UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
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 o
Check the
appropriate box:
| x | Preliminary Proxy Statement |
| o | Confidential, for Use of the Commission Only (as permitted by |
| Rule 14a-6(e)(2)) | |
| o | Definitive Proxy Statement |
| o | Definitive Additional Materials |
| o | Soliciting Material under ss.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. |
| o | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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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| o | Fee paid previously with preliminary materials. |
| o | 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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April
___, 2008
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 9:00 a.m. on Tuesday, June 10,
2008, at The Downtown Club at Plaza, 49th Floor, One Shell Plaza, 910 Louisiana
Street, 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 2007 Annual Report to Shareholders is also enclosed.
Sincerely,
/s/ S.P.
Johnson IV
S.P.
Johnson IV
President
and Chief Executive Officer
CARRIZO
OIL & GAS, INC.
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
To
Be Held June 10, 2008
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 Downtown Club at Plaza, 49th Floor, One
Shell Plaza, 910 Louisiana Street, Houston, Texas, on June 10, 2008, at 9:00
a.m. for the following purposes:
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(1)
|
to
elect seven members to the Board of Directors for the ensuing
year;
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(2)
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to
amend our Amended and Restated Articles of Incorporation to increase the
number of authorized shares of our common stock from 40,000,000 to
90,000,000;
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(3)
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to
approve the appointment of Pannell Kerr Forster of Texas, P.C. as
independent registered public accounting firm for the fiscal year ending
December 31, 2008; and
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(4)
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to
transact such other business as may properly come before the
meeting.
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The
Company has fixed the close of business on April _____, 2008, 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/ Paul
F. Boling
Paul F.
Boling
Secretary
April_____,
2008
1000
Louisiana Street, Suite 1500
Houston,
TX 77002
Important
Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting
to be Held on June 10, 2008.
The
proxy statement and annual report to shareholders are available at
www.crzo.net/proxy2008.pdf
CARRIZO
OIL & GAS, INC.
1000
Louisiana Street, Suite 1500
Houston,
Texas 77002
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 2008 Annual Meeting of Shareholders (the “Annual
Meeting”) to be held at The Downtown Club at Plaza, 49th Floor, One Shell Plaza,
910 Louisiana Street, Houston, Texas on June 10, 2008, at 9:00 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 May _____, 2008. 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
Procedures
Shareholders
of record as of April _____, 2008, 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 _____ 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 in this proxy statement; (2) for the amendment
of the Amended and Restated Articles of Incorporation; (3) for the appointment
of Pannell Kerr Forster of Texas, P.C. (“PKF”) as the Company’s independent
registered public accounting firm for the fiscal year ending December 31, 2008;
and (4) 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.
-2-
Security
Ownership of Management and Certain Beneficial Owners
The table
below sets forth information concerning (1) the only persons known by the
Company, based solely 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
December 31, 2007, and (2) the shares of Common Stock beneficially owned as
of March 28, 2008 by each director, the Chief Executive Officer, the Chief
Financial Officer and three other executive officers whose names appear in the
“Summary Compensation Table,” 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. As of March 28, 2008, the Company had 30,615,845 shares of
Common Stock issued and outstanding.
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Amount
and Nature of
Beneficial Ownership
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Name and Address of Beneficial
Owner(1)
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Number of Shares(2)
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Percent
of
Common
Stock
(rounded)
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Directors
and Executive Officers:
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S.
P. Johnson
IV
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751,806 | 2.4 | % | |||||
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Paul
F.
Boling
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59,980 | * | ||||||
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Gregory
E.
Evans
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51,088 | * | ||||||
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J.
Bradley
Fisher
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41,487 | * | ||||||
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Richard
H.
Smith
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16,845 | * | ||||||
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Steven
A.
Webster
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2,573,991 | 8.3 | % | |||||
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Thomas
L. Carter,
Jr.
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17,125 | * | ||||||
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Paul
B. Loyd,
Jr.
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170,590 | * | ||||||
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F.
Gardner
Parker
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100,000 | * | ||||||
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Roger
A.
Ramsey
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29,000 | * | ||||||
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Frank
A.
Wojtek
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152,458 | * | ||||||
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Executive
Officers and
Directors
as a Group (11
persons)
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3,964,370 | 12.7 | % | |||||
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Columbia
Wanger Asset Management, L.P. (3)
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2,532,993 | 8.1 | % | |||||
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Centennial
Energy Partners, L.L.C.
(4)
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1,955,922 | 6.3 | % | |||||
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Neuberger
Berman Inc.
(5)
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2,159,402 | 6.9 | % | |||||
__________
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* Less
than 1%.
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(1)
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Except
as otherwise noted and pursuant to applicable community property laws,
each shareholder has sole voting and investment power with respect to the
shares beneficially owned. None of the shares beneficially
owned by our executive officers or directors are pledged as security,
except for 120,000 shares held in a margin account by Mr.
Wojtek. The business address of each director and executive
officer is c/o Carrizo Oil & Gas, Inc., 1000 Louisiana Street, Suite
1500, Houston, Texas 77002.
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(2)
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The
table includes shares of Common Stock that can be acquired through the
exercise of options within 60 days of March 28, 2008 as follows: Mr.
Johnson — 236,668, Mr. Boling — 19,250, Mr. Evans — 13,333, Mr.
Fisher — none, Mr. Smith — none, Mr. Webster — 285,834, Mr. Carter —
3,334, Mr. Loyd — 29,500, Mr. Parker — 55,000, Mr. Ramsey — 13,500, Mr.
Wojtek — 2,500, and all executive officers and directors as a group
—658,919. The percent of the class owned by each person has
been computed assuming the exercise of all options deemed to be
beneficially owned by that person, and assuming that no options held by
any other person have been
exercised.
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(3)
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Based
solely on a Schedule 13G filed on January 22, 2008, Columbia Wanger Asset
Management, L.P., an investment advisor, reported sole voting power over
2,382,993 shares, shared voting power over 150,000 shares and sole
dispositive power over 2,532,993 shares. The address of the
principal business office of Columbia Wanger Asset Management, L.P. is 227
West Monroe Street, Suite 3000, Chicago, Illinois
60606.
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-3-
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(4)
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Based
solely on a Schedule 13G filed on February 12, 2008, Centennial Energy
Partners, L.L.C. reported shared voting power and shared dispositive power
over 1,955,922 shares. Peter K. Seldin, the managing member of
Centennial Energy Partners, L.L.C., also reported shared voting power and
shared dispositive power over 1,955,922 shares. The address of
the principal business office of Centennial Energy Partners, L.L.C. is 575
Lexington Avenue, 33rd Floor, New York, New
York 10022.
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(5)
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Based
solely on a Schedule 13G filed on February 13, 2008, Neuberger Berman Inc.
reported sole voting power over 42,175 shares, shared voting power over
1,686,927 shares and shared dispositive power over 2,159,402
shares. Neuberger Berman, LLC also reported sole voting power
over 42,175 shares, shared voting power over 1,686,927 shares and shared
dispositive power over 2,159,402 shares. Neuberger Berman
Management Inc. reported shared voting power over 1,686,927 shares and
shared dispositive power over 1,686,927 shares. Neuberger
Berman Equity Funds reported shared voting power over 1,661,527 shares and
shared dispositive power over 1,661,527 shares. The address of
the principal business office of each of these entities is 605 Third
Avenue, New York, New
York 10158.
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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 2009 Annual Meeting of Shareholders and until
their successors have been duly elected and qualified or until their resignation
or removal: Mr. S.P. Johnson IV, Mr. Steven A. Webster,
Mr. Thomas L. Carter, Jr., Mr. Paul B. Loyd, Jr., Mr. F. Gardner Parker,
Mr. Roger A. Ramsey and Mr. Frank A. Wojtek. 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 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.
Nominees
The
following sets forth information concerning the seven nominees for election as
directors at the Annual Meeting, including information as to each nominee’s age
as of March 31, 2008, position with the Company and business experience during
the past five years. All nominees are currently serving as directors
and are standing for re-election.
S.P. Johnson IV, age 52, has
served as our President and Chief Executive Officer and a director since
December 1993. Prior to that, he worked for Shell Oil Company for 15
years. His managerial positions included Operations Superintendent,
Manager of Planning and Finance and Manager of Development
Engineering. Mr. Johnson is also a director of Basic Energy Services,
Inc. (a well servicing contractor) and Pinnacle Gas Resources, Inc. (a coalbed
methane exploration and production company). Mr. Johnson is a
Registered Petroleum Engineer and has a B.S. in Mechanical Engineering from the
University of Colorado.
Steven A. Webster, age 56,
has been the Chairman of our Board of Directors since June 1997 and has been a
director since 1993. Mr. Webster has served as Co-Managing Partner
and President of Avista Capital Partners, a private equity firm focused on
investments in the energy, media and healthcare sectors, since July
2005. From January 2000 until June 2005, Mr. Webster served as the
Chairman of Global Energy Partners, Ltd., an affiliate of CSFB Private Equity,
which made private equity investments in the energy business. From
December 1997 to May 1999, Mr. Webster was the Chief Executive Officer and
President of R&B Falcon Corporation, an offshore drilling contractor, and
prior to that, was Chairman and Chief Executive Officer of Falcon Drilling
Company, which he founded in 1988. Mr. Webster is also a director of
Grey Wolf, Inc. (an onshore drilling company), SEACOR Holdings, Inc. (a marine
transportation and service provider), Geokinetics, Inc. (a seismic acquisition
and geophysical services company), Basic Energy Services, Inc., Hercules
Offshore, Inc. (an offshore drilling contractor) and Pinnacle Gas Resources,
Inc., as well as various private companies. He is also a trust
manager of
-4-
Camden
Property Trust (a real estate investment trust). Mr. Webster holds an
M.B.A. degree from Harvard Business School and a Bachelor of Science in
Industrial Management degree from Purdue University.
Thomas L. Carter, Jr., age
56, has been a director since March 2005. He has been President
and Chief Executive Officer of Black Stone Minerals Company, L.P., a
privately-owned Delaware limited partnership located in Houston, Texas, since
its formation in 1998. Mr. Carter has also served as Managing General
Partner of Black Stone Energy Company from 1980 to the present. Prior
to the formation of Black Stone, Mr. Carter served as Managing General Partner
of W.T. Carter & Bros. from 1987 through 1992. From 1975 to 1979,
Mr. Carter was with Texas Commerce Bank in Houston, Texas. Mr. Carter
holds an M.B.A. and B.B.A. from the University of Texas at Austin.
Paul B. Loyd, Jr., age 61,
has been a director since 1993. Mr. Loyd was Chairman of the Board
and Chief Executive Officer of Reading & Bates Corporation from 1991 to 1997
and from 1999 to 2001 until its merger with Transocean Inc. Mr. Loyd
has been the principal of Loyd & Associates, Inc., a private 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 currently a director of Frontier Oil
Corporation (a refining and marketing company) and is a member of the Board of
Trustees of Southern Methodist University. Mr. Loyd served as
President of our company from its inception in September 1993 until December
1993. Mr. Loyd holds an undergraduate degree from Southern Methodist
University and an M.B.A. degree from Harvard Business School.
