.P. Hamilton 1997 GRAT, Enron Capital & Trade Resources Corp. and Joint Energy Development
Investments II Limited Partnership.
99.3 Form of Amendment to Executive Officer Employment Agreement.
99.4 Press Release dated January 8, 1998.
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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
----------------------------
Frank A. Wojtek
Chief Financial Officer,
Vice President and Secretary
Date: January 9, 1998
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Exhibit Description
4.1 Statement of Resolution Establishing Series of Shares designated 9% Series A Preferred Stock.
4.2 Warrant Certificates.
99.1 Stock Purchase Agreement dated January 8, 1998 among the Company, Enron Capital & Trade Resources
Corp. and Joint Energy Development Investments II Limited Partnership.
99.2 Shareholders' Agreement dated January 8, 1998 among the Company, S.P. Johnson IV, Frank A. Wojtek,
Steven A. Webster, Paul B. Loyd, Jr., Douglas A.P. Hamilton, DAPHAM Partnership, L.P., The Douglas
A.P. Hamilton 1997 GRAT, Enron Capital & Trade Resources Corp. and Joint Energy Development
Investments II Limited Partnership.
99.3 Form of Amendment to Executive Officer Employment Agreement.
99.4 Press Release dated January 8, 1998.
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