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EXHIBIT 99.2
SHAREHOLDERS' AGREEMENT
This Shareholders' Agreement (this "Agreement") dated as of the 8th
day of January, 1998, ("Effective Date") is by and among CARRIZO OIL & GAS,
INC., a Texas corporation (the "Company"), 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 (individually, a
"Major Shareholder" and collectively, the "Major Shareholders"); ENRON CAPITAL
& TRADE RESOURCES CORP., a Delaware corporation ("ECT"); and JOINT ENERGY
DEVELOPMENT INVESTMENTS II LIMITED PARTNERSHIP, a Delaware limited partnership
("JEDI II").
W I T N E S S E T H:
WHEREAS, the Major Shareholders are the current owners of a
substantial number of shares of Common Stock (as hereinafter defined);
WHEREAS, contemporaneously herewith, ECT and JEDI II are to acquire a
substantial number of shares of Series A Preferred Stock and Warrants (as
hereinafter defined);
WHEREAS, the Company, the Major Shareholders, ECT and JEDI II desire
to enter into this Agreement to evidence their agreement regarding certain
matters related to the Series A Preferred Stock and the Warrants.
NOW, THEREFORE, in consideration of the mutual agreements and promises
herein contained and on this date made and other consideration, the sufficiency
of which is hereby acknowledged, the Major Shareholders, ECT, JEDI II and the
Company, each with the other, do hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Certain Defined Terms. As used in this Agreement, the
following terms shall have the meanings indicated:
Agreement: This Shareholders' Agreement, as the same may be
supplemented or amended from time to time.
Articles of Incorporation: means the Amended and Restated Articles of
Incorporation of the Company.
Board of Directors: means the Board of Directors of the Company.
Bylaws: means the Amended and Restated Bylaws of the Company, as
amended.
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Common Stock: means the common stock, par value $.01 per share, of
the Company or any successor class of the Company's common stock.
Person: means an individual or individuals, a partnership, a
corporation, a company, a limited liability company, an association, a joint
stock company, a trust, a joint venture, an unincorporated organization, any
other form of legal entity, or a governmental authority.
Series A Preferred Stock: means the 9% Series A Preferred Stock, par
value $0.01, having the relative rights, preferences, privileges and
limitations set forth in the Statement of Resolution (attached hereto as
Exhibit A) (the "Statement of Resolution").
Stock Purchase Agreement: means the Stock Purchase Agreement dated
January 8, 1998 between the Company, ECT and JEDI II (attached hereto as
Exhibit B).
Warrants: means the warrants which are exercisable for the purchase
of 1,000,000 shares of Common Stock having the relative rights, preferences,
privileges and limitations set forth in the Warrant Certificate (as defined in
the Stock Purchase Agreement).
1.2 For purposes of this Agreement, shares of Common Stock shall
be deemed to be beneficially owned by a Person if such Person would be deemed
to be the beneficial owner of such shares under Rule 13d-3(a) of the Securities
Exchange Act of 1934, as amended (excluding the application of Rule 13d-5(b)(1)
as a result of this agreement).
ARTICLE II
TRANSFER RESTRICTION PROVISION
2.1 Transfer Restriction. (a) Each of the Major Shareholders
hereby agrees that it shall not, without the consent of ECT (acting on behalf
of itself and JEDI II) (or if ECT, JEDI II and their respective Affiliates do
not beneficially own the largest amount of the outstanding Series A Preferred
Stock that is then beneficially owned by any shareholder, then only with the
consent of the holders of a majority of the Series A Preferred Stock),
transfer, assign, donate, sell, devise, encumber or in any other manner
alienate (collectively "Transfer") any portion of the Common Stock beneficially
owned by it as of the date hereof as set forth beside its signature (such
shares, excluding the Nonrestricted Shares (as defined below), are referred to
herein as the "Restricted Shares") provided that commencing on January 1, 1998
each of the Major Shareholders may Transfer during each calendar year through
and including 2001 up to 20% of the number of shares of Common Stock owned by
such Major Shareholder as of the date hereof and any portion of such shares
permitted hereby to be Transferred in prior calendar years that were not so
transferred or assigned (such shares that may be so Transferred are referred to
herein as the "Nonrestricted Shares"). Further, each Major Shareholder shall
retain the final 20% of its current holdings until no shares of the Series A
Preferred Stock remains outstanding. Upon any redemption of any shares of the
Series A Preferred Stock (the percentage of the outstanding shares so redeemed,
being called the "Released Percentage"), a Released Percentage of the
Restricted Shares shall thereupon be released from transfer restrictions
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imposed hereby (which release shall be in addition to the other releases from
the transfer restrictions provided hereby).