F. Gardner Parker, age 66,
has been a director since 2000. He has been Managing Outside Trust
Manager with Camden Property Trust since 1998. He also serves on the
boards of Sharps Compliance Corp. (a waste management services provider), Blue
Dolphin Energy Company (a pipeline operations and oil and gas exploration and
production holding company), Hercules Offshore, Inc. and Pinnacle Gas Resources,
Inc. In addition, he serves on the board of directors of the
following private companies: Gillman Automobile Dealerships, Net Near U
Communications, MCS Technologies, Camp Longhorn, Inc., nii communications, inc.,
Sherwood Healthcare Inc., and Arena Power. Mr. Parker also worked
with Ernst & Ernst (now Ernst & Young LLP) for 14 years, seven of which
he served as a partner. He is a graduate of The University of
Texas.
Roger A. Ramsey, age 69, has
been a director since 2004. He is the Chairman and Chief Executive
Officer of Medserve, Inc., a privately held corporation. He served as
Chairman of the Board of Allied Waste Industries, Inc. from October 1989 through
his retirement in December 1998, and Chief Executive Officer of that company
from October 1989 through July 1997. Beginning in 1960, Mr. Ramsey
was employed by the international accounting firm of Arthur Andersen
LLP. In 1968, Mr. Ramsey co-founded Browning-Ferris Industries, Inc.
and served as its Vice President and Chief Financial Officer until
1976. Mr. Ramsey is a director of WCA Waste Corporation (a waste
management company), a public company. Mr. Ramsey is also a member of
the Board of Trustees at Texas Christian University and Chairman of the Board of
Vericenter, Inc., a privately held corporation.
Frank A. Wojtek, age 52, has
been a director since 1993. He has been Vice President, Secretary and
Director of A-Texian Compressor, Inc. (a natural gas compression services
company) since July 2004. Mr. Wojtek served as our Chief Financial
Officer, Vice President, Secretary and Treasurer from 1993 until August
2003. 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 has also held the positions of Vice President
and Secretary/Treasurer of Loyd & Associates, Inc., a private financial
consulting firm, since 1989. 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 were companies in the offshore drilling
industry. Mr. Wojtek holds a B.B.A. in Accounting with Honors from
The University of Texas.
Director
Independence
The Board
has determined that Messrs. Carter, Loyd, Parker, Ramsey and Wojtek are
“independent directors” within the meaning of Marketplace Rule 4200(a)(15) of
the Nasdaq Stock Market.
-5-
Committees
of the Board of Directors
The Board
of Directors held four meetings during the fiscal year ended December 31, 2007,
and transacted business on seven occasions during the fiscal year by unanimous
written consent.
During
2007, 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 held during his service on the Board of
Directors. The Board of Directors has a Nominating Committee, an
Audit Committee, a Compensation Committee and a Budget Committee.
The Board
of Directors has a Nominating Committee, which currently consists of Messrs.
Loyd and Carter. The primary responsibilities of the Nominating
Committee include identifying, evaluating and recommending, for the approval of
the entire Board of Directors, potential candidates to become members of the
Board of Directors and recommending membership on standing committees of the
Board of Directors. The Nominating Committee held one meeting during
2007. A copy of the Nominating Committee Charter may be found on the
Company’s website at www.crzo.net. The
Board of Directors has determined that Messrs. Loyd and Carter are independent
for purposes of Nasdaq Marketplace Rule 4200(a)(15).
The Board
of Directors has an Audit Committee, which currently consists of Messrs. Parker
(chairman), Carter and Ramsey. The Audit Committee held six meetings
during 2007. The Audit Committee has direct responsibility for the
appointment, retention, compensation and oversight of the independent registered
public accounting firm for the purpose of preparing the Company’s annual audit
report or performing other audit, review or attest services for the
Company. The Audit Committee has sole authority to approve all
engagement fees and terms of the independent registered public accounting firm
and to establish policies and procedures for preapproval of audit and nonaudit
services. The Audit Committee also reviews and discusses the annual
audited financial statements with management and the independent registered
public accounting firm. A copy of the Audit Committee Charter may be
found on our website at www.crzo.net.
The Board
has determined that all of the members of the Audit Committee satisfy the
independence standards under the Nasdaq Marketplace Rules and Rule 10A-3 of the
Securities Exchange Act. In addition, the Board has determined that
Mr. Parker is an “audit committee financial expert,” as such term is defined in
Item 401(h) of Regulation S-K promulgated by the Securities and Exchange
Commission (the “SEC”). Mr. Parker is a certified public accountant
and served as partner in a major accounting firm.
The Board
of Directors has a Compensation Committee which currently consists of Messrs.
Parker (chairman) and Ramsey. The Compensation Committee held five
meetings during 2007. The primary responsibilities of the
Compensation Committee are to review and approve the compensation of the Chief
Executive Officer and our other executive officers and oversee and advise the
Board on the policies that govern our compensation programs. The
Compensation Committee has the authority to select, retain, terminate, and
approve the fees and other retention terms of special counsel, compensation
consultants or other experts or consultants, as it deems appropriate, without
seeking approval of the Board of Directors or management. The
Compensation Committee retains the independent compensation consulting firm of
A.G. Ferguson & Associates, Inc. to provide the Compensation Committee with
market data and recommendations regarding our executive compensation
program. Our CEO annually reviews the performance of our other named
executive officers and makes recommendations to the Compensation Committee
regarding base salary adjustments, cash bonuses and long-term incentive awards
for the other named executive officers.
The
Compensation Committee has been appointed by the Board of Directors to
administer our incentive plan (subject in some cases to action by the full
Board). The Compensation Committee may delegate to the Chief
Executive Officer and other senior officers of the Company certain of its duties
under the incentive plan. In February 2005, the Compensation
Committee delegated authority to the Chief Executive Officer to designate
certain eligible participants, excluding “officers” (as defined in Rule 16a-1
promulgated under Section 16 of the Exchange Act) and directors, to receive
options under the plan and to determine the number of options to be issued to
each such designee, subject to certain limitations. In October 2006,
the Board of Directors designated a special stock award committee of the Board
consisting solely of Mr. Johnson to award certain eligible participants,
excluding
-6-
Section 16
officers and directors, shares of restricted stock under the plan and to
determine the number of restricted shares to be issued, subject to certain
limitations.
A copy of
the Compensation Committee Charter can be found on our website at www.crzo.net. The
Board of Directors has determined that Messrs. Parker and Ramsey are independent
for purposes of Nasdaq Marketplace Rule 4200(a)(15).
Director
Nominations Process
In
assessing the qualifications of candidates for director, the Nominating
Committee considers, in addition to qualifications set forth in the Company’s
bylaws, each potential nominee’s personal and professional integrity,
experience, reputation, skills, ability and willingness to devote the time and
effort necessary to be an effective board member, and commitment to acting in
the best interests of the Company and its shareholders. The
Nominating Committee also considers requirements under the listing standards of
the Nasdaq Stock Market, Inc. for a majority of independent directors, as well
as qualifications applicable to membership on Board committees under the listing
standards and various regulations. The Nominating Committee makes
recommendations to the Board, which in turn makes the nominations for
consideration by the shareholders.
Suggestions
for potential nominees for director can come to the Nominating Committee from a
number of sources, including incumbent directors, officers, executive search
firms and others. The Nominating Committee will consider director
candidates recommended by shareholders. The extent to which the
Nominating Committee dedicates time and resources to the consideration and
evaluation of any potential nominee brought to its attention depends on the
information available to the Committee about the qualifications and suitability
of the individual, viewed in light of the needs of the Board, and is at the
Committee’s discretion. Recognizing the contribution of incumbent
directors who have been able to develop, over a period of time, increasing
insight into the Company and its operations and, therefore, provide an
increasing contribution to the Board as a whole, the Nominating Committee
reviews each incumbent director’s qualifications to continue on the Board in
connection with the selection of nominees to take office when that director’s
term expires, and conducts a more detailed review of each director’s suitability
to continue on the Board following expiration of the director’s
term.
In
addition, the Nominating Committee’s policy is that it will consider candidates
for the Board recommended by shareholders. Any such recommendation
should include the candidate’s name and qualifications for Board membership and
should be submitted in writing to the Secretary, Carrizo Oil & Gas, Inc.,
1000 Louisiana Street, Suite 1500, Houston, Texas 77002, along
with:
|
·
|
a
signed statement of the proposed candidate consenting to be named as a
candidate and, if nominated and elected, to serve as a
director;
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|
·
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a
statement that the writer is a shareholder of the Company and is proposing
a candidate for consideration by the Nominating
Committee;
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·
|
a
statement detailing any relationship between the candidate and any
customer, supplier or competitor of the
Company;
|
|
·
|
the
financial and accounting background of the candidate, to enable the
Nominating Committee to determine whether the candidate would be suitable
for Audit Committee membership; and
|
|
·
|
detailed
information about any relationship or understanding between the proposing
shareholder and the candidate.
|
Although
the Nominating Committee will consider candidates recommended by shareholders,
it may determine not to recommend that the Board, or the Board may determine not
to, nominate those candidates for election to the Board of
Directors.
-7-
Director
Compensation
The table
below contains information about the compensation received by each of our
non-employee directors during 2007. S. P. Johnson IV, our
President and Chief Executive Officer, receives no extra pay for serving as a
director.
|
Name
|
Fees
Earned or Paid in Cash ($)
|
Stock
Awards ($)(1)
|
Option
Awards
($)(2)
|
All
Other
Compensation
($)
|
Total
($)
|
||||||||||||
|
Steven
A. Webster
|
180,000 | (3) | 62,744 | 12,601 |
─
|
255,345 | |||||||||||
|
Thomas
L. Carter, Jr.
|
28,500 | 82,209 | 25,333 |
─
|
136,042 | ||||||||||||
|
Paul
B. Loyd, Jr.
|
12,000 | 32,884 | 3,135 |
─
|
48,019 | ||||||||||||
|
F.
Gardner Parker
|
50,000 | 164,418 | 4,925 |
─
|
219,343 | ||||||||||||
|
Roger
A. Ramsey
|
40,500 | 115,093 | 8,805 |
─
|
164,398 | ||||||||||||
|
Frank
A. Wojtek
|
20,000 | 32,884 | 1,742 |
─
|
54,626 | ||||||||||||
_____________
|
(1)
|
Represents
the compensation cost recognized by us in 2007 related to restricted stock
awards in accordance with Statement of Financial Accounting Standards No.
123(R). As of December 31, 2007, our directors held unvested
restricted shares in the following amounts: Webster ─ 6,168,
Carter ─ 2,500,
Loyd ─ 1,000,
Parker ─ 5,000,
Ramsey ─ 3,500 and
Wojtek ─
1,000.
|
|
(2)
|
We
did not grant any stock option awards in 2007. These amounts
represent the compensation cost recognized by us in 2007 related to option
awards in prior years, in accordance with Statement of Financial
Accounting Standards No. 123(R). As of December 31, 2007, our
directors held exercisable options to purchase our shares of Common Stock
in the following amounts: Webster ─ 285,834,
Loyd ─
29,500, Parker ─ 55,000,
Ramsey ─ 13,500 and
Wojtek ─
2,500. As of December 31, 2007, our directors held
unexercisable options to purchase our shares of Common Stock in the
following amounts: Carter ─ 3,334,
.
|
|
(3)
|
Includes
$165,000 paid pursuant to a consulting agreement between the Company and
an entity owned by Mr. Webster. See “Certain Transactions –
Certain Matters Regarding Mr. Webster” for more
information.
|
For the
2007-2008 director term, each director not employed by the Company or any of its
subsidiaries (an “Outside Director”) received an annual retainer of $10,000 plus
compensation of $2,500 per regular meeting attended ($1,000 if attended via
telephone), $1,000 per special meeting attended ($500 if attended via telephone)
and $1,000 per committee meeting ($500 if attended via
telephone). The additional annual retainers for the Chairmen of the
Audit, Compensation and Nominating Committees were $12,500, $6,000 and $2,500,
respectively, and for non-chairman members of the Audit and Compensation
Committees were $7,500 and $4,000, respectively. All directors are
reimbursed for travel and lodging expenses of attending meetings.
Under the
Incentive Plan, the Chairmen of the Audit, Compensation and Nominating
Committees and the nonchairmen members of the Audit, Compensation and Nominating
Committees who are deemed by the Committee to be independent for purposes of the
rules of the Nasdaq Stock Market may be granted stock options and/or restricted
stock at the discretion of the Board of Directors or the Compensation
Committee. The vesting terms of any stock options or shares of
restricted stock granted to Outside Directors are at the discretion of the
Compensation Committee or the Board of Directors. Each stock option
granted to an Outside Director (1) has a ten-year term and (2) has an
exercise price equal to the fair market value of a share of Common Stock on the
date of grant. Shares of restricted stock granted to Outside
Directors in the 2007-2008 director term and the 2008-2009 director term will
become fully vested on the first anniversary of the date of grant.
Mr.
Webster did not receive the award for the Nominating Committee Chairman in the
2007-2008 director term. Mr. Webster will not receive the awards
mentioned above which he would otherwise be entitled in light of the consulting
agreement between the Company and an entity owned by Mr.
Webster. Although the Company may
-8-
from time
to time grant Mr. Webster stock options or restricted stock in his capacity
as a consultant to the Company, the Company does not expect to make any regular
grants of stock options or restricted stock to Mr. Webster.
Shareholder
Communication with the Board of Directors
Shareholders
may communicate with the Board by submitting their communications in writing,
addressed to the Board as a whole or, at the election of the shareholder, to one
or more specific directors, c/o Secretary, Carrizo Oil & Gas, Inc., 1000
Louisiana Street, Suite 1500, Houston, Texas 77002.
The Audit
Committee of the Board of Directors has established procedures for the receipt,
retention and treatment of complaints regarding accounting, internal accounting
controls, or auditing matters. Shareholders who wish to submit a
complaint under these procedures should submit the complaint in writing to: F.
Gardner Parker, Chairman of the Audit Committee, Carrizo Oil & Gas, Inc.,
1000 Louisiana Street, Suite 1500, Houston, Texas 77002. The Company
also has a confidential hotline by which employees can communicate concerns or
complaints regarding these matters.
Director
Attendance at Annual Meeting of Shareholders
The
Company does not have a policy regarding director attendance at annual meetings
of shareholders. Five of the Company’s directors attended the
2007 Annual Meeting of Shareholders.
Code
of Conduct
The
Company has a Code of Conduct that is applicable to all employees and directors
and that satisfies the requirements of Nasdaq Marketplace Rule
4350(n). The Code of Conduct is available on the Company’s website at
www.crzo.net.
Section
16(a) Reporting Compliance
Section
16(a) of the Exchange Act requires that the Company’s executive officers and
directors, and persons who own more than 10% of a registered class of the
Company’s equity securities, file reports of ownership and changes of ownership
with 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, 2007, 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 for one Form 4 filing reporting sales by S.P.
Johnson IV filed on July 9, 2007, one business day late.
-9-
COMPENSATION
DISCUSSION AND ANALYSIS
Overview
This
Compensation Discussion and Analysis covers the following topics:
|
·
|
our
process of setting executive
compensation;
|
|
·
|
the
philosophy and objectives of our executive compensation
program;
|
|
·
|
the
components of our executive compensation;
and
|
|
·
|
the
tax deductibility of executive
compensation.
|
The
Executive Compensation Process
The
Compensation Committee
The
Compensation Committee’s responsibilities, which are more fully described in the
Compensation Committee’s charter, include each of the following:
|
·
|
Annually
reviewing and approving our general compensation philosophy and overseeing
the development and implementation of our compensation
programs.
|
|
·
|
Reviewing
and approving corporate goals and objectives relevant to the compensation
of the CEO, evaluating the performance of the CEO in light of those goals
and objectives, and having the sole authority to determine the CEO’s
compensation level based on this
evaluation.
|
|
·
|
Reviewing
and approving the compensation of all of our other “officers” (as defined
in Rule 16a-1 promulgated under Section 16 of the Exchange
Act).
|
|
·
|
Making
recommendations to the Board with respect to our long-term incentive
plan.
|
|
·
|
Administering
our long-term incentive plan in accordance with the terms and conditions
of the plan, discharging any responsibilities imposed on, and exercising
all rights and powers granted to, the Compensation Committee by the plan,
and overseeing the activities of the individuals and entities responsible
for the day-to-day operation and administration of the
plan.
|
Compensation
Consultant
During
2007, the Compensation Committee retained AG Ferguson & Associates, Inc.
(“AG Ferguson”) to assist the Compensation Committee with executive compensation
matters, and the Compensation Committee has also retained AG Ferguson for 2008.
AG Ferguson has assisted the Compensation Committee on executive compensation
matters since 2005. AG Ferguson is responsible for preparing and presenting a
comprehensive competitive market study of the compensation levels and practices
of a group of industry peers. The Compensation Committee determines
the identity of the companies in the industry peer group annually. In
2005 and again in 2008, AG Ferguson also prepared and presented a director
compensation study using the same industry peer group. A
representative of AG Ferguson attends a meeting of the Compensation Committee
each year to present their annual compensation study. The
Compensation Committee believes AG Ferguson is independent of
management. AG Ferguson works exclusively for the Compensation
Committee and generally performs no services directly for
management. Management does not retain the services of a compensation
consultant.
The
Compensation Committee considers AG Ferguson’s market study of the industry peer
group before making decisions with respect to executive compensation (including
base salary, bonuses and equity-based compensation) in its
discretion.
-10-
The
companies that the Compensation Committee selects for the industry peer group
are designed to represent our competitors of similar size and scope in the
exploration and production sector of the energy industry that generally compete
in our areas of operation for both business opportunities and executive talent.
The industry peer group changes from time to time due to business combinations,
asset sales and other types of transactions that cause peer companies to no
longer exist or no longer be comparable. The Compensation Committee approves any
revisions to the peer group on an annual basis. The following 15
companies comprised the industry peer group used during 2007:
|
·
|
Abraxas
Petroleum Corporation
|
|
·
|
ATP
Oil & Gas Corporation
|
|
·
|
Berry
Petroleum Company
|
|
·
|
Brigham
Exploration Company
|
|
·
|
Delta
Natural Gas Company, Inc.
|
|
·
|
Edge
Petroleum Corporation
|
|
·
|
Energy
Partners, Ltd.
|
|
·
|
Goodrich
Petroleum Corporation
|
|
·
|
Harken
Energy Corporation
|
|
·
|
Parallel
Petroleum Corporation
|
|
·
|
Penn
Virginia Corporation
|
|
·
|
PetroQuest
Energy, Inc.
|
|
·
|
Range
Resources Corporation
|
|
·
|
Swift
Energy Company
|
|
·
|
The
Meridian Resource Corporation
|
Role
of Executive Officers in Our Executive Compensation Program
Our CEO
annually reviews the performance of our other named executive officers and makes
recommendations to the Compensation Committee regarding base salary adjustments,
cash bonuses and long-term incentive awards for the other named executive
officers (but not for himself), based in part on AG Ferguson’s market
study. Both our CEO and our CFO participate in meetings of the
Compensation Committee to discuss executive compensation, but they are
subsequently excused to allow the members of the Compensation Committee to meet
in executive session.
Philosophy
and Objectives of Our Executive Compensation Program
The
guiding philosophy and specific objectives of our compensation program are: (1)
to align executive compensation design and outcomes with our business strategy,
(2) to encourage management to create sustained value for our shareholders, (3)
to attract, retain, and engage our executives and (4) to support a
performance-based culture for all of our employees. These primary objectives are
evaluated annually by: (a) measuring and managing executive compensation, with
the goal of focusing a majority of the total compensation package on a balance
of short-term and long-term performance based incentives, (b) aligning incentive
plan goals with shareholder value-
-11-
added
measures and (c) having an open and objective discussion with management and the
Compensation Committee in setting goals for and measuring performance of the
named executive officers. We believe that each of these objectives is
important to our compensation program. Our compensation program is
designed to reward our executives for meeting or exceeding the short-term
financial and operating goals and the long-term strategy of the
Company.
Executive
Compensation Components
The
compensation of the named executive officers consists of the following
components:
|
·
|
base
salary;
|
|
·
|
annual
bonus;
|
|
·
|
long-term
equity-based compensation;
|
|
·
|
severance
and change of control benefits; and
|
|
·
|
perquisites
and other benefits.
|
We
believe that each of these components is necessary to achieve our objective of
retaining highly qualified executives and motivating them to maximize
shareholder return.
Base
Salary
Base pay
is designed to provide basic economic security for our executives and be
competitive with salary levels for comparable executive positions at the
companies in our industry peer group. The Compensation Committee
reviews comparable salary information provided by AG Ferguson as one factor to
be considered in determining the base pay for our executive officers and aims
for base pay for our executives to be within a general range of the median for
the peer group. 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 relative importance of these
factors varies among our executives depending on their positions and the
particular operations and functions for which they are
responsible. The employment contracts of the named executive officers
provide that base pay will be reviewed at least annually and may 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 our other executives. In the past, the
Compensation Committee has also taken into account positive financial results
and drilling success in determining base salaries. The Compensation
Committee considers all of these factors and ultimately makes a decision
regarding the base pay of the named executive officers in its
discretion.
Annual
Bonus
The
annual bonus for each named executive officer is determined by the Compensation
Committee. The annual bonus is a cash incentive designed to motivate
our executives to maximize shareholder returns. The Compensation
Committee reviews bonus information for comparable executive positions at the
companies in our industry peer group provided by AG Ferguson and aims for
bonuses for our executives to be within a general range of the median for the
peer group. The Compensation Committee also considers the other factors
described above under “Base Salary.” The employment agreement of each
named executive officer contemplates annual bonus awards in an amount comparable
to the annual bonus awards of other named executive officers, taking into
account the individual’s position and responsibilities. The
Compensation Committee ultimately makes a decision regarding the bonuses of the
named executive officers in its discretion. In April 2007, with
respect to 2006, each of Messrs. Johnson, Boling, Fisher, Evans and Smith was
awarded a bonus equal to 100%, 72%, 90%, 80% and 20%, respectively, of their
annual base pay. The bonuses with respect to 2008 have not yet been
determined. See Note 1 to the “Summary Compensation Table” for more
information on the 2007 bonuses.
-12-
Long-Term
Equity-Based Compensation
The
objectives of our long-term incentive plan are to (1) attract and retain the
services of key employees, qualified independent directors and qualified
consultants and other independent contractors and (2) encourage a sense of
proprietorship in and stimulate the active interest of those persons in our
development and financial success by making awards designed to provide
participants in the plan with a proprietary interest in our growth and
performance. Long-term equity-based compensation is tied to
shareholder return.
Particularly
in recent years, the market for executives in our industry has grown
increasingly competitive. The Compensation Committee believes,
therefore, that equity compensation awards are particularly important in
retaining our executives and attracting new executives. Under our
incentive plan, long-term incentive compensation includes stock options, which
generally have a ten-year term and vest on a schedule determined by the
Compensation Committee or the Board of Directors. The exercise price
of stock options granted is equal to or greater than the fair market value of
our 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 our executives with those of our shareholders by encouraging our executives
to enhance the value of our company and, hence, the price of the common stock
and each shareholder’s return.