(b) No partition of the shares of a Major Shareholder between a
Major Shareholder and his spouse upon divorce nor any assignment or transfer
upon a Major Shareholder's death shall be considered a Transfer; provided that
such spouse or such transferee upon death must, as a condition of such
partition, assignment or transfer agree in writing to take such shares of
Common Stock subject to the terms and conditions of this Agreement. Nothing in
this Section 2.1 shall prevent a Major Shareholder from a Transfer of
Restricted Shares to his Family Group; provided, that no Transfer may be made
to a Major Shareholder's Family Group until the transferee has agreed in
writing to be bound by the terms of this Agreement. "Family Group" means, with
respect to a Major Shareholder, (a) the spouse of the Major Shareholder, or (b)
any trust solely for the benefit of the Major Shareholder, the Major
Shareholder's spouse, and/or their respective ancestors and/or descendants,
including any descendants by adoption; provided, however, that the trustee or
trustees (including any substitute or replacement trustee or trustees) must be
a trustee on the date hereof or shall have been approved by ECT on behalf of
itself and JEDI II, which approval may not be unreasonably withheld. Any
Transfer back to a Major Shareholder from his Family Group shall not be
restricted by this Section 2.1.
(c) The restrictions of this Section 2.1 shall not prohibit the
pledge of Common Stock of any Major Shareholder; provided, however, any
transfer following such pledge in foreclosure, liquidation or otherwise in any
attempt to realize upon the value of the pledged Common Stock shall be
considered a Transfer hereunder.
ARTICLE III
NEW SERIES OF PREFERRED STOCK
3.1. Series A Preferred Stock. The Major Shareholders consent to
the adoption of the Statement of Resolution and the consummation of all
transactions contemplated therein.
3.2 New Directors.
(a) The Major Shareholders (without limitation of the
consent set forth in Section 3.1 above) consent to the provisions in the
Statement of Resolution which provide that if the Company fails to redeem the
required number of Series A Preferred Stock on January 8, 2005 or the
applicable Redemption Date (as defined in the Statement of Resolution)
("Redemption Date") then the number of directors constituting the Board of
Directors shall, effective as of the time of election of such additional
directors as provided in the Statement of Resolution and without further
action, be increased as set forth in the Statement of Resolution. The Major
Shareholders further consent to the provisions of the Statement of Resolution
which provide that such additional directors shall continue as directors and
such additional voting right shall continue until such time as the Series A
Preferred Stock presented for redemption and required to be redeemed as
provided in Section 4(b) of the Statement of Resolution (excluding Section
4(b)(ii)(F) have been redeemed or all necessary funds have been set aside for
payment as provided in Section 6 of the Statement of Resolution, as the case
may be, at which time (A) such additional directors shall cease to be
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directors, (B) such additional voting right of the holders of Series A
Preferred Stock shall terminate and (C) the number of directors constituting
the Board of Directors shall, without further action, be decreased to that
number of directors remaining as directors following the effect of clause (A)
above (but subject to later adjustment in accordance with the Articles of
Incorporation and the Bylaws), provided that this sentence shall not limit the
effect of the preceding sentence upon the failure by the Corporation to redeem
the required number of Series A Preferred Shares upon the occurrence of any
subsequent redemption obligation provided in Section 4(b).
(b) The Major Shareholders hereby agree that they shall
not object to or oppose any increase in the Board of Directors as contemplated
in Section 3.1(a). Notwithstanding the foregoing, the foregoing does not
constitute an agreement by the Major Shareholders as to the voting of their
shares of Common Stock.
(c) Each Major Shareholder agrees without duplication to
promptly provide ECT and JEDI II with copies of all Schedule 13D's, all Forms 4
and 5, and all amendments thereto pertaining to such Major Shareholder filed by
them with the Securities and Exchange Commission.