Although
we have in the past relied upon stock option awards to provide long-term
incentives for our executives, in the last several years the Compensation
Committee has begun to rely upon restricted stock. Particularly given
the significant increase in our stock price in the past several years, the
Compensation Committee believes that the use of restricted stock may be a
preferable tool to incentivize executive officers. The Compensation
Committee reviews incentive award information for comparable executive positions
at the companies in our industry peer group provided by AG Ferguson and aims for
the size of awards for our executives to be within a general range of the median
for the peer group. The Compensation Committee also considers the
other factors described above under “Base Salary.” The Compensation
Committee ultimately makes a decision regarding the size of awards granted to
the named executive officers in its discretion. The shares of
restricted stock generally vest in one-third increments over a three-year
period, although the Compensation Committee has also granted special awards that
have different vesting schedules. The three-year vesting period the
Compensation Committee adopted is designed to encourage the retention of our
executives. The Compensation Committee retains the flexibility to
grant either restricted stock or stock options in the future, depending on
various factors, including the price of the common stock.
We may
periodically grant new awards to provide continuing incentive for future
performance. In making the decision to grant additional awards, the
Compensation Committee consider factors such as the size of previous grants and
the number of awards held. In determining whether to grant executive
officers awards under the plan, the Compensation Committee considers factors,
including that executive’s current ownership stake in our 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 awards would encourage the executive to remain with us and the value of
the executive’s service to us. We do not currently have any stock
ownership guidelines for officers or directors.
In
addition to regular grants, the Compensation Committee or the Board of Directors
may from time to time grant shares of restricted stock or stock options to newly
hired executives as a hiring incentive.
Severance
and Change of Control Benefits
As
described in more detail under “Employment Agreements” and “Potential Payments
to the Named Executive Officers Upon Termination or Change of Control,” we have
entered into employment agreements with the named executive officers that
provide for specified severance pay and benefits upon certain termination
events, including termination events after a change of control. The
employment agreements contain change of control provisions that we believe are
comparable to similar provisions employed by a majority of the companies in our
industry peer group. The Compensation Committee believes these
agreements encourage executives to remain in our employment in the event of a
change of control of the Company and during circumstances which indicate that a
change of control might occur. The Compensation Committee believes this program
is important in maintaining strong leadership and in encouraging retention in
these situations.
-13-
Perquisites
and Other Benefits
We also
make 401(k) contributions and pay insurance premiums for the named executive
officers and our other employees. We believe providing these benefits
as part of our overall compensation package is necessary to attract and retain
highly qualified executives and that these benefits are comparable to those
provided by our peer group. In the past, we have awarded overriding
royalties in certain oil and gas properties (assigned legal interests) to some
of the named executive officers, but we have since adopted a policy that we will
not grant any overriding royalty interests to our executive
officers. We also have a “notional” overriding royalty interest
participation arrangement with Mr. Fisher, which is not an assigned legal
interest but is based on our oil and gas production in a certain operated field
located in our Barnett Shale area in the Fort Worth Basin. Mr.
Fisher’s “Other Compensation” for 2007 and 2006 included $2,578 and $7,039 of
compensation from overriding royalty interests and $18,193 and $8,941 of
compensation from this “notional” overriding royalty interest,
respectively. See Note 4 to the “Summary Compensation Table” for more
information. We believe this arrangement serves as an additional
incentive for Mr. Fisher, as Vice President and Chief Operating Officer, to
create value for our shareholders. We may grant similar “notional”
overriding royalty participation rights to our named executive officers from
time to time in the future.
Deductibility
of Executive Compensation
Section 162(m) of the Internal
Revenue Code. Section 162(m) of the Internal Revenue Code of
1986, as amended, generally limits (to $1 million per covered executive) the
deductibility for federal income tax purposes of compensation paid to certain
executives, unless it is “performance-based compensation.” The
Compensation Committee and the Board of Directors will take deductibility or
nondeductibility of compensation into account but have in the past authorized,
and will retain the discretion in the future to authorize, the payment of
potentially nondeductible amounts.
-14-
SUMMARY
COMPENSATION TABLE
The
following table sets forth the compensation during 2007 and 2006 of the
Company’s Principal Executive Officer, the Company’s Principal Financial Officer
and the three other most highly compensated executive officers serving at
December 31, 2007 (collectively, the “named executive officers”).
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)(1)
|
Stock
Awards
($)(2)
|
Option
Awards ($)(3)
|
All
Other Compensation
($)(4)
|
Total
($)
|
|||||||||||||||||||
|
S.
P. Johnson IV
President
and
Chief
Executive Officer
|
2007
|
348,875
|
________
|
346,281
|
28,155
|
11,902
|
735,213
|
|||||||||||||||||||
|
2006
|
313,958
|
330,000
|
121,525
|
58,364
|
10,022
|
833,969
|
||||||||||||||||||||
|
Paul
F. Boling
Chief
Financial Officer,
Vice
President, Secretary
and
Treasurer
|
2007
|
208,333
|
________
|
427,893
|
6,542
|
7,373
|
650,141
|
|||||||||||||||||||
|
2006
|
188,239 |
140,400
|
301,291
|
44,142
|
6,250
|
680,322
|
||||||||||||||||||||
|
J.
Bradley Fisher
Vice President and
Chief Operating Officer
|
2007
|
250,000
|
________
|
551,399
|
11,410
|
29,629
|
842,438
|
|||||||||||||||||||
|
2006
|
245,907
|
216,000
|
405,609
|
11,410
|
23,677
|
902,603
|
||||||||||||||||||||
|
Gregory
E. Evans
Vice
President of
Exploration
|
2007
|
203,333
|
________
|
414,538 | 48,327 | 7,168 | 673,366 | |||||||||||||||||||
|
2006
|
185,770 | 152,000 | 288,475 | 48,327 | 6,176 | 680,748 | ||||||||||||||||||||
|
Richard
H. Smith(5)
Vice President of
Land
|
2007
|
186,667 |
________
|
142,808 | 0 | 6,618 | 336,093 | |||||||||||||||||||
|
2006
|
66,916 | 36,440 | 31,825 | 0 | 158 | 135,339 | ||||||||||||||||||||
___________
|
(1)
|
Amounts
earned with respect to 2007 have not yet been determined. We
expect that this determination will be made in April 2008. The
amount shown for 2006 includes amounts earned with respect to 2006 but
paid in the second quarter of 2007.
|
|
(2)
|
Represents
the compensation cost recognized by us in the applicable year related to
restricted stock awards in accordance with Statement of Financial
Accounting Standards No. 123(R). For a discussion of the
valuation assumptions, see Note 2 to our financial statements in our
Annual Report on Form 10-K for the year ended December 31,
2007. See “Grants of Plan-Based Awards Table” for information
on awards of restricted stock that we granted in
2007.
|
|
(3)
|
We
did not grant any stock option awards in 2007 or 2006. These
amounts represent the compensation cost recognized by us in the applicable
year related to option awards in prior years, in accordance with Statement
of Financial Accounting Standards No. 123(R). For a discussion
of the valuation assumptions, see Note 2 to our financial statements in
our Annual Report on Form 10-K for the year ended December 31,
2007.
|
|
(4)
|
The
amounts shown as “All Other Compensation” for the named executive officers
include the following:
|
-15-
|
Year
|
Mr. Johnson
|
Mr. Boling
|
Mr. Fisher
|
Mr. Evans
|
Mr. Smith
|
|
|
Matching
contributions under the 401(K) Plan
|
2007
2006
|
$
11,063
9,377
|
$
6,583
5,605
|
$
7,906
7,052
|
$
6,425
5,531
|
$
5,904
─
|
|
Life
insurance premium
|
2007
2006
|
839
645
|
790
645
|
952
645
|
743
645
|
714
158
|
|
Overriding
royalties
|
2007
2006
|
─
─
|
─
─
|
20,771
15,980
|
─
─
|
─
─
|
See
“Compensation Discussion and Analysis — Perquisites and Other Benefits” for a
discussion of overriding royalties granted to certain named executive
officers.
|
(5)
|
Mr.
Smith joined our Company in August
2006.
|
-16-
GRANTS
OF PLAN-BASED AWARDS
The table
below contains information with respect to plan-based awards to the named
executive officers during 2007.
|
Name
|
Grant
Date
|
All
Stock Awards: Number of Shares of Stock or Units (#)
|
Grant
Date Fair Value of Stock Awards ($/Sh) (1)
|
|
S.
P. Johnson IV
|
5/29/07
|
13,715
|
$542,565
|
|
Paul
F. Boling
|
5/29/07
|
7,990
|
316,084
|
|
J.
Bradley Fisher
|
5/29/07
|
9,370
|
370,677
|
|
Gregory
E. Evans
|
5/29/07
|
7,825
|
309,557
|
|
Richard
H. Smith
|
5/29/07
|
6,845
|
270,788
|
_____________
|
(1)
|
Represents
the grant date fair value per share of the awards calculated in accordance
with Statement of Financial Accounting Standards No.
123(R). For a discussion of the valuation assumptions, see Note
2 to our financial statements in our Annual Report on Form 10-K for
the year ended December 31,
2007.
|
-17-
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
The table
below presents information on the outstanding equity awards held by the named
executive officers as of December 31, 2007.
|
Option
Awards
|
Stock
Awards
|
|||||||||||||||||||||
|
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options
(#)
Unexercisable
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options
(#)
|
Option
Exercise Price
($)
|
Option
Expiration Date
|
Number
of Shares or Units of Stock That Have Not Vested
(#)
|
Market
Value of Shares or Units of Stock That Have Not Vested
($) (1)
|
|||||||||||||||
|
S.
P. Johnson
|
100,000 |
─
|
─
|
2.25 |
2/17/2010
|
─
|
─
|
|||||||||||||||
| 25,000 |
─
|
─
|
3.14 |
4/28/2010
|
─
|
─
|
||||||||||||||||
| 45,000 |
─
|
─
|
4.01 |
12/6/2011
|
─
|
─
|
||||||||||||||||
| 50,000 |
─
|
─
|
4.43 |
4/7/2013
|
─
|
─
|
||||||||||||||||
| 8,334 |
─
|
─
|
8.27 |
9/3/2014
|
─
|
─
|
||||||||||||||||
| 5,556 | (2) | 2,778 | (2) |
─
|
15.01 |
2/28/2015
|
─
|
─
|
|
|||||||||||||
|
─
|
─
|
─
|
─
|
─
|
3,100 | (3) | 169,725 | (3) | ||||||||||||||
|
─
|
─
|
─
|
─
|
─
|
10,000 | (4) | 547,500 | (4) | ||||||||||||||
|
─
|
─
|
─
|
─
|
─
|
13,715 | (5) | 750,896 | (5) | ||||||||||||||
|
Paul
F. Boling
|
19,250 |
─
|
─
|
6.98 |
2/19/2014
|
─
|
─
|
|||||||||||||||
|
─
|
─
|
─
|
─
|
─
|
1,570 | (3) | 85,958 | (3) | ||||||||||||||
|
─
|
─
|
─
|
─
|
─
|
25,000 | (6) | 1,368,750 | (6) | ||||||||||||||
|
─
|
─
|
─
|
─
|
─
|
3,067 | (4) | 167,918 | (4) | ||||||||||||||
|
─
|
─
|
─
|
─
|
─
|
7,990 | (5) | 437,453 | (5) | ||||||||||||||
|
J.
Bradley Fisher
|
─
|
─
|
─
|
─
|
─
|
1,950 | (3) | 106,763 | (3) | |||||||||||||
|
─
|
─
|
─
|
─
|
─
|
35,000 | (6) | 1,916,250 | (6) | ||||||||||||||
|
─
|
─
|
─
|
─
|
─
|
2,666 | (4) | 145,964 | (4) | ||||||||||||||
|
─
|
─
|
─
|
─
|
─
|
9,370 | (5) | 513,008 | (5) | ||||||||||||||
|
Gregory
E. Evans
|
6,666 | (7) | 6,667 | (7) |
─
|
14.90 |
3/2/2015
|
500 | (3) | 27,375 | (3) | |||||||||||
|
─
|
─
|
─
|
─
|
─
|
25,000 | (6) | 1,368,750 | (6) | ||||||||||||||
|
─
|
─
|
─
|
─
|
─
|
3,333 | (4) | 182,482 | (4) | ||||||||||||||
|
─
|
─
|
─
|
─
|
─
|
7,825 | (5) | 428,419 | (5) | ||||||||||||||
|
Richard
H. Smith
|
─
|
─
|
─
|
─
|
─
|
10,000 | (8) | 547,500 | (8) | |||||||||||||
|
─
|
─
|
─
|
─
|
─
|
1,260 | (5) | 68,985 | (5) | ||||||||||||||
|
─
|
─
|
─
|
─
|
─
|
5,585 | (9) | 305,779 | (9) | ||||||||||||||
_____________
|
(1)
|
Based
on the closing market price of our common stock on the Nasdaq Global
Select Market on December 31, 2007 ($54.75 per
share).
|
-18-
|
(2)
|
Represents
an award of options to purchase 8,334 shares of common stock that
vested/vests in one-third increments on February 28, 2006, 2007, and
2008.
|
|
(3)
|
Represents
an award of shares of restricted stock, which vest on May 23,
2008.
|
|
(4)
|
Represents
an award of shares of restricted stock, half of which vest on May 23, 2008
and the other half of which vest on May 23,
2009.
|
|
(5)
|
Represent
an award of shares of restricted stock, 15% of which vests on May 29,
2008, 60% of which vests on May 29, 2009 and the remaining 25% of which
vests on May 29, 2010.
|
|
(6)
|
Represents
an award of shares of restricted stock that vests on July 23,
2008.
|
|
(7)
|
Represents
an award of options to purchase 20,000 shares of common stock that
vested/vests in one-third increments on March 2, 2006, 2007 and
2008.
|
|
(8)
|
Represents
an award of shares of restricted stock, half of which vests on September
22, 2008 and the other half of which vest on September 22,
2009.
|
|
(9)
|
Represents
an award of shares of restricted stock that vests on May 29,
2010.
|
OPTION
EXERCISES AND STOCK VESTED
The
following table shows information concerning the amounts realized by the named
executive officers on the exercise of options to purchase our common stock
during 2007, and the vesting of restricted share awards during
2007:
|
Option
Awards
|
Stock
Awards
|
|||||||||||||||
|
Name
|
Number
of Shares Acquired on Exercise (#)
|
Value
Realized on Exercise
($)
|
Number
of Shares Acquired on Vesting
(#)
|
Value
Realized on Vesting
($)
|
||||||||||||
|
S.
P. Johnson IV
|
─
|
─
|
8,100 | 319,221 | ||||||||||||
|
Paul
F. Boling
|
19,750 | 808,384 | 3,103 | 121,793 | ||||||||||||
|
J.
Bradley Fisher
|
15,000 | 685,634 | 3,283 | 128,858 | ||||||||||||
|
Gregory
E. Evans
|
6,667 | 211,951 | 2,167 | 85,055 | ||||||||||||
|
Richard
H. Smith
|
─
|
─
|
5,000 | 223,100 | ||||||||||||
Compensation
Committee Interlocks and Insider Participation
The
members of the Compensation Committee during the last completed fiscal year were
Mr. Parker and Mr. Ramsey. There are no matters relating to
interlocks or insider participation that we are required to report.
Certain
Transactions
The
Charter of the Audit Committee also provides that the committee will review all
related party transactions required to be disclosed pursuant to Item 404 of
Regulation S-K for potential conflicts of interest. In addition, our
Code of Conduct requires that directors and officers and other employees
disclose possible conflicts of interest to our Chief Executive Officer, Chief
Financial Officer or a member of the Audit Committee.
-19-
Pinnacle
Transaction
We formed
Pinnacle Gas Resources, Inc. (“Pinnacle”) in 2003 when we and Rocky Mountain
Gas, Inc. contributed interests in certain leases for coal bed methane
properties to a joint venture. Simultaneously, affiliates and related
parties of CSFB Private Equity (“CSFB Parties”) contributed cash to
Pinnacle. The CSFB Parties currently own approximately 33% of the
outstanding shares of Pinnacle. During the second quarter of 2007,
Pinnacle became a publicly traded entity on the Nasdaq Global
Market.
We, the
CSFB Parties and others are party to an agreement providing generally for
multiple demand registration rights with respect to the Pinnacle common stock in
favor of the CSFB Parties, one demand registration right in favor of the Company
and certain piggyback registration rights for the Company subject to the
satisfaction of specified conditions. In June 2007, CCBM sold 41,894
shares of Pinnacle stock pursuant to registration rights it received from
Pinnacle. As of December 31, 2007, CCBM owned 2,417,208 shares of
Pinnacle common stock.
We
previously had the right to appoint two members of Pinnacle’s board of
directors. We agreed to give up this right in connection with certain
recapitalization and financing transactions. However, Mr. Johnson and
Mr. Parker currently serve on Pinnacle’s board of directors.
Our
Chairman, Steven A. Webster, serves as Chairman of Global Energy Partners, which
through June 30, 2005, was an affiliate of CSFB Private Equity. Mr.
Webster now serves as Co-Managing Partner of Avista Capital Partners LP, which
is not affiliated with CSFB but which has an affiliate that provides consulting
services to an affiliate of CSFB. Mr. Webster and certain of his
Avista associates serve on the board of directors of Pinnacle.
On
October 15, 2007, Pinnacle, Quest Resource Corporation (“Quest”), and Quest
Merger Sub, Inc., a wholly owned subsidiary of Quest (“Merger Sub”), entered
into an agreement and plan of merger whereby Merger Sub will merge with and into
Pinnacle. The merger agreement provides for Quest’s acquisition of all of the
issued and outstanding shares of Pinnacle’s common stock for aggregate
consideration of approximately 15.5 million shares of Quest’s common stock, or
approximately $98 million based on the closing price of Quest’s common stock on
March 28, 2008. Upon completion of the merger, each share of
Pinnacle’s common stock will be converted into the right to receive 0.5278
shares of Quest’s common stock. Completion of the merger transaction
is conditioned upon, among other things, adoption of the merger agreement by
both Pinnacle’s and Quest’s stockholders.
Certain
Matters Regarding Mr. Webster
In
December 2001, the Company sold to Mr. Webster a 2% working interest in
certain leases in Matagorda County and the right to participate in the Staubach
#1 well located within those leases in exchange for $20,000 and the payment by
Mr. Webster of a 33% promoted interest for drilling costs through casing
point of that well. The terms of this sale were consistent with the
terms of sales to other participants in this project.
In
November 1999, the Company entered into a month-to-month agreement, as amended,
with San Felipe Resource Company, an entity owned by Mr. Webster, under which
Mr. Webster provides consulting services to the Company in exchange for a fee of
$15,000 per month.
Due to
the limited capital available in the first half of 2006 to fund all of our
ongoing lease acquisition efforts in the Barnett Shale and other shale plays, we
elected to enter into several lease option agreements with a number of third
parties and with Mr. Webster (collectively, the “counterparties”). The terms and
conditions of the leasing arrangement (agreement terms are described below) with
Mr. Webster are consistent with the leasing arrangements we entered into with
the other third parties. These leasing arrangements provide us the option to
purchase leases from the counterparties, over an option period, generally 90
days, for the counterparties’ original cost of the leases plus an option fee.
Strategically, these leasing arrangements have allowed us to temporarily control
important acreage positions during periods that we have lacked sufficient
capital to directly acquire such oil and gas leases.
Since May
2006, we have acquired certain oil and gas leases through the aforementioned
lease option arrangement with Mr. Webster. The acquisitions were made pursuant
to a land option agreement between Mr. Webster and us dated January 25, 2006.
The terms and conditions of this leasing arrangement with Mr. Webster are
consistent with leasing arrangements we have entered into with the other third
parties. Under the option agreement, Mr. Webster agreed to acquire oil and gas
leases in areas where we are actively leasing or where we deem
-20-
prospective.
On or before the 90th day from the date that Mr. Webster acquires any lease in
these areas, we have the option to acquire these leases from Mr. Webster for
110% of Mr. Webster’s purchase price or, on the 90th day, pay a non-refundable
10% option extension fee to add a second 90-day option period. On or before the
end of this second 90-day option period, we have the option to pay Mr. Webster
110% of his original purchase price to acquire the lease. If, at the end of the
second option period, we have not exercised our purchase option, Mr. Webster
will retain ownership of the oil and gas leases. In addition to the cash
payments described above, we will assign a one-half of one percent of 8/8ths
overriding royalty interest (proportionally reduced to the actual net interest
in any given lease acquired) on any lease we acquire from Mr. Webster in the
first 90-day option period and a one percent of 8/8ths overriding royalty
interest (also proportionally reduced) on any lease acquired from Mr. Webster in
the second 90-day option period. As of December 31, 2006, Mr. Webster had
acquired oil and gas leases for approximately $4.2 million, we had paid
approximately $4.4 million for leases from Mr. Webster and we had made option
extension payments of approximately $48,000 to Mr. Webster. There are
currently no outstanding lease options under our arrangement with Mr.
Webster. There was no activity under this arrangement in
2007. We may continue to use these arrangements as a strategic
alternative.
Certain
Matters Regarding Mr. Carter
Mr. Carter
and his immediate family members collectively own interests directly and
indirectly through entities, which are royalty owners in the Company’s Louisiana
Delta Farms #1, Louisiana Delta Farms #2 and King Gas #1. Mr. Carter
also serves as an executive officer, general partner or controlling shareholder
of these entities (the “Black Stone Entities”) and in some cases he and his
family hold substantial interests in these entities. The Black Stone
Entities acquired the royalty interests from a third party in June
2004. The Company estimates that, during 2007, (1) the Black Stone
Entities collectively earned approximately $663,000 from working interests in
which the Company is a partial owner, (2) approximately $20,400 of the amount
received from these working interests was attributable to the ownership of Mr.
Carter and his immediate family, and (3) Mr. Carter’s family members received
approximately $5,500 directly from these working interests. In
addition, the Black Stone Entities own royalty interests in the undeveloped
Lazarus and Twins Prospects, which the Company may develop in the
future.
In 2007
and 2006, we acquired certain oil and gas leases for approximately $0.2 million
and $1.1 million, respectively, from Black Stone Acquisitions Partners I L.P.,
the general partner of which is Black Stone Minerals Company L.P. (“Black Stone
Minerals”). Thomas L. Carter, Jr., a member of our board of
directors, is the Chief Executive Officer and an owner of a significant interest
in Black Stone Minerals. Black Stone Acquisitions Partners also
retains a royalty interest in the acquired leases, which are located in
Mississippi. The terms and conditions of the lease agreement with
Black Stone Acquisitions Partners I L.P. are generally consistent with the lease
agreements that we have entered into with other third parties.
Employment
Agreements
The
Company has entered into employment agreements with each executive officer
listed below. The following chart shows the annual base salaries that
these executive officers are currently being paid by the Company.