ARTICLE IV
BUSINESS OPPORTUNITY MATTERS
Section 4.1 No Restrictions on Business Activities. The Major
Shareholders consent to the provisions of the Stock Purchase Agreement which
provide that:
a) Subject to the restrictions contained in the Stock
Purchase Agreement and to the fullest extent permitted by law, neither ECT,
JEDI II nor any of their Affiliates (as defined in the Stock Purchase
Agreement) shall be expressly or implicitly restricted or proscribed pursuant
to the Stock Purchase Agreement (attached hereto as Exhibit B), the
relationship that exists between ECT, JEDI II and the Company or otherwise,
from engaging in any type of business activity or owning an interest in any
type of business entity, regardless of whether such business activity is (or
such business entity engages in businesses that are) in direct or indirect
competition with the businesses or activities of the Company or any of its
Affiliates. Without limiting the foregoing, subject to the restrictions
contained in the Stock Purchase Agreement and to the fullest extent permitted
by law, (i) neither the Company nor its Affiliates nor any other Person shall
have any rights, by virtue of the Basic Documents (as defined in the Stock
Purchase Agreement), the relationship that exists between ECT, JEDI II and the
Company or otherwise, in any business venture or business opportunity of ECT,
JEDI II or any of their Affiliates, and neither ECT, JEDI II nor their
Affiliates shall have any obligation to offer any interest in any such business
venture or business opportunity to the Company, any Affiliate of the Company or
any other Person, or otherwise account to any of such Persons in respect of any
such business ventures, (ii) the activities of ECT, JEDI II or any of their
Affiliates that are in direct or indirect competition with the activities of
the Company or any of its Affiliates are hereby approved by the Majority
Shareholders, and (iii) by virtue of the Basic Document (as defined in the
Stock Purchase Agreement), it shall not be deemed a breach of any fiduciary or
other duties, if any and whether express or implied, that may be owed by ECT,
JEDI II or their Affiliates to the Company or its Affiliates for ECT or JEDI II
to permit themselves or one
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of their Affiliates to engage in a business opportunity in preference or to the
exclusion of the Company, its Affiliates or any other Person.
(b) For purposes of Section 8.2 of the Stock Purchase Agreement,
the term "Affiliate" when used to refer to Affiliates of ECT or JEDI II, shall
exclude the Company and its Affiliates.
ARTICLE V
MISCELLANEOUS
5.1. Remedies. Subject to Section 5.13 hereof, each party hereto
acknowledges that a remedy at law for any breach or attempted breach of this
Agreement will be inadequate, agrees that each other party hereto shall be
entitled to specific performance and injunctive and other equitable relief in
case of any such breach or attempted breach, and further agrees to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such injunctive or any other equitable relief.
5.2. Termination. The provisions of this Agreement shall terminate
upon the earlier of (a) the date upon which neither ECT nor JEDI II hold any
Series A Preferred Stock of the Company and (b) seven years from the date
hereof.
5.3. Amendment. This Agreement may only be amended by an instrument
in writing signed by the parties hereto.
5.4. Reliance. The parties hereto acknowledge and agree that the
Persons signatory to the Stock Purchase Agreement are entering into such
agreement in reliance on the terms and provisions of this agreement.
5.5. Notices. Any notice, request, reply, instruction or other
communication (herein severally and collectively called notice) in this
Agreement provided or permitted to be given to the Company, any Major
Shareholder, ECT or JEDI II must be given in writing and may be given or served
by depositing the same in the United States mail, in certified or registered
form, postage fully prepaid, addressed to the party or parties to be notified,
with return receipt requested, or by delivering the same in person to such
party or parties. Notice deposited in the United States mail, mailed in the
manner hereinabove described, shall be effective upon deposit. Notice given in
any other manner shall be effective only if and when received by the party to
be notified. For purposes of notice hereunder:
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the address for ECT shall be:
Enron Capital & Trade Resources Corp.
1400 Smith Street
Houston, Texas 77002
Attn: Donna W. Lowry
Phone: 713/853-6973
Fax: 713/646-3750
the address for JEDI II shall be:
Joint Energy Development Investments II
Limited Partnership
1400 Smith Street
Houston, Texas 77002
Attn: Donna W. Lowry
Phone: 713/853-1939
Fax: 713/646-4039 or 713/646-4946
the address for the Company shall be:
Carrizo Oil & Gas, Inc.
14811 St. Mary's Lane, Suite 148
Houston, Texas 77079
Attn: S.P. Johnson IV
Phone: 281/496-1352
Fax: 713/229-1522
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the address for each of the Major Shareholders shall be:
S.P. Johnson IV Douglas A.P. Hamilton
14811 St. Mary's Lane, Suite 148 14811 St. Mary's Lane, Suite 148
Houston, Texas 77079 Houston, Texas 77079
Frank A. Wojtek The Douglas A.P. Hamilton 1997
14811 St. Mary's Lane, Suite 148 1997 GRAT
Houston, Texas 77079 c/o Mr. Kim Baptiste
Schulte Roth & Zabel L.L.P.
Steven A. Webster 900 Third Avenue
14811 St. Mary's Lane, Suite 148 New York, New York 10022
Houston, Texas 77079
DAPHAM Partnership, L.P.