-21-
|
Name and Current Position
|
Annual
Salary
|
|||
|
S.
P. Johnson
IV
|
$ | 348,875 | ||
|
President
and Chief Executive Officer
|
||||
|
Paul
F.
Boling
Chief
Financial Officer, Vice President, Secretary and
Treasurer
|
$ | 208,333 | ||
|
J.
Bradley
Fisher
Vice
President and Chief Operating Officer
|
$ | 250,000 | ||
|
Gregory
E.
Evans
Vice
President of Exploration
|
$ | 203,333 | ||
|
Richard
H.
Smith
Vice
President of Land
|
$ | 186,667 | ||
__________
Each of
the employment agreements of Mr. Johnson and Mr. Fisher 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. The employment agreements for Mr.
Boling, Mr. Evans and Mr. Smith have an initial one-year term; provided that at
the date of the agreement and on every day thereafter, the term of such
employment agreement is automatically 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) for any reason (including by reason of
death) during a sixty day period following the elapse of one year after such a
change of control (“window period”) or (y) by the employee with good reason (as
defined), under the agreements the employee will generally be entitled to (1) an
immediate lump sum cash payment equal to 150% for Messrs. Johnson and Fisher and
100% in the case of Mr. Boling, Mr. Evans and Mr. Smith (375% for Mr. Johnson
and 275% for Mr. Fisher, if termination occurs after or in anticipation of 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%, (2)
continued participation in all the Company’s welfare benefit plans and continued
life insurance and medical benefits coverage, (3) a pro-rated bonus for the year
of termination and (4) 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 and an extension of the period
of exercisability of any such awards until the earlier of (A) one year following
his date of termination or (B) the date such awards would have lapsed had the
employee remained employed for the remaining term. If the termination
is after or in anticipation of a change of control, the assumed remaining
employment period for Mr. Boling, Mr. Evans and Mr. Smith for purposes of
calculating the lump sum described above in subparagraph (1) shall be 18
months. 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 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, a prorated
annual bonus for the year of death, continued welfare benefits for the
employee’s dependents for one year following death and immediate vesting and
extension of exercisability of equity awards as described above.
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. In the event of a dispute regarding
the employee’s rights upon termination of employment, (1) the parties are
required to submit the dispute to arbitration; (2) the Company is only required
to pay the employee’s attorneys fees pending a dispute if the termination
occurred within two years after a change in control (as defined in the
agreement) or, in the case of a termination before a change in control, if the
termination was not initiated by the employee (with or without good reason); and
(3) the Company is only required to pay the employee severance pending
resolution of a dispute in the case of a termination within two years after a
change in control. The
-22-
agreements
also provide that the employees will be entitled to a gross-up payment to offset
the effect of any excise tax imposed under Section 4999 of the Code in
connection with payments contingent on a change of control. Upon a
voluntary termination of employment, the employees have agreed to be subject to
one-year noncompetition and one-year nonsolicitation covenants.
Potential
Payments to the Named Executive Officers Upon Termination or Change of
Control
The
following tables provide information regarding potential payments to each of our
named executive officers in connection with certain termination events,
including a termination related to a change in control of our
company.
|
Executive
Benefits and Payments Upon Termination of
S.
P. Johnson IV
(1)
|
Voluntary
Termination (No Good Reason/No Change of Control)
|
Good
Reason/
Involuntary
Not
for Cause Termination
|
Involuntary
For
Cause Termination
|
Change
of Control Termination (Involuntary, Good Reason,
Voluntary)
|
Death
|
Disability
|
||||||||||||||||||
|
Severance
Payments
|
$ | 0 | $ | 855,569 | (2) | $ | 0 | $ | 1,615,611 | (3) | $ | 848,875 | $ | 855,569 | ||||||||||
|
Long-Term
Incentives:
|
||||||||||||||||||||||||
|
Unvested
and Accelerated Stock Options
(4)
|
$ | 0 | $ | 110,398 | $ | 0 | $ | 110,398 | $ | 110,398 | $ | 110,398 | ||||||||||||
|
Unvested
and Accelerated Restricted Shares
(5)
|
$ | 0 | $ | 1,468,121 | $ | 0 | $ | 1,468,121 | $ | 1,468,121 | $ | 1,468,121 | ||||||||||||
|
Life
Insurance Proceeds
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 500,000 | $ | 0 | ||||||||||||
|
Disability
Benefits
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | (6) | |||||||||||
|
Benefits
Continuation
|
$ | 0 | $ | 20,004 | $ | 0 | $ | 20,004 | $ | 20,004 | $ | 20,004 | ||||||||||||
|
280G
Tax Gross-up
|
$ | 0 | $ | 0 | $ | 0 | $ | 607,044 | $ | 0 | $ | 0 | ||||||||||||
|
Total:
|
$ | 0 | $ | 2,454,092 | $ | 0 | $ | 3,821,178 | $ | 2,947,398 | $ | 2,454,092 | ||||||||||||
|
(1)
|
The
executive’s current base salary is $348,000. Information in
this table assumes a termination date of December 31, 2007 and a price per
share of our common stock of $54.75 (the closing
market price per share on December 31,
2007).
|
|
(2)
|
Reflects
receipt by the executive of a cash severance payment of an amount equal to
(a) 150% of the executive’s base salary that would have been paid to
the executive for the period beginning with the date of termination and
ending on the date that is one year later plus (b) the product of the
annual bonus that would have been paid to the executive with respect to
the year of the termination and a fraction, the numerator of which is the
number of days in the year through the date of termination, and the
denominator of which is 365. This payment is in addition to the
payment of the executive’s base salary through the date of
termination.
|
|
(3)
|
Reflects
receipt by the executive of a cash severance payment of an amount equal to
(a) 375% of the executive’s base salary that would have been paid to
the executive for the period beginning with the date of termination and
ending on the date that is one year later plus (b) the product of the
annual bonus that would have been paid to the executive with respect to
the year of the termination and a fraction, the numerator of which is the
number of days in the year through the date of termination, and the
denominator of which is 365. This payment is in addition to the
payment of the executive’s base salary through the date of
termination.
|
|
(4)
|
Represents
the value of accelerated vesting of stock options that were unvested at
December 31, 2007 based on the closing market price per share of our
common stock on December 31, 2007.
|
-23-
|
(5)
|
Represents
the value of accelerated vesting of shares of restricted stock that were
unvested at December 31, 2007 based on the closing market price per
share of our common stock on December 31,
2007.
|
|
(6)
|
Our
named executive officers are not eligible for any disability benefits that
are not available to our other
employees.
|
|
Executive
Benefits and Payments Upon Termination of
Paul
F. Boling
(1)
|
Voluntary
Termination (No Good Reason/No Change of Control)
|
Good
Reason/
Involuntary
Not
for Cause Termination
|
Involuntary
For Cause Termination
|
Change
of Control Termination (Involuntary, Good Reason, Voluntary)
|
Death
|
Disability
|
||||||||||||||||||
|
Severance
Payments
|
$ | 0 | $ | 351,717 | (2) | $ | 0 | $ | 448,138 | (3) | $ | 150,000 | $ | 351,717 | ||||||||||
|
Long-Term
Incentives:
|
||||||||||||||||||||||||
|
Unvested
and Accelerated Stock Options
(4)
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||
|
Unvested
and Accelerated Restricted Shares
(5)
|
$ | 0 | $ | 2,060,000 | $ | 0 | $ | 2,060,000 | $ | 2,060,000 | $ | 2,060,000 | ||||||||||||
|
Life
Insurance Proceeds
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 500,000 | $ | 0 | ||||||||||||
|
Disability
Benefits
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | (6) | |||||||||||
|
Benefits
Continuation
|
$ | 0 | $ | 20,004 | $ | 0 | $ | 20,004 | $ | 20,004 | $ | 20,004 | ||||||||||||
|
280G
Tax Gross-up
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||
|
Total:
|
$ | 0 | $ | 2,431,781 | $ | 0 | $ | 2,528,202 | $ | 2,730,064 | $ | 2,431,781 | ||||||||||||
|
(1)
|
The
executive’s current base salary is $208,000. Information in
this table assumes a termination date of December 31, 2007 and a price per
share of our common stock of $54.75 (the closing
market price per share on December 31,
2007).
|
|
(2)
|
Reflects
receipt by the executive of a cash severance payment of an amount equal to
(a) 100% of the executive’s base salary that would have been paid to
the executive for the period beginning with the date of termination and
ending on the date that is twelve months later plus (b) the product
of the annual bonus that would have been paid to the executive with
respect to the year of the termination and a fraction, the numerator of
which is the number of days in the year through the date of termination,
and the denominator of which is 365. This payment is in
addition to the payment of the executive’s base salary through the date of
termination.
|
|
(3)
|
Reflects
receipt by the executive of a cash severance payment of an amount equal to
(a) 100% of the executive’s base salary that would have been paid to
the executive for the period beginning with the date of termination and
ending on the date that is eighteen months later plus (b) the product
of the annual bonus that would have been paid to the executive with
respect to the year of the termination and a fraction, the numerator of
which is the number of days in the year through the date of termination,
and the denominator of which is 365. This payment is in
addition to the payment of the executive’s base salary through the date of
termination.
|
|
(4)
|
Represents
the value of accelerated vesting of stock options that were unvested at
December 31, 2007 based on the closing market price per share of our
common stock on December 31, 2007.
|
|
(5)
|
Represents
the value of accelerated vesting of shares of restricted stock that were
unvested at December 31, 2007 based on the closing market price per
share of our common stock on December 31,
2007.
|
|
(6)
|
Our
named executive officers are not eligible for any disability benefits that
are not available to our other
employees.
|
-24-
|
Executive
Benefits and Payments Upon Termination of
J.
Bradley Fisher
(1)
|
Voluntary
Termination (No Good Reason/No Change of Control)
|
Good
Reason/
Involuntary
Not
for Cause Termination
|
Involuntary
For Cause Termination
|
Change
of Control Termination (Involuntary, Good Reason, Voluntary)
|
Death
|
Disability
|
||||||||||||||||||
|
Severance
Payments
|
$ | 0 | $ | 588,092 | (2) | $ | 0 | $ | 890,668 | (3) | $ | 225,000 | $ | 588,092 | ||||||||||
|
Long-Term
Incentives:
|
||||||||||||||||||||||||
|
Unvested
and Accelerated Stock Options
(4)
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||
|
Unvested
and Accelerated Restricted Shares
(5)
|
$ | 0 | $ | 2,682,020 | $ | 0 | $ | 2,682,020 | $ | 2,682,020 | $ | 2,682,020 | ||||||||||||
|
Life
Insurance Proceeds
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 500,000 | $ | 0 | ||||||||||||
|
Disability
Benefits
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | (6) | |||||||||||
|
Benefits
Continuation
|
$ | 0 | $ | 20,004 | $ | 0 | $ | 20,004 | $ | 20,004 | $ | 20,004 | ||||||||||||
|
280G
Tax Gross-up
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||
|
Total:
|
$ | 0 | $ | 3,290,116 | $ | 0 | $ | 3,595,692 | $ | 3,427,024 | $ | 3,290,116 | ||||||||||||
|
(1)
|
The
executive’s current base salary is $250,000. Information in
this table assumes a termination date of December 31, 2007 and a price per
share of our common stock of $54.75 (the closing
market price per share on December 31,
2007).