Paul B. Loyd, Jr. c/o Mr. Kenneth Huff
14811 St. Mary's Lane, Suite 148 7629 N. Pinesview Avenue
Houston, Texas 77079 Scottsdale, Arizona 85258
and
9256 N. Pelham Parkway
Milwaukee, Wisconsin 53217
5.6. GOVERNING LAW. THIS AGREEMENT SHALL BE SUBJECT TO AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
5.7. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties to this Agreement and their respective
heirs, executors, distributees, successors and assigns. No rights under this
Agreement may be assigned without the consent of the other parties hereto.
5.8. Representations. Each of the Major Shareholders hereby
represents and warrants that as of the date of the execution of this Agreement
it beneficially owns all of (and not a greater number than) the number of
shares of Common Stock set forth beside its signature, and that all such shares
are held in the name set forth below its signature, except for less than
100,000 shares owned by Cerrito Partners in which Steven Webster is a
beneficial owner.
5.9. Invalid Provisions. Should any portion of this Agreement be
adjudged or held to be invalid, unenforceable or void, such holding shall not
have the effect of invalidating or voiding the remainder of this Agreement, and
the portion so held invalid, unenforceable or void shall, if possible, be
deemed amended or reduced in scope, or to otherwise be stricken from this
Agreement to the extent required for the purposes of validity and enforcement
thereof.
5.10. Section Headings. The section and paragraph headings contained
herein are for reference purposes only and shall not in any way affect the
meaning and interpretation of this Agreement.
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5.11. Execution in Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed and delivered shall
be deemed an original, and such counterparts together shall constitute only one
instrument.
5.12. Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no agreements between
the parties in connection with the subject matter hereof except as set forth
specifically herein and therein.
5.13 Dispute Resolution. (a) Any controversy, dispute or claim
arising out of or relating to this Agreement, or the transactions contemplated
hereby (a "Dispute") shall be resolved in accordance with this Section 5.13.
(b) any party hereto may give any other party hereto written
notice (a "Dispute Notice") of any Dispute which has not been resolved in the
normal course of business. Within four (4) business days after delivery of the
Dispute Notice, the receiving party shall submit to the party giving such
Dispute Notice a written response (the "Response"). The Dispute Notice and the
Response shall each include (i) a statement setting forth the position of the
party giving such notice, a summary of the arguments supporting such position
and, if applicable, the relief sought and (ii) the name and title of a senior
manager of such party who has authority to settle the Dispute and will be
responsible for the negotiations related to the settlement of the Dispute (the
"Senior Manager").
(c) Within four (4) business days after delivery of the Response
provided for in Section 5.13(b), the Senior Managers of both parties shall meet
or communicate by telephone at a mutually acceptable time and place, and
thereafter as often as they reasonably deem necessary, and shall negotiate in
good faith to attempt to resolve the Dispute that is the subject of such
Dispute Notice. If such Dispute has not been resolved within ten (10) business
days after delivery of the Dispute Notice, then the parties shall attempt to
settle the Dispute pursuant to Section 5.13(b).
(d) If the Dispute has not been resolved by negotiation between
the Senior Managers pursuant to Section 5.13(c), a neutral mediator acceptable
to all parties to the mediation (the "Mediator") shall be appointed within four
(4) business days. The Mediator shall attempt, through negotiations in any
manner deemed reasonably appropriate by the Mediator, in which the parties
shall participate, to resolve the Dispute. The Mediator shall be compensated
at a rate agreeable to all parties to the mediation and the Mediator. The
Compensation and other expenses of the mediation shall be shared equally among
all parties to the mediation.
(e) In the event that the Dispute has not been resolved within
five (5) business days after the appointment of the Mediator, the Dispute shall
be resolved by arbitration administered by the American Arbitration Association
(the "AAA") in accordance with the terms of this Section 5.13, the Commercial
Arbitration Rules of the AAA, and, to the maximum extent applicable, the United
States Arbitration Act. Judgment on any matter rendered by arbitrators may be
entered in any court having jurisdiction. Any arbitration shall be conducted
before three arbitrators. The arbitrators shall be individuals knowledgeable
in the subject matter of the Dispute. ECT, if a party to the arbitration, or
JEDI II, if a party to the arbitration, shall select one arbitrator, the Major
Shareholders and the
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Company shall jointly select one arbitrator and the two arbitrators so selected
shall select the third arbitrator. If the third arbitrator is not selected
within three (3) business days after the request for an arbitration, then any
party to the mediation may request the AAA to select the third arbitrator. The
arbitrators may engage engineers, accountants or other consultants they deem
necessary to render a conclusion in the arbitration proceeding. To the maximum
extent practicable, an arbitration proceeding hereunder shall be concluded
within forty-five (45) days of the filing of the Dispute with the AAA.
Arbitration proceedings shall be conducted in Houston, Texas. Arbitrators
shall be empowered to impose sanctions and to take such other actions as the
arbitrators deem necessary to the same extent a judge could impose sanctions or
take such other actions pursuant to the Federal Rules of Civil Procedure and
applicable law. At the conclusion of any arbitration proceeding, the
arbitrators shall make specific written findings of fact and conclusions of
law. The arbitrators shall have the power to award recovery of all costs and
fees to the prevailing party. All fees of the arbitrators and any engineer,
accountant or other consultant engaged by the arbitrators, shall be paid one
half by ECT and JEDI II and one half by the Major Shareholders and the Company
jointly, unless otherwise awarded by the arbitrators.
In addition, nothing in the preceding paragraph, nor in the exercise
of any right to negotiate, mediate or arbitrate thereunder, shall limit the
right of any party hereto to obtain provisional or ancillary remedies such as
replevin, injunctive relief, attachment or appointment of a receiver from a
court having jurisdiction, before, during or after the pendency of any
negotiation, mediation or arbitration proceeding. The institution and
maintenance of any action for such relief, or the pursuit of provisional or
ancillary remedies, shall not constitute a waiver of the right or obligation of
any party to submit any claim or dispute to negotiation, mediation or
arbitration, including those claims or disputes arising from the exercise of
any relief or pursuit of provisional or ancillary remedies.
(f) All negotiations between the Senior Managers pursuant to this
Section 5.13 shall be treated as compromise and settlement negotiations.
Nothing said or disclosed, nor any document produced, in the course of such
negotiations which is not otherwise independently discoverable shall be offered
or received as evidence or used for impeachment or for any other purpose in any
current or future negotiation, mediation, arbitration or litigation.
5.14 Company a Party; Stop Transfer Instructions. The Company
agrees to give effect to the transfer restrictions imposed by this Agreement by
placing an "issuer hold" on the shares owned by the Major Stockholders and it
will not release such issuer hold except for Nonrestricted Shares in accordance
with the terms hereof, and the Company is entering into such Agreement solely
for such purpose. Each Major Shareholder consents to the Company making a
notation on its records and giving instructions to any transfer agent of the
Restricted Shares in order to implement the restrictions or transfer
established in this Agreement. The Company agrees to keep a copy of this
Agreement (as it may from time to time be amended) at its place of business and
to make such Agreement subject to the same right of examination by shareholders
of the Company, in person or by agent, attorney or accountant, as are the books
and records of the Company.
5.15 No Shareholders Meeting. The consents of the Major
Shareholders given in this Agreement are not intended to and do not constitute
the action on behalf of all shareholders of the Company, nor an action pursuant
to a meeting of shareholders, nor an action by written consent without a
meeting pursuant to Article 9.10 of the Texas Business Corporation Act.
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5.16 Reliance. Each Major Shareholder acknowledges that ECT and
JEDI II, in making their investment in the Series A Preferred Stock and the
Warrants, are relying on the representations, warranties and covenants of each
Major Shareholder as set forth in this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by themselves or by their respective representatives thereunto duly
authorized as of the date first above set forth.
CARRIZO OIL & GAS, INC.
By: /s/ S. P. Johnson IV
------------------------------------
Name:
Title:
ENRON CAPITAL & TRADE RESOURCES CORP.
By: /s/ Timothy Detmering
------------------------------------
Name:
Title:
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JOINT ENERGY DEVELOPMENT
INVESTMENTS II LIMITED PARTNERSHIP
By: ENRON CAPITAL MANAGEMENT II
LIMITED PARTNERSHIP,
its sole general partner
By: ENRON CAPITAL II CORP., its
sole general partner
By: /s/ Timothy Detmering
------------------------------
Name:
----------------------------
Title:
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Shares Owned:
783,085 /s/ S.P Johnson IV
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S.P. Johnson IV
1,273,721 /s/ Frank A. Wojtek
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Frank A. Wojtek
1,371,016 /s/ Steven A. Webster
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Steven A. Webster
800,796 /s/ Douglas A.P. Hamilton
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Douglas A.P. Hamilton
1,396,756 /s/ Paul B. Loyd, Jr.
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Paul B. Loyd, Jr.
DAPHAM PARTNERSHIP L.P.
395,960 /s/ Kenneth Huff
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Kenneth Huff,
General Partner
DOUGLAS A.P. HAMILTON 1997 GRAT
200,000 /s/ Kim E. Baptiste
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Kim E. Baptiste,
Trustee
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