|
|
(2)
|
Reflects
receipt by the executive of a cash severance payment of an amount equal to
(a) 275% of the executive’s base salary that would have been paid to
the executive for the period beginning with the date of termination and
ending on the date that is one year later plus (b) the product of the
annual bonus that would have been paid to the executive with respect to
the year of the termination and a fraction, the numerator of which is the
number of days in the year through the date of termination, and the
denominator of which is 365. This payment is in addition to the
payment of the executive’s base salary through the date of
termination.
|
|
(3)
|
Reflects
receipt by the executive of a cash severance payment of an amount equal to
(a) 150% of the executive’s base salary that would have been paid to
the executive for the period beginning with the date of termination and
ending on the date that is one year later plus (b) the product of the
annual bonus that would have been paid to the executive with respect to
the year of the termination and a fraction, the numerator of which is the
number of days in the year through the date of termination, and the
denominator of which is 365. This payment is in addition to the
payment of the executive’s base salary through the date of
termination.
|
|
(4)
|
Represents
the value of accelerated vesting of stock options that were unvested at
December 31, 2007 based on the closing market price per share of our
common stock on December 31, 2007.
|
|
(5)
|
Represents
the value of accelerated vesting of shares of restricted stock that were
unvested at December 31, 2007 based on the closing market price per
share of our common stock on December 31,
2007.
|
|
(6)
|
Our
named executive officers are not eligible for any disability benefits that
are not available to our other
employees.
|
-25-
|
Executive
Benefits and Payments Upon Termination of
Gregory
E. Evans
(1)
|
Voluntary
Termination (No Good Reason/No Change of Control)
|
Good
Reason/
Involuntary
Not
for Cause Termination
|
Involuntary
For Cause Termination
|
Change
of Control Termination (Involuntary, Good Reason,
Voluntary)
|
Death
|
Disability
|
||||||||||||||||||
|
Severance
Payments
|
$ | 0 | $ | 359,542 | (2) | $ | 0 | $ | 453,649 | (3) | $ | 162,666 | $ | 359,542 | ||||||||||
|
Long-Term
Incentives:
|
||||||||||||||||||||||||
|
Unvested
and Accelerated Stock Options
(4)
|
$ | 0 | $ | 265,680 | $ | 0 | $ | 265,680 | $ | 265,680 | $ | 265,680 | ||||||||||||
|
Unvested
and Accelerated Restricted Shares
(5)
|
$ | 0 | $ | 2,007,044 | $ | 0 | $ | 2,007,044 | $ | 2,007,044 | $ | 2,007,044 | ||||||||||||
|
Life
Insurance Proceeds
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 500,000 | $ | 0 | ||||||||||||
|
Disability
Benefits
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | (6) | |||||||||||
|
Benefits
Continuation
|
$ | 0 | $ | 20,004 | $ | 0 | $ | 20,004 | $ | 20,004 | $ | 20,004 | ||||||||||||
|
280G
Tax Gross-up
|
$ | 0 | $ | 0 | $ | 0 | $ | 201,410 | $ | 0 | $ | 0 | ||||||||||||
|
Total:
|
$ | 0 | $ | 2,652,270 | $ | 0 | $ | 2,947,787 | $ | 2,953,394 | $ | 2,652,270 | ||||||||||||
|
(1)
|
The
executive’s current base salary is $203,000. Information in
this table assumes a termination date of December 31, 2007 and a price per
share of our common stock of $54.75 (the closing
market price per share on December 31,
2007).
|
|
(2)
|
Reflects
receipt by the executive of a cash severance payment of an amount equal to
(a) 100% of the executive’s base salary that would have been paid to
the executive for the period beginning with the date of termination and
ending on the date that is twelve months later plus (b) the product
of the annual bonus that would have been paid to the executive with
respect to the year of the termination and a fraction, the numerator of
which is the number of days in the year through the date of termination,
and the denominator of which is 365. This payment is in
addition to the payment of the executive’s base salary through the date of
termination.
|
|
(3)
|
Reflects
receipt by the executive of a cash severance payment of an amount equal to
(a) 100% of the executive’s base salary that would have been paid to
the executive for the period beginning with the date of termination and
ending on the date that is eighteen months later plus (b) the product
of the annual bonus that would have been paid to the executive with
respect to the year of the termination and a fraction, the numerator of
which is the number of days in the year through the date of termination,
and the denominator of which is 365. This payment is in
addition to the payment of the executive’s base salary through the date of
termination.
|
|
(4)
|
Represents
the value of accelerated vesting of stock options that were unvested at
December 31, 2007 based on the closing market price per share of our
common stock on December 31, 2007.
|
|
(5)
|
Represents
the value of accelerated vesting of shares of restricted stock that were
unvested at December 31, 2007 based on the closing market price per
share of our common stock on December 31,
2007.
|
|
(6)
|
Our
named executive officers are not eligible for any disability benefits that
are not available to our other
employees.
|
-26-
|
Executive
Benefits and Payments Upon Termination of
Richard
H. Smith
(1)
|
Voluntary
Termination (No Good Reason/No Change of Control)
|
Good
Reason/
Involuntary
Not
for Cause Termination
|
Involuntary
For Cause Termination
|
Change
of Control Termination (Involuntary, Good Reason, Voluntary)
|
Death
|
Disability
|
||||||||||||||||||
|
Severance
Payments
|
$ | 0 | $ | 218,073 | (2) | $ | 0 | $ | 304,466 | (3) | $ | 37,333 | $ | 218,073 | ||||||||||
|
Long-Term
Incentives
|
||||||||||||||||||||||||
|
Unvested
and Accelerated Stock Options
(4)
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||
|
Unvested
and Accelerated Restricted Shares
(5)
|
$ | 0 | $ | 922,264 | $ | 0 | $ | 922,264 | $ | 922,264 | $ | 922,264 | ||||||||||||
|
Life
Insurance Proceeds
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 500,000 | $ | 0 | ||||||||||||
|
Disability
Benefits
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | (6) | |||||||||||
|
Benefits
Continuation
|
$ | 0 | $ | 20,004 | $ | 0 | $ | 20,004 | $ | 20,004 | $ | 20,004 | ||||||||||||
|
280G
Tax Gross-up
|
$ | 0 | $ | 0 | $ | 0 | $ | 155,515 | $ | 0 | $ | 0 | ||||||||||||
|
Total:
|
$ | 0 | $ | 1,160,340 | $ | 0 | $ | 1,402,248 | $ | 1,479,601 | $ | 1,160,340 | ||||||||||||
|
(1)
|
The
executive’s current base salary is $186,667. Information in
this table assumes a termination date of December 31, 2007 and a price per
share of our common stock of $54.75 (the closing market price per share on
December 31, 2007).
|
|
(2)
|
Reflects receipt by the executive
of a cash severance payment of an amount equal to (a) 100% of the
executive’s base salary that would have been paid to the executive for the
period beginning with the date of termination and ending on the date that
is twelve months later plus (b) the product of the annual bonus that
would have been paid to the executive with respect to the year of the
termination and a fraction, the numerator of which is the number of days
in the year through the date of termination, and the denominator of which
is 365. This payment is in addition to the payment of the
executive’s base salary through the date of
termination.
|
|
(3)
|
Reflects
receipt by the executive of a cash severance payment of an amount equal to
(a) 100% of the executive’s base salary that would have been paid to
the executive for the period beginning with the date of termination and
ending on the date that is eighteen months later plus (b) the product
of the annual bonus that would have been paid to the executive with
respect to the year of the termination and a fraction, the numerator of
which is the number of days in the year through the date of termination,
and the denominator of which is 365. This payment is in
addition to the payment of the executive’s base salary through the date of
termination.
|
|
(4)
|
Represents
the value of accelerated vesting of stock options that were unvested at
December 31, 2007 based on the closing market price per share of our
common stock on December 31, 2007.
|
|
(5)
|
Represents
the value of accelerated vesting of shares of restricted stock that were
unvested at December 31, 2007 based on the closing market price per
share of our common stock on December 31,
2007.
|
|
(6)
|
Our
named executive officers are not eligible for any disability benefits that
not available to our other
employees.
|
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 the members of the Audit Committee are “independent,” as
required by applicable standards of
-27-
the
Nasdaq Stock Market. The Audit Committee operates pursuant to a
written charter adopted by our Board of Directors. A copy of the
Audit Committee Charter is available on the Company’s website at www.crzo.net.
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 registered
public accounting firm is 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 registered
public accounting firm. The Audit Committee has also discussed with
the independent registered public accounting firm 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 registered public
accounting firm 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 Company’s
Annual Report on Form 10-K for the fiscal year ended December 31,
2007.
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 registered public accounting firm. 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 registered
public accounting firm is in fact “independent.”
The Audit
Committee
F.
Gardner Parker
Thomas L.
Carter, Jr.
Roger A.
Ramsey
Pursuant
to SEC Rules, the foregoing Audit Committee Report is not deemed “filed” with
the SEC and is not incorporated by reference into the Company’s Annual Report on
Form 10-K.
Compensation
Committee Report on Executive Compensation
Our
compensation committee has reviewed and discussed with management the section
titled “Compensation Discussion and Analysis” included in this proxy
statement. Based on that review and discussion, we have recommended
to the Company’s board of directors the inclusion of the “Compensation
Discussion and Analysis” section in the Company’s proxy statement for the 2008
annual general meeting of shareholders.
This
report is issued as
of ,
2008.
The
Compensation Committee
F.
Gardner Parker
Roger A.
Ramsey
-28-
Pursuant
to SEC Rules, the foregoing Compensation Committee Report is not deemed “filed”
with the SEC and is not incorporated by reference into the Company’s Annual
Report on Form 10-K.
-29-
Equity
Compensation Plans
Information
concerning our equity compensation plans at December 31, 2007 is as
follows:
|
Plan
Category
|
Number
of Securities to be Issued Upon
Exercise
of Outstanding Options
(a)
|
Weighted-Average
Exercise Price of Outstanding Options
(b)
|
Number
of Securities Remaining Available for Future Issuance Under Equity
Compensation Plans (Excluding SecuritiesReflected in Column
(a))
(c)
|
|||||||||
|
Equity
compensation plans
approved
by security
holders
|
761,921 | $ | 4.67 | 641,494 | ||||||||
PROPOSAL
2
AMENDMENT
OF ARTICLES
OF INCORPORATION
TO
INCREASE THE AUTHORIZED SHARES
The Board
of Directors has approved a resolution to amend Article Four of our Amended and
Restated Articles of Incorporation (as amended to date, the “Articles”) to
increase (1) the total number of shares of all classes of stock which the
Company will have authority to issue from 50,000,000 to 100,000,000 and (2) the
number of authorized shares of Common Stock from 40,000,000 to 90,000,000 (the
“Amendment”).
The
proposed amendment would replace the first sentence of Article Four of the
Articles with the following sentence:
“The
aggregate number of shares that the corporation shall have the authority to
issue, is 100,000,000 shares, consisting of 90,000,000 shares of Common Stock,
par value $0.01 per share, and 10,000,000 shares of Preferred Stock, par value
$0.01 per share.”
If the
Amendment is approved by at least a majority of our outstanding shares, the
Amendment will become effective upon the filing of articles of amendment with
the Secretary of State of the State of Texas, which filing is expected to occur
promptly after the Annual Meeting. Thereafter, the additional shares
may be issued from time to time by action of our Board of Directors on such
terms and for such purposes as our Board of Directors may consider appropriate
from time to time.
Current
Capital Structure
Under Texas law, the Company may only
issue shares of capital stock to the extent such shares have been authorized
under the Articles. The Articles currently authorize the Company to
issue 40,000,000 shares of Common Stock and 10,000,000 shares of preferred
stock, par value $0.01 per share (the “Preferred Stock”). As of March
28, 2008, 30,615,845 shares of Common Stock were issued and outstanding and
761,921 shares of Common Stock were reserved for issuance. After
taking into account the reserved shares, a balance of 8,622,234 authorized but
unissued shares of Common Stock would be available for issuance under the
Articles. No shares of Preferred Stock as of such date were issued
and outstanding or reserved for issuance.
-30-
Reasons
for Amendment
The
number of issued and outstanding shares of Common Stock has increased from
10,375,000 as of December 31, 1997 to 30,615,845 as of March 28,
2008. As a result, the number of available shares of Common Stock has
been reduced. Our Board of Directors considers it desirable that it
have the flexibility to have additional shares of Common Stock available for
issuance in connection with possible financings, stock dividends or stock
splits, acquisition transactions, employee benefit plans and other corporate
purposes. The availability of the additional shares for issuance in
the future would give us greater flexibility and would generally allow shares of
Common Stock to be issued without the expense and delay of a special
shareholders’ meeting.
If the
Amendment is approved by the shareholders, the Board of Directors does not
intend to solicit further shareholder approval prior to the issuance of any
additional shares of Common Stock, except as may be required by applicable law
or the rules of any stock exchange or quotation system on which the Common Stock
may be listed or quoted. The Nasdaq Global Select Market, on which
the Common Stock is quoted, currently requires shareholder approval in certain
instances, including in connection with transactions where the present or
potential issuance of shares is or will be equal to or in excess of 20% of the
number of shares of Common Stock outstanding before such issuance.
The
proposed Amendment could, under certain circumstances, have an anti-takeover
effect, although this is not the intention of this proposal. For
example, in the event of a hostile attempt to take over control of Carrizo, it
may be possible for us to endeavor to impede the attempt by issuing shares of
Common Stock, which would dilute the voting power of the other outstanding
shares and increase the potential cost to acquire control of us. The
proposed Amendment therefore may have the effect of discouraging unsolicited
takeover attempts and potentially limiting the opportunity for our shareholders
to dispose of their shares at a premium, which is often offered in takeover
attempts, or that may be available under a merger proposal. The
proposed Amendment may have the effect of permitting our current management,
including the current Board, to retain its position, and place it in a better
position to resist changes that shareholders may wish to make if they are
dissatisfied with the conduct of our business. However, the Board is not aware
of any attempt to take control of Carrizo, and the Board has not presented this
proposal with the intent that it be utilized as a type of anti-takeover
device. The Board has no current plans for the issuance of the
additional shares of Common Stock for which authorization is being sought,
except in connection with equity compensation plans.
To the
extent that additional authorized shares are issued in the future, the issuance
may decrease the existing shareholders’ percentage equity ownership and,
depending on the price at which they are issued, could be dilutive to the
existing shareholders. The holders of Common Stock have no preemptive
rights and the Board of Directors has no plans to grant such rights with respect
to any such shares.
Required
Vote and Board of Directors Recommendation
Approval
of the proposed Amendment will require the affirmative vote of the holders of at
least a majority of the outstanding shares of Common Stock outstanding on the
record date. The persons named in the accompanying proxy will vote in
accordance with the choice specified on the proxy, or, if no choice is properly
indicated, in favor of the adoption of the proposed
Amendment. Abstentions and broker non-votes will be counted as
present for the purposes of determining if a quorum is present but will have the
same effect as a vote against the proposed Amendment. A failure to
vote shares will also have the effect of a vote against the
Amendment.
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE ADOPTION
OF THE PROPOSED AMENDMENT.
PROPOSAL
3
APPOINTMENT
OF PANNELL KERR FORSTER
OF TEXAS, P.C.
AS
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board
of Directors has appointed, and recommends the approval of the appointment of,
Pannell Kerr Forster of Texas, P.C. as independent registered public accounting
firm for the fiscal year ending December 31,
-31-
2008. PKF
served as the Company’s independent public registered accounting firm for the
fiscal year ended December 31, 2007. Representatives of PKF 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 PKF as the Company’s independent registered public
accounting firm for 2008. The affirmative vote of a majority of the
votes cast at the Annual Meeting will be required for
ratification. Although the appointment of an independent registered
public accounting firm is not required to be submitted to a vote of
shareholders, the Board of Directors recommended that the appointment be
submitted to our shareholders for approval. If our shareholders do
not approve the appointment of PKF, the Board of Directors will consider the
appointment of another independent registered public accounting
firm.
Independent
Registered Public Accounting Firm’s Fees
PKF
billed the Company as set forth in the table below for professional services
rendered for the audit of the Company’s annual financial statements for the
years ended December 31, 2007 and 2006 and for the review of the Company’s
quarterly financial statements included in the Company’s Quarterly Reports on
Form 10-Q for 2007 and 2006 and for work on other SEC filings.
|
Description
|
Fiscal 2007
|
Fiscal 2006
|
||||||
|
Audit
Fees
|
$ | 641,531 | $ | 364,040 | ||||
Audit
Committee Preapproval Policy
The Audit
Committee has adopted a policy that all audit, review or attest engagements and
permissible non-audit services, including the fees and terms thereof, to be
performed by the independent registered public accounting firm (subject to, and
in compliance with, the de
minimis exception for non-audit services described in Section
10A(i)(1)(B) of the Securities Exchange Act of 1934 and the applicable rules and
regulation of the SEC) will be subject to specific pre-approval of the Audit
Committee. No non-audit services were performed by PKF pursuant to
the de minimis
exception in 2007.
The
Board of Directors recommends that shareholders vote FOR the ratification of the
appointment of PKF as independent registered public accounting firm for the
Company for 2008.
ADDITIONAL
INFORMATION
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 2009 Annual Meeting of Shareholders must be received by the
Company no later than January , 2009. However,
if the date of the 2009 Annual Meeting of Shareholders changes by more than 30
days from the date of the 2008 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.
-32-
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 2009 Annual Meeting
of Shareholders is the same as the date of the 2008 Annual Meeting of
Shareholders, shareholders who wish to nominate directors or to bring business
before the 2009 Annual Meeting of Shareholders must notify the Company no later
than March 23, 2009.
A copy of
the Company’s Bylaws setting forth the requirements for the nomination of
director candidates by shareholders and the requirements for proposals by
shareholders may be obtained from the Company’s Secretary at the address
indicated on the first page of this proxy statement. A nomination or
proposal that does not comply with the above procedures will be
disregarded. Compliance with the above procedures does not require
the Company to include the proposed nominee or proposal in the Company’s proxy
solicitation material.
Householding
The 2007
Annual Report to Shareholders, which includes financial statements of the
Company for the year ended December 31, 2007, has been mailed to all
shareholders entitled to vote at the Annual Meeting on or before the date of
mailing this proxy statement. The SEC permits a single set of annual
reports and proxy statements to be sent to any household at which two or more
shareholders reside if they appear to be members of the same
family. Each shareholder continues to receive a separate proxy
card. This procedure, referred to as householding, reduces the volume
of duplicate information shareholders receive and reduces mailing and printing
expenses. A number of brokerage firms have instituted
householding.
As a
result, if you hold your shares through a broker and you reside at an address at
which two or more shareholders reside, you will likely be receiving only one
annual report and proxy statement unless any shareholder at that address has
given the broker contrary instructions. However, if any such
beneficial shareholder residing at such an address wishes to receive a separate
annual report or proxy statement in the future, that shareholder should contact
their broker or send a request to the Company’s Secretary at the Company’s
principal executive offices, 1000 Louisiana, Suite 1500, Houston, Texas 77002,
telephone number (713) 328-1000. The Company will deliver,
promptly upon written or oral request to the Secretary, a separate copy of the
2007 Annual Report and this proxy statement to a beneficial shareholder at a
shared address to which a single copy of the documents was
delivered. The Annual Report is not a part of the proxy solicitation
material.
Annual
Report on Form 10-K
Carrizo
will provide to each shareholder, without charge and upon written request, a
copy of its Annual Report on Form 10-K for 2007, including the financial
statements, schedules and a list of exhibits. Any such written
requests should be directed to the Secretary of the Company, at the address
indicated on the first page of this proxy statement.
By Order
of the Board of Directors
/s/ Paul F.
Boling
Paul F.
Boling
Secretary
Dated: ,
2008
Houston,
Texas
-33-
CARRIZO
OIL & GAS,
INC.
JUNE 10,
2008
THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints S.P.
Johnson IV and Paul F. Boling, jointly and severally, proxies, with full power
of substitution and with discretionary authority to vote all shares of Common
Stock that the undersigned is entitled to vote at the Annual Meeting of
Shareholders of Carrizo Oil & Gas, Inc. (the "Company") to be held on
Tuesday, June 10, 2008, at The
Downtown Club at Plaza, 49th Floor, One Shell Plaza, 910 Louisiana Street,
Houston, Texas, at 9:00 a.m. or at any adjournment thereof, hereby
revoking any proxy heretofore given. This proxy, when
properly executed, will be voted in the manner directed herein. In the absence
of specific direction to the contrary, this proxy will be voted for proposals 1,
2, 3 and 4.
The undersigned hereby acknowledges
receipt of the Notice of, and Proxy Statement for, the aforementioned Annual
Meeting.
(Continued
and to be signed on the reverse side)
ANNUAL
MEETING OF SHAREHOLDERS OF
CARRIZO OIL &
GAS, INC.
June 10,
2008
Please date, sign
and mail
your proxy card in
the
envelope provided as
soon
as
possible.
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND "FOR"
PROPOSALS 2 AND 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
| 1. ELECTION OF DIRECTORS | NOMINEES: |
FOR
|
AGAINST
|
ABSTAIN
|
||||
|
o
|
S.P.
Johnson IV
|
2.
Amendment of the Amended and Restated Articles
|
||||||
|
o
|
FOR
ALL NOMINEES
|
o
|
Steven
A. Webster
|
of
Incorporation to increase the number of
|
||||
|
o
|
Thomas
L. Carter, Jr.
|
authorized
shares of common stock from 40,000,000
|
o
|
o
|
o
|
|||
| o |
WITHHOLD
AUTHORITY
|
o
|
Paul
B. Loyd, Jr.
|
to
90,000,000.
|
||||
| FOR ALL NOMINEES |
o
|
F. Gardner Parker | ||||||
|
|
o
|
Roger
A. Ramsey
|
3.
Approval of the Appointment of Pannell Kerr Forster
|
|||||
| o | FOR ALL EXCEPT |
o
|
Frank
A. Wojtek
|
of
Texas, P.C. as the Company’s Independent
|
||||
| (See instructions below) |
|
|
Registered
Public Accounting Firm for the fiscal
|
|||||
|
year
ending December
31, 2008.
|
o
|
o
|
o
|
|||||
|
|
|
|
|
|||||
| INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark | 4. With discretionary authority as to such other matters | |||||||
|
"FOR ALL
EXCEPT" and fill in the box next to each nominee you
|
as
may properly come before the meeting.
|
|||||||
|
wish to withhold,
as shown here: x
|
|
|
|
|
||||
To change the address on your account,
please check the box at right and indicate your new address in the address space
above. Please note that changes to the registered name(s) on the account may not
be submitted via this method.
Signature of Shareholder
_________________________________
Date_________________________________
Signature of
Shareholder_________________________________
Date_________________________________
NOTE:
Please sign exactly as your name or names appear on this proxy. When shares are
held jointly, each holder should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title as such. If the signer is
a corporation, please sign full corporate name by duly authorized officer,
giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